Mexico’s Economic Analysis (1982-2018)

Mexico is well known for having a serious political sickness that affects the economics of the country and each citizen, corruption. But other factors play an important role when it comes to a country’s economy, such as political instability and changes in government regulations. During the last five governments, there have been a lot of changes in the Mexican economy due to the way each presidential government rules the country every 6 years. In the last 37 years we have had 5 different presidents that have ruled the country and shaped the mexican economy; Miguel de la Madrid (1982-1988), Carlos Salinas de Gortari (1988-1994), Ernesto Zedillo Ponce de León (1994-2000), Vicente Fox (2000-2006), Felipe Calderón (2006 - 2012), and Enrique Peña Nieto (2012-2018).

In December of 1982, Miguel de la Madrid began his term in a precarious time for the Mexican economy. In 1982 Mexico was in a recession because the drop in the price of oil in mid-1981 had a severe negative effect on public finances, while the external debt of the public sector greatly increased as well. It was in 1982 when the Mexican government announced that it could not meet scheduled debt payments, thus beginning the 1982 debt crisis. As well, during his 6 years as president, the country experienced the highest inflation rates with an average of 94.3% because, after the 1982 crisis, very few international organizations were willing to invest or grant loans to Mexico, so the government opted to resort to continuous devaluations to achieve an adjusted current account balance, causing high rates of inflation. The government of Miguel de la Madrid (1982-1988) responded with the application of an economic program known as the Immediate Program for Economic Reorganization (PIRE) in 1987 to reduce the growth of public spending, the start-up of infrastructure projects and the fulfilment of foreign debt payments. The reason why, in 1988 the government reduced its spending, changed tax codes to increase tax revenue, increased the prices of government-controlled goods, and began a process of privatizing parastatal companies as a long-term plan of economic stability. During this period of time it wasregistered the lowest GDP per capita with respect to the following 4 governments and the lowest economic growth rate with an average of 0.34%, not only because of what it was previously mentioned but also because De la Madrid paid 28 billion dollars in external debt; although despite this, it increased from 9.4 billion dollars in 1983 to 185 billion dollars. Another factor that will explain the low rate of economic growth is the fact that at the end of the six-year term, after the collapse of the Mexican stock, the government imposed drastic economic measures which include a greater devaluation of the peso against the dollar to the point that 1 USD was equivalent to 2,289.58 pesos.

In 1989 Carlos Salinas de Gortari began his presidency achieving an average of 4.08% of economic growth and 22.14% of inflation thus slightly increasing GDP per capita to an average of 7,777.92 USD in all its 6 years, which were great measurements considering the Mexican economy before and during Miguel de la Madrid’s government, especially inflation rate. At the beginning of his presidency, the government of Carlos Salinas (1988-1994) created the Pact for Stability and Economic Growth (PECE) program in order to reduce the rate of inflation, which it successfully achieved, since inflation decreased from 141.0% in 1987 to 8.3% in 1994. His government was the only one that did not present a negative economic growth rate, it was free of recessions for different reasons, such as the fact that during this period, many reforms were carried out; such as the continuous privatization of parastatal companies, the rise of the EZLN and Agrarian Reform, the signing of the North American Free Trade Agreement (NAFTA), the liberalization of banking, the independence of the central bank (Banco de México), and the process of returning to international financial markets after the debt crisis of 1982. But Carlos Salinas' reforms caused one of the greatest inflation rates just before his government came to an end, passing the baton, or rather the disaster to his successor, Ernesto Zedillo Ponce de León. Gortari´s government made an equally great mistake also known as the December mistake, where the currency devalued because of the lack of international reserves, so the government decided to rescue the banks, a decision that cost a great percentage of the GDP.

Zedillo's government began with one of the worst Mexican economic crises. Even so, It was during Zedillo’s government that we had both the highest and lowest annual inflation rates with respect to the next 4 governments, probably because Zedillo privatized the Mexican railway system, and the foundation of the Bank Savings Protection Fund, to support the national bank against debtors. This is how he reached economic stability, going from the beginning with a recession to an expansion that came to increase GDP growth to 6.8% in one year and 4.3% as an average for his entire six-year term, the highest in recent years. As well during this period, there was still a high inflation rate of 22.1%, not as high as the previous government but still high, probably due to the free float that caused a massive outflow of currency due to the political situation in the country, the fall of the Mexican stock market, the bankruptcies of thousands of companies and unemployment, which were consequences of the December Mistake. This rapid economic growth also was reflected in the GDP per capita, which once again, increased, compared to the previous government, to an average of USD 8,287.22 during those six years.

From 2000 to 2006 Vicente Fox was elected president. He was the first president of a political party that was not PRI and during his administration, the average growth rate of real GDP per capita increased once more to $8,807 USD. This low average was due in part to negative growth of -1.7% between 2000 and 2001, which coincided with the 2001 recession in the United States. On average, during his government, there was an inflation of 4.7% and an average of 1.9% in economic growth, both way lower than the one of Zedillo’s government, but one of the reasons for this was because he reduced external debt, which went from 144,526.6 million dollars in 2001 to 133,647.9 million dollars to the second quarter of 2006. Presidents Ernesto Zedillo and Vicente Fox were in charge of trade liberalization and during their administration various free trade agreements were signed with Latin American and European countries and thus maintaining a low rate of inflation. They also reduced income inequality little and it was during this period that Mexico became one of the most open countries to free trade and the economic base has been reconfigured accordingly.

Felipe Calderon's government began in 2006 achieving a decrease in inflation percentage with an average of 4.3% during six years of its government. As well, the GDP per capita kept increasing to $9,108.08 USD, but during this period there was an average of around 1.73% of economic growth, a low economic growth that reflected the scarce employment opportunities and aggravated informality, thus causing low incomes, reduced productivity, lack of social security and health services. The government performed well considering that it faced the crisis of legitimacy derived from the presidential election, the world economic crisis of 2008, the drop in oil prices and the increase in the levels of violence associated with drug trafficking. In 2008, there was a world recession that affected not only the economy of Mexico but the world's economy.

Unlike the last governments of the previous 4 presidents, during Enrique Peña Nieto’s government, there was no recession, but his government did start with an economic slowdown, where GDP and housing construction fell. There was an average of 4.05% of inflation, the lowest inflation rate in the last 49 years. Some will say that this is actually due to the fact that the previous presidents' long-term plans to reduce inflation and increase economic growth had paid off. It was until 2017 that the inflation rate increased drastically from 2.8 to 6%, which was the highest of those recorded in the preceding 17 years, due to the increase in goods and services such as tomatoes, eggs, gasoline, air transport, tourist services and domestic gas; the terrorist attack on the twin towers also was a factor that altered not only the world economy indirectly. Peña Nieto’s government implemented the opening and the creation of the best conditions for foreign investment, increased Mexican exports, as well as the creation of jobs with relatively high salaries in some sectors; this impulse did not significantly increase per capita growth as expected. . In the end, during the Peña Nieto years, GDP growth, on average, was less than 3% and the GDP per capita slightly increased from 9,108.08 USD to 9,766.75 USD.

In general, the Mexican economy has grown more than it has shrunk, with a maximum of 6.8% GDP growth between 1996 and 1998. Although, GDP shows an average annual growth rate with a downward trend in the last three six-year terms, starting from 3.9% during the six-year term of President Carlos Salinas, 3.5% under President Ernesto Zedillo, and 1.9% on average during the six-year term of Vicente Fox. In total, there were only 5 years in which there was a considerable decrease in GDP, the highest was -6.3% during the government of Ernesto Zedillo in which growth was successfully recovered in a surprisingly fast way. In fact, the government of Ernesto Zedillo was the one that had the highest percentage of growth with an average of 4.38%. Likewise, the lowest inflation percentage was during the government of Peña Nieto and the highest during the government of Miguel de la Madrid. Fortunately, the GDP per capita increased each government period at the same time that inflation was decreasing in each six-year term, although the same cannot be said of the percentage of economic growth, since without a doubt Zedillo takes the credit for achieving the highest percentage of economic growth during his government. Economically speaking, the government of Miguel de la Madrid was the worst for the Mexican economy because it registered the highest inflation percentage, the lowest economic growth percentage and the amount of GDP per capita during the period from 1982 to 2018. All this data is the result of different social problems since these are determining factors that change and shape the economy, after all, the economy is the reflection of society.

Works Cited

Lecona, R. (2022). Cincuenta años de actividad económica en México. Retrieved 4 September 2022, from https://www.realestatemarket.com.mx/articulos/infraestructura-y-construccion/18356-cincuenta-anos-de-actividad-economica-en-mexico

Bizberg, I. (2020). El fracaso de la continuidad. La economía política del sexenio de Enrique Peña Nieto. Foro Internacional, 629-682. doi: 10.24201/fi.v60i2.2735

Barraza, E., & Barraza, E. (2017). Cronología de sucesos sociopolíticos en México (1968-1989). Retrieved 4 September 2022, from https://barriozona.com/cronologia-de-acontecimientos-sociopoliticos-en-mexico-1968-1988/

Político, R. (2012). ¿Cómo fue el sexenio de Miguel de la Madrid?. Retrieved 4 September 2022, from https://www.animalpolitico.com/2012/04/como-fue-el-sexenio-de-miguel-de-la-madrid-2/