Central Bank Autonomy in Mexico / Volume III: Concurrent Visions
Author: Eduardo Turrent
Date: 2015-11-13T06:00:00+00:00
Publisher: Banco de México

Central Bank Autonomy in Mexico

A Historical Overview

Volume I

The Central Banking System in the World

Agustín Carstens

Governor

Roberto del Cueto Legaspi
Manuel Ramos Francia
Manuel Sánchez González
José Julián Sidaoui Dib
Deputy Governors

BANCO DE MÉXICO

EDUARDO TURRENT
Project supervision

AÍDA GARCÍA DIMAS
Historical research and project coordination

ANTONIETA CRUZ
Editorial coordination

ANTONIETA CRUZ
GERMÁN GÓMEZ
Iconographic research

NOSTRA EDICIONES
Editing, design, and prepress

SANDRA FERRER ALARCÓN
Graphic and editorial design

LUCERO VÁZQUEZ TÉLLEZ
ROSALINDA RESÉNDIZ PADRÓN
Graphic design

GREGORY DECHANT
Translation

MARÍA ESPERANZA ZOREDA LEE
Translation oversight

LIDIA CASTRO RAMÍREZ
Text transcription

LUIS EKIRO
GERARDO PEÑA TORRES
Banco de México images 2012

We would like to thank the following institutions for their support:
Sistema de la Reserva Federal
Banco Central de Chile
Centro de Estudios Monetarios
Latinoamericanos, CEMLA

Banco de México:
Oficina de Acervo Numismático
Subgerencia de Coordinación de Archivos
Subgerencia de Numismática y Comercialización

The reproduction of the images of banknotes used to illustrate the present work has been authorized by the Secretaría de Hacienda y Crédito Público (official authorization UBA/DGABM/1339/2005, dated November 2005).

First edition, 2012

All rights reserved

BANCO DE MÉXICO
Avenida Cinco de Mayo 2
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06059, México, D.F.

IEBN: 484-132-000005-28

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Concurrent Visions

The Decision “Not to Devaluate”

Devaluations in Mexico have always been highly traumatic events. This kind of damaging and predatory development had occurred in 1938 —as a result of the expropriation of the foreign oil companies— and on successive occasions in 1947-1948 and 1954. Mexico was the only country in the third world that shared a border with the world’s richest economy: that of the United States. As a result, maintaining the price of the US dollar in pesos had acquired a symbolic significance and was a source of national pride similar to that evoked by the national anthem, the flag, and the emblem of the eagle perched on a prickly pear cactus, devouring a serpent. Almost by automatic association, every time parity collapsed as a consequence of a crisis in the balance of payments, a sort of stigma was attached to the national soul. In the devaluation crisis detonated by the events of March 1938, the authorities were rhetorically skillful enough to blame the development on the effects of the perverse campaigns of the oil companies that had been expropriated. But an identical or even similar excuse was no longer available —like an ace up the sleeve— to those responsible for the country’s finances. The public had learned quickly from past devaluation experiences and there would be no possibility in the future, moreover, of once again “nationalizing” the oil reserves that the devil had registered in Mexico’s name. In this historical context, and unlike today, the decision to “devaluate” or “not devaluate” could be, in principle, set by the authority and not necessarily be the inevitable result of a balance of payments disequilibrium, since the capital account was practically closed.

President Lázaro Cárdenas and his cabinet. To the right of Cárdenas, his brilliant and controversial Secretary of Finance, Eduardo Suárez.

The shattering experience had been engraved in the national subconscious. But in addition to the implicit learning experience, there were other aggravating circumstances in the devaluations of 1947-1948 and 1954. In the former case, it would have been difficult to find a cause —or a scapegoat— similar to the unique circumstances of 1938. The reaction was one of great surprise and anger when, just a year and seven months into the six-year administration of President Miguel Alemán, whose election had generated boundless optimism, the government was forced to abandon the exchange rate it had promised to maintain. The unease and skepticism were even more intense in 1954, when on the day before Easter Sunday, the administration of President Adolfo Ruiz Cortines announced euphemistically that the exchange rate of the Mexican peso was to be determined by free market forces. No one was so gullible as to believe that this “flotation” device would not depreciate the value of the peso, which had stood at the level of 8.60 to the dollar since May 1949.

In contrast to what had taken place in the devaluation crises of 1938 and 1947-1948 or even during the period previous to parity with the US dollar having been fixed, in 1934, at 3.60 Mexican pesos, in 1954 the authorities did not expect Banco de México’s international reserves to run out, with the inevitable consequence of having to abandon the prevailing rate and readjust it at a more sustainable level. The devaluation of 1954 was preventive or preemptive in nature, so when the balance of international reserves was made known, it turned out to be, if not intact, at least at a reasonable level. This measure was very useful, because it made it possible to move immediately to a new official parity. Almost no one suspected there was a risk of devaluation and when the adjustment of the exchange rate became known, the reaction of the public was highly adverse. Rumors even began to circulate of the possibility of a coup d’état and the forced resignation of President Ruiz Cortines.

Very similar to the experience of 1948-1949, the devaluation of April 1954 came about as a result of a crisis in the balance of payments, sharpened by the flight of capital. The Mexican government was under strong pressure owing to the large amounts of capital fleeing the country, but the delegation dispatched to the International Monetary Fund had to reply to the arguments of an Executive Board oblivious to the difficulties Mexico was confronting. Mexican delegates, Raúl Martínez Ostos and Ernesto Fernández Hurtado, were well aware beforehand that their meeting with the IMF Executive Board would be no field day. In fact, the session took on the character of a confrontation. Three arguments were made in opposition to approval of the Mexican request: that Mexico’s balance of payments problems were transitory and did not require a change in dollar parity, that the proposed exchange rate adjustment was too large, and finally that the change in parity did not require a contingent credit from the International Monetary Fund.[1]

President Manuel Ávila Camacho flanked by two high-ranking military men.

A very particular feature of the 1954 devaluation was the intense capital flight provoked by the announcement of the modification of parity. The outflows of capital would not let up, leading to a sharp drop in the level of international reserves. Again, the recommendations of the economists from the International Monetary Fund and probably of the highest Mexican officials as well were for a tightening of fiscal discipline, control over the means of payment, and an expansion of credit. It was therefore gratifying and reassuring to the Mexican government that a report by IMF economists stated that it had shown a great deal of discipline in its spending policies and that Banco de México was making every possible effort to prevent a subsequent expansion of bank credit. The same demands were made as in 1948-1949 with regard to fiscal, monetary, and credit policy, as the government was called on to contain inflationary pressures and maintain the exchange rate within the parameters of the Bretton Woods system.[2]

The year 1958 brought a real shakeup of the political and social stability of Mexico. The agitation created by a series of trade union movements put to the test the negotiating capacity of both the lame-duck administration of President Adolfo Ruiz Cortines and the incoming administration of President-elect Adolfo López Mateos. The catalyst was the conflict generated by the railway workers’ union, which began to mobilize in the early months of 1958.

Protest movements involving telegraph, trolley, and telephone workers rose up in the wake of the labor agitation stirred up by the railway workers and Mexico City primary school teachers, as well as protests by a powerful group in the oil workers’ union, known as the chimales in allusion to the last name of one of their leaders, surnamed Chimal. There followed mobilizations of students, who protested noisily against an increase of fares on urban public transport. The months of June and July 1958 were the most agitated, but the measures taken by the government and the passing of time ended up weakening many of the movements. The railway workers’ movement did not yield, however, remaining in action all through 1958 and the beginning of 1959, until Vallejo and his close collaborators were imprisoned.

When these events are viewed in retrospect, the skill with which some of the leaders of the movements acted remains surprising. First of all, they were able to mobilize their bases by touching the basic springs of interest and partiality. Labor organizations always want higher salaries and more generous benefits, so movement supposedly directed toward those ends are capable of awakening strong support. But the case of the leaders was a little different, especially if Demetrio Vallejo, Valentín Campa, and Othón Salazar are considered. Men of strong ideological passions, they certainly pursued other ends through their activism: from creating agitation to constituting the thin edge of the wedge of a movement called to transform Mexican society. No one today would deny that bonds of friendship united Vallejo and Othón or even that they had acted in concert. Scholarship on the subject would agree that “the railway workers’ movement was linked with various political parties making up a coalition whose main function was to promote solidarity with the railway workers and cooperate with the leaders of the trade unions affiliated with those parties.”[3] Valentín Campa, a former leader of the railway workers who had been expelled from the union, rejoined the movement through this coalition.

The government responded to these movements with a mixed strategy: a combination of negotiation, dissuasion, force, and political shrewdness used to gain time and maneuvering room. President Ruiz Cortines, always so cautious in political matters, called on the support of the army, but more as a simple show of force than with the intention of intervening. In other words, he wanted the army to act as a deterrent force and it was present under this premise at many of the demonstrations organized by the mobilized labor groups.

The commemoration of the 25th anniversary of Banco de México was headed by President Miguel Alemán (1946-1952). To the left of the president is his Secretary of Finance, Ramón Beteta, and to his right Banco de México’s Director, Carlos Novoa.

The strategy was not always easy to implement. Since their objective was not to reach an agreement but to destabilize, the leaders of the movement always found a way to protest in favor of demands that would be impossible to satisfy. Unfortunately, this was the case of many of the activists who had gone into action during the agitated year of 1958. Both President Ruiz Cortines and his successor, however, were animated by a spirit of conciliation. Shortly after being sworn in as president on 1 December 1958, López Mateos met personally with the executive committee of the railway workers’ union, headed by Vallejo, in an attempt to reach an agreement on a new balance of labor relations in the railway corporation.[4]

As we have seen, the political problems of 1958 began early in the year and continued until López Mateos was sworn in as president in December. The agitation caused widespread public concern, which the duration of the conflicts rendered all the more acute. In the midst of the uncertainty and confusion, and as a result of an understandable nervousness, rumors of a possible devaluation slowly began to circulate. They gradually gained force and by the month of November they had become a veritable torrent. Things reached the point where people no longer spoke of the devaluation as a possibility but simply said categorically: “Nothing to be done… the peso is going to be devalued.”

The agitators of the railway workers’ movement and their allies were the most zealous disseminators of the rumor, a task for which they were magnificently prepared. They printed thousands of brochures, which were distributed in great numbers all over Mexico City through their organization, based on the well-known system of activist cells. The deliberate objective of their strategy was to suggest that everything pointed to a devaluation. It is strange that the contemporary press did not talk about the rumors of a devaluation, which were spreading like wildfire. But apart from the fact that the press in those days was very different from what it is now, Mexico, unfortunately, has never been a country of readings… but rather of rumors. The meager circulation of newspapers is sufficient evidence thereof. Rumors, on the other hand, gain strength and advance with overwhelming force. The railway workers and their allies understood this and exploited its effects with great cleverness in 1958.

Apparently, opposition political movements have always sought to cause devaluations. Devaluation is the outcome of a pass-through effect to the general price level that, especially at that time, took place immediately or almost immediately, from the depreciation of the national currency against the dollar, and which affects society as a whole, particularly workers and the poor. As has been proved econometrically, this pass-through effect from depreciations to the general price level, has become smaller in view that floating exchange rate regimes —which relies on supply and demand— and a deeper foreign exchange market have made devaluations a less traumatic experience.

The truth is that at that time an exchange rate adjustment, which also tended to be irreversible, implied, in practice, that fixed income fell behind prices. Thus, it should not be strange that, historically, some devaluation events of that nature ended up being the fuel for jump-starting social turmoil. A situation in which people are dissatisfied and predisposed is the best breeding ground for stirring up political commotion. Devaluation could therefore be used as an instrument of political turmoil and as a tool to destabilize.

Devaluation is a circumstance that affects society as a whole, especially the workers and the poor. In the final analysis, what the modification of the exchange rate causes is a decrease in fixed income relative to prices. It is not surprising, therefore, that devaluations serve to accelerate and intensify social movements. A situation in which people are disaffected and predisposed to discontent is the ideal breeding ground for political unrest. In short, a devaluation can be used as an instrument of political agitation in order to destabilize.

As the rumors of devaluation began to intensify, President-elect López Mateos felt growing concern. It is necessary to recall here the economic repercussions of modifying the exchange rate in fixed exchange rate regimes. This happens not only because the prices of imported goods immediately go up, but because international trade arbitration tends to quickly level the domestic prices of so-called “tradable goods” with those of imports. Hence, upward pressures are passed on partially by contagion through the economy.

One of the most harmful effects of inflation is the redistributive effect it has on economic agents with fixed incomes, most of whom are wage earners. The unpredictability of circumstances and the uncertainty caused by inflation tends to produce higher nominal interest rates, which in turn inhibit investment and slow growth. Moreover, under an environment of higher inflation, the latter becomes more widespread, beyond relative prices. As a result, inflation is unstable, economic forecasts become difficult, and this uncertainty leads to speculation and hoarding in place of productive investment. Finally, there is the problem of capital flight, which arises when the general public begins to perceive inflationary pressures on the horizon, and becomes still worse when inflation actually sets in.

For López Mateos, just recently sworn in as president, a devaluation was a totally undesirable outcome. The exchange rate was much more than the price of the US dollar. As an economist would put it technically, it was “the link between the domestic and foreign communities of payments.” The exchange rate was a symbol of the strength of a country, a symbol almost important as the flag or the country’s historical heroes. The exchange rate was therefore a critical factor and its maintenance had political, economic, social, financial, and international repercussions. That is why it was necessary to do everything possible to maintain control of the exchange rate situation.

President Adolfo López Mateos, who at the beginning of his administration had to deal with large social mobilizations carried out mainly by the railway workers and teachers. López Mateos stood firm against the agitation and made it clear to his Secretary of Finance, Ortiz Mena, that there would be “no possibility of devaluation.”

One of the most powerful arguments was the issue of redistributive repercussions, which touched President López Mateos closely. As Secretary of Labor, López Mateos had learned how difficult it was to raise wages without affecting productive units. And he knew these efforts were in vain when inflation began to take off. His government therefore had two economic priorities: avoiding a devaluation and fostering the growth of wages in real terms.

There had been a slowdown in the economy of the United States in 1958 and this recession had affected the Mexican economy as well. The main repercussion, though certainly not the only one, had been the weakening of the export sector. Others effects included decreases in tourism revenues, in direct foreign investment, and in remittances sent home by Mexican workers in the United States. Nevertheless, the balance of payments situation in Mexico was solid, without any visible signs of vulnerability. The danger of a fatal destabilization of the balance of payments came from the flight of capital, precisely the development that the leaders of the labor movements had attempted to provoke when they began to agitate the year before. Wishing to avoid a massive capital flight, the government took action to increase public confidence in the Mexican currency.

The recently constituted administration of President López Mateos took decisions on two fronts. On the political front, López Mateos decided to bring the full force of the law to bear on the railway workers’ and teachers’ movements. Demetrio Vallejo, Valentín Campa, and Othón Salazar were arrested and jailed. It is known that the President met with these leaders in an attempt at conciliation but, when he realized how intransigent they were, he was left with no other choice but the legal option. On the economic side, the government’s measures were designed to reinforce the confidence of economic agents. To this end, several secretaries of state traveled abroad and the press announced with great fanfare the news of the aid obtained from international financial organizations, the commercial banks, and the U.S. Department of the Treasury. In its sober but limpid language, the Annual Report of Banco de México for 1959 referred to this important conjuncture.

In spite of the timely manner with which the new Administration announced, at the beginning of the year, its economic and financial program, the climate of uncertainty of the previous year continued to prevail through the first quarter of 1959. Nevertheless, the financial and credit measures announced by the monetary authorities in March modified the situation, as it was made clear that the stability of the currency would be maintained and that there were resources sufficient to that end. It was announced that, in addition to plentiful reserves of gold and currency, credits of US$100 million from the Export Import Bank and of US$90 million from the International Monetary Fund had been obtained to back up the currency. This announcement was complemented by the adoption of domestic measures to regulate the currency which immediately boosted confidence and tended toward increasing the amount of Mexican pesos available for lending by the banking system.[5]

A similar crisis of confidence had been provoked by the Cuban Revolution and the expressions of support it received in Mexico. At the beginning of 1960, Cuban President Osvaldo Dorticós visited Mexico and was received cordially wherever he went. Of particular concern to leaders of the business sector were certain declarations by Mexican politicians to the effect that the country was “correctly to the left.” The private sector’s worries about economic policy were expressed by various media. Particularly noteworthy was a full-page announcement published in all the newspapers under the title “Which Way Are We Heading, Mr. President?” The text was signed by the Confederation of National Chambers of Commerce, the Confederation of Industrial Chambers, and the Mexican Confederation of Employers.[6]

The challenge was to avoid a serious crisis of confidence. One of the government’s actions was to provide a timely response to the main demands of the business sector contained in the full-page announcement in the press. Among other replies, the government of López Mateos indicated: “The private sector has often requested the Government’s help in better developing its businesses and it has always received a frank and friendly welcome. The State supports and promotes private initiative, but it is also ready to step in where it is absent and replace it in its deficiencies…” Thus, all through the episode López Mateos and members of his cabinet met periodically with the principal private sector groups in order to reiterate the main guidelines of its domestic economic policy, and especially the role that the private sector had to play in it. President John F. Kennedy’s visit to Mexico in 1962 put an end to the situation of uncertainty and to the flight of capital. The announcement of policies to be implemented under the umbrella of the Alliance for Progress renewed the public trust in the policies of its own government.[7] The crisis of confidence was gradually overcome and 1963 was a year of exceptional economic results, with 8% growth in gross domestic product.

The Strategy and the Central Bank

It was not by chance that the economic policy plan that presidential candidate López Mateos had drawn up to be put into execution during his presidency was congruent with the decision he had already taken not to devaluate. A passage in the text on exchange rate policy states clearly: “Perhaps there is no more important task at the present time than to avoid a new devaluation, against which the Government must work with all its resources.”[8]

López Mateos had decided on this economic policy program almost from the moment he was chosen as the candidate of the official party to be president for the following six-year administration. He charged Antonio Ortiz Mena, the head of the Mexican Social Security Institute, with the task of preparing the document. Why did he call on a lawyer, without experience in the Secretariat of Finance, to draw up his economic program? Both López Mateos and Ortiz Mena had been appointed by President Adolfo Ruiz Cortines to senior positions in his administration. The former was chosen as Secretary of Labor and the latter to head the Social Security Institute. The common issues dealt with by those two departments led to frequent meetings between the men in charge of them. Both of them included businesspeople and trade union organizations among their clientele and the basic element of their responsibilities was salaries and wages. In the course of these meetings, López Mateos must have come to appreciate his colleague’s exceptional talents in economic and financial matters. So shortly after he was chosen as a candidate for the presidency, López Mateos asked Ortiz Mena to draw up the economic policy program he planned to implement during his administration.

Surprisingly enough, since the main author of the document would be appointed Secretary of Finance, the details of fiscal, monetary, and lending policy were incorporated into the last part of the text. Obviously, the importance of these issues was not reflected by their location at the end of the table of contents. We have seen that, in the economic strategy of the López Mateos administration, maintenance of official parity in the exchange rate was a fundamental element. The same could necessarily be said of the policies that were indispensable to achieving this end, including the policy on wages and salaries. But the structure of the document was determined by sectors: fishing, mining, energy and fuel, industry, domestic trade, foreign trade, tourism, transportation and communications, public works, low-cost housing, social security, regional development, finance, and foreign capital. As we know, any economic policy plan depends on a diagnosis. Each one of the chapters of the national economic policy began with its respective diagnosis.

All of the policies mentioned in the document would be indispensable to achieving the ends of “evaluating the general living standard of the population” and “continuing to increase domestic income and improve the way it is distributed.”[9] Fiscal, monetary, and lending policy would be the necessary condition for achieving this sustained growth, with constant rises in real wages. The mobilization of financial resources had special importance for Mexico, since without the necessary funds these ends could not be attained. According to the plan, financial policy would have to be reformulated from the bottom up and “extraordinary efforts would need to be made to achieve better coordination between fiscal, monetary, lending, and public investment policies.” The document emphasized the rigor with which fiscal and monetary policy was to be conducted:

Independently of the need to coordinate monetary policy with other aspects of national financial policy, it is necessary to review the bases on which it has hitherto rested, its orientations, and its effects. Whereas some years ago monetary expansion was used too liberally as a tool for financing economic development, it has been held subsequently that monetary policy should basically contribute to maintaining stable conditions, with a marked preference for the use of restrictive measures governing credit and means of payment in general.[10]

The plan emphasized the need, as we have seen, for the best possible coordination between monetary and fiscal policy, the fundamental principle or guideline for setting fiscal policy being the “avoidance of budget deficits, with care taken to achieve a balance not only in the accounts of the Federal Government but also in the public sector as a whole.” Regarding this last point, the text of the program read:

In drawing up the annual public spending budget, it is necessary first to consider the effect it may have on price levels, on the amount and distribution of revenue, on domestic investment, and on the volume of occupation. Budgetary control should not be limited strictly to the accounts of the Federal Government but should extend to all decentralized agencies and state-owned companies, for the purpose of which the budgets of all government departments and agencies should be consolidated annually in a complete public sector budget.[11]

The government of López Mateos managed to avoid the grave danger of a devaluation which emerged at the beginning of the six-year administration. An unexpected adjustment of the exchange rate would have disturbed productive activity, unleashed inflationary pressures, and provoked a generalized feeling of disaffection toward the authorities. The main long-term consideration concerning exchange stability was that it was indispensable to sustained growth. Only in an environment of permanent stability could the conditions exist in which investors obtained long-term credit at foreseeable interest rates. Only in an environment of stability could sufficient incentives be offered for savings to be expanded and to remain in the country and for real wages to continue to rise without interruption.[12]

Three events occurred during the administration of President Adolfo López Mateos which raised concern among businesspeople in Mexico: the trade union agitation of 1958-1959, the triumph of the Cuban revolution (and Mexico’s reaction to it), and the nationalization of the electricity industry in 1960.

The functioning of the economy depends crucially on the daily behavior of millions of consumers and producers. Economic policy must therefore ensure that this behavior is compatible with the ends it seeks. The economic strategy proposed in the National Economic Program, which was applied during the entire period of what has come to be known as “stabilizing development,” from 1958 to 1970, took careful account of this principle. Hence the efforts exerted to maintain the confidence of economic agents in the nation, in the functioning of its economy, in its promising future, in the constant value of its currency, and in the maintenance of exchange rate parity. Ortiz Mena has described in his memoirs how meetings were frequently organized with the main business groups in Mexico to explain “the reasons and goals of [the government’s] economic policy.” He recalls that these meetings were extremely useful because they allowed the business community to understand “firsthand the President’s commitment to a policy of stability and growth.”[13]

Even though the Mexican economy benefitted, during the entire period of stabilizing development, from a highly benign external environment of stable prices for exports and continual growth of export sales, the administrations of López Mateos and Gustavo Díaz Ordaz were never assured of maintaining the public’s confidence. They faced at least two extremely serious crises which entailed the risk of a massive run on the Mexican currency. The first of these episodes had to do with Mexico’s refusal to break off diplomatic relations with Cuba, as urged by the United States through the Organization of American States, after the government of the island declared itself Marxist-Leninist. Following other minor crises of confidence, the second important episode was the result of the development of the student movement of 1968. As he had done in 1958, Secretary of Finance Ortiz Mena traveled abroad to demonstrate publicly the support Mexico was receiving from international financial organizations, announcing the loans that had been obtained from the main commercial banks and the government of the United States.

President Adolfo Ruiz Cortines (third from left) with the very well-known leader of the socialist party, Vicente Lombardo Toledano (right).

Maintaining confidence was a fundamental component of the strategy of stabilizing development.[14] Ortiz Mena had already alluded implicitly to the link between them by explaining that a very effective way of bolstering domestic confidence was to obtain foreign backing for the economic strategy that was being implemented. In order to preserve domestic confidence, he explained, permanent contact was maintained with the following groups: businesspeople, trade unions, intellectuals, journalists, and the rest of the media. As we have seen, an important part of this task was also to meet with some frequency with the President, so that he could validate the explanations being given by his Secretary of Finance.

Antonio Ortiz Mena (extreme right), the prestigious Secretary of Finance during the six-year administrations of presidents Adolfo López Mateos (1958-1964) and Gustavo Díaz Ordaz (1964-1970).

A similar effort was made with the labor groups, with whom Ortiz Mena had developed a close relationship during his time as head of the Mexican Social Security Institute under the administration of Adolfo Ruiz Cortines. His main interlocutors were the Confederation of Mexican Workers (Confederación de Trabajadores de México, or ctm), the Regional Mexican Workers’ Confederation (Confederación Regional Obrera Mexican, or crom), and the Revolutionary Confederation of Workers and Campesinos (Confederación Revolucionaria de Obreros y Campesinos, or croc), among many others. Although Ortiz Mena does not explicitly say so in his memoirs, it is reasonable to suppose that the main argument he wielded in his dealings with these groups had to do with the prerequisites for wage increases and their link with the economic strategy being followed. In order for wages to go up in a sustainable way it was necessary to achieve a continual increase in productivity, accompanied by price stability, so that inflation did not swallow up the pay raises.

It was particularly important to obtain foreign backing for the economic strategy that had been adopted. A key contact in this order of things was the government of the United States and particularly its fiscal and monetary authorities: the Department of the Treasury and the Federal Reserve. Equally vital was communication with foreign commercial banks, mainly in the United States, Europe, and Japan. To this cast of characters we might add the international financial organizations, and most importantly, of course, the International Monetary Fund and the World Bank. Dialogue with these interlocutors was fundamental for two purposes: to obtain financing for the investment projects required for the country’s development and also to stimulate capital inflows and direct foreign investment. The effect of these capital inflows on the balance of payments would bolster the supply of currency and thus contribute to stabilizing the exchange rate and diminishing the possibility of a highly undesirable devaluation.

Ortiz Mena has recounted in his memoirs that, following the example of England immediately after the Second World War, in 1959 Mexico decided to call on the International Monetary Fund and negotiate a program whereby it could obtain resources to constitute a “second reserve of international currency.” With a credible economic program and the blessing of the IMF it would be able to obtain additional resources from other international financial organizations and certain official entities in the United States. An IMF program was a sort of endorsement, difficult to obtain from any other international body, of the economic policy of the government. The proposal was formally submitted to the organization in February 1959 by Secretary of Finance Ortiz Mena himself and Rodrigo Gómez, the director of Banco de México. Significantly, the principal objectives of the program included “maintaining the free convertibility of the peso,” “bringing down the fiscal deficit,” and “carrying out a monetary and lending policy compatible with domestic and external economic stability.”[15]

Rodrigo Gómez and well-known Belgian economist Robert Triffin.

Under the strategy of stabilizing development, the exchange rate fulfilled the function of permanently anchoring price stability. Crucial to this price stability was the responsibility entrusted to Banco de México of maintaining a stable exchange rate. Of course the proper functioning of the central bank depended on sound public finances, so that any risk of fiscal predominance could be avoided. Given this precondition, monetary policy had to be prudent and designed at all times to combat the forces of inflation, which tend to be strong, diverse, and subtle. This way of expressing the matter has been attributed to Rodrigo Gómez, who was director of Banco de México from 1952 until his death in 1970, at the watershed between the administrations of Díaz Ordaz and his successor Luis Echeverría.

The forces of inflation are “strong,” explained Rodrigo Gómez in a lecture delivered to the prestigious Per Jacobsson Foundation, because they come from the highest levels of the public administration. All the members of a government cabinet wish to advance as far as possible the interests of the secretariats entrusted to them. Given this desire, there is often no hesitation about requesting that financing of projects come from the central bank. And it is also true that these pressures come not from a single front but from several: both secretaries of state and public entities entrusted with important responsibilities in public administration. An aggravating factor or additional danger is that there is never any lack of supposedly prestigious experts willing to endorse in their writings or speeches the proposals to which inflationary policies apply.[16]

All through the period of stabilizing development the Mexican government acted with the conviction that monetary policy should be designed to achieve robust stability: with a constant exchange rate and a level of inflation similar to that of Mexico’s northern neighbor and principal trading partner, the United States. Thus, toward the end of 1958, after the National Economic Program of the president-elect had been approved, there was unanimous accord regarding the ideal person to head Banco de México. Neither López Mateos nor his future Secretary of Finance harbored the slightest doubt. Rodrigo Gómez had been director of Banco de México since 1952 and had amply proven his abilities over a long career in the central bank. He was a highly respected figure both in Mexico and abroad.

Jovial, shrewd, intelligent, and endowed with many other fine personal qualities, Rodrigo Gómez, who had been born in Nuevo León and worked successfully in the currency exchange business as a young man, believed firmly in the virtues of a prudent monetary policy. Fortunately for Mexico, he shared this conviction with the person who had recommended his reappointment: Secretary of Finance Antonio Ortiz Mena. The two men made a formidable team in the course of working in tandem through two six-year administrations. One of their greatest achievements was to convince the presidents under whom they served of the importance of avoiding inflationary and destabilizing economic policies. During this period, therefore, Banco de México was not autonomous in any strict legal sense, but its management was consistent with its having obtained formal independence. The maintenance of the fixed exchange rate called for a highly disciplined monetary policy.

It is not known whether President López Mateos recommended to his successor that Antonio Ortiz Mena and Rodrigo Gómez be maintained in their respective positions as Secretary of Finance and director of Banco de México. As it happened, they remained at their posts and this implied a tacit acceptance by President Díaz Ordaz of the economic strategy that had been in place over the previous six years. This acceptance was formalized in the 1966-1970 Economic and Social Development Program which was endorsed by the President himself. Of the nine objectives set in this program, at least three directly involved Banco de México and the management of monetary policy. The general goals of the program were to achieve at least 6% annual growth until 1970, to give priority to agricultural activities, to continue promoting industrialization, to attenuate the imbalances caused by development, and to improve education, health care, housing, and social welfare. The central bank could contribute crucially to a more equitable distribution of wealth, to the encouragement of domestic savings, and of course to “maintaining the stability of the exchange rate and bringing down inflationary pressures.”[17]

Specifically, the policies of the years of stabilizing development were designed to maintain the exchange rate, keep inflation down, and accumulate a moderate quantity of international reserves. All of these ends were satisfactorily fulfilled for as long as the strategy was in place. The authorities always declared that the money supply grew in proportion to growth in demand during these years. Because of the control of inflation achieved during the period, it is reasonable to suppose that the differential (4.1 percentage points) between real annual GDP growth (6.8% on average) and that of the money supply (10.9% on average) could be attributed to the process of remonetization induced by price stability. Drawing on their experience and good judgment, Banco de México authorities —with Rodrigo Gómez at the head— intervened by raising interest rates and causing a contraction of lending every time they got wind of an inflationary trend. Banco de México remained alert in order to react with the greatest possible speed.

The strategy of stabilizing development made the maintenance of the exchange rate and price stability its priorities. Neither these, however, nor the soundness of the public finances were the ultimate ends of the strategy. The real goal was the sustainable growth of the gross domestic product, of per capital production, and of real wages. In retrospect, it could be said that the focus on promoting a “stabilizing economic development” was successful, since it increased voluntary domestic saving even as it led to the proper assignment of productive resources “in the aim of bolstering the stabilizing effects of economic growth.”[18] Thus, by strengthening the foundations of expansion and stability through this virtuous circle, the danger of inflationary cycles —balance of payment crises— and consequent devaluations, which had caused so much harm to Mexico in the past, was circumvented.

The strong performance of the Mexican economy between 1958 and 1970 began to be noticed by foreign experts and even heads of state. With clearly exaggerated praise, people even spoke of a “Mexican miracle.” The phrase was excessive, perhaps, but not entirely inaccurate. In an international comparison of economic results, Mexico made a good showing even among the most successful examples. In a sampling of seventeen countries that had achieved outstanding growth between 1959 and 1970, only the relevant cases of Japan, Singapore, and South Korea, with average annual growth rates of 11.2%, 9.6%, and 8.2%, respectively, developed more rapidly than Mexico. With a real annual growth rate of 6.8% in those years, Mexico ranked above Brazil, Spain, Italy, France, Germany, Australia, and seven other countries. Inflation in Mexico averaged 2.5% annually during the period, while the European average was 3.8%, and the ratio of total debt to gross domestic product was 14.4% in Mexico compared to 38.9% in Europe.[19]

Banco de México’s main building at the time when Rodrigo Gómez and his collaborators were fighting tooth and nail against the forces of inflation, which, in the words of this legendary central banker, tend to be “strong, diverse, and subtle.”

An important goal of the strategy —explicitly formulated by President López Mateos— was to achieve sustained growth in the income and wages of the majority of the population. A highly representative indicator, the hourly wage in the manufacturing sector in Mexico City, went from 3.27 pesos in 1958 to 7.45 in 1970. Adjusted for the rise in retail prices, this represents a real increase of 66%. From 1959 to 1970 the nominal minimum wage increased by an average rate of 6% annually (9.2% from 1959 to 1964). A study of wages carried out toward the end of the period showed that average net wages after social security deductions but before income tax had grown by 31% from 1965 to 1970 alone. The most representative wage in the sampling showed an increase of 27% during the same period. Finally, the average wage, including benefits, increased by a little less than 25% in real terms during the period.[20]

The Critics and the Change of Model

In 1967 the Mexican economy was booming, with rapid economic growth and stability. This growth was accompanied by an equally rapid rise in the minimum wage and the level of real wages in the Mexico City manufacturing sector, with the best figures of the entire period of stabilizing development in the areas of investment, domestic savings, and private savings. In the three years from 1964 through 1966, the price index showed an average annual variation of 3.3%, consistent with the average for the period from 1964 to 1970.[21]

In April of 1967 Mexico received a piece of news that did justice to the situation just described. The Executive Director of the International Monetary Fund decided to include the Mexican peso among its loan currencies. At the time, there were only fifteen currencies in the world that enjoyed the distinction, including the Australian dollar, the Belgian franc, the German mark, the pound sterling, the Italian lira, the Japanese yen, and of course the US dollar. So the Mexican peso joined a select group of currencies —the crème de la crème— from April 1967 to September 1971.[22] Significantly enough, the Mexican peso lost the distinction less than a year into the 1970-1976 presidential term.

Toward the end of the six-year administration of President Gustavo Díaz Ordaz, there took place another event which seemed to lend its weight to the economic strategy that had been implemented since 1958. It was at this time, in fact, that the expression “stabilizing development,” which was to have such a distinguished future, was first coined. It all started with the decision to submit to the meetings of the IMF and the World Bank in September 1969 a document which presented a synthetic account of the Mexican economy and the economic policy implemented during the two six-year administrations ending in 1970.

Banco de México’s banknote factory was inaugurated at the end of the administration of President Gustavo Díaz Ordaz. This photograph shows Antonio Ortiz Mena and Rodrigo Gómez, next to the president, at the unveiling of the plaque.

Entitled “Stabilizing Development: A Decade of Economic Strategy in Mexico,” the document began to circulate in Washington, D.C. in September of 1969. Well received by the international financial organizations, it was also unanimously approved by members of the Mexican government, including the Secretary of the Interior (and future President) Luis Echeverría. Considered in retrospect, the approval of the Secretary of the Interior was surprising, since the document supported several theses which would become anathema during Echeverría’s administration and even later in some circles. The best example is perhaps that of the concern, already beginning to develop at the time, for Mexico’s demographic problems.

The text also contained other theses which were clearly at odds with what was proclaimed and done during the period of so-called “shared development” after 1970. One of them concerned the advisability of a prudent management of the external debt, which the document recommended was to be used for the partial financing of necessary investment in irrigation, highways, energy, railways, industry, etc. It clearly suggested that taking out foreign loans to finance budget deficits was undesirable.[23] The document insisted that the public sector deficit should remain at a reasonable level and be financed soundly, so that it would never become an inflationary factor.

The document also offered a warning of the dangers of inflation, among other reasons because it produces the pernicious phenomenon of forced saving. As a consequence of the process of inflation/devaluation induced by changes in the prices of goods and services, real consumption contracts in low-income sectors of the population and the unconsumed volume is transferred to the proprietors of the goods of production. By contrast, the saving that should be encouraged is not “forced” but “voluntary.” For this reason, according to the document, the policy of stabilizing development rejected a priori the generation of forced inflationary saving. It recommended acting on the factors that caused voluntary saving.[24]

Panoramic view of the main operating facility of the banknote factory.

Despite the document’s emphasis on that issue, it is not clear how the non-consumed volume of low-income urban sectors is transferred to the owners of productive assets. Specifically, in the presence of inflation, banknotes and coins are transferred between those that have them and those that issue/mint them, with the resulting loss of efficiency. Therefore, how do the owners of productive assets receive any resources as a result of inflation?

Finally, the document insisted on the need for striking a balance, both externally and internally, in the course of development. To this end, it was necessary to avoid increasing the money supply in order to finance deficits and essential to maintain strict control over the government’s accounts.

The student movement of 1968 was a watershed in the history of Mexico. The movement had a great deal to do with a generational phenomenon that manifested itself in many countries. There were versions of the same process in Germany, England, Italy, the United States and France, in the springtime of the year. Mexicans were struck by the vivid and impressive images of barricades in Paris and of a nation paralyzed by strikes which had been called by the students and seconded by the powerful French trade unions. In Mexico, few observers identified the movement as a local chapter of a worldwide process. The student movement of 1968 was a complex development with many different causes. One of its springs was clearly the ideological imperative of “the revolution” as a means to a miraculous redemption of the peoples of Latin America. There was also a condemnation of the authoritarianism and lack of democracy in Mexico behind the phenomenon. Some even interpreted the events as a challenge to the economic strategy which had been implemented over the previous decade. Thus, an academic vogue emerged in the intellectual circles of the time. Among economists, it became fashionable to criticize the concept of stabilizing development. This trend would become relatively important, and years later Clark Reynolds, a prestigious American scholar, added his voice to the chorus. The new critique even inspired the title of his text: “Why Mexico’s Stabilizing Development Was Really Unstabilizing?”[25]

Economist David Ibarra was one of the thinkers who began to criticize the policies of stabilizing development during the 1960s. Ibarra served as Secretary of Finance in the administration of President José López Portillo from 1977 until the spring of 1982, when he was removed from his post.

From a political standpoint, the main challenge to the prevailing situation came from sociologist Pablo González Casanova, with his book published in 1965: La democracia en México (Democracy in Mexico).[26] Particularly noteworthy among economists critical of the model was David Ibarra, who published an important essay entitled “Markets, Economic Development, and Economic Policy.”[27] Ibarra’s central argument was that a future could be glimpsed in which the factors that had sustained development would exhaust themselves. His research showed that the process of capital accumulation faced obstacles, given the strong propensity toward consumption of the higher-income strata, the slow reaction of tax collection to wage increases, and the possible limitations on the availability of currency. The problems facing economic development in Mexico were in large part the result of an unequal distribution of wealth.

The pioneering work on the subject of income distribution was done by economist Ifigenia Martínez. The results of her research would become a reference for a group of economists with little sympathy for the model of stabilizing development.[28] There was a similar lack of sympathy even among politicians and intellectuals who had formerly promoted the strategy. These critics had become disaffected with the economic policies in place, considering them too “conservative” and “lukewarm.” Behind these criticisms there was an ideological motivation, of course, but also a generational element. These critics were part of a combative, contrarian current that was beginning to question the economic legacy of an elder generation. Once more, we see the dialectic encounter between one wave of critical thinkers and the next, characterized by destructive impulses, as diagnosed in the theory of generations developed by the Spanish philosopher José Ortega y Gasset.[29]

The critical tendency represented by González Casanova, David Ibarra, and Ifigenia Martínez was joined by other analysts with a similarly confrontational spirit. Incidentally, these young economists were also tempted, as often happens, by the circles of power. One of them was the Polish immigrant Miguel S. Wionczek. As the editor of two thick volumes of essays he penned an introductory essay entitled “The Basic Conditions for Future Socio-Economic Development.” In his essay Wionczek heralded the danger of a difficult bottleneck in the future: Mexico’s capacity for economic growth. He foresaw two pressures created by this bottleneck: on the one hand, domestic and foreign debt, and on the other, the stagnation of tax revenues. His prognosis was that in the future the State would have ever fewer resources to invest in public works and social services and that this would weaken the forces of development.[30]

A more specialized study of the low potential of tax collection in Mexico was produced by Francisco Javier Alejo.[31] He agreed with Ibarra and Wionczek that the tax burden was light in Mexico but his special discovery was that there existed an unequal distribution of the burden according to economic sector. On the one hand, there were three sectors (agriculture, construction, and services) in which tax collection was below the national average and, on the other hand, a series of sectors (manufacturing, commerce, electricity, and transportation) in which it was above the average. After explaining his view of the technical reasons for the low collection capacity in certain sectors, the author made the obvious call for a thoroughgoing tax reform.

This generation of critical economists, who seemed to be guided by an alternative project of economic policy, found a way into high positions in the government of President Luis Echeverría. Belonging to a political system with a single hegemonic party, President Díaz Ordaz faced the process of choosing his successor with low personal prestige but fairly ample maneuvering room. He never explained why he chose his Secretary of the Interior to succeed him in the presidency. He probably believed, in the wake of the 1968 disturbances and given the solid functioning of the economy, that Mexico needed a “political president” rather than an “economic president.” What is known for certain is that Díaz Ordaz was as surprised as anyone when his successor removed his mask and revealed his genuine style of governing.

As a comment at the margin of these critiques to the model, which are not exempt of ideological bias, at that time the idea of closing the country to foreign trade was to protect the new local industries (justifying that they were in their “incipient period”, and that they needed a protected environment to properly develop). Either wright or wrong, what is true is that such thesis was misused and that once the government had committed to these protectionist public policies, there were no incentives to stop using them. Moreover, in the long run, the macroeconomic results of the stabilizing development policies were not positive: severe distortions arose, inefficiency was rewarded and overall the country lost the opportunity of improving its productivity -in benefit of all Mexicans, by leaving its industry out from an environment of effective international competitiveness. It must be pinpointed, nevertheless, that the stabilizing development model did not mismanage monetary financing, and thus prevented further harms to the economy. That would definitely not be the case of the new model of “shared development” that was proposed as an alternative.

The new administration reoriented its economic strategy based on a rationale very different from that set forth herein and followed other guidelines which, in the end, proved to be unwise. At first everything seemed relatively anodyne: economic policy was also to give attention to the problem of income distribution and the economic backwardness of rural areas, along with other social issues. Technically, the new model consisted of adding a new objective —improved income distribution— to the traditional goals of economic growth, with an increase in real wages. In the rhetoric of the new focus a certain technocratic arrogance could be clearly glimpsed, as well as an open rejection of “stabilizing development.” The propagandists referred to the new strategy as “shared development.” The entire nation was made aware of the change in strategy on the occasion of President Echeverría’s inaugural address.

The paragraphs on economic policy incorporated into that address clearly stated that it was “necessary to modify the strategy of our development in order to fulfill the mandates of the Constitution… The Revolution will speed up its march.”[32] Why was it necessary to modify the development strategy and speed up the march of the Revolution? The distance between the new administration and its predecessors was characterized by the need to address more directly the problems of income redistribution.[33] In at least six paragraphs of his inaugural address President Echeverría referred to the problem of social inequalities and the need to combat them through economic policy.

The need for more rapid growth did not mean doing away with “institutional equilibrium” and stability. “The popular classes —the new president declared emphatically— strongly resent the increase in living costs.” For this reason, it was essential to maintain monetary stability and to “promote the capitalization of the country in order to achieve quickly a self-sustained progress.” Nevertheless, the great difference was the place given to stability as one of the strategy objectives:

It is not certain that there is an inevitable dilemma between economic expansion and income distribution. Those who preach that we have to grow first in order to distribute later are mistaken or lie because of their own interests… For this reason, it is indispensable to divide income with equality and to broaden the internal market of consumers.[34]

It is strange that, at the time, the positions staked out in that address were not the object of more vigorous criticism. Perhaps the influential currents then in fashion in economic thought made such a judgment difficult to formulate. An important study shows that the neo-Keynesian, structuralist focus (influenced by the Economic Commission for Latin America and the Caribbean [eclac] and the Latin American and Caribbean Institute for Economic and Social Planning [ilpes]) had gained prestige and had begun significantly to impact the design of economic policy in various countries.[35]

Perhaps the most obvious contradiction in the inaugural address was between the firm conviction of the need to “advance with a great speed” and the promise to maintain the fixed exchange rate. President Echeverría committed himself formally to “preserv[ing] the strength of our currency and… maintain[ing] free convertibility. Nevertheless, legitimate doubts could have been raised about the causes alleged for the country’s ability to maintain parity: “The monetary stability which we enjoy has its origin in political stability and hard work.” Although this may have been true, it would not have been amiss for the President also to explain how the central bank’s coherent monetary policy had contributed to this. But the times were too neo-Keynesian, too influenced by the dogmas of eclac, for such a declaration.

Another important inconsistency involved price stability. Stabilizing development had been extremely successful in controlling inflation, but the stubborn refusal to adapt the theoretical explanations of the phenomena seems rather ill-advised in retrospect. It was necessary to update the theoretical aspects of the strategy and stay in fashion intellectually. Inflation was no longer caused by an excess of aggregate money supply, stimulated by the expansionary monetary policy of the central bank.

The real cause of this phenomenon [increase in living costs] is not wage increases which enlarge monetary circulation but also necessarily stimulate the volume of production. Rather, it is provoked by the scarcity of goods as well as by the speculative mechanisms which should be checked for the sake of general interest.[36]

In his inaugural address, President Echeverría announced unambiguously the tax reform program he had in mind, which he was unable to carry out in the end. He also announced that public spending should be strong enough to “direct growth” and that the problems generated by Mexico’s demographic explosion would “require constant increases of public expenditure.” This would not affect, however, his declared intention to ensure that international loans should not “exceed the anticipated capacity of payment.”

In 1971 Bancomext published a volume that gathered the principal theses that were to guide the economic policy of the six-year administration. The book complemented the formulations of President Echeverría’s inaugural address. While the speech presented very clearly his intention to adopt a new general development strategy and outlined the goals he wished to reach, the volume published by Bancomext precisely explained the policies by means of which these goals would be achieved. These policies were summed up in the first chapter, “General Guidelines of Economic Policy,” and explained more fully in sections on “Economic Growth with Income Redistribution,” “Strengthening of Public Finances,” and “Modernization of Agricultural Policy.”

Thus, the income redistribution that was to accompany growth would be achieved through a “greater share of work in domestic production.” There would also be measures designed to decentralize industry and transfer it to more depressed economic zones, agricultural development, programs on behalf of marginalized groups and areas, increased access to educational opportunities, job training, the expansion of public health programs, rural development, and low-cost housing. Obviously, all this would require greater spending, but the book explained that the administration would “channel more resources [into] and improve the functioning of institutions and entities whose work had redistributive effects, directly or indirectly.”[37]

The section on the “Strengthening of Public Finances” described the basic tenets of the tax reform that was to be carried out. Among other objectives, the government wished to “capture additional domestic resources” so that, “through greater participation of the government in domestic production,” the public sector could extend “its activity of economic development and social welfare.” The measures designed to modernize the agricultural sector would consist in part of greater coverage by state action. As for investment, “the new Mexican administration [was] committed to intensifying irrigation projects, channeling a greater volume of financial resources into rural areas, and intensifying agricultural expansion projects.”

By the middle of the six-year term there were clear signs of the destabilizing trends that were to become acute at the end of the period, leading to a major crisis. An ominous sign was the destitution of the prudent Secretary of Finance, Hugo B. Margáin, and the President’s declaration that the country’s finances would henceforth be managed “from Los Pinos [the presidential residence].” With the government running deficits in both public expenditures and the current account, the country’s foreign debt began to increase rapidly. There were also signs of a lack of confidence in the maintenance of exchange parity. One important indicator was the balance of bank deposits denominated in foreign currencies, which shot up during the second half of the six-year administration. The balance of payments was also hard hit. A special concern involved imports of food and crude oil. Nor did it go unnoticed by certain observers that the growth of imports was speeding up and that of exports slowing down. Inflationary pressures began to be clearly felt, at least in the second half of the period. Even an analyst relatively favorable to the ideological movement and the change of model was able to write, with great foresight:

Thus, the concept of what later came to be known as shared development was formulated. The new model, if model it was, proposed contradictory tasks from the very beginning. It sought to sustain high growth rates and redistribute income but at the same time maintain the free convertibility of the peso and the exchange rate. In pursuit of these goals, Echeverría became entangled in a spasmodic economic policy of contraction and acceleration, which in the long run fostered nothing but a lack of confidence.[38]

Outgoing President Gustavo Díaz Ordaz and President-elect Luis Echeverría in the days before relations between these two Mexican political figures began to deteriorate.

The intense fiscal and monetary expansion of the 1970-1976 presidential administration had two harmful consequences: the rapidly increasing balance of Mexico’s foreign debt and rising inflation. This was happening even as the government sought to maintain the official parity of 12.50 pesos to one US dollar. The real exchange rate was going up continually and by the end of the period the peso was clearly overvalued. As a result, a balance of payments and foreign exchange crisis of major dimensions was looming. Foreign loans were taken out no longer to finance investment projects and public expenditures but to stem capital flights that were pushing up the real price of dollars. The devaluation announced on 1 September 1976 effectively entombed President Echeverría’s aspirations for historical vindication. A final blow against the prestige of his administration, the devaluation would mark it like an epitaph.

Endnotes

Concurrent visions

[1] IMF Archives, Emergency Executive Board Meeting, 16 April 1954.

[2] “Trends in Mexico’s International Position,” IMF Archives, Western Hemisphere (20 December 1954).

[3] Valentín Campa, “Sobre las huelgas ferrocarrileras de 1958,” Solidaridad (31 July 1970), p.33.

[4] Ibid., p. 198.

[5] Informe Anual del Banco de México (1959), p.15.

[6] “¿Por cuál camino, Señor Presidente?” Excélsior (24 November 1960), p. 23-A.

[7] Antonio Ortiz Mena, El desarrollo estabilizador: reflexiones sobre una época (Mexico City: El Colegio de México / Fondo de Cultura Económica, 1998), pp. 91-96.

[8] Política Económica Nacional (pen), undated mimeographed copy, paragraph 208, p. 126.

[9] Ibid., p. 4.

[10] Ibid., p. 27.

[11] Ibid., p. 123.

[12] Ortiz Mena, El desarrollo estabilizador, pp. 81 and 82.

[13] Ibid., pp. 83 and 84.

[14] Ibid., p. 83.

[15] Ibid., 83-86.

[16] Rodrigo Gómez, “Discurso pronunciado en la Fundación Per Jacobsson” (November 1964), in Textos de Rodrigo Gómez (Mexico City, 1967), pp. 151-154. Original English language version available online at http://www.perjacobsson.org/lectures/1964.pdf

[17] Ortiz Mena, El desarrollo estabilizador, pp. 99 and 100.

[18] Ibid., p. 49.

[19] Ibid., pp. 52 and 289.

[20] Rafael Izquierdo, Política hacendaria del desarrollo estabilizador, 1958-1970 (Mexico City: Fondo de Cultura Económica / El Colegio de México, 1995), pp. 129 and 130.

[21] Ibid., tables I.1, I.2, I.3, and I.4, pp. 159-162.

[22] Margaret Garritsen de Vries, The International Monetary Fund, 1966-1977, vol. I (Washington, D.C.: International Monetary Fund, 1976), pp. 322-324.

[23] Antonio Ortiz Mena, “Desarrollo estabilizador: Una década de estrategia económica en México,” in El Trimestre Económico (Mexico City: Fondo de Cultura Económica, 1970), p.12.

[24] Ibid., p. 10.

[25] Clark Reynolds, “Por qué el desarrollo estabilizador de México fue en realidad desestabilizador. Algunas consecuencias para el futuro,” El Trimestre Económico 250 (April-June 1996), pp. 653-680.

[26] Pablo González Casanova, La democracia en México (Mexico City: Era, 1965).

[27] David Ibarra, “Mercados, desarrollo económico y política económica: perspectivas de la economía de México,” in El perfil de México en 1980 (Mexico City: siglo veintiuno editores, 1970), pp. 89-199.

[28] Ifigenia Martínez Navarrete, “La distribución del ingreso en México: Tendencias y perspectivas,” in ibid., pp. 15-73.

[29] See Enrique Krauze “Cuatro estaciones de la cultura Mexicana,” in Caras de la historia (Mexico City: Joaquín Mortiz, 1983), p. 154.

[30] Miguel S. Wionczek et al., La sociedad mexicana: presente y futuro, No. 8 (Mexico City: Fondo de Cultura Económica, 1974).

[31] Francisco Javier Alejo, “La política fiscal en el desarrollo económico de México,” in Miguel S. Wionczek et al., Crecimiento o desarrollo económico, vol. I (Mexico City: Sepsetentas, 1971), pp. 83-94.

[32] The quotations from President Echeverría’s inaugural address come from Appendix B of Leopoldo Solís, Economic Policy Reform in Mexico. A Case Study for Developing Countries (New York: Pergamon Press, 1981), pp. 199-206.

[33] Ibid., p. 200.

[34] Ibid., p. 200.

[35] Elsa Garrido Romo, “La década de 1970 en México: etapa de la transición del pensamiento económico,” in María Eugenia Sotelo (ed.) Historia del Pensamiento económico en México. Problemas y tendencias (1982-2000)(Mexico City: Trillas, 2005), pp. 290 and 91.

[36] Quoted in Solís, Economic Policy Reform in Mexico, p. 201.

[37] México: la política económica del nuevo gobierno (Mexico City: Banco Nacional de Comercio Exterior 1971).

[38] Luis Medina Peña, Hacia el nuevo Estado. México, 1920-1994, 2nd edition (Mexico City: Fondo de Cultura Económica, 1995), p. 178.

Central Bank Autonomy in Mexico

A Historical Overview

The publication consists of 10 volumes:

1. The Central Banking System in the World
With Preface and Foreword

2. Mexican Central Bank Autonomy: Historical Background

3. Concurrent Visions

4. Echoes from Abroad

5. Institutional Autonomy

6. A Difficult Takeoff

7. Unprecedented Stability
With Sources Consulted

Table of Contents

- Concurrent Visions

- The Decision “Not to Devaluate”
- The Strategy and the Central Bank
- The Critics and the Change of Model
- Endnotes