NEW LOW OBSERVER

Source

Krugman, Paul R. "Mexicans Send Message with Votes, but the Results may Not be what they Hope." Los Angeles Times. Jul 24, 1988, page 2.

Claims

• "Dragged down by a massive burden of foreign debt, buffeted by declining oil prices and given an earthquake as a final insult, Mexico had shown little economic growth since 1982."
• "The standard of living of ordinary workers had fallen by half."
• "The sinking peso had fed an inflationary spiral that had taken the inflation rate in a country once proud of its price stability into triple digits."
• "Salinas and his team must succeed in controlling inflation; they must translate that inflationary success into political success that gives them the power to pursue economic liberalization; they must then fairly quickly deliver results in terms of economic growth that validate their economic program."

Prediction

"Is anyone in the U.S. government prepared to take the lead? Or will we drift, hoping that Mexico's problems will go away, or at least wait until January [1989]? If we do, we risk a foreign policy disaster that will make our Central American worries look trivial."

Outcome

1. “In its largest loan ever made to a debt-pressed nation, the United States said today that it would grant Mexico up to $3.5 billion to help it cope with reduced revenues resulting from the plunge in oil prices. The short-term loan is intended to tide over Mexico, which depends heavily on oil exports, for a few months until it can get longer loans of similar magnitude from the big multinational lending agencies, the World Bank and the International Monetary Fund. (Kilborn, Peter T. “Mexico to receive up to $3.5 Billion as loan from U.S.” New York Times. Oct 18, 1988. page A1.).

see also: Mexican Peso Crisis