imf

[saraaa]

I need to know how did the IMF intervene to solve the Mexican crisis in 1994 & what did it do to overcome it ? I would be so thankful if anyone who knows about it can explain it for me or tell me where i can find the answer to my question.

[JohnPPotts]

Basically, Mexico had a lot of debts denominated in (US) dollars. Its currency collapsed, (ie, you suddenly needed a lot more pesos to buy a dollar) and so the Mexican government couldn't pay the debts it owed. As a result the IMF (and the US government) lent it the money it needed to cover the debt which:

1) Meant Mexico could pay the debt and

2) Convinced the markets that it was worth investing in Mexico (as the US would, to a certain extent "back-up" the debt) and so restore confidence.

Essentially, this was what the UK tried (unsuccessfully) to do when it was kicked out of the ERM in 1993 - however, the other members of the ERM (notably Germany) were unprepared to lend us the money (rightly or wrongly, but that's a different debate).