Mexico And The World Bank: Rebuilding A Country

1829 words - 8 pages

Mexico and The World Bank: Rebuilding a Country

The 1994/1995 financial crisis in Mexico affected me in a very personal way. My family is from Mexico City, and my dad owns a small private firm that specializes in manufacturing tools. After the devaluation, I not only watched my father struggle with the failing economy and lack of business growth opportunities, I also witnessed a country begin to sink deeper into poverty and despair. There are many reasons for the devaluation, but one of the main ones is probably the “poor savings rates and the low rate of investment (only saved 19 percent of GDP from 1980-1994)” (Bloomburg). Low levels of social development and high levels of poverty ...view middle of the document...

The Bank currently runs 31 active projects with a net commitment of $5.4 billion.

Today Mexico is defined as a middle-income country, although many of its residents continue to survive off less than 1 or 2 dollars per day. Those who live on less than $1 per day do not have access to sufficient food or clean water. Income per capita is $5070 (the highest in Latin America). Life expectancy at birth is now calculated to be 72. The under-five mortality rate dropped from 46 to 29 per 1000 births between 1990 and 2000. Almost three quarters of the population lives in rural areas, and 86 percent have access to clean water. Yet there is also a huge gap between the northern and southern regions of Mexico (with the Northern being more industrialized) and a huge gulf between the rich and the poor. There is room for much improvement, and Mexico must work hard at establishing an efficient government that will allow for economic growth and a rise in the standard of living.

Reducing poverty is generally accepted as Mexico’s main goal over the next few decades. But there are many underlying obstacles that must be addressed before poverty levels can begin to be quantifiably reduced. Development policies designed by the Bank attempt to focus equally on administration, infrastructure and the environment. These are the sectors that rely on the World Bank to provide investment and strategic management, but Mexico must also increase its competitiveness in the world market, boost its agricultural productivity and maintain economic stability. Only then will Mexico be able to directly address the poverty issue.

The acronym CAS stands for the Country Assistance Strategy. The CAS outlines a development agenda that is consistent with the Mexican National Agenda for the years 2001-2006. There are five main points to this agenda:

1-Consolidate macroeconomic gains
2-Accelerate growth through enhanced competitiveness
3-Reduce poverty by investing in human capital
4-Create environmental sustainability
5-Create a more efficient, accountable and transparent government

The first goal basically means that Mexico needs to establish economic stability, primarily by creating stricter budgetary rules, extensively reform taxes, and improve the tax administration. Once these goals are completed, the groundwork will be laid for Mexico to grow and compete more successfully in world markets. One example of a project designed by the World Bank to aid the financial sector is the Financial Sector Project (1995-2000). Under this project, banks in trouble were analyzed and restructured, and all major banks were audited. The World Bank also established a new regulatory framework for private debt and attempted to secure capital-market transactions. The main goal was to extend regulation and supervision of all banks so that they would be forced to act fairly.

The second goal basically states that Mexico needs to improve its...

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