Lesson from Mexico

Lesson from Mexico

Although Indonesia's economy is in better shape than Mexico's, prudence is still needed in handling the economy. This is the important message we get from Finance Minister Mar'ie Muhammad. We would like to add that we also have to learn from the Mexican crisis.

Economic crisis befell that country in the 1980s. The price of oil, its major export commodity, dwindled. Mexico failed to service its foreign debt. Its economy entered a prolonged recession.

Only through prudent economic reform, belt-tightening and foreign loans did the country manage to overcome the crisis, in a period of ten years.

Praises were heaped on Mexico and more foreign loans flew in after it joined NAFTA with the United States and Canada. It managed to tone down inflation from 150 percent to 15 percent.

Exports increased but imports, mostly luxury items, proved to be bigger. In the last seven years exports rose only 25 percent compared to import's, 400 percent.

There was no action taken when its peso was depreciated severely against the dollar. When President Emesto Zedillo Ponce de Leon, finally took the devaluation measure last month, it was too late already.

This is apparently the message behind the minister's statement. He also said that a credibility crisis befalling the finance authority in the country is one of the trigger factors behind the crisis.

-- Kompas, Jakarta