International Policy

Mexican Bailout Problems Linger

The International Monetary Fund's $52 billion bailout of Mexico in 1995 was not the success its defenders claim. Three years later, some economists contend the IMF's failures there are still obvious.

While Mexico did repay the money it borrowed from the U.S. Treasury, it has yet to repay the IMF -- which gets 18 percent of its funds from U.S. taxpayers. Critics charge the IMF funds let the Mexican government put off necessary reforms -- such as privatizing the state-owned oil monopoly, Pemex.

  • Absent privatization or even deregulation of Pemex, gasoline prices in Mexico are much higher than in the U.S.

  • Mexican citizens have suffered a sharp decline in their standard of living since the debt crisis hit -- with real per capita income slumping back to its 1974 level.

  • From the end of 1994 to the end of 1996, Mexico added $60 billion to its total external debt -- which now tops $160 billion.

  • Instead of fully opening up banking to foreign investment, the government has bailed out commercial banks to the tune of $45 billion by buying all their bad or shaky loans.

A number of economists see further U.S. loans to the IMF as indefensible. They argue that the IMF lends at rates which do not reflect the risks involved, that the interest rates are lower than those for U.S. Treasury bills, and that the legacy of the Mexican bailout is the Asian crisis of today. Asia's developing economies got the message that anything goes, and that they, too, would be rescued when things got out of hand.

Source: Ian Vasquez and L. Jacobo Rodriguez (both of the Cato Institute), "What to Expect from IMF? Look at Mexico," Investor's Business Daily, April 1, 1998.

Home | Support Us | All Issues | Social Security | Debate Central | Contact Us

Dallas Headquarters: 12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
Washington Office: 601 Pennsylvania Avenue NW, Suite 900 South Building, Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
© 2001 NCPA