{
  "title": "Mexico - Marking the Retirement of its Brady Bonds, address by Horst Köhler, Managing Director of the IMF",
  "publication": "IMF News, June 12, 2003",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp061203a",
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  "summary": "Given at a Celebration at Los Pinos, Mexico City",
  "publishDate": "2003-06-12",
  "sections": [
    {
      "heading": "Introduction",
      "content": "- Speech delivered at a Celebration at Los Pinos, Mexico City, June 12, 2003.\n- Purpose: celebrate Mexico's early repurchase of its Brady bonds and broader political and economic transformation.\n- Highlights:\n  - Political transition to a vibrant multi-party democracy.\n  - Economic move from deep debt and recurrent financial crisis to growing leadership among emerging market countries.\n  - Credit attributed to the Mexican people and their leaders for sustained political and economic reform."
    },
    {
      "heading": "Achievements",
      "content": "- Macroeconomic stabilization and performance:\n  - Inflation had reached 100 percent during the 1980s; now \"firmly in the single-digit range.\"\n  - Current account deficit reduced from an average of more than 7 percent of GDP pre-1994-95 crisis to a sustainable 2-3 percent of GDP.\n  - International reserves increased ten-fold over the past decade to over US$50 billion.\n  - Mexico has moved from being a debtor to being a creditor of the Fund.\n- Growth and social indicators:\n  - Real GDP growth has averaged 4 percent since the mid-1990s—nearly twice as fast as during the 1980s.\n  - Exports now comprise 30 percent of GDP—nearly double the share in 1985.\n  - Improvements in key social indicators: life expectancy, infant mortality, and adult literacy.\n- Structural and policy reforms contributing to recovery:\n  - Fiscal policy and debt management: improved efficiency and transparency; quasi-fiscal activities controlled; targeted transfers to the poor; leadership in developing domestic debt market and investor relations.\n  - Monetary and exchange rate policy: close to a decade of experience with a flexible exchange rate and movement toward a full inflation-targeting regime supported by an independent central bank.\n  - Financial sector: restored stability after 1994-95 liquidity and solvency problems; regulation and supervision moving toward international best practice; increased competitiveness through foreign investment.\n  - Trade openness and NAFTA (entry in 1994): fostered a strong traded sector, matching high financial market integration and spurring innovation and competition.\n  - Institutional reforms: privatization and deregulation in key industries; stronger domestic bankruptcy framework; initiatives to strengthen transparency in fiscal and financial areas."
    },
    {
      "heading": "Forward-looking challenges",
      "content": "- Primary challenges: raising growth and reducing poverty—interconnected goals.\n- Recent trends and sources of weakness:\n  - Growth has recently slowed after acceleration in the late 1990s.\n  - Poverty remains high with significant regional disparities.\n  - Slowdown reflects cyclical weakness in the United States and weakening stimuli from contributors to 1990s growth, such as NAFTA.\n- Policy agenda (National Development Plan) priorities and recommended reforms:\n  - Fiscal reform:\n    - Further reform and strengthening of the fiscal position within a prudent medium-term framework.\n    - Sustained further reductions in the broad fiscal deficit (the PSBR) are essential to address remaining financial vulnerabilities and improve public debt dynamics.\n    - Tax reform emphasized due to considerable infrastructure financing needs, relatively low share of non-oil revenues, and scope to broaden the tax base and reduce evasion.\n  - Labor-market reform:\n    - Increase labor-market flexibility toward levels of Mexico's main trading partners to boost employment, productivity, and integration of marginalized workers.\n    - Business and labor groups have collaborated on draft legislation to move in this direction; passage would improve competitiveness.\n  - Institutional and business environment reforms:\n    - Create an open and supportive environment for private business in infrastructure to attract needed investment and exploit energy resources.\n    - Improve governance of public enterprises via robust, market-based structures to achieve greater efficiencies.\n  - Social policy and governance:\n    - Prioritize education and human capital development, with responsibilities increasingly at decentralized government levels; require consensus across regions for clear reform frameworks.\n    - Efforts to combat corruption seen as important for social equity, as corruption disproportionately burdens smaller businesses and the poor."
    },
    {
      "heading": "Role of the IMF and regional outlook",
      "content": "- IMF objectives in international financial architecture:\n  - Two-fold challenge: prevent crises and improve crisis resolution when they occur; intensified efforts to learn from recent crises.\n- Crisis prevention and surveillance:\n  - Emphasis areas: more flexible exchange rates; stronger fiscal positions, institutions, and debt management; efficient and diversified financial sectors; operational autonomy for central banks; increased transparency.\n  - Mexico cited as an example of correcting macroeconomic and financial weaknesses to reduce vulnerability.\n- Crisis resolution and sovereign debt restructuring:\n  - Promotion of collective action clauses (CACs) in emerging market bond issues as a key step.\n  - Mexico led by issuing government bonds under New York law with CACs earlier in the year; others have followed and CACs look likely to become standard.\n- Latin America outlook:\n  - Six months prior, the region experienced negative growth—the worst in at least a decade.\n  - Since then, some downside risks receded; Latin America expected to recover in 2003, with growth rising to over 4 percent in 2004.\n  - Recovery driven by rising political consensus for stronger economic policies; Fund has supported sustainable macroeconomic frameworks and strengthened social safety nets.\n  - Markets have responded; macroeconomic and financing pressures have begun to ease.\n  - Challenge: transition from emerging recovery to sustained growth with improved equity over the medium term.\n  - Mexico accounts for fully a quarter of regional GDP; its continued success is crucial to regional prosperity.\n- IMF personnel note:\n  - Agustin Carstens has agreed to become Deputy Managing Director at the IMF—the first from Mexico; anticipated to be a valuable resource for the IMF membership.\n\n---\n\n\n References\n\n- Mexico and the IMF\n- Speeches\n- Horst Köhler\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp061203a"
    }
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    "[Markdown version](/en/news/articles/2015/09/28/04/53/sp061203a/index.md)",
    "[Structured JSON version](/en/news/articles/2015/09/28/04/53/sp061203a/index.json)",
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    "Published: June 12, 2003",
    "Speech delivered at a Celebration at Los Pinos, Mexico City, June 12, 2003.",
    "Purpose: celebrate Mexico's early repurchase of its Brady bonds and broader political and economic transformation.",
    "Highlights:",
    "Macroeconomic stabilization and performance:",
    "Growth and social indicators:",
    "Structural and policy reforms contributing to recovery:",
    "Primary challenges: raising growth and reducing poverty—interconnected goals.",
    "Recent trends and sources of weakness:",
    "Policy agenda (National Development Plan) priorities and recommended reforms:",
    "IMF objectives in international financial architecture:",
    "Crisis prevention and surveillance:",
    "Crisis resolution and sovereign debt restructuring:",
    "Latin America outlook:",
    "IMF personnel note:",
    "[Mexico and the IMF](http://www.imf.org/external/country/MEX/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[Horst Köhler](https://www.imf.org/external/np/omd/bios/hk.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
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