Word: zedillo
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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...
That represents a devastating loss for a nation that has been strongly dependent on funds from abroad to fuel its economic revival. Coaxing the money back will be a tough problem for Zedillo, but only one of many. Another will be how to keep interest rates high enough to attract new investors without sending them so high that they force Mexico into a recession. Commercial lending rates have already almost doubled since the devaluation, to hover around 40%. Credit-card rates are more than 50%. Yet another problem will be how to keep a lid on inflation, which the devaluation...
...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...
...worst shock was the March assassination of Luis Donaldo Colosio, the presidential candidate of the Institutional Revolutionary Party and Salinas' hand-picked successor. As a replacement, Salinas pressed the party's Old Guard to choose his Education Minister and Colosio's campaign manager, Zedillo, a Yale-educated technocrat. As a campaigner, Zedillo was so colorless that at one rally his wife had to nudge him to throw his arms into the air and shout "Viva Mexico!" at the appropriate moment. But he was committed to the Salinas reforms. Then in September came another blow: the killing of Zedillo's main...
...that, Zedillo came to office with the advantage of having won what was generally agreed to be the cleanest race in modern Mexican history. What he did not get was one crucial gift from Salinas. For months investors had been expecting that he would devalue the currency, a common favor that departing Mexican leaders perform as a sort of economic housecleaning for their successors...