Privatizations and monetary policy in Mexico during 1991 and 1992

• Autores: Baldrich, Jorge
• Año de publicación: 1994
• Idioma: inglés
• Tipo de recurso: documento de conferencia
• Materia: Ciencias Económicas; privatizations; Mexico
• Institución: Universidad Nacional de La Plata

The 1991 - 1992 privatizations determined government proceeds equivalent to 6 percent of Mexico's GDP. The privatizations were carried cut at a time the country had significantly improved its public finances, curbed high Inflationary expectations and, also, turned its current account from a surplus of 0553,164 million in 1987 to a deficit of USS7,800 million im 1990. This paper argues that, under a current account deficit, a privatization policy tends to increase the supply of domestic assets the private sector is seeking. However, the model presented shows that two cases must be distinguished, if the privatization proceeds are received in tradable ta (money or foreing bonds) the Government absorbs the assets that the private sector want to dispose of; if, to the contrary, the proceeds are received in domestics assets (i.e. domestica bonds) what the Government absorbs is the assets that the private sector seeks and, in this case, the convergence to external equilibrium could be postponed. In particular, the paper argues that the 1992 policy of using the proceeds from privatizations to redeem domestic public debt held by the commercial banks prompted an additional disequilibrium force on the Mexican balance of payments.
Facultad de Ciencias Económicas