Former Mexican finance official Francisco Gil Díaz spoke yesterday at the Fletcher School about the vast changes that have occurred in Mexico's economy over the past 15 years.
Gil Díaz was the secretary of finance and public credit under President Vicente Fox from 2000 to 2006. He is currently the chairman of Movistar Mexico, an affiliate of the telecommunications giant Telefónica SA.
The former minister spoke about macroeconomic stability in Mexico and his role in the recent restructuring of the country's economy. Much of his talk focused on the financial reforms that were enacted in Mexico during the six years he was in Fox's cabinet.
His presentation was part of the Charles Francis Adams lecture series at the Fletcher School and was sponsored by the Latin American Student Club, the International Business Club and the Office of Alumni Relations at the Fletcher School.
Gil Díaz began his talk by discussing the problems Mexico faced during the nation's financial crisis in the early 1990s.
Specifically, he cited the weakness of the peso, which he said was largely a result of a government policy that prohibited foreign banks from having holdings in the currency. This, in turn, he said, damaged the futures market in Mexico.
To strengthen the peso, reforms were enacted that allowed foreign investments in pesos. Previously, the problem of the weakening peso had been unsuccessfully addressed through manipulation of the exchange rate, according to Gil Díaz.
"We opened up the futures market by allowing [investments in pesos]," he said. "All of the sudden we had a futures market ... - a very liquid [and] very deep market."
Moreover, he said that, in recent years, the peso has been "one of the most stable" currencies in the world, and that a large percentage of Mexican banks are now owned by foreign banks.
Gil Díaz then spoke about financial reforms that were designed to encourage private borrowing and to decrease the amount of borrowing done by the Mexican government.
As a result of such policies, he said, the traditional deficit in Mexico has decreased. In addition, interest rates have fallen.
Gil Díaz stressed that these changes occurred as a result of many different government policies and laws.
"Rather than a single mother of all reforms, there were over 40 legislative acts and many [other] rulings," he said.
He cited laws that increased transparency in the banking system as a major boon to Mexico's financial situation. In addition, he claimed that changes, such as increased mortgage availability, that were designed to affect rural and agricultural markets were important components of the positive upturn in Mexico's economy.
"Mortgages in Mexico have been increasing by leaps and bounds," he said.
According to Gil Díaz, the overall result of these reforms and others is that the Mexican financial sector has increased its share of the country's gross domestic product (GDP).
The former minister also devoted some time to discussing changes that have occurred in the realms of pensions, the Mexican stock market, national debt and exports.
He said that changes to pension laws gave more rights to workers, including the possibility of the continued availability of pension funds if Mexicans who were previously in the public sector switched to the private sector, and vice-versa.
In addition, he noted that in recent years the composition of debt in the country has changed substantially, with a trend of decreased external public debt and increased external private debt. This has paralleled the overall growth of Mexican exports.
He concluded the lecture with an account of price gouging by Mexico's main telephone company, Teléfonos de México, explaining the need for a more diverse telecommunications market. This point touched on his previous anti-monopoly work, especially in the telecommunications industry.
Over 40 people, primarily Fletcher School students and faculty, attended the lecture, which followed by a luncheon.
Carmen Arce-Osuna, a second-year Fletcher student and president of the graduate school's Latin American Student Club, had a large part in organizing Gil Díaz's visit to Tufts. She said that the event was popular with those at the Fletcher School and that the waiting list for the luncheon and talk was long.
Arce-Osuna, originally from Mexico, said she was very pleased with Gil Díaz's presentation and that it provided her a unique window into the behind-the-scenes political workings of her native country.
"I think [the talk] was very specific," she said. "I learned a lot about my own country by looking [at] the [insider's view] of things."
