The Effects of IMF Policy on Poverty in Mexico
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The International Monetary Fund (IMF) has become the most powerful international organization of the Twentieth Century, decisively influencing the well-being of a majority of the World's population. Supporters of the IMF believe that the IMF is necessary in helping developing countries resolve their balance-of-payments difficulties and effectively restructure their economies in order to foster long-run economic growth. Many critics of the IMF, however, assert that the IMF often fails to cultivate growth, and moreover, that IMF policies often exacerbate economic difficulties and increase poverty in developing countries. Because the effects of IMF policy differ for each country, it is necessary to assess the effects on a case-by-case analysis. Mexico provides a good starting point, for it lies at the heart of the 1980s debt crisis and is considered to be a darling reformer of the IMF. Throughout the 1980s and 1990s, Mexico continually pursued IMF structural adjustment policies, paying out hundreds of billions of dollars in debt-service repayments. Nonetheless, the Mexican economy virtually collapsed in 1994. In addition, although economic growth has been positive since the late 1980s, Mexico still struggles with poverty. This paper therefore attempts to analyze the effects that IMF policy has had in Mexico, with particular emphasis on poverty. Although IMF policy may have been successful at generating positive economic growth in Mexico, this success was not accompanied by a reduction in poverty. This case study of Mexico therefore provides evidence that IMF policy needs to include measures specifically targeted at poverty reduction in order to be the most beneficial.