Currency Crisis in Mexico The Mexican financial crisis began from 1994-1995, and it was mainly known as the “Tequila Crisis”. The crisis started after Mexico’s devaluation of the peso in the month of December in 1994. It precipitated as the worst banking crisis in Mexican history, it was the largest depreciation in one year, from being at 5.3 pesos per dollar to increasing to over 10 pesos per dollar. Mexico’s crisis demonstrated that that costs that arise when a country lets its guard down and allows markets to exercise their discipline instead. We begin to think of all the reasons of why the crisis began.
I will also tell you about the extreme amount of money that is made because of the drugs and how much drugs that are sent to the US. In 11. December 2006 the new president of Mexico Felipe Calderon decided to intervene the Mexican military in the war against drugs. Since this day the country have suffered very high loses of innocents and civilians deaths. The goal for the president when the intervened was to reduce violence.
Historians often divide the Mexican Revolution into three main periods of fighting due to its length and complexity. Of the three periods, the one that had the most impact on Mexican society at the time was the first phase in which Francisco Madero overthrew Porfirio Diaz as new revolutionary leaders such as Emiliano Zapata and Pancho Villa arose. This period allowed people that were not usually involved in politics to become more involved. The phase of the revolution that had the most potential to create change in Mexican society later was the third one that saw Conventionalists take on Constitutionalists for control of the country. This stage created the Constitution and led to a single political party gaining control of México.
The first research, which the author found, is about the reason behind the Brazilian Crisis on 1990s. This article was saying that in that year, Brazil had a little problem with its foreign balance, which happened a hyperinflation at that time due to the evolution of Brazilian internal debt itself. And the interest costs of the outstanding government debt becomes a major component of government expenditure and thus of the government deficit is one of the reason of the hyperinflation. However, in this article, it saying that abandoning active fiscal policy and the impossibility of controlling monetary aggregates could be a way to overcome the hyperinflation in Brazil. In this article, did not mention about the specific number of the hyperinflation in Brazil.
The purpose of this essay is to examine the debt crisis that took place in the 1980s by assessing the role of the international bankers as well as the government’s role in both debtor and creditor nations. Once Mexico announced that they could not repay their debt, soon after countries such as Brazil and Argentina followed the same path, resulting in developing countries being faced with a debt crisis (Carmichael 1989, 121). Although majority of the outcomes were negative, surprisingly the debt crisis led to positive outcomes, for example secondary markets were established, industrial countries experienced low-inflationary growth and banks’ balance sheets in creditor nations were strengthened (Carmichael 1989, 121). This essay will not only address the causes and origins of the debt crisis in the 1980s, but more importantly draw attention to the ways in which this debt crisis may have been prevented. It is imperative to first define the debt crisis as well as to determine the origin and causes of the debt crisis in the 1980s before one can provide an explanation for the actions of the bankers and governments who were involved.
The total collapse in the confidence of government is one of the partial cause that leads to hyperinflation. It is mainly due to the fact that when the people start to lose confidence on the government as well as its currency, more people are willing to exchange bolivars for dollars, raising more pressure causes the nation to run out of foreign exchange reserves (Weisbrot, 2013). Additionally, the downfall in confidence causes the government to issue more and more fiat money – the currency that a government has declared to be the official medium of payment that is recognized by the law but it is not backed by a physical commodity (Investopedia, n.d.). As a result, the currency that flow through the market has very little to no value at all. Until December 2016, Nicolas Maduro, the president of Venezuela conducted a new monetary policy that did not seem to improve the country’s situation.
Wade (1998) argues that the crisis was not only a result of crony capitalism or domestic policy failures but also international capital movement and global economic order, which has been shaped by interests in the West. Wade suggests that the crisis had a root in Plaza Accord in 1985, which caused Yen appreciate against the US Dollars. Consequently, the Accord drove Japanese manufacturers to relocate in Southeast Asia; the accord also led to the expansion of foreign borrowing in the region, due to international excess liquidity that was caused by developed countries’ expansion of monetary
Then third part was just the conclusion. In 2001 Hoshi, reported that individual bank data showed an “increase in the proportion of loans to the real estate sector in the 1980’s led to higher non-performing loans in 1998 (Nada, 2008, p.61).” A governmental factor that influenced the Japanese market is for example a decline that was seen in the 1980’s after a foregin exchange law. Hoshi and Kashyap debated that a change in deregulation, combined with the limited liability policy, could possible explain why banks didn’t get smaller when losing keiretsu (Nada, 2008). One way of looking at this study is that the saving options that were on the households had no effect because people were still putting money in their banks. The Japanese government applied interest rate controls, to guarantee profits, and definte deposits (Nada, 2008).
However research on social spending did bring out an interesting point , which does apply to Mexico .That is that social spending after a certain limit becomes pointless .In this case it is 10% of extreme poverty. This idea implemented by the government can only be successful if it also manages to create a growing economic environment. The balance between social spending and a spurring economic environment is something that can actually help reduce further poverty for fellow Mexicans by helping to provide work for those unemployed. In 2017, the figure was 2.5 million. This figure seems relatively low compared to other countries in the Central America.
There was dramatic run-up in Asset prices and excessive exposure to forex movements. Once the USA stabilized, and increased its interest rates, there was flight of capital from the region, leading to the collapse in SE Asian countries. 2. The famous economist Paul Krugman examined the phenomenon, and was of