2006 News Releases

For immediate release: June 20, 2006

Dallas Fed’s Economic Letter Examines Mexico’s Vulnerability to Financial Crises

DALLAS—Solid macroeconomic discipline and improved debt management on the part of Mexico’s government have reduced the likelihood of an election-year financial shock, according to the June issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In “Mexico’s Financial Vulnerability: Then and Now,” senior economist Erwan Quintin and economic analyst José Joaquín López state that while Mexico has suffered financial setbacks during three of the past five presidential elections, positive steps such as the establishment of a truly independent central bank have put Mexico on more solid financial footing.

“With a clearly stated objective and constitutional protection, Banco de México has become a no-nonsense practitioner of inflation targeting,” the authors write.

The Mexican government also has reduced budget deficits and short-term borrowing, according to the authors. In addition, monetary authorities in Mexico no longer try to support a fixed value of the peso.

Despite these positive steps, the authors find that deep structural reforms remain needed in Mexico.

The June 2006 issue of Economic Letter can be found at www.dallasfed.org.

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