25-YEAR TRACK OF MEXICO’S INFLATION
Reference: ("inflation.eu worldwide inflation," 2012)
This line graph represents Consumer Price Index (CPI) inflation for the last twenty-five years in Mexico. The graph spans from 1987 to 2011. The data recorded is the inflation percentage for the year. The high for the last twenty-five years was 159.17% in 1987. The low for the last twenty-five years was 3.33% in 2005. There are two spikes of inflation. These occurred in 1987 and 1995 and were sparked by economic irresponsibility.
The first spike in inflation, which occurred in 1987, was a result of poor fiscal policy implemented by President Echeverria and President Lopez Portillo. Their presidential terms ran from 1970 to 1982. During their tenure they implemented expansionist policies that exceeded the limitations of ...view middle of the document...
The policies of President Madrid would result in lower inflation percentages until 1995. President Salinas would use these same policies as well as the reduction of minimum wages and adopting a fixed exchanged rate to address Mexico’s economy.
Inflation gradually decreased from 1988 until 1995. The implementation of liberalized trade and government reform allowed Mexico to streamline tax collections and privatize 63% of the companies that were once government owned. ("Encyclopedia of nations," 2012) Although, the economy seemed to be recovering slowly, it was the mismanagement of currency that caused the inflation rate to spike in 1995. Current account deficits (imports greater than exports) progressed to a point where the government was without international reserves to pay for imports. ("Encyclopedia of nations," 2012) In 1995 President Zedillo had taken office. In an effort to save Mexico’s economy Zedillo elected to abandon the fixed exchange rate, which caused the peso to become devalued. (Wikipedia, 2011) Devaluation of the peso caused the inflation rate to jump from 7.05% to 51.29%. The Mexican economy was quick to recover from this crisis because of a boom in exports and a relief package that was provided by the international community headed by the United States of America. Mexico’s inflation continues to remain low due to liberalized trade. Mexico is one of the most open countries in the world to trade with.
Encyclopedia of nations. (2012). Retrieved from http://www.nationsencyclopedia.com/economies//Americas/Mexico-MONEY.html
Gil-Diaz, F. (2012). The origin of mexico. Retrieved from http://www.cato.org/pubs/journal/cj17n3-14.html
inflation.eu worldwide inflation data (2012). Retrieved from http://www.inflation.eu/inflation-rates/mexico/historic-inflation/cpi-inflation-mexico.aspx
Wikipedia. (2011, November 26). Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Economy_of_Mexico