The Stability Dividend

Sep 1, 2004

Vicente Fox promised radical reforms to restructure the economy - then failed to deliver. Despite political disarray, Mexico's financial system keeps growing.

It has been 16 years since Mexico began its conversion from an inward-looking, state-dominated economy to an open, market-driven system. Under President Vicente Fox, many promised reforms have fallen by the wayside, yet policy consistency and economic stability have transformed Mexico's capital markets.

The country's financial system is unrecognizable from the corrupt system that collapsed in the wake of the December 1994 Tequila Crisis.

In the years since, a series of technocratic reforms has allowed the markets to flourish. The Central Bank, which was given independence as part of the reforms, is attempting to keep inflation within its official target range of 2% to 4% for the second year running. Interest rates on Cetes, 28-day government paper, touched a historic low of 4.25% earlier this year. The Finance Ministry, known as Hacienda, is paying down Mexico's external debt year by year, aided by an investment-grade rating. This year's budget...

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