The Latest IMF‐Sponsored Stabilization Program: Does It Represent a Long‐Term Solution for Mexico's Economy?

Abstract

On 20 December 1994, the newly inaugurated government of President Ernesto Zedillo shattered Mexico's facade of modernity by finding itself, first, forced to devalue the currency by 14% (in real terms), and then, only a few days later and under intense pressure from speculators (sacadolares), to allow the peso to float freely against the dollar. By the end of December, the value of the peso vis-a-vis the dollar had dropped by more than 30%, and the country had lost between $7 and $8 billion in foreign exchange reserves.