Mexico's Economy, 2009

Mexico had a history of repeated financial crises, with high inflation leading to current account deficits with volatile capital inflows, culminating in significant devaluations. Concerns persisted that this pattern might repeat itself in the future. In the years prior to 1980, the government of Mexico had put in place a command and control economy with an extensive array of regulations through which it intervened in the economy on an ongoing basis and with discretionary powers. Governments created barriers to entry for foreign investment and imports and put in place price controls that protected existing Mexican firms. After 1980, a series of trade and investment reforms opened the economy. Nevertheless, many expressed the view that Mexico's reform movement stalled under President Fox (2000-2006) and that extensive government intervention continued to stifle competition. Exhibits present macroeconomic data as well as World Bank Investment Climate Indicators. A series of challenges now confronted Mexico, including the U.S. financial crisis and recession, competition with China, appropriate monetary policy, opening oil production to foreign companies and a rise in corruption and violent crime.