Did the Global Capital Markets Fail Mexico?

If the Mexican prudence had not been overly dependent on investments from the United States, it might give way saved itself from crashing when the U. S. economy went by dramatic changes. Then again, Mexico was not adept at marketing its investments in any case. Perfect markets aver on better information while imperfect information is a form of market failure. Of course, Mexico had not supplyd sufficient information about long-term investment to American investors. As the example of the United States online account deficit reveals, Mexico was not hurt by its current account deficit alone.Rather, the country should have worked to perfect its market for long-term investments to save itself from the crash. In fact, Mexico is entitled to long-term investments from countries besides the United States, too, if it seeks to fork up perfect information to foreign investors. With the advent of the Internet, this has become relatively simple. It was not the global capital markets that fa iled Mexico. Rather, Mexico failed itself. superstar of the reasons for investors pulling out their capital from Mexico was policy-making upheaval in the country.Mexico did not only need to provide perfect information about long-term investments to foreign investors, but also knowledge about managing the political risks faced by investors at the time. Hedging is a way to manage such political risks. As an example, a foreign investor may obtain insurance from the Multilateral Investment Guarantee Agency of the creation Bank. The insurance may provide covers against civil disturbance, war, expropriation, in addition to currency transfers.National insurance companies run by the government may similarly be approached by a foreign investor to obtain cover for risks that draw near from non-payment (Frenkel, Karmann, & Scholtens, 2004, p. 20). The Mexican government should have promoted such insurance companies at the time. In fact, information about hedging as a political risk manag ement tool should have been considered a part of perfect information for a perfect market of investments. What is more, perfecting a market thus should have been considered a major(ip) step toward further development of Mexico.