Volume 45 Number 178,
July-September 2014

After the Crisis, Public Policies to Promote Economic Growth, Alma Chapoy and Patricia Rodríguez (coords.), Collection of Problemas del Desarrollo books, IIEC-UNAM, 2012.

The devastating economic, political and social situation engendered by the current crisis has been depicted in a variety of informational media, a result of serious and in-depth research in searching for how to respond to and resolve this situation. Journalistic reporting, documentaries, forums and conventions, not to mention books, have illustrated, updated and clarified the study of current economic issues. The book After the Crisis, Public Policies to Promote Economic Growth, achieves this very set of objectives. It begins with concern for the behavior of the Bank of Mexico, which has acted exclusively to control inflation, and how this has impacted income distribution and foreign trade, which have limited the growth of the Mexican economy. This perspective is further enriched with an analysis of how the Bank of Mexico has implemented monetary policy with the short-term interest rate and the exchange rate. Increasing the bank funds rate modifies relative prices, both for financial markets and the real sector of the economy. The results obtained in the first channel of transmission are reinforced in the second and the third, which reduces inflation, accompanied by a drop in economic activity levels and job creation as well as a social cost for the economy.

On another note, the theoretical regime linking current transactions to the asset variations they provoke, the asset-flow matrix, describes how these balances have behaved, calculated with values for the past 30 years of economic development indicators in Mexico. One of the conclusions drawn is that, as a result of economic opening and liberalization, public policy has achieved its promise of guaranteeing price stability, which was possible because this strategy balanced the institutional sectors that make up the economy, thereby achieving the full neoliberal model. However, when this happened, real salaries fell and interest rates indexed to the exchange rate rose. In the absence of economic growth, the country’s financial assets and wealth have fallen into both Mexican and foreign hands.

This book also generates discussion surrounding how the financial institutions responsible for financing the Mexican economy have behaved, analyzing the role of commercial banks and financial policy. The authors conclude that there is no systematic relationship between financial depth, banking credit, financial repression and economic growth, because the only objective of commercial banks is high profitability.

This attitude is reinforced by the actions of foreign banks operating in the country, such as cancelling products or services, selling assets, incorporating and developing technology, strategic alliances, purchasing large and consolidated banks, etc. This stance is the result of a system in which foreign banks function as an integrated whole in their countries of origin, but their subsidiaries abroad have been designed only to achieve a specific purpose – high returns – and there is no interest in or commitment to providing sufficient financing to productive activities that would contribute to Mexico’s economic development.

Not only are financial entities guilty of this, but public agencies (states, municipalities, decentralized bodies) are as well. They have subjected their public resources to financialization. The choice to make high-risk investments, such as derivatives, has affected social policy meant to promote human development and public finances. The discussion extends to financialization and public administration, as well. Public sector governments and agencies entered financialization as borrowers, the basis of financial market growth. Financing the budget deficit by issuing government bonds and other public debt notes in financial markets was possible precisely because there was a bond market open to foreign financial investors.

The link between emerging financial markets and liberalized global economies led to the securitization of public debt. This has reduced the capacity of governments to implement economic policies that would support the development of their own societies, weakening public institutions and making public revenue less productive.

Finally, the book concludes with an econometric model of the relationship between the financial structure of enterprises and investment in Mexico. The data encompasses figures from 1988 to 2009, and the results reveal that debt is one of the main sources of financing for companies, precisely because of their low financial cost, while banking credit was rather reduced in the debt structure, because banking credit has contracted and interest rates have been high. Finally, the study revealed a trend towards companies investing in financial assets.

Elizabeth Concha
Metropolitan Autonomous University

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Published in Mexico, 2012-2018 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: August 29th, 2018.
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