The Mexican Banking Crisis Lives On

Oct 5, 2003

Eight years after the government's banking intervention, the Mexican public still lacks a full accounting of the costly decisions taken to stabilize the country's financial system.

The aftershocks of the systemic crisis in Mexico's banking system that followed the peso crash of 1995 can still be felt today. At the time, the recently inaugurated government of Ernesto Zedillo implemented a series of measures and programs to avoid bankruptcy and safeguard the savings deposited in all banks. In the end, the government managed to maintain confidence in the banking system, recapitalize the banks, and restore growth in the country's economy after its dramatic collapse in the first half of 1995.

Nevertheless, the government took many arbitrary and discretionary actions due to inexperience and the need to implement effective measures urgently. This not only left a very high domestic debt, but also a bitter aftertaste and many doubts surrounding the legality and ethics of what was done. Eight years have passed and the issue is still on the front page of most newspapers. Its ultimate resolution remains uncertain...

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