Mexico's Financial Crisis:
Origins, Awareness, Assistance, and Initial Efforts to Recover
GGD-96-56, Feb 23, 1996
Pursuant to a congressional request, GAO examined Mexico's financial crisis, focusing on the: (1) origins of the crisis; (2) extent to which the U.S. government and the International Monetary Fund (IMF) were aware of Mexico's financial crisis; (3) U.S. and IMF response to the crisis; and (4) Treasury's use of the Exchange Stabilization Fund (ESF) to fund financial assistance to Mexico.
GAO found that: (1) Mexico's financial crisis began in 1994 amid growing concern over Mexico's fiscal and monetary policies and exchange rate system; (2) although the United States expressed concern over Mexico's short-term exchange rate policies, the Federal Reserve and Treasury did not forsee the magnitude of the crisis; (3) U.S. and IMF assistance to Mexico was intended to help Mexico overcome its short-term liquidity crisis and to prevent those effects from spreading to emerging foreign exchange markets; (4) the United States pledged up to $20 billion in loans and security guarantees to Mexico under ESF, and IMF pledged $17.8 billion to Mexico under a standby arrangement to be disbursed over 18 months; and (5) the Treasury Secretary acted within his discretion by using ESF funds to provide assistance to Mexico to promote a stable exchange rate system.