It was almost 20 years ago that Mexico was looking down the barrel of a peso crisis. Lax banking, declining dollar reserves and low oil prices, among other factors, had conspired to push the economy to the brink, and the peso came crashing down.
Today, though, there are analysts who point to Mexico as a model of macroeconomic management. And they credit Agustin Carstens, Mexico's central bank governor, as one of the main contributors to crafting the policies that will hopefully make calamities like the peso crisis a thing of the past.
So stark is the turnaround that Carstens now measures his country's economy, not against his southern neighbors, but against some of the biggest players on the world stage. "The advanced countries have problems with large deficits, with debt-to-GDP that's very large," he says. They face "problems in their financial systems, of monetary policies that have had to be oriented to attend to objectives that are not traditionally those of central banks." But in Mexico, "the reality is that we've not had any of these problems."
Indeed, Mexico is expected to generate economic growth approaching 4 percent this year, while interest rates have remained unchanged at 4.5 percent. Mexico's debt-to-GDP ratio rests just north of 30 percent, and the banking system, Carstens notes, is well-capitalized, extending credit. Reserves have reached record levels.
Carstens has held senior positions in the Central Bank and International Monetary Fund, and put forward a credible bid last year for the LMF's top job. He also served as Mexico's finance minister in the cabinet of Felipe Calder6n. Since he became Mexico's central bank governor in 2010, his country has emerged as a bright spot in an otherwise gloomy global scenario. "It's gratifying that this recognition is being given to Mexico," Carstens says. "The reality is that we've worked to reach this place so that ... Mexico is one of the most solid economies, not just among emerging countries, but the whole of the G-20."
Mexico wasn't always such a sexy selection for emerging markets investors, though. In 2009, the economy...