Köhler lauds Mexico's economic turnaround

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On June 12 in Mexico City, IMF Managing Director Horst Köhler paid tribute to Mexico's political and economic achievements in recent years. His remarks, which are edited and excerpted here, were delivered on the occasion of the retirement of Mexico's Brady bonds.

The full text of the address is available on the IMF's website (www.imf.org).

Today we celebrate Mexico's political and economic transformation over the past decade.

Politically,Mexico has made a smooth transition to a vibrant multi-party democracy. Economically, Mexico has moved from deep debt and recurrent financial crisis to a position of growing economic leadership among emerging market countries.

Mexico's achievements

Mexico's remarkable economic turnaround since its crisis of 1994-95 well illustrates the rewards of sustained sound economic management.Mexico has entered a new era of macroeconomic stability.

Inflation, which had reached 100 percent during the 1980s, is now firmly in the single-digit range-a tribute to nearly a decade of central bank independence.

The current account deficit, which had averaged more than 7 percent of GDP in the run-up to the 1994-95 crisis, is now down to a sustainable 2-3 percent of GDP. International reserves have increased tenfold over the past decade to over $50 billion.

Mexico has moved from being a debtor to being a creditor of the IMF.

Macroeconomic stability is yielding dividends for Mexico.Mexico has achieved investment grade status and foreign direct investment has risen sharply over the past decade.Most important, real GDP growth has averaged 4 percent since the mid-1990s-nearly twice as fast as during the 1980s-and well ahead of most other countries in the region. Public debt has been brought down. Social conditions are improving, especially in key indicators of life expectancy, infant mortality, and adult literacy. These achievements are the results of determined macroeconomic and structural policies that have reduced Mexico's vulnerabilities, increased the flexibility of response to external shocks, and raised productivity:

* Improved fiscal policy and debt management have been critical to the recovery of confidence.

Fiscal spending has become more efficient and more transparent, with quasi-fiscal activities being firmly controlled, while transfers to the poor have encouraged human capital development. Mexico has been a leader in Latin America...