Devaluation of the Peso

Devaluation of the peso is being considered in the wake of the economic crisis that developed recently in Brazil and which is exerting negative impacts on the Mexican economy and placing increasing pressure on the peso in international currency markets. The pressure on the peso continues to be exacerbated by low-level of global demand for petroleum, which, in turn, affects adversely both Mexico's balance of trade position and the fiscal position of the national government in Mexico.

The proposed policy to devalue the peso is assessed through this research. The primary intended audience for this policy assessment of the President of Mexico and his advisers.

The tight monetary policy imposed by the central bank, together with the tight fiscal policy pursued by the national government, has caused some decrease in domestic demand. Inflation, however, is rising as the value of the peso decreases. Global oil prices collapsed in 1998 and have shown no signs of improvement.

Lower oil prices translate into lower revenues for the national government and a widening trade gap that puts pressure on the peso. Although oil accounts for only 10 percent of Mexico's exports, Petroleos Mexicanos, the state-owned oil company, generates 38 percent of national government revenues. National government revenues from Petroleos Mexicanos decrease by US$800 million on an annual basis for US$1 reduction in the world price for oil. Conversely, each US$



Related Essays

Currency Devaluation & Oil Revenues in Mexico CURRENCY DEVALUATION & OIL REVENUES: A POLICY ASSESSMENT Introduction Devaluation of the peso is being considered in the wake of the economic crisis that .... (1786 7 )

Castro's Government & US Policy .... The government could have cut demand through massive devaluation of the peso to its black-market level but the devaluation and the accompanying depreciation of .... (3111 12 )

Mexico and International Marketing .... in a nation which has had two serious financial crises in 15 years (Mexico suffered a current account deficit correction and devaluation of the peso in the .... (3592 14 )

International Monetary System .... Peso Devaluation of 1994: A Case Study of This Process Mexican exchange rate policy after 1987 was geared primarily to an anti-inflation effort. .... (1596 6 )

Rates of Inflation in Mexico: A Look at the Price Index .... 0.5 6.9 2.5 48.5 Dec 0.9 7.1 3.3 52.0 Source: Economist Intelligence Unit, 1996 This price spiral was set in motion by the devaluation of the Peso which began .... (761 3 )

Category: Economics - D
Common Topics
Click Here to Get Instant Access to over 32,000 Professionally Written Papers!!!
Join Now  
Saved Papers  
Save your essays here so you can locate them quickly!
"Great site, I got a lot of new ideas I would have never thought of before."
Nate A.
"I love this site!!!"
Marie H.
"Thank you for making such a high quality site! Your papers are the best I have seen around"
Debbie B.
"Your site was very helpful and gave me the details I needed in order to complete my essay!!!"
Mike F.
"This site is an excellent vehicle for quick referrences. Thanks a bunch!"
Carla T.
Copyright © 2007 - 2014 Lots of Essays. All Rights Reserved. DMCA