The economic meltdown in
The Mexican government went into a damage-control mode following last December’s devaluation of the peso and the tumultuous impact on the emerging markets that resulted. Finally, on March 9, the government announced its economic recovery program. The program’s basic thrust envisions that
Mexican Finance Minister Guillermo Ortiz said he expected the plan would reduce the country’s reliance on imports and spur exports to create a trade surplus by yearend. Annual inflation is expected to reach 42 percent, and salaries for minimum wage workers will increase by 10 percent. Other contract wages will be negotiated between unions and employers without government guidelines. The value-added tax will be increased to 15 percent from 10 percent.
As a result of the austerity program, it is estimated that 750,000 Mexican jobs will be lost. Thousands of businesses are expected to go bankrupt. Interest rates of 90 percent on mortgages, credit cards, and car loans will push many families into insolvency.
Finance Minister Ortiz acknowledged that neither the government’s original emergency measures in January nor the availability of more than $50 million of financial aid from the
In addition, the Mexican “meltdown” raises foreign policy concerns in
What happens next? It is unlikely the U.S. Congress will agree to any kind of loan guarantee program for either
The step taken by the
Riordan Roett is director of the Latin American Studies Program at the