THE CRISIS OF 1994 AND ITS CONSEQUENCES

Abstract

During the last part of the 20th century, Mexico used various economic policies. In the 1970s, it maintained a Keynesian program that ended in populism, and in the 1980s, the implementation of the neoliberal model began. The fundamental characteristic of these years was a Recurrent sexennial crisis. The government of Carlos Salinas de Gortari carried out negotiations with international financial institutions to reduce the total debt and obtain better interest rates. Thereby reducing the payment of its service; additionally, the income from the sale of parastatal companies gave a respite to our finances, which allowed us to be perceived as a country with development prospects. Thanks to this, we entered the OECD. It is essential to mention that the international agreements were made to expect significant capital investments to arrive since the money needs to have returned. During this time, the reprivatization of banking was carried out, which was sold above all to stock market operators who knew little about the management of banking institutions. In addition to this, there was a banking liberalization and deregulation process, which facilitated the entry of the so-called swallow capitals. The problem is that the Salinas government did not take proper care of monetary policy since the fundamental objective was to contain inflation; the consequence was the overvaluation of the exchange rate. The result was the increase in the price of our merchandise. The deterioration of our trade balance caused a substantial current account deficit, which added to the fracture of the ruling party and various political events, which caused 1994 to end with devaluation and very severe crises.