Mexico from the Oil Boom to the Debt Crisis: an Analysis of Policy Responses to External Shocks, 1978–85

Mexico has a very special place in the present international debt crisis. It was the country where, in August 1982, the crisis started, and also, from 1983 onwards, the country whose adjustment to it was increasingly seen, by international organisations and banks (more than by the Mexican government itself) as a demonstration of how to get out of the crisis. This chapter is very critical of these optimistic views on Mexico’s adjustment process. Indeed, it argues that the Mexican experience is an example of the limitations of orthodox policies. Although the conditions for their application were comparatively favourable, the fragility and internal contradictions of this policy approach progressively eroded the room for manoeuvre that had been obtained through a large short-term external adjustment. Consequently, after three years of depression and large relative price adjustments, the country was left in continuous economic and financial troubles with no significant long-term, structural adjustment having taken place.