Mexico's Balance of Payments Problem
| Mini Case for Chapter 3 | Mexico’s Balance-of-Payments Problem |
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Chapter 3 Mini-Case: Mexico’s Balance of Payments Problem
The term balance of payments refers to the accounting record of the country’s monetary transaction with the rest of the world. These transactions include the exports and imports of goods and services of the country, financial capital and financial transfers. The balance of payment record is a way to allow countries to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. .
In this mini-case we will look into 4 key aspects such as Mexico’s key economic indicators, the causes of the country’s balance of payment problems, policies in which Mexico could have implemented in order to avoid the problems and the lessons in which developing countries can learn from this incident. Through these 4 key aspects, the reader would be able to gain a better understanding about Balance of Payments concepts.
Trend in Mexico’s key economic indicators: balance of payments, exchange rate, and foreign reserve holdings. Yr | Balance of Trade | Current
Account | Direct
Foreign
Investment | Portfolio
Investment | Gross
International
Reserves | Total
External
Debt | Public
Sector
External
Debt | Interest
Payments | 1994 | -18.5 | -29.7 | 6.1 | 8.2 | 6.1 | 142.2 | 85.4 | 11.8 | 1995 | 7.1 | -1.6 | 15.7 | -9.7 | 15.7 | 169.9 | 100.9 | 13.6 |
Mexico’s current account deficit was continuously increased from $5 billion to $25 billion during the period 1988 through mid-1994. In late 1994, it became $30 billion.
Prior to 1994, Mexico experienced sharp rising trade deficits starting from 1989 and caused the current account to sink into deficit, ballooning from a deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November 1993 the government of Mexico reported that cumulative foreign investments was US$ 34 billion,
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Chapter 3 Mini-Case: Mexico’s Balance of Payments Problem
The term balance of payments refers to the accounting record of the country’s monetary transaction with the rest of the world. These transactions include the exports and imports of goods and services of the country, financial capital and financial transfers. The balance of payment record is a way to allow countries to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. .
In this mini-case we will look into 4 key aspects such as Mexico’s key economic indicators, the causes of the country’s balance of payment problems, policies in which Mexico could have implemented in order to avoid the problems and the lessons in which developing countries can learn from this incident. Through these 4 key aspects, the reader would be able to gain a better understanding about Balance of Payments concepts.
Trend in Mexico’s key economic indicators: balance of payments, exchange rate, and foreign reserve holdings. Yr | Balance of Trade | Current
Account | Direct
Foreign
Investment | Portfolio
Investment | Gross
International
Reserves | Total
External
Debt | Public
Sector
External
Debt | Interest
Payments | 1994 | -18.5 | -29.7 | 6.1 | 8.2 | 6.1 | 142.2 | 85.4 | 11.8 | 1995 | 7.1 | -1.6 | 15.7 | -9.7 | 15.7 | 169.9 | 100.9 | 13.6 |
Mexico’s current account deficit was continuously increased from $5 billion to $25 billion during the period 1988 through mid-1994. In late 1994, it became $30 billion.
Prior to 1994, Mexico experienced sharp rising trade deficits starting from 1989 and caused the current account to sink into deficit, ballooning from a deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November 1993 the government of Mexico reported that cumulative foreign investments was US$ 34 billion,