The World Bank and the International Monetary Fund share much of the responsibility for Mexico's current economic crisis, the U.S. 50 Years Is Enough Campaign charged today.
"For twelve years, as principal architects of Mexico's economic program, the Bank and the Fund promoted deregulation of trade and financial markets without adequate concern for what the costs would be," said Mary Purcell, Public Outreach Coordinator of the Campaign. "In Mexico's current economic instability and in its social and political polarization, we are witnessing the results of such short-sighted policies."
The centerpiece of Mexico's adjustment program--trade liberalization--was financed with $1 billion in loans from the World Bank. Although the Bank conditioned loan money on detailed reductions in tariff and non-tariff barriers, a strategy for dealing with the resulting flood of cheap imports was never devised. Extremely high interest rates encouraged by the World Bank and IMF to attract foreign investment and prevent capital flight have strangled small and medium-sized Mexican producers, while encouraging foreign short-term speculators.
"Wall Street and Washington said Mexico was hot while low interest rates in the United States allowed investors to make money quickly in emerging markets," said Carlos Heredia, International Program Director of Equipo Pueblo, a Mexican non-governmental development organization that is an international partner of the Campaign. "Now the magic is gone, the poor are poorer than ever, and all the Bank and Fund can do is repeat their tired line that it will just take some more time for their adjustment policies to work."
Heredia, a former official in Mexico's Ministry of Finance, and Purcell are authors of The Polarization of Mexican Society: A Grassroots View of World Bank Economic Adjustment Policies. The report was just published by the NGO Working Group on the World Bank and The Development GAP. (Copies are available. Call 202 898 1566.)
"The so-called 'Unity Accord' is simply another in a series of 'economic stabilization pacts' that have resulted in a continuous decline in real wages, credit restrictions and reduced social services for the poor," Heredia alleged. "Mexico is approaching a moment of reckoning. The government's strategy for dealing with the crisis is going to throw Mexico into a severe recession."
Poor and working-class Mexicans, who have shouldered the burden of adjustment for the past 12 years, will carry the burden of the current crisis, too. "This is the most powerful signal to date that poor and working-class Mexicans will never see the rewards promised under the adjustment model promoted by the World Bank and IMF," said Purcell. "Until the underlying causes of poverty and the lack of productive jobs are addressed, economic and social stability will remain elusive."