#44 Mexico from Bust to Boom: A Political Evaluation of the 1976-1979 Stabilization Program

By Laurence Whitehead

This draft paper was prepared for a June 1979 Workshop on "Economic Stabilization Programs in Latin America: Political Dimensions" organized by the Latin American Program of the Woodrow Wilson International Center for Scholars.

Summary

This paper evaluates Mexico's recent experience of economic stabilization policies (under the three-year Extended Fund Facility arranged with the IMF in September 1976) from a comparative-politics standpoint. By comparison with various South American experiences of inflation and stabilization that were discussed in the same Wilson Center workshop, Mexico's short-term performance must be rated quite favourably. This was not a case in which Fund orthodoxy prevailed at every point, nor was the Fund analysis accepted without qualification by Mexico's policy makers. At the end of the period, economic disequilibria, as measured by IMF criteria, remained considerably larger than the three-year plan had envisaged, but "confidence" had been restored and rapid growth was in prospect. The interpretation offered in the paper is that Mexico's cyclical pattern of presidential politics largely determined the effective contents of the stabilization package, and that the resilience of the Mexican system of political management goes far to explain why the economic outcome was more favourable than in the South American cases. An accident of geological endowment (the nation's huge oil resources) certainly accentuated the process of recovery from "bust" to "boom," but this factor did not operate in isolation, and should not be considered an adequate explanation on its own. The impact of a geological endowment upon economic conditions depends upon political mediation. However, although this paper seeks to highlight the contribution of Mexican political management to the recent short-term economic improvement, it concludes with some qualifications. The final section considers some constraints on the scope and efficacy of Mexican "reformism," particularly in relation to longer term and more structural problems.