san antonio business and economics society old wine in new bottles? the mexican economy today jorge...

San Antonio Business and Economics Society

Old Wine in New Bottles?Old Wine in New Bottles?The Mexican Economy TodayThe Mexican Economy Today

Jorge G. Gonzalez

Trinity University

Current Situation

• Rapid Economic Growth

Real GDP% Change

4.42

-6.17

5.156.76

4.813.65

-8-6-4-202468

1994 1995 1996 1997 1998 1999

Source: Banco de México www.banxico.org.mx

Current Situation

• Rapid Economic Growth

• Decline in Inflation Rate

Inflation Rate

7.05

51.97

27.7

15.7218.61

12.32

0

10

20

30

40

50

60

1994 1995 1996 1997 1998 1999

Source: Banco de México www.banxico.org.mx

Current Situation

• Rapid Economic Growth

• Decline in Inflation Rate

• Decline in Interest Rates

Interest Rates28-day CETES

0

20

40

60

80

J an-94

J an-95

J an-96

J an-97

J an-98

J an-99

J an-00

Source: Banco de México www.banxico.org.mx

Current Situation

• Rapid Economic Growth

• Decline in Inflation Rate

• Decline in Interest Rates

• Increase in Employment

Employment(Thousands of IMSS Members)

10000

11000

12000

13000

14000

15000

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Source: INEGI www.inegi.gob.mx

Current Situation

• Rapid Economic Growth

• Decline in Inflation Rate

• Decline in Interest Rates

• Increase in Employment

• Strong Peso

Exchange RatePesos per U.S. Dollar

456789

1011

Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00

Source: Banco de México www.banxico.org.mx

Current Situation

• Rapid Economic Growth

• Decline in Inflation Rate

• Decline in Interest Rates

• Increase in Employment

• Strong Peso

• Strong International Sector

International Trade(Billions of Dollars)

94

- I

95

- I

96

- I

97

- I

98

- I

99

- I

10

20

30

40

Exports

Imports

Source: Banco de México www.banxico.org.mx

Can it get any better?

• Strong U.S. economy

• Price of oil

• Strong domestic demand

• Investment rating

A Tale of Two Years1994

• Zapatistas (January)• Car bombs (January)• Kidnappings (March)• Colosio (March)• Capital Flight• Large Trade Deficit• Controlled Peso

2000• Chiapas and UNAM• Strong DFI• Strong Floating Peso• Investment Rating

Future Dangers

Exogenous• International Crisis• Price of Oil• Increase in U.S. Rates• Recession in U.S.

Endogenous• Political Uncertainty• Loss of Discipline• Banking Sector• Balance of Payments

San Antonio Business and Economics Society

Old Wine in New Bottles?Old Wine in New Bottles?The Mexican Economy TodayThe Mexican Economy Today

Jorge G. Gonzalez

Trinity University