La Década Perdida
Encyclopedia
"La Década Perdida", meaning "the lost decade", is a designation to the financial period of crisis in Latin America
during the 1980s (and for some well into the subsequent decade). Sometimes the term is used in exclusive reference to Mexico
.
After the petroleum
boom previous to the government of Mexican president José López Portillo
(from 1976 to 1982), Mexican government began to rely heavily on export barrels to support the financial needs in the country. These exports were mainly directed towards the United States
, mainly due to the petroleum crisis of 1973, taking advantage of the high prices these barrels gathered.
When the market finally settled, thus reducing the high prices per barrel, the financial stability of the country was endangered. Diversification of income would have prevented the problem, but due to the inability of other production sectors to make up for the reduced profit, Mexico had to inflate
the currency to by then historic levels. The Mexican peso
would then be devaluated by a 500%. Given these circumstances, López Portillo nationalized all financial institutions in 1982, during his last public address to the nation by saying: "Defenderé el peso como un perro" ("I'll defend the peso like a dog").
During the next period, president Miguel de la Madrid
tried to bring back foreign investment and new trade agreements, culminating with Mexico's admission to the General Agreement on Tariffs and Trade
(GATT) on January 1986 and also his proposed "Economic Solidarity Pact" in 1987, which finally put inflation under control, which averaged 100% until that time.
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
during the 1980s (and for some well into the subsequent decade). Sometimes the term is used in exclusive reference to Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
.
After the petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
boom previous to the government of Mexican president José López Portillo
José López Portillo
José López Portillo y Pacheco was the President of Mexico from 1976 to 1982.Born in Mexico City, López Portillo studied Law at the National Autonomous University of Mexico before beginning his political career with the Institutional Revolutionary Party in 1959.He held several positions in the...
(from 1976 to 1982), Mexican government began to rely heavily on export barrels to support the financial needs in the country. These exports were mainly directed towards the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, mainly due to the petroleum crisis of 1973, taking advantage of the high prices these barrels gathered.
When the market finally settled, thus reducing the high prices per barrel, the financial stability of the country was endangered. Diversification of income would have prevented the problem, but due to the inability of other production sectors to make up for the reduced profit, Mexico had to inflate
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
the currency to by then historic levels. The Mexican peso
Mexican peso
The peso is the currency of Mexico. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". The Mexican peso is the 12th most traded currency in the world, the third most traded in the Americas, and by far the most...
would then be devaluated by a 500%. Given these circumstances, López Portillo nationalized all financial institutions in 1982, during his last public address to the nation by saying: "Defenderé el peso como un perro" ("I'll defend the peso like a dog").
During the next period, president Miguel de la Madrid
Miguel de la Madrid
Miguel de la Madrid Hurtado is a Mexican politician affiliated to the Institutional Revolutionary Party who served as President of Mexico from 1982 to 1988.-Biography:...
tried to bring back foreign investment and new trade agreements, culminating with Mexico's admission to the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
(GATT) on January 1986 and also his proposed "Economic Solidarity Pact" in 1987, which finally put inflation under control, which averaged 100% until that time.