Peso crashes again in a no-confidence vote against Mexico headline dec kyy

Mexico's currency fell for the second day running in a dramatic vote of no-confidence by the financial markets in the emergency economic plan announced on Tuesday. In early trading the new peso fell sharply against the dollar. Bond and share prices followed suit.

As markets opened, the peso fell 20 centavos against the US currency, to 5.5 pesos, after a 40-centavo fall on Tuesday. The currency closed 25 centavos lower at 5.6 to the dollar.

Interest rates on government debt increased 10 percentage points to more than 30 per cent after the weekly auction yesterday. Share prices on the bolsa lost 4.5 per cent of their value in the first few minutes.

Argentinian and Brazilian shares fell in sympathy.

Guillermo Ortiz, Mexico's finance minister, flew to New York for meetings with banks and investors. A spokesman said: "It's going to be a pep talk."

Although authorities ranging from the International Monetary Fund to the US administration welcomed the plan outlined by President Ernesto Zedillo, it has clearly failed to restore the confidence of the financial community - despite the $18bn international rescue fund to defend the peso. The government's credibility in the markets was shattered by an unexpected devaluation of the previously fixed peso exchange rate on 20 December, and by the Mexican government's inept handling of the crisis that has since unfolded.

The emergency plan involves cuts in government spending, a pact with union leaders limiting wage rises to 10 per cent, and additional privatisation and deregulation of the economy. Analysts fear that the tough measures, which will more than halve expected growth this year, will be unacceptable to the Mexican people. Javier Maldonado, chief analyst at Mexican bank Bancomer, said: "These measures are going to be very bitter."

Talks with labour representatives before the announcement of the plan dragged on for 20 hours. Yet without wage restraint, the government would find it hard to halt a surge in inflation as a result of devaluation and higher import prices.

However, most observers thought the measures were necessary. "The plan has the essential elements," said Nora Lustig, a researcher on the Mexican economy at the Brookings Institute in Washington. But she added that its outcome depended on popular acceptance. "If people believe the crisis will be short-lived, the chance of success is pretty high," she said.

Mickey Kantor, the US Trade Representative, described Mexico's economy as fundamentally sound. He defended the North American Free Trade Agreement.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test