debt in the early 1980s. A large proportion of the foreign borrowing in which Mexico engaged in the late-1970s and early-1980s "was wasteful or unjustified in that it primarily financed consumption and government budget deficits rather than investment" (Dornbusch and Fischer 837). A substantial proportion of the increase in Mexico's external debt during this period was linked to an exodus of capital by residents of Mexico. Between 1979 and 1982, the estimate of capital flight from Mexico precipitated by residents of the country was US$30 billion (Dornbusch and Fischer 837).
As a consequence of the debt crisis accompanies by capital flight, the Mexican government resorted to "inflationary finance"·printing money (Dornbusch and Fischer 839). As a consequence, the Mexican peso experienced a huge depreciation in real terms from 1982 to 1986·28 percent. This real currency depreciation caused real wage levels in Mexico to plunge, which, in turn, prompted multinational corporations (MNCs) to attempt to establish bases of production in the cou
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