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How To Avert The Next Mexico

Economic Trends


Alot can be learned from last year's Mexican crisis. That's the message of a paper presented by economists Lawrence R. Klein, A. Gilbert Heebner, and Frederick Heldring at a recent conference sponsored by the Federal Reserve Bank of Philadelphia and the Global Interdependence Center.

Among the signs that should have alerted international investors and lending agencies to the growing risks of a crisis, note the economists, were Mexico's large current-account deficits, coupled with its low savings rate and artificially high exchange rate. Mexico's widely unequal income distribution and political turmoil were other bad omens.

To avert and contain future crises in emerging nations, the economists stress the need for greater surveillance by the International Monetary Fund and for standby plans to set up syndicates of loans to help problem nations. They also stress the importance of accurate and timely economic data. By mid-1994, Mexico had stopped reporting the level of its international reserves, uhich were dropping sharply. Had this been known, market pressures at home and abroad might have impelled Mexican officials to take action earlier--thus averting, or at least lessening, the ensuing crisis.BY GENE KORETZ By Kathleen Madigan

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