Economic Survey of Latin America and the Caribbean 1994-1995

image of Economic Survey of Latin America and the Caribbean 1994-1995

Issued in two volumes - volume I gives insight into the economic trends, the international economy and the role of exchange rate policy in Latin America and the Caribbean. Volume II explores the economic developments by country. Complimentary statistical tables are included.




In 1994 the Mexican economy was beset by a marked degree of uncertainty and was particularly affected by a number of crucial political events. Trends in the leading variables were in keeping with the Government's economic programme for most of the year, but the external sector's cumulative imbalances, the implementation of an expansionary monetary policy at a time when reserves were being drawn down, and a number of serious political developments all combined to set off a major crisis in the last 10 days of December. Economic growth sped up to an annual rate of 3.5% after two years of meagre results. The rate of inflation, whose reduction remained the economic programme's main objective, continued to fall, reaching just 7% per annum -the lowest rate in 20 years. The non-financial public sector, for its part, was unable to reproduce the strong performance it had turned in during the preceding three years -when its accounts alternated between balance and surplus- but did manage to hold its deficit to less than 1% of gross domestic product (GDP). Other developments were less positive, however. In particular, the deficit on the balance-of-payments current account widened to US$ 29 billion, or almost 8% of GDP, and the flow of external resources, which in past years had more than covered this deficit, began to exhibit fluctuations that made it necessary for the country to draw down its international reserves. Furthermore, on the assumption that both the outflow of foreign exchange and the higher level of uncertainty in the economy were only temporary trends which would reverse their course once the elections were over -in view of the firm support forthcoming from Mexico's partners in the North American Free Trade Agreement (NAFTA) and the new prospects opened up by economic integration- an expansionary monetary policy vas adopted. Finally, domestic borrowing inci eased, at the same time as debt maturities were shortened and the face value of debt instruments 'vas pegged to the exchange rate in an effort to reduce the uncertainty prevailing in financial markets.


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