Mexico upbeat in spite of crisis

By Richard Braddell

The Mexican president, Ernesto Zedillo, has called upon Apec member countries to do their utmost to further the group's free trade goals and those of the WTO within established time-frames.

Observing that since Mexico had joined the North American Free Trade Agreement it had become by far the largest exporter in Latin America, President Zedillo said exports were now leading Asia's recovery.

In an impassioned speech in support of free trade and free global capital markets, President Zedillo also said that while free capital markets had deepened Mexico's currency crisis in 1995, they had also helped in its rapid recovery because free markets recognised its adjustments much faster.

But he also warned that a sound banking system was essential if countries were to weather financial storms.

"Rather dramatically, the case of some Apec countries has established that moderate fiscal and current account deficits, price stability and even very high domestic savings rates do not preclude financial crisis," he said.

Rejecting controls on capital mobility, President Zedillo said the markets had to work better, "not less".

"The relevant question is how to make domestic economies less vulnerable to the disruptive effects of capital mobility without giving up its benefits?" Part of the answer lay in prudent public debt management and free floating exchange rates which gave room to cope with the volatility of international financial flows.

But the domestic banking system had proved to be the weakest part in emerging economies, a fact demonstrated in both the Asian and Mexican financial crises.

"Avoiding the crash is only one part of the story. The building of a sound banking system should be an important and fundamental objective."