Mexican Financial Crisis Case Study

The Mexican economy was hit hard by the global financial crisis. Mexico had a high economic dependence on the United States around the time of the global financial crisis as a result of the North American Free Trade Agreement. Consequently, when the global financial crisis hit the United States economy there was a heavy impact on the Mexican economy as well.
Mexico’s economy was very vulnerable to fluctuation in the United States economy and relied heavily on the United States as an export market. Mexico experienced a large decrease in exports of goods and services and in foreign investment. Approximately 80% of Mexico’s exports were sent to the United States. When United States demand for goods and services started to decline, Mexico saw
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Mexico also experienced a decline in foreign direct investment. Total FDI flows to Mexico decreased by 42.5%. This is mainly because 44.1% of FDI came from the United States and went into the manufacturing industry.
Employment rates were affected as well. Unemployment and informal employment increased and by September 2009 it had peaked at 6.4%, which was twice the unemployment from the previous year. Also, because of the recessive labor market in the United States, immigrant workers had a hard time finding jobs. This negatively affected Mexico’s remittance flow. This is important to note because the consumption of low income families in the regions of Mexico with high migration rates heavily depended on the flow of remittance from the United States.
Reducing the Impact

In response to the global financial crisis Mexico implemented different policies. When the crisis started to affect only the poorest parts of the Mexican society the government tried to adopt policy measures that would lessen the blow, especially on low income families. These measures included:
• Increasing public expenditure on infrastructure.
• Freezing household energy prices.
• Implementing programs to support

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