2002 News Releases

For immediate release:
September 24, 2002

Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org

Dallas Fed Examines the Mexican Economy, Welfare Reform and Brazil’s Financial Troubles

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines Mexico’s prospects for economic success.

"Is Mexico Ready to Roar?" suggests that while in the past 20 years Mexico has become a more open economy, much work remains before the country can become the next development success story. Dallas Fed senior economist Erwan Quintin lists several obstacles to long-term growth in Mexico and describes how several East Asian nations overcame similar obstacles in recent decades. He notes what Mexico can learn from these nations' successes. Quintin concludes that Mexico can move toward long-term growth when the government diminishes its reliance on oil revenues, improves the country’s legal and regulatory institutions, and begins to fight its human capital deficit by targeting basic education.

In "Welfare Reform Revisited," senior economist Jason L. Saving writes that many observers now cite welfare reform as one of the most successful policy experiments in a generation. The welfare rolls have plunged without a corresponding increase in poverty. Saving notes that the welfare reform law is up for renewal, and several changes are being considered. But, in broad terms, the law is likely to mirror the one signed by President Clinton six years ago.

Finally, in "The Politics of Brazil’s Financial Troubles," Dallas Fed Vice President William C. Gruben and Quintin note that Brazil has been generating primary budget surpluses since the end of 1999 and continues to do so. In 2000, Brazil’s Congress enacted the Fiscal Responsibility Law, forcing government administrators to manage revenues and expenditures according to clear and obvious rules. But Brazil’s country risk interest premium on dollar-denominated government debt has doubled since last May, and its exchange rate has devalued by much more than 30 percent since the beginning of the year. What explains this contradiction between bona fide fiscal responsibility and investor fitfulness? Next month’s presidential elections.

Find the September/October issue of Southwest Economy online at www.dallasfed.org under the What's New heading.

-30-