Mexico - 2003 Article IV Consultation-Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; And Statement by the Executive Director for Mexico (Electronic book text)

1. Mexico has been hard hit by the global crisis, essentially for reasons outside the authorities' control. Financial conditions tightened sharply following the failure of Lehman Brothers last September. At the height of the turmoil, some Mexican corporates incurred large losses on foreign currency derivatives transactions, which put substantial pressure on the exchange rate and credit spreads. As the U.S. downturn intensified-especially the collapse of industrial production which has large spillovers to Mexico-real activity weakened very sharply. Combined with still heightened financial market strains, concerns arose earlier this year over tail risks of a downward spiral as discussed in IMF Country Report No. 09/126.