MUDRA MAGAZINE AUGUST EDITION - Christ College

MUDRA MAGAZINE AUGUST EDITION
THE TEQUILA CRISIS, IN A NUTSHELL
Mexico suffered its worst economic crises under the presidency of Carlos
Salinas de Gortari, an economist and reformer whose 6 year administration
ended with a budget deficit of 7% and the economy in shatters. In 1981 a
technocratic government came to power and deregulated the Mexican
economy, appointed PhDs from Ivy Universities to run the Government.
Even with all that reforms underway the economy grew by less than 1%
during 1981-89. No payoff emerged after all those reforms, in 1994 wages
were still below 1981 levels because of the overvalued peso. The country‟s
currency(peso) was indexed to the dollar, 1 Dollar=1 Peso, making its
goods expensive relative to other countries, established currency board had
a negative impact and pegging the Peso to the Dollar laid the groundwork
for their own demise.
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