Mexico Economic and Financial Policy Between the 1990’s and 2000’s

During the nineties of the 20th century. and of the early 21st century, Mexico, from an industrial economy in decline and withdrawn essentially on the internal market, has been converted into an economy of services open to international competition. The strong expansion of domestic production, which lasted until 2000,it is followed by three years of very contained growth, attributable to an unfavorable economic situation (mainly linked to the slowdown in the US economy and the failure to adopt timely corrective measures), and by another three years of significant recovery. In the early 2000s, government action was aimed at modernizing the financial system, improving the quality of public spending and the sustainability of state finances, and finally containing inflation and stabilizing the exchange rate.

The restructuring of the financial market has resulted in the exit of the public banks and in the sale of the shares that the State held in many private credit institutions. To increase recourse to bank credit and facilitate access by companies to the capital market, provisions have been issued to protect the rights of creditors and minority shareholders. The stability of the financial system has been pursued through measures aimed at promoting closer supervision of credit institutions. An attempt was also made to encourage the development of non-bank financial intermediaries. Finally, to guarantee the financial resources necessary for the development of the primary sector, an institution dedicated to the disbursement of credit to rural producers was set up.

The goal of fiscal rigor was another constant element of economic policy. An attempt was made to correct the numerous structural weaknesses of the tax system which in the 1990s had shown a strong dependence on the trend in oil prices. In fact, there had been years, such as 1998, in which, due to the reduction in crude oil revenues, the State had had to proceed to a drastic reduction in expenses, and others, such as 1999, where public spending had been increased thanks to higher oil-related revenues. To strengthen the credibility of government authorities with national and international investors and combat this peculiar instability in short-term public spending, the government established in 2000 a reserve fund. Furthermore, with the aim of making the long-term orientations of economic policy more credible, it has worked to launch multi-annual national development financing programs. The quality and sustainability of public finance have been pursued by appealing to the responsibility of local authorities, which have been assigned the task of playing a decisive role, once the slow process of fiscal decentralization has been completed. Another attempt at intervention concerned the definition of the legal and regulatory framework of the public service, to ensure a qualitative improvement in their performance for families and businesses. For Mexico business, please check

In order to promote entrepreneurial development, an attempt was made to lighten the burden of bureaucratic practices and to speed up the process for the establishment or termination of business activities. Investments in infrastructures aimed at contributing to development, increasing the competitiveness of the business fabric and increasing productivity were also encouraged. Access to subsidized loans was mainly reserved for operators in the secondary, primary and foreign trade sectors. Particular financial support was guaranteed to micro, small and medium-sized enterprises capable of competing on the market and promoting technological development. In the energy sector, the government has set itself the objectives of making public producers more efficient and promoting the entry of new private operators in the gas and electricity production sector. while confirming the monopoly of the state in distribution. In order to reduce production costs it was favored, starting from2005, the participation of private companies in investment projects, and an attempt was made to promote greater efficiency in the operation and management of state-owned enterprises. The reform of the telecommunications sector, launched in 2002, was inspired by the desire to increase coverage, improve the quality of service and reduce its costs, promote competition, as well as encourage the use and diffusion of new technologies and new ones. services; however, the opening of the market to private operators remained limited.

On the labor market, the first timid interventions that were carried out in 2002 in agreement with companies and trade unions were followed in subsequent years by measures aimed at ensuring greater flexibility and increasing productivity and employment. Monetary policy was put at the service of containing inflationary pressures and recovering the confidence of national and international investors. The costs associated with an uncontrolled increase in the price level – such as the dispersion of national savings, the reduction of the investment time horizon and the failure to redistribute income – have in fact always been considered too high by the authorities. After the weight crisis of the mid-nineties and the entry of the national currency into a flexible exchange system, since 1998 the government has worked to stabilize its value and make the Mexican currency a strong currency and considered a reference for investors of the area.

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