ABSTRACT
What can governments do? What should they do? In the past thirty years, Mexico’s response has touched on two extremes. While in 1982 the public balance had reached a deficit worth 14.8 percent of GDP, by 1992 it was showing a surplus of 1.5 percent of GDP. As a result, the description of Mexico’s experience usually falls into the stereotype of a country that, having suffered the consequences of its excesses, is now an example of fiscal rectitude. However, to adopt such a simplistic view is equivalent to throwing away all of the lessons that were learnt during those years. We believe that in order to understand fiscal issues in Mexico, it is necessary to adopt a more comprehensive view. Therefore, this chapter is organized as follows. The next section offers a description of the structure of public finances in Mexico and its most relevant institutional features. Based on the former, the chapter develops an analytical framework which is then applied, in a subsequent section, to the review of fiscal issues in Mexico during the period 1970-2001. The final section offers our concluding remarks.
