The 1980s Mexican Political Economy
Reinterpreted through the Hypothesis of Financialization
Violeta Rodríguez

To complement the above point, I propose the hypothesis that in the 1990s,6 with the complete opening up of the domestic economy and foreignization of banks, the economic policy elevated that performance to an international standard; furthermore, with the reform of the country's pension systems, the policy converted these funds into the most sizeable working capital for said debt operations,7 ensuring their yields, as a domestic and private source of demand and payments.

The paper is divided into two sections. The first section describes the descriptive statistic of the balance and interests of Mexican debt,8 to show how financial performance became stronger until the country began the process of financialization, and not before. The second categorizes Mexico's macroeconomic political steps taken in the period in question, based on their role in the evolution of the process until the stage of leveraged buy-outs. The conclusions propose that the aforementioned policy went beyond this evolution, since it paved the way for Mexican financialization to reach its third stage –“consumer debt”– by the mid-1990s.

PRE-1970S ECONOMIC POLICY AND THE PROFITABILITY
OF FINANCE OPERATIONS IN THE DOMESTIC ECONOMY

The performance of Mexico's financial sector had clearly not seen the development or growth it would attain after the country's financialization: between 1940 and 1973, the variables that defined its value–specifically the amount of debt and its interest rate–fluctuated with nominally constant and insignificant real movements, in sharp contrast to the marked increases from the end of the 1970's (see Figure 1).

Internal Debt

As financialization progressed in Mexico throughout the 1980s, the stock-flow 9 in the private sector had deteriorated (see Figure 2) due to the lower levels of employment, salaries and non-finance profits during the period, which exceeded the reduction in personal consumption. This led to the reduction of savings in this sector to zero, and becoming negative during the 1990s, with the unprecedented growth applied by the banks to active interest rates.

This affected the yield of the asset funds (see Figure 3), the negative balance of which, in the private non-finance sector, reflected the increase of their debt–also at unprecedented levels (see Figure 4). This performance was similar to that of internal public debt in the 1980s that improved when the government intensified its monetary restriction strategy. As a result, the banks’ reserve funds could sustain a surplus throughout the 1980s and for most of the 1990s, and this surplus was effectively or potentially the most obvious sign of Mexico's financialization.

6 The statistical and analytic basis for this shall be covered in a later paper, since this article focuses exclusively on the 1980s.

7 Chenais, 2003: 37 and 51-54 refers to the central role of pensions systems in financialization.

8 That information, together with all the tables and figures referred to hereine, can be found in the Annex of Tables and Figures on the magazine's website: www.revistas. unam.mx

9 The stock-flow balance and financial assets were calculated using the methodology described by Rodríguez (2010), which is based on Goodley, W. and Cripps, F. (1983); Goodley, W. (2004) and Dos Santos, C. (2004)