LatinFinance - Special Edition - August 2013 - 37

Peso in freefall
12

Apr 1995
—
Fujimori’s golden
moment

MXP per USD

10
8
6
4

1998

1997

1996

1995

1994

1993

Mar 1994
—

Mexico in crisis

Peruvian president alberto fujimori
wins a second five-year term, shortly
after ending a border conflict with
ecuador. latinfinance had crowned
fujimori man of the Year in 1994,
for halting Peru’s economic crisis:
he brought down inflation to 57% in
1993, cut four points off the public
deficit, and secured imf credit. Six
months later, the country announces a debt restructuring agreement
with creditors to swap between
$6bn and $8bn of debt and interest
into Brady bonds. as man of the
Year, he defends his brutal campaign against maoist terrorist group
Shining Path, saying: “i cannot
see success in political, social and
economic reform as long as violence
exists. i don’t agree with making
reforms while living with terrorism.”
the conflict killed nearly 70,000
Peruvians between 1980 and 2000.

Apr 1996
—
venezuela signs
iMF deal
Venezuelan president
Rafael caldera announces a reversal of
many policies with an
economic adjustment
program that complies
to imf demands and
opens the way for an
aid package. caldera
increases taxes and
gas prices, lifts some
foreign exchange
controls and floats the
bolívar. the currency
drops from 290 to the
dollar to around 480.

trading is suspended for a day in mexico in memory of
presidential candidate luis Donaldo colosio, who is assassinated in tijuana. the killing, combined with a new
Zapatista protest movement which started in chiapas in
January, unsettled international investors. the nervousness came on top of much deeper economic problems.
mexico’s trade deficit was $1.6bn in october, up from
$130m in march 1991. fast interest rate rises put pressure
on a weak, newly privatized banking sector, and bank
lenders struggled. foreign cash deserted the country.
investment from overseas fell from $60bn in January 1994
to $34bn by the end of the year. in December 1994, mexico
floats the peso, causing stocks, bonds and the currency
to plunge. the following year, mexican official alejandro
Valenzuela tells LatinFinance the
country had “no other choice” than
Aug 1998
Russia calls a debt moratorium, driving a flight to quality among em investors. the
to continue allowing the free float,
—
troubles started a year earlier when the rapid devaluation of the thai baht sparked
saying it did not have the internaeconomic crisis in asia. “Rumors of a Venezuelan devaluation caused its par bonds to
widen from USt+943bp to a spread of 2,047bp in the month of august alone,” LatinFitional reserves to defend the peso.
nance wrote in September 1998. “mexico’s peso also got hammered.” carlos menem,
“if it doesn’t work, we will seek some
the argentine president, told LatinFinance in September the country had overcome
more alternatives,” he said. mexico’s
mexico’s crisis. “now we have to resist the effects of the crisis in southeast asia, which
now includes the problems of Japan. it was totally unpredictable that Japan would
crisis reverberates across latin
reach this point. it has to open itself to the world and then things will change. they have
america.
to instrument policies, i would say, similar to those we put into action here in argentina.
if not, they won’t overcome this crisis that is dragging down the whole world.”

Feb–95

US rateS cycle
endS The US
Federal Reserve
ends an aggressive
monetary tightening cycle with rates
at 6%. US interest
rates had been 3%
at the beginning of
1994.

apr–95

derivativeS grow
The Chicago Mercantile
Exchange launches
Mexican peso futures and
options contract trading,
and soon after files to
offer similar trading in
Brazilian real derivatives.
While such products are
already traded on the São
Paulo stock exchange,
the CME is more liquid
and attractive for US and
European investors.

aug-95
Look Who’S BRokIng
noW Intercapital Securities’ chairman Martin
Quintin-Archard leaves
the firm, which had been
particularly prominent
with LatinFinance readers
for its creative advertising.

dec–96

jun–98

1998
gUATEMALA EndS
WAR guatemala
reaches a peace accord, ending a 36-year
civil war between the
government and Marxist guerrillas.

eUro preparation
Argentina raises 1trn
Italian lira ($560m), amid
a trend for European
currency debt. Yet across
Latin America, issuers
are also preparing for the
introduction of the euro,
which some fear will bring
a “host of mechanical
problems”.

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