Devaluation

All through last year, Mexico lived beyond its means. Sales abroad failed to keep pace with purchases abroad, and the government tried early this year to bring foreign trade back into balance by boosting duties on all imports 25%. When the trade deficit kept getting worse and capital showed signs of taking flight northward, officials decided that they could not wait for this summer's expected bumper cotton and coffee crops to save the situation. Last week the government abruptly announced a devaluation of the Mexican peso--from 8.65 to 12.50 to the dollar.

Mexico's economic situation is by no means as bad as such drastic action implies. Its cash dollar reserves still exceeded the $200 million mark, and it has not even touched its $100 million emergency credits with the International Monetary Fund and the U.S. Treasury. Mexico's Treasury Secretary Antonio Carrillo Flores insisted last week that within the national economy, affairs are "generally satisfactory."

Now, as then, Mexican officials hope to reduce nonessential imports, boost exports (particularly of metals, which have slumped badly), reverse the movement of capital, stimulate internal investment, and bring in more tourists. Of one thing the officials can be sure: thousands of vacation-minded U.S. citizens will be keenly interested to learn that south of the border this summer the dollar will reach 44% further.

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