ABSTRACT
Restoration of growth to rates that offer some hope of improvement in per capita income should be the predominant economic concern in the coming sexennio. This chapter examines the stage by providing a brief historical overview of the developments leading up to the current situation. It assesses the limits on fiscal policy imposed by the macroeconomic targets embedded in the stabilization program. The chapter provides a quantitative framework for discussing the possibility of achieving satisfactory output growth within these constraints without jeopardizing external balance. It considers the role of exchange rates and fiscal policy, and traces the impact of external developments on growth and external debt in Mexico. Between 1950 and 1974, Mexico enjoyed a remarkable period of high growth, low inflation and moderate external debt accumulation. The government’s allocation of its total expenditure between consumption and investment is an important determinant of output growth for any given aggregate expenditure level and time path of the real interest rate.
