ABSTRACT
This chapter discusses very briefly some salient features of Mexico’s balance of trade. It focuses on the evolution of private sector net exports and relates this evolution to the real exchange rate, the domestic wage in dollar terms and an index of competitiveness. Several analysts of the Mexican foreign sector have suggested the existence of a close relationship in the last twenty-five years between the inflation adjusted operational balance of the public sector and the current account balance. External shocks aside, the overall balance of trade moves in close relationship with the net exports of the private sector. Mexico had an increasingly significant external imbalance in 1988 reflected in a rapid reduction of foreign exchange reserves. One of the factors behind this development was the contraction of the private sector trade balance associated, inter alia, with appreciation of the real exchange rate.
