Mexico's Circle of Misery: How U.S. Bailouts Postpone Reform

Since the debacle of December 1994, when the peso collapsed and Mexico nearly defaulted on its debt, the country has suffered a series of blows to its self-confidence and stability. Mexico has been through crises before-in 1976, 1982, and 1987-88-but the current situation is far more precarious. The country is mired in its 15th year of economic stagnation, corruption has reached unprecedented depths, public cynicism about government has grown, and political violence has returned. Mexico was never the paragon of middle-class serenity, well-being, and modernity that its champions abroad claimed, but its social cleavages and tensions are more serious than ever.

Nevertheless, the imminent explosion that many have predicted will not take place. And though optimists have argued that the Mexican economy is back on track and that the overhaul of the political system has begun, the country is not poised for rapid political reform and economic growth. Rather, as long as Mexico delays the changes that will bring prosperity to all, the country will remain stalled, divided between a minority whose lot depends on the United States and a majority periodically buffeted by economic and political crisis. Until a new generation of bold leaders arises, Mexico will simply muddle through, enacting superficial reforms while failing to confront its imposing dilemmas.

Not since the late 1920s has Mexico suffered so lengthy an economic depression. Per capita income is, in constant dollars, lower today than in 1980. Mexicans purchased fewer automobiles in 1995 than in 1981, even though the country's population grew by nearly half during that time, from 66 million to 95 million. President Ernesto Zedillo Ponce de Léon correctly points out that only through sustained economic expansion of at least five percent per year will the standard of living of all Mexicans rise, but the last time the economy grew at that rate for two consecutive years was in 1980-81. Even the most sanguine projections foresee no growth in per capita income during Zedillo's six-year term.

Register for free to continue reading.
Registered users get access to three free articles every month.

Or subscribe now and save 55 percent.

Subscription benefits include:
  • Full access to ForeignAffairs.com
  • Six issues of the magazine
  • Foreign Affairs iPad app privileges
  • Special editorial collections

Latest Commentary & News analysis