How Mexico reshaped the global economy
While work continued in the late 1970s on the North-South issue, culminating in the 1980s Brandt Commission Report, Reagan’s election in the United States ensured that there would be no North-South redistributive compromise.
Even without this framework, however, foreign capital, driven by the petrodollar boom, continued to flow into Mexico. The government has borrowed increasing amounts for social programs and government investments. Mexico’s foreign debt exploded under Echeverría and his successor, José López Portillo, from $ 4 billion to $ 50 billion in the 1970s, then skyrocketed to over $ 80 billion in 1981 alone. .
When it was announced in 1982 that Mexico could not honor its foreign obligations, the country had taken on so much debt that it was a systemic risk. If Mexico collapsed, it could take Wall Street with it. The US government stepped in to intervene, creating a bailout with private banks and multilateral institutions like the IMF and the World Bank.
This agreement kept the Mexican government afloat, but required a radical reorientation of Mexican economic policy. World Bank structural adjustment programs have been put in place to oversee the privatization of state-owned enterprises, lowering tariffs, reforming the tax system, and weakening organized labor.
This marked the start of what we call today the Washington consensus. Of course, liberal economists and many business leaders in Mexico were only too happy to see these “free market” reforms put in place with the help of international institutions as well.
Thus, in the 1980s, the very international institutions that Mexican officials had spent decades demanding, building and defending finally became important architects of the neoliberal transition. Ultimately, these institutions were used to dismantle the development project of the state itself.