The Imf Is a Convenient Scapegoat for the Failure of Politicians to Properly Manage the Economies of Their Countries

The first contacts of Mexico with the IMF policies began in 1976 after the collapse of the Mexican peso. The collapse was the result of a very active role of the Mexican government in the economy without much regard for macroeconomic balances. Generally in Mexico there had always been two positions regarding the economy: the first one in favour of a strong privatisation process and the importance of opening the economy, including the financial sector; the second one favouring an active participation of the government in the productive sector, the protection of the national industry and the slowing down of the financial liberalisation process.

This essay will undertake a brief review of the involvement of the IMF in the structural adjustment policies in Mexico, particularly the measures taken for the economic crisis of 1994-1995. This paper will highlight the fragmented opinions towards the role of the IMF in the economic liberalization of Mexico, as well as the management of the crisis to show that there is not a unified opinion on the IMF. Furthermore, this essay will argue that the IMF is not the conventional scapegoat for politicians as in the cases of other Latin American countries due to the nature of the relations of the IMF with the Mexican government. Such relations led to a much closer and colluded relationship among both actors. During the 1994-1995 crisis, the Mexican government, rather than blaming the IMF for such a crisis, solicited a loan and assistance from the IMF to handle the crisis. The IMF became a partner, rather than a scapegoat in the handling of the crisis. In this sense, the IMF is perceived by the general public as more of an ally of the government, who is seen as the main responsible for the poor management of the economy and the crisis.

The 1976 agreement with the IMF was partly secret and the general public considered the situation as a threat to national independence and as a kind of plot against national interests . Since 1976 the Mexican economy has gone through different phases of growth and recovery. The economic performance has generated growth but not a real redistribution of wealth, a considerable reduction of poverty, or a visible improvement in the per capita income. Simultaneously, the economic policies undertaken by the Mexican government since 1976 -with the guidance of the IMF- were directed at the creation of solid economic foundations, such as a balanced budget, small external deficit, a more realistic exchange rate and a more open economy in order to allow free international trade and a financial liberalisation process . The coincidence of these polices with a very poor economic performance has lead to a general rejection of the IMF recommendations that are consequently characterised as being neo-liberal. For the majority of the population, this term implies a fast process of opening the economy which has caused a reduction in the population's living standard.

In the Mexican case, the adjustment policies were instrumented for too long without achieving a sustainable economic growth. A consequence of this is, in addition to the high social costs, is the IMF's lack of credibility in the public opinion. Therefore, it can be said that in Mexico there is a rather negative perception of the programmes of the IMF due to two main factors. First, since 1976 the government has preached to follow the IMF programmes and the Mexican economy has had small growth rates during this period. The growing social inequalities and poverty are still unresolved matters which, in the public perception, seem to have been exacerbated by the IMF rather than diminished. Second, the IMF is considered to be primarily concerned with the stability of the financial system, not with economic development. With the 1994 crisis, the IMF was essentially focused on the macroeconomic balances after the crisis. This view was considered to be rather narrow and it did not solve the problem of the weakness of the financial system and other economic problems. Thus, the adjustment policies were ineffective because they did not generate the conditions for a sustainable economic development.

This perception was strengthened after the Mexican financial crisis of 1994-95. During the crisis, the Mexican government purchased more than $45 billion of bad debts from Mexican banks . In addition, the IMF committed $17.8 billion to Mexico with the understanding that all foreign creditors would be kept whole . This loan was aimed to rescue American, European and other foreign national investors and bankers, but not to control de crisis. Thus, the result of this bailout was the transfer of billions of dollars from Mexican taxpayers collectively to the country's wealthiest and most politically powerful enterprises and individuals . The bailout and redistribution of wealth in Mexico was approved by the IMF and the U.S. government: "IMF loans are used to rescue wealthy, politically connected bankers, investors, and financiers at the expense of domestic taxpayers. Consider the 1995 IMF loan to Mexico. The so-called Mexican bailout did not bail out Mexico's citizens; rather, it bailed out the foreign financial institutions that made bad loans to Mexico. Mexico's citizens paid the price of "adjustment"...From 1994 to 1996, Mexico's taxpayers were saddled with an additional $60 billion in external debt--a good portion owed to the IMF...Standard, austere IMF policy prescriptions reduce economic growth rates, deepen and prolong recessions, and affect most severely the poorest people in the borrowing ..." . The short term liquidity problems that the IMF solves have placed it in the Mexican public opinion as a questionable institution. Mexicans perceive that profitability of the investment or protecting international capital and not economic development is the only condition to grant a credit to a developing country. In the words of Charles Calomiris: "The 1995 IMF bailout of investors in Mexico effectively privatized investor profits and socialized investor losses" .

The groups with an opposite view on the role of the IMF in Mexico are essentially in the left: parties like PRD, PT, and social groups and movements like the Zapatista groups in Chiapas, the students groups, small peasants, trade unions that are not associated to the traditional workers' organisations or even important intellectuals such as Jorge Castaсeda and Carlos Fuentes. These groups argue against an economic policy which generates slow rates of growth without distributing the benefits. They point out that the number of poor people in Mexico has increased and that there are indications that the financial rescue undertaken in the 1994-1995 crisis was through large frauds . In this sense, such groups argue that the adjustment policies suit the objectives of international