MX Economic Policies in Response to the Crisis DPL

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The objective of the Economic Policies in Response to the Global Crisis Development Policy Loan Program for Mexico is to support economic policies to mitigate the impact of the global crisis and strengthen the medium-term framework for sustainable economic recovery and growth. The program will contribute to achieving this objective by further developing the regulatory, monitoring and financial framework for fiscal and financial sustainability, labor market efficiency, and trade liberalization. The country shares a common border with the United States, over which more than 80 percent of its exports is exchanged. Millions of Mexican emigrants live in the United States, and prior to the crisis, they sent home over $25 billion per year in remittances. A number of important financial institutions are subsidiaries of international banks that were at the epicenter of the financial crisis. Tourism and other service exports also have the United States as a prime consumer. While the crisis started in the United States, its impact has been more heavily felt in many areas in Mexico. Trade has declined by about 30 percent in the first half of the year. Remittances have fallen substantially, 12.6 percent, in dollar terms, in the first seven months of the year, and foreign investment, direct and portfolio investment, declined by 45 percent in the first half of 2009. The impact of these external factors on the overall economy has been substantial: Gross Domestic Product (GDP) in the first half of the year declined 9.2 percent compared to a year earlier and the Mexican economy lost more than half a million jobs between June 2008 and June 2009.