ss: P. O. Box 3087, Laredo, TX 78044-3087
telephone: [52] (5) 211-0042
FAX: [52] (5) 511-9980, 208-3373
consulate(s) general: Ciudad Juarez, Guadalajara, Monterrey, Tijuana
consulate(s): Hermosillo, Matamoros, Merida, Nuevo Laredo

Flag: three equal vertical bands of green (hoist side), white, and
red; the coat of arms (an eagle perched on a cactus with a snake in
its beak) is centered in the white band

Economy
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Economic overview: Mexico has a free market economy with a mixture
of modern and outmoded industry and agriculture, increasingly
dominated by the private sector. Mexico entered 1996 on the heels of
its worst recession since the 1930s. Economic activity contracted
about 7% in 1995 in the aftermath of the peso devaluation in late
1994. Although Mexico City was able to correct imbalances in its
external accounts, meet international payments obligations, and
dramatically improve its trade balance in 1995, the domestic economy
suffered harshly as the ZEDILLO administration stuck to a strict
austerity program. The tight monetary and fiscal policies helped
prevent spiraling inflation and kept government spending under
control but drove interest rates to record heights, making it
difficult for most Mexicans to service their debts. At the same
time, consumers' reduced purchasing power made buying even
necessities difficult for some. Many small- and medium-sized firms
were unable to survive under the twin burdens of high interest rates
and depressed domestic demand for their goods. Business closures and
cutbacks fueled unemployment; more than 1 million Mexicans lost
their jobs. According to the government and most private sector
observers, the recession bottomed out in the third quarter of 1995,
but the difficult year fed growing dissatisfaction with the ruling
party, led to a crisis of confidence in President ZEDILLO'S ability
to lead, and spurred increased tensions within the ruling party.
While the ZEDILLO administration is optimistic that 1996 will bring
some recovery - the government is forecasting 3% growth and 21%
inflation - Mexico will face several key vulnerabilities, including
the financial health of the banking sector, shaky investor
confidence that could be easily jarred by more political or economic
shocks, and increasingly emboldened dissenters within the ruling
party.

GDP: purchasing power parity - $721.4 billion (