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Mexico: Recovery and Relapse, 1976-82
Country Study > Chapter 1 > Historical Setting > From Revolution to Governance, 1940-82 > Recovery and Relapse, 1976-82

RECOVERY AND RELAPSE, 1976-82


President López Portillo was inaugurated on December 1, 1976, amid a political and economic crisis inherited from the previous administration. A rising foreign debt and inflation rate, a 55 percent currency devaluation, and a general climate of economic uncertainty that had spurred capital flight plagued the economy. The new administration also faced a general lack of confidence in government institutions. Unexpected help arrived as a result of the confirmation of the large oil reserves. The Mexican government chose to follow a policy of increasing oil production only gradually to prevent an inflationary spiral that would disrupt economic recovery. Nevertheless, by 1981 Mexico had become the fourth largest producer of oil in the world, its production having tripled between 1976 and 1982. While production increased, so did the price per barrel of crude oil.

The immense revenues generated by oil exports during the administration of López Portillo gave Mexico a greater degree of confidence in international affairs, particularly in its ever important relations with the United States. The government, for example, refused to participate in the United States-led boycott of the 1980 Summer Olympic Games in Moscow. When the two countries could not agree on the price of natural gas, Mexico flared its excess resources rather than sell to the United States below its asking price. Also in defiance of United States wishes, Mexico recognized the Farabundo Martí National Liberation Front rebels in El Salvador as a representative political force. These steps occurred although the United States remained Mexico's major oil customer and its major source of investment capital.

As in so many developing countries, oil did not solve all of Mexico's problems, however. The oil industry grew rapidly but could not employ the ever-increasing ranks of the unskilled. Oil made Mexico a rich nation in which a majority of the people continued to live in poverty. Foreign banks and the international lending agencies, seeing Mexico as a secure investment with abundant energy resources, flooded the country with loans that kept the peso overvalued.




Last Updated: June 1996


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Mexico was first published in 1996. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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