 | This article has multiple issues. Please help improve it or discuss these issues on the talk page . (Learn how and when to remove these template messages)
|
Mexico and the International Monetary Fund are the international relations between Mexico and the International Monetary Fund (IMF). Mexico joined the IMF in 1945. As of 2022 [update] , Mexico has had 18 numbers of arraignment with the IMF. [1]
Mexico joined the International Monetary Fund (IMF) on December 31, 1945, a year after the inception of the IMF in 1944. [1] As of 2022, Mexico has 11816.7 million Special Drawing Rights(SDR's,) and a SDR quota of 8912.7 Million. The leading director of Mexico on the IMF Executive Board is Pablo Moreno, with Alfonso Guerra, and Jose Andres Romero serving as alternatives. [2] Mexico's current governor is Rogelio Eduardo Ramirez de la O with Victoria Rodriguez Ceja serving as an alternative. [2] As of 2022, Mexico holds 90,586 votes totaling 1.80% of total voting shares in the IMF. Mexico has the second greatest number of votes in Latin America. [3]
As of 2022, Mexico has had 18 numbers of arraignment with the IMF since its membership in 1945. [1]
Mexico recorded the largest trade balance deficit in the years 1946 and 1947, as a result of mass consumption during World War 2, causing Banco de Mexico to practically lose all their accumulated reserves during the war. [4] As a result, in July 1948, Mexico informed the IMF that it could no longer maintain the par value of the peso that was established without further financial support. [5] Seeking financial assistance from both the IMF and the United States, mixed responses from both parties were received. The United States, decided that before agreeing to Mexico's request, the IMF would have to decide if the peso's par value was rational under their current circumstances. [5] IMF executive board members doubted that the par value of the peso was reasonable, and whether it could be maintained. [5] Following lack of IMF willingness to assist Mexico, the Bank of Mexico chose to float the peso up until June 1949, when Mexico established a new par value for the peso. [5]
Mexico suffered from a massive debt crisis in 1982, resulting in the country requesting emergency financing from the IMF. Despite an early period of economic success, a decline in oil prices and an increase in US interest rates caused Mexico to double its debt from 1979 to 1982 causing an excess inflation rate of nearly 60% of its GDP. [6] Recognizing Mexico's state of economic panic, secretary of finance Jesus Silva Herzog advised former IMF acting manager William Dale to send a mission to Mexico, in attempts to reach a solution. [6] Negotiations began in August 1982 in order to secure appropriate funding assistance. However, on August 11, Mexico's commercial bank creditors no longer rolled over principle payments that were due on August 16, creating further economic difficulties for Mexico. [6] As a result, Herzog flew to Washington in order to meet with newly appointed IMF managing director Jacques de Larosière on August 13, 1982. IMF support was promised on the condition that Mexico find a solution to avoid further defaults on future debt payments. [6]
Mexico successfully avoided future defaults on debt payments due to $7 billion of American aid that consisted of payments for advanced oil exports, and credit guarantees from both US Department of Agriculture and the Treasury Department's Exchange Stabilization Fund. [6] The Bank for International Settlements also provided $1.85 billion, giving Mexico the short term funding in order to avoid becoming default. The programs and conditions that applied to the Mexican debt crisis lasted for three years. [7] As a result of IMF involvement in Mexico following its economic crisis, many believe this marked the IMF's role of international crisis manager in Latin America. [8]
Prior to the 1982 debt crisis, Mexico enjoyed a period of economic stability. This changed in 1976, when a change of president and an alteration of fiscal policy led to a recession. This led to the country being granted an economic stabilization program through the IMF, one of the first programs of this nature to be installed in Mexico by the IMF. [9]
Following the crisis that occurred in 1982, Mexico with IMF assistance managed to reduce inflation by 160 percent by 1987 to 8 percent in 1993. [10] Following this marginal success of Mexico's economy, 1994 would mark another crisis. 1994, a currency crisis in Mexico resulted in the devaluation of the Mexican peso, which resulted in a severe financial crisis. The currency crisis has been said to have been brought on by the new fiscal policies created by the government at the time. Critics blame past IMF financial assistance, as it is argued past IMF assistance during times of irresponsible financial management set expectations of IMF bailouts if a future economic crisis occurred. [11] However, other explanations for the crisis have been argued such as political developments undermining trust in the government resulting in capital flight, or rise of US interest rates creating capital outflow contributing to the Mexican crisis. [12] The Mexican Peso Crisis was extremely severe. At the same time, major organizations such as the International Monetary Fund, the World Bank, and other major banks, such as J.P. Morgan, praised the Mexican economic reforms of the time, claiming that the country's reforms were effective in bettering the economy. [13]
In the month of December, the government changed Presidents and cabinet, which resulted in a transformation of fiscal policy. Within the course of December 15 - December 21, approximately US$5.5 billion left the country, and by the end of December, the Mexican peso's devaluation was 35%. This devaluation in the matter of a couple of weeks ultimately led to interventions by the IMF and other organizations affiliated with the group. In January 1995, the IMF entered the scene and laid out a 7.8 billion bailout package that would aid Mexico in overcoming the crisis. However, the United States stepped in and increased this rescue package to US$50 billion with the aid of private banks, the IMF, and the Bank for International Settlements. [14] As a result, this marked the first international crisis of the 21st century, and a successful instance of IMF involvement in a financial crisis. [10]
As of 2009, the Mexican government requested an increase in credit line from the IMF. This was approved by the IMF in the same year, [15] increasing Mexico's credit line to US$47 billion. A notable feature about this increase is that it is one of the new arrangements under the new IMF lending reforms or the Flexible Credit Line. [16] This increase was meant to ensure that Mexico would be able to prosper despite global financial crises, and the program would last solely a year. However, the program was renewed less than a year later on March 25, 2010. The flexible credit line (FCL) allowed Mexico to remain a reliable player internationally. [17] However, the FCL did not prevent Mexico from having a record low GDP when compared to other Latin American countries. The 2008 financial crisis in the United States had a big impact on the Mexican economy because relations between both countries were close and friendly. Their friendly economic relationship was namely due to NAFTA, which is a free trade agreement in North America between the United States, Mexico, and Canada. [18] The U.S./Mexico relationship was one of Mexico's greatest assets and allowed for Mexico to become one of the most important Latin American countries due to its increase in manufacturing factories and economic reforms. [19] The FCL allowed Mexico to handle the pressures from other Latin American countries because with the financial and ideological support from the U.S., Mexico could be a formidable opponent. [20] U.S. interests lie with Mexico because Mexico is a good indicator of the economies from other nearby countries in Latin America. In 2009, Mexico's increased credit line was sufficient to remain relatively stable.
Mexico's credit line has fluctuated since the 2009 agreement, rising to $88 billion in 2016 and decreasing to $74 billion in 2019. The most recent change in the Flexible Credit Line and the IMF occurred in 2021. The FCL, which is intended for economic crisis prevention and as an insurance policy, should anything happen within the economy [21] was approved by the IMF in 2021 for a two-year plan valuing $50 billion. [22] This change in arrangement marks the ninth FCL agreement, and is a considerable decline compared to the FCL agreement made in 2017 and 2019. The FCL in 2017 allowed for access to $86 billion, and in 2019 was valued at $61 billion. [22] The decrease in FCL usage comes as a result of Mexican authorities requesting reductions in the limit. As a result, Mexican authorities are treating the new FCL arraignment as a "precautionary". [22] Mexico has been lowering its FCL usage in response towards its economic growth and confidence in the reduction of financial risk over the years. Despite this, the FCL still serves an important function, and serves a safety net for Mexico's economy in case of economic crisis. Credit lines also decreased because Donald Trump threatened to disband the North American Trade Agreement. [23] The Mexican economy remains stable, with the peso at the same rate of inflation as years prior. Consumption has risen, which is projected to boost the economy by the end of 2019, despite the decrease in foreign investment. Since the 2009 agreement, Mexico's economy has become better able to handle economic surprises that could have been more detrimental. [24] Mexico faces pressure from the IMF to reform its economic policy and make changes to the proposed budget by President Obrador. The IMF is skeptical of President Obrador's projections regarding tax reforms and issues with Pemex. [25]
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 190 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of last resort to national governments, and a leading supporter of exchange-rate stability. Its stated mission is "working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world." Established in July 1944 at the Bretton Woods Conference, primarily according to the ideas of Harry Dexter White and John Maynard Keynes, it started with 29 member countries and the goal of reconstructing the international monetary system after World War II. It now plays a central role in the management of balance of payments difficulties and international financial crises. Through a quota system, countries contribute funds to a pool from which countries can borrow if they experience balance of payments problems. As of 2016, the fund had SDR 477 billion.
The 1997 Asian financial crisis was a period of financial crisis that gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.
The Mexican peso crisis was a currency crisis sparked by the Mexican government's sudden devaluation of the peso against the U.S. dollar in December 1994, which became one of the first international financial crises ignited by capital flight.
The 1998–2002 Argentine great depression was an economic depression in Argentina, which began in the third quarter of 1998 and lasted until the second quarter of 2002. It followed fifteen years of stagnation and a brief period of free-market reforms. The depression, which began after the Russian and Brazilian financial crises, caused widespread unemployment, riots, the fall of the government, a default on the country's foreign debt, the rise of alternative currencies and the end of the peso's fixed exchange rate to the US dollar. The economy shrank by 28 per cent from 1998 to 2002. In terms of income, over 50 per cent of Argentines lived below the official poverty line and 25 per cent were indigent ; seven out of ten Argentine children were poor at the depth of the crisis in 2002.
Foreign exchange reserves are cash and other reserve assets such as gold and silver held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
Structural adjustment programs (SAPs) consist of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their stated purpose is to adjust the country's economic structure, improve international competitiveness, and restore its balance of payments.
The Convertibility plan was a plan by the Argentine Currency Board that pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth. While it initially met with considerable success, the board's actions ultimately failed. The peso was only pegged to the dollar until 2002.
The Latin American debt crisis was a financial crisis that originated in the early 1980s, often known as La Década Perdida, when Latin American countries reached a point where their foreign debt exceeded their earning power, and they could not repay it.
“Global debt” refers to the total amount of money owed by all sectors, including governments, businesses, and households worldwide.
Adolfo César Diz was an Argentine economist who was President of the Central Bank of Argentina from 1976 until 1981.
The Great Recession was a period of marked general decline observed in national economies globally, i.e. a recession, that occurred in the late 2000s. The scale and timing of the recession varied from country to country. At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression. One result was a serious disruption of normal international relations.
The post-2008 Irish banking crisis was when a number of Irish financial institutions faced almost imminent collapse due to insolvency during the Great Recession. In response, the Irish government instigated a €64 billion bank bailout. This then led to a number of unexpected revelations about the business affairs of some banks and business people. Ultimately, added onto the deepening recession in the country, the banks' bailout was the primary reason for the Irish government requiring IMF assistance and a total restructuring of the government occurred as result.
The 2008 Latvian financial crisis, which stemmed from the global financial crisis of 2008–2009, was a major economic and political crisis in Latvia. The crisis was generated when an easy credit market burst, resulting in an unemployment crisis, along with the bankruptcy of many companies. Since 2010, economic activity has recovered and Latvia's economic growth rate was the fastest among the EU member states in the first three quarters of 2012.
The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, was a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).
International lender of last resort (ILLR) is a facility prepared to act when no other lender is capable or willing to lend in sufficient volume to provide or guarantee liquidity in order to avert a sovereign debt crisis or a systemic crisis. No effective international lender of last resort currently exists.
Poland was one of the founding members of the International Monetary Fund (IMF) in 1945. Under pressure from the Soviet Union, the country withdrew in 1950, believing that the organization had become a tool for the United States. Poland rejoined the IMF in 1986, following the end of martial law in Poland (1981–1983) and the withdrawal of the US veto against Polish membership.
South Korea and the International Monetary Fund (IMF) partner together to assist the country in managing its financial system. South Korea's economy is considered fundamentally sound because of the balance of their banking sector and their aim toward a zero structural balance without compromising their ability to sustain debt. The IMF Board in 2019 assessed that the policy framework and financial system in place are sturdy and firmly set.
The International Monetary Fund (IMF) has historically had a large presence in Indonesia, Southeast Asia's largest economy. During the Suharto era of the 1960s to 1990s the IMF enjoyed an active presence in the Indonesian economy and politics gaining influence through political sympathizers and technocrats within the Indonesian government. The early years of the Suharto era saw economic growth and modernization in a country that had only recently gained independence form Dutch colonialists. However, as the country modernized and growth slowed corruption became even more rampant particularly amongst the inner circle of the regime. After the fall of Suharto in 1998 the new elected government had a different approach to the IMF and was not so friendly towards restrictions on its economic decisions.
The national debt of Pakistan, or simply Pakistani debt, is the total public debt, or unpaid borrowed funds carried by the Government of Pakistan, which includes measurement as the face value of the currently outstanding treasury bills (T-bills) that have been issued by the federal government.
The Sri Lankan economic crisis is an ongoing crisis in Sri Lanka that started in 2019. It is the country's worst economic crisis since its independence in 1948. It has led to unprecedented levels of inflation, near-depletion of foreign exchange reserves, shortages of medical supplies, and an increase in prices of basic commodities. The crisis is said to have begun due to multiple compounding factors like tax cuts, money creation, a nationwide policy to shift to organic or biological farming, the 2019 Sri Lanka Easter bombings, and the impact of the COVID-19 pandemic in Sri Lanka. The subsequent economic hardships resulted in the 2022 Sri Lankan protests. Sri Lanka received a lifeline in the form of an Indian line of credit amounting to $4 billion. This substantial credit infusion served to cover the costs of importing essential goods and fuel. As a result, the foreign currency reserves of debt-ridden Sri Lanka experienced a notable improvement, reaching $2.69 billion.
{{cite web}}: Cite uses generic title (help)