The 1994 financial crisis in Mexico (also the “tequila crisis” - the name is not a correct translation into Russian of the Spanish idiomatic expression efecto tequila, corresponding to the Russian “ domino effect ”) - is a financial and economic crisis that has revealed a number of shortcomings in the Mexican economy , such as dependence on the United States and the lack of mechanisms for regulating external financial flows [1] .
Description of events
On January 1, 1994, in the state of Chiapas , an armed uprising began, in which up to 4 thousand Zapatistas took part. As of January 12, when hostilities were discontinued due to the start of negotiations, the Zapatista controlled about 20% of the territory of the state of Chiapas, and the total number of deaths in the conflict was 140 people. The zapatista’s initial goal was to foment revolution throughout Mexico, and since it didn’t, they used the rebellion as a platform to draw international attention to their movement against signing the NAFTA . As a result, investors began to be wary of investing their money in an unstable region.
After the murder on March 23, 1994 of the IRP presidential candidate Luis Donaldo Colosio , the new candidate was economist Ernesto Zedillo , who was elected head of state in July 1994, gaining 50.2% of the vote [2] . On the eve of the presidential election in Mexico, the domestic political situation has become complicated. The reaction of the Mexican exchange to these changes led it to last place in the list of 24 largest exchanges in the world. The fall in shares caused the transfer of funds to the fixed income securities market and the outflow of capital from the country [1] .
The stagnation in production caused an increase in the trade deficit (in 1992-1994, according to the World Bank , it averaged 7.4% of GDP , reaching $ 28.6 billion, or 8.2% of GDP, by the end of 1994) [3] and made Mexico unattractive to foreign investment . In view of the decline in investment inflows, the government has taken a number of emergency measures, including raising interest rates on government bonds and transferring most of domestic short-term debt to short-term government bonds indexed to the dollar. However, such a policy led to an intensification of the crisis: the indexation of debt led to an increase in public debt and a decrease in the effect of devaluation [1] .
With financial assistance from the United States, the government and the Bank of Mexico managed to temporarily reassure foreign investors, and for most of 1994 inflation was held at 6.9%, and exports of manufacturing products grew by 29.1% [1] .
But on November 1, it was announced that the level of foreign exchange reserves was reduced from $ 29 billion at the beginning of March to $ 17.1 billion, and on December 3 they fell to $ 12.7 billion. On December 20, the peso rate fell from 3.5 to 4 for $ 22 December The Bank of Mexico deducted pesos by 49.8%. Foreign exchange reserves fell to $ 6.15 billion. The Bank of Mexico announced a reduction in foreign exchange reserves to $ 3.8 billion and set the course at 5.5 - 6 pesos per dollar [1] [3] . The peso continued to fluctuate, reaching $ 8 per dollar. The country's solvency was in jeopardy because Mexico did not have the means to pay short-term government obligations [1] .
To overcome the crisis , a program is published on January 3, 1995 , providing for the following measures: reducing the foreign trade deficit, restoring equilibrium between the main macroeconomic indicators, smoothing the inflationary effects of devaluation by gradually raising prices, freezing salaries, and cutting government spending [1] [2] . By limiting the growth of money supply and reducing the volume of banking operations, Mexico avoided hyperinflation , but failed to regain the trust of foreign creditors [1] .
The total amount of financial assistance to Mexico amounted to $ 51.8 billion - an unprecedented amount at that time. The United States - $ 20 billion, Latin American countries - $ 1 billion, central banks in Europe and Japan - $ 10 billion, IMF - $ 17.8 billion, commercial banks - $ 3 billion [1] took part in the formation of the loan package.
The first victims of the crisis were construction companies and the automotive industry, in which production fell by half. About 20 thousand enterprises went bankrupt, in the small industry 2 million business entities were on the verge of bankruptcy. 700 thousand people were left without work. The large amount of outstanding debt led to the threat of massive bankruptcy of small banks and the crisis of the entire credit system as a whole, which led to an increase in government participation in the banking sector. To solve these problems, programs were implemented to restructure the debt of small and medium enterprises for 65 billion new pesos and to create several hundred thousand temporary jobs [1] .
Notes
- ↑ 1 2 3 4 5 6 7 8 9 10 Osokina N. The Mexican Economic Crisis of 1994 // Observer. - LLC "RAU-University", 1998. - No. 10 (105) .
- ↑ 1 2 Mexico // Encyclopedia " Around the World ."
- ↑ 1 2 Madorski E. Currency crises in emerging markets: short- and medium-term risks of the bank: Dis. Cand. econ. sciences. - SPb. , 1999.