Economic Survey of Latin America and the Caribbean 1986

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In 1986 the evolution of the Latin American economy was marked by contradictory changes. While the main variables used to measure domestic economic performance showed some improvement, the situation of the external sector worsened considerably. Thus, although the rate of economic growth picked up and unemployment and inflation slackened, the terms of trade worsened, the trade surplus fell and the balance-of-payments deficit increased sharply.




After a brief and limited upswing, the Mexican economy suffered a marked decline in 1986, due mainly to two factors. Firstly, from the second half of 1985 there was an intensification of the policy aimed at reducing the external and fiscal deficits and curbing inflation. However, it was not possible to achieve these objectives on account of the sudden drop, early that year, in the world price of petroleum: a product which had assumed great importance in the development of the country since the end of the previous decade. The shortfall of US$8.5 billion in exports of hydrocarbons and the need to pay a similar amount in interest on the foreign debt created severe problems in meeting external payments. Secondly, the public finances —which are heavily dependent on earnings from petroleum exports— deteriorated substantially and the effect of this decline was soon felt in all economic activities, thus deepening the recession.


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