Word: pesos
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Dates: during 1990-1999
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After his Finance Minister said publicly just 10 days earlier that the currency would not be devalued, Zedillo used the occasion of a potential December uprising in Chiapas first to nudge the peso downward, then abruptly to let it float against the dollar. Plummet is what it did instead. In a world where international investment money can cross borders with a few taps on a computer keyboard, a thunder of key taps arose from the offices of stunned investment-fund managers in New York City and other financial centers. As they swiftly dumped Mexican securities, the peso went into...
...which is tied to Mexico more closely than ever by NAFTA, it is important that Zedillo solve all of these problems. Mexico's long-term prospects still look good. But the peso mess raises questions about the ability of the nation's leaders to ensure the stability of Mexico, the U.S.'s second largest trading partner, where Americans hold more than half of all direct investment. Wary of appearing to be managing Mexico's affairs, the White House kept silent for most of last week, even as it worked overtime to arrange an international peso-rescue package of as much...
...peso's troubles are expected to have little direct impact on the U.S. As Mexican wages grow cheaper in dollar terms, some U.S. firms may find it more attractive to move jobs south. But Mexico may become less attractive for firms like auto manufacturers that would still have to bring in dollar-priced American-made parts for final assembly. "Mexican products will be more competitive on the global market, and there will be more jobs created in Mexico than otherwise would have been the case," says Robert Hormats, vice chairman of Goldman Sachs International. And the prospect of gradual improvement...
...irony of the peso's misfortune is that it happened to a country that up until a year ago gave all the signs of being on a durable winning streak. Mexico has steadily climbed out of the debris of the debt crisis of the early 1980s, when a dip in the price of oil, its most valuable export, left the nation unable to pay its bills. For years afterward Mexico was a dirty word to foreign investors, who left it to starve for development capital. Rebuilding credibility required a long stretch of austerity and the sale of inefficient state operations...
...surprise of many, Salinas left office instead with the peso still hovering at an unrealistic four to the dollar. Even without a devaluation, he reckoned, the underlying strengths of Mexico's economy would continue to draw investors, however nervous they might be about his nation's political stability. What he failed to calculate was the impact of rising interest rates around the world, especially in the U.S., which gave investors attractive alternatives for their money. Another possibility is that Salinas, who would very much like to be named the first head of the World Trade Organization, which will be created...