Economics in Mexican American culture

Mexican Economy

Economics in the Mexican-American culture

Economics in the Mexican -American culture

As traced since the treaty of Guadalupe Hidalgo for instance 1940s to mid 1970s, the economy of Mexico experienced a strong average growth of more than 6%, single digit inflation, as well as comparatively low external indebtedness. However before the end of 1970s, this was no longer the case for expansionary government policies turned to generate higher inflation in addition to relentless external payments problems and continue to fail to facilitate sustained growth. Because of the government spending, revenues became outpaced facilitating steep budget deficits and raising debts from external forces. Moreover, low real interest rates made domestic saving go down.

There was a signal from the 1976, financial and economic crisis indicating the importance of addressing the fundamental problems based on the economy, but due to discoveries of petroleum incentives for reform became reduced as well as postponing the inevitable day of reckoning. In the late 1970s, the government was able to expand its debt-financed spending hoping for a higher low interests and high oil revenue. An aggravated balance of payments problem was created, hence undermining the confidence of private sector and encouraging capital flight.

Meanwhile, as the struggle by the Mexican government to improve its status within the financial community of the world, assisted by the United States, the situation that they experienced at home remained unsettled. Even though in 1983 after GNP fell by 5% making the year 1984 of a brief optimism for the Mexican, the year that followed the economy contracted by 1% fading any hopes of growth.

The Mexican economy has continued to be depressed with event and other factors such as: the major natural disaster. The two major earthquakes resulted to lose of lives between 5,000 and 10,000 people, and 300,000 were left homeless. Heavy burden was placed on an already struggling nation as they were to incur the cost of reconstruction and cost of relief, (Earthy Family, 2013). Another factor was consistence fall in prices of oil as well as an ever increasing high level of foreign debt service that forced a new round of austerity measures. The effect of De la Madrid was on the federal budget after cutting additional U.S.$465 million by lowering government investments and subsidies, creating a partial freeze on the federal hiring as well as selling more than 200 parastatals owned by state. This new-tightening measures by the President resulted to an annual fall of inflation in 1982 to 60% from 100%. Again the public sector deficit had gone down to 6.9% from 13.6% of gross domestic product.

In 1986 after De la Madrid addressed the Nation declaring that their austerity effort was permanent and, vowing never again will there be deviation from the economic course, there had been precedent-setting agreement with the IMF involving new loans to Mexico tied to fluctuations within the world price of crude oil. However the crisis did not seem to vanish.

Mexico relation with United States can be considered to be a reactive pattern of activism, neglect, as well as intervention. The 1980s crisis which seemed to be a threat to the Mexican stability facilitated emerging attention of activist to its southern neighbor by the United State. When there was economic default on U.S.$100 billion in foreign loan an alarm raised to the Washington as well as other industrialized world. It seemed that it could bring political upheaval which became a worry to the United States. Hence, the existing lesser issues between these two countries had to receive increased attention. These were like drug, migration, trade, investment, and environmental concerns (Richard Sicotte, 2009).

Despite the two nations failing to come to an agreement on the best strategy that could be used in solving The Mexico's balooning foreign debt, the government of the United Sates went on to work with the Mexicans and proving support efforts that can buoy the economy of Mexico and try to reschedule the debt. One of the step taken by the United States was when it was announced that the several debt relief agreements in August 1982. Based on the terms of agreement, a purchased ahead of schedule U.S.$600 million in Mexican crude oil was done by United State as a strategic oil reserve. Treasury of the United State as well offered U.S. 1 billion in guarantees purposed for the Mexican new commercial bank loans.

An accord was reached with Mexico later by a group of 530 foreign creditors under the umbrella of a bank advisory group. The agreement that was scheduled was to allow Mexico to pay its foreign debt for a span of fourteen years with an interest rate that was to be lower as compared to original contracted. Chairman of the United States Federal Reserve Board (Paul A. Volker, together with his fellows advocated for a reduction of the interest rates, as a recognition that Mexico has instituted hard austerity measures and there are in need of some fiscal relief for the purposes of restoring economic growth