How has Mexico changed since its own 1995 “Tequila” crisis?
Back in 1995, we had an unsustainable current-account deficit of 7% of gross domestic product, and it was being financed with short-term capital flows which made us very vulnerable. So, we let the peso float — that helps the economy absorb shocks. We have used a solid fiscal policy as our anchor, and our objective has been to have a smaller fiscal deficit each year. Today, our inflation is at the same level of our main trade partners [the U.S. and Canada]. Also, the Bank of Mexico (Central Bank) won independence in 1993, and that was a very important institutional change. Plus, we have stretched our debt maturities to longer periods, as long as 30 years. In May, we bought back the last remaining Brady bonds [discounted bonds issued for the restructuring of Mexico’s foreign debt after the 1982 default, named after then-U.S. Treasury official Nicholas Brady]. We retired the last $5 billion of the initial stock of $30 billion in Brady bonds. With our external financing resolved, we have
