NCPA - National Center for Policy Analysis

Mexico In Financial Soup--Again

November 13, 1995

Mexico's government has been desperately trying to boost its ailing peso, and taking all the wrong moves.

  • This year, the monetary base will grow by about 40 percent -- fueling inflation.
  • The government is spending huge amounts off-budget to pump up the economy, while spending borrowed dollars to buy its own currency on the open market and prop up its value.
  • Interest rates there are now over 50 percent.
  • Per capita incomes in Mexico are only 54 percent of what they were at their 1980 peak.

Mexico's beleaguered workers and consumers are paying the price for the government's profligacy and lack of discipline.

The U.S. may once again be begged to bail the country out, as we, other countries and the International Monetary Fund did earlier this year with a $52 billion aid package. But this would probably be pouring gasoline -- rather than water --on a raging fire.

Source: Perspective, "Peso Crisis Redux," Investor's Business Daily, November 13, 1995.


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