A decade after the Tequila crisis of December 1994, the Mexican economy presents a macroeconomic landscape that has been fundamentally improved. An independent central bank brings new transparency and accountability to the conduct of monetary policy, with a stated objective of targeting inflation. The fiscal deficit has been held under 2 percent of gross domestic product every year since the 1994–95 crisis. The exchange rate floats successfully, with accumulated foreign exchange reserves reaching nearly $65 billion in December. Markets for government debt attract investors at low rates, and government securities now have a duration of up to 20 years.

            The success of Mexican macroeconomic policy can be seen in the course of recent history. Together with the North American Free Trade Agreement and the opening of Mexican markets to trade, it contributed to the rapid recuperation of the Mexican economy after 1994–95. And it was essential in limiting the 2001 Mexican downturn to a mild recession, a landmark in a country where every downturn of the prior 30 years had been...

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