tequila crisis
TRANSCRIPT
1994 MEXICAN PESO CRISIS (Tequila Crisis)
Syeda Aniqa AdibaRH-14
Akib Moin ArkaZR-19
Arifur Reza ChowdhuryZR-23
Md. Alvi RahmanZR-52
Johan AhmedZR-79
GROUP 3
BACKGROUND
CAUSES
IMPACT TAKEAWAYS
ASSISTANCE
OUTLINE
BACKGROUND
1
2
3
5
6
7
4 8
9
CAUSES
INCREASE IN US INTEREST
RATES
MYRIADS OF POLITICAL
EVENTS
CURRENT ACCOUNT DEFICIT
PEG EXCHANGE
RATE SYSTEM
ASSASINATION OF LUIS
SHARP RISE IN INTEREST
RATES
OTHER POLITICAL SHOCKS
IMPACTS
MACRO-ECONOMIC IMPACTS
7.4%
50% 52%
6.2% 25-35%
Peso Depreciation
GDP Decline
in 1995.
Hyperinflation
In 1995.
Real Wages Fell
Unemployment
In 1995
Prices Increase in 1995
35%
Severe Recession Decreased in Gross Income Per Capita
IMPACTS ON HOUSEHOLD
21
3 4 Increased Remittances
To Mexico
Incomes Plummeted
Average Consumption Declined
Decreased SavingsSpent Less On Healthcare
Hike In Mortality Rates
In 1996.
IMPACTS ON INVESTMENT SCENARIO
1 2 3 4 5 6 7
Financial Markets’ Perception Regarding Mexico Changed
Investors Shifting to
Foreign Investments
Few Investors were Interested
in Purchasing New Debt
Foreign Investors
Withdrew Capital
Mutual Funds Began Liquidating
Strong Ripple Effects in Financial
Markets of Asia & Latin America
Central Bank Raised
Interest Rates
IMPACTS ON BANKING SECTOR
Upward Market Pressure on
Interest Rates
Downward Market Pressure
on Peso
Strong Rise of Non-Performing
Loan Ratio
Thousands of Mortgages went
Default
Liquidity Problems Occurred
Govt. Faced Imminent
Sovereign Default
Unable to Honor Foreign Currency
Liabilities
CB Purchased Dollar with
Weakened Pesos
BENEFITSOF
BAILOUT PACKAGE
IMF$17.8 Billion
USA$20 Billion
BIS$10 Billion
CONSORTIUM of LATIN AMERICA NATIONS
$1 Billion
CANADACAD $1 Billion
USA Coordinated the $50 Billion Bailout Package in January, 1995
Improving Market Liquidity
Restructuring of Public Debt
Alleviate Growing Risk Premium And Boost Investor’s Confidence
ASSISTANCE
TAKEAWAYS
THANK YOU !