5

**Table I**

||||**Basic**|**Macroec**|**onomic**<br>|**Indicato**|**rs**|||||
|---|---|---|---|---|---|---|---|---|---|---|---|
||1983|1984|1985|1986|1987|1988|1989|1990|1991|1992|1993|
|Money and Finance:||||||||||||
|[ntlation%(CPI) 1/|101.9|65.5|57.7|86.2|131.8|114.2|20|26.7|22.7|15.5||
|Mil Growth Rate 2'|41.4|62.4|53.8|72.1|129.7|58.1|40.7|62.6|119.8|17.3|14.2|
|Interest Rate (Cetes 28|75.4|62.2|82|135.2|156.4|114.5|56.9|42|21.4|17.1||
|days. Annual)||||||||||||
|BOP - US$||||||||||||
|Trade Balance|14105|13184|8398|5020|8787|2610|405|-882|-7279|-15934||
|ExportsofGNFS|30004|33886|31503|26339|32975|36712|42307|48673|51401|55299|61242|
|Imports ofGNFS|16216|21028|23741|21805|23894|34146|42426|51535|60508|73617|76394|
|Current Account|5424|3765|404|-1771|3820|-2922|-6085|-7114|-13780|-22800||
|Capital Account|339|1306|-316|-2716|-1189|-1163|3176|8164|24134|25955||
|Fiscal||||||||||||
|Primary BaL./GDP|4.8|5.5|3.9|2.6|5.6|8|8.5|7.7|5.3|4.5||
|Economic Bal./GDP|-8.1|-7.1|-8|-14.5|-14.4|-9.3|-4.8|-2.2|-0.3|1.6|0.7|
|Oil Price ($/Bar) 4/|28.37|28.25|26.98|13.82|17.79|14.15|17.19|22.05|18.3|19.22||
|LIBOR|9.7|10.9|8.4|6.9|7.2|<br>8|9.3|8.3|6|||
|Real Sector:||||||||||||
|GDP Growth Rate|-4.2|3.6|2.6|-3.8|1.9|1.2|3.3|4.4|3.6|2.8|0.1 I|
|Mfc. Growth Rate|-7.8|5|6.1|-5.3|3|3.2|7.2|6.1|4|2.3|<br>-1.5|
|Real Exchange Rate|1.49|1.31|1.28|1.65|1.56|1.34|1.350|1.302|1.189|||
|Consumption.GDP 5,'|69.7|72.3|73.7|77.1|74.6|78|78.8|79.3|80.7|82.9||
|Investment/GDP 5'|20.8|19.9|21.2|18.3|19.3|20.4|21.4|21.9|22.4|23.2||

# A.2. The Magnitude of Capital Flows

11. Associated with these macroeconomic developments was a sharp improvement in confidence of both Mexico's private sector and foreign investors. Long-term capital inflows, including massive capital repatriation, skyrocketed to US$24 billion in 1991, after being negative (on average) over 1985-88. Capital inflows remained strong in 1992 at US$26 billion, and during the first half of 1993 at US$16 billion. Although Mexico's economic rebound can be traced back to structural reforms which began well before the Pacto, the reform program was intensified (both in scope and in depth) after the Salinas Administration came into office in late 1988. Among the more important actions have been: the comprehensive commercial foreign debt restructuring cum-debt reduction reached in 1990; commercial bank privatization over 1991-92; application of most privatization proceeds to domestic debt reduction; NAFTA ratified in 1993; reform of the land-tenure "ejido" system, and. the central bank autonomy law passed in December 1993 by an overwhelming congressional majority. Most of these reforms were virtually inconceivable in 1988.

12. With all the successes that Mexico has had in restructuring its economy, regaining access to foreign capital markets, and in bringing down inflation to single-digit levels, the recent evolution observed in several macroeconomic indicators are a cause of concern. The strong deceleration in economic growth over 1991-92 has coincided with a sharp real peso appreciation and large trade deficits. Although trade and current account deficits were over-financed by private capital inflows, and the real ER appreciation was, in large measure, induced by these capital inflows, the sustainability of economic growth per se is now in question. Economic