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Mexico Economy Essay

2299 words - 10 pages

Most Latin America countries are known as third world countries because the economic structure still in development. To overcome such judgment the countries had been developing different policies since the 1970s. The policies promise to help the countries to obtain a healthier economy and have an economic growth. The author Franko explains in the book The Puzzles of Latin America Economic Development how the economist Paul Rosenstein “believes that in order to achieve sustained growth, an economy must develop various industries simultaneously, requiring a coordination of investment or a big push.” (pg. 19) But to accomplished economic growth countries need to reduce the ...view middle of the document...

Besides reducing the control of the government over the economy neo-liberalism recommends the government and financial institutions to enforce fiscal transparency, and make monetary policy changes, to encourage foreign and domestic investment. Monetary policy changes will include lowering interest rates and inflation. Franko believes foreign investment is important to maintain because “Foreign trade will introduce competitive price pressure and create incentives for external orientation and transparency in public policy” (151 franko 2007). Neo-liberalism is best described as the most efficient market in the world.
In the Article IV Consultation with the International Monetary Fund in 2001, Mexico adopted multiple steps to liberalize trade and attract new investments. Mexico main concentration was in the long-term inflation target, which affects monetary policy. With an inflation rate of 6.5 in 2001, Mexico was required to lower inflation to 3 percent by the end of 2003. The International Monetary Fund agreed that “the corto has proven to be a flexible and efficient monetary policy instrument, most considered that a move toward direct interest rate targeting over the medium-term will facilitate the communication of monetary policy intention and will be appropriate once monetary policy credibility is sufficiently well established”(International Monetary Fund, 2001). The reduction in inflation rates will also encourage new investments and discourage capital flight.
Mexico was also required to complete a ROSC module on fiscal transparency. The policy encourages the redefinition of the institutional coverage, reassigned commercial public enterprises to the rest of the public sector, share information of Mexico’s government fiscal accounts to the public, clearly specify fiscal objectives, as well as liabilities and tax expenditures and include consistent financial management information. The government will be also required to implement new tax laws, and regulations. Recommendations and implementation changes will be also required in audit performance. Directors believed that “fiscal policy stance is warranted to maintain investor confidence, lower borrowing costs, and promote economic growth” (International Monetary Fund, 2001). IMF desired to have an economic growth by decrease inflation rates and obtaining fiscal transparency. Mexico failed to decrease inflation in 2003, and still in process of fiscal transparency.
Human Development Status
(See appendix example one pg. )
In the Human Development indicators, Mexico is part of the group of high development. Mexico is above others Latin American countries. Mexico’s HDI value is of .854 taking the country to the 53 place.
GDP per capita PPP. Mexico’s GDP per capita PPP ($ current US) in 2008, was of 14,570. The overall GDP per capita PPP (current US $) in Latin America is of 10575, which is slightly lower than Mexico. Mexico’s economy seems to be a prominent country when we compared...

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