“Lanka could follow Mexican path to recover from economic mess”
Sri Lanka is currently following the same successful path that Mexico followed to overcome their economic recession (Tequila crisis) in 1995 said Mexican Ambassador to Sri Lanka Federico Salas Lotfe.
Mexico’s economy experienced a severe recession as a result of the peso’s devaluation and the flight to safer investments from 1994. The country’s GDP declined by 6.2% throughout 1995. Mexico’s banks collapsed and the country faced severe inflation and extreme poverty skyrocketed as real wages plummeted. Unemployment nearly doubled and over one million people lost their jobs. Prices increased by 35%.
He said that one of the first things they did was ask people to tighten their belts and cut down public expenditure similar to what Sri Lanka is doing today. An ambitious programme was also launched to sell off Mexico’s largest public enterprises “Morocco also sought IMF assistance for a bail package towards setting their long-standing intention and also contacted donor countries like America to obtain fresh credit.”
The government introduced several important economic reforms in that period. He also said that they obtained a 50 billion dollar loan for a bailout out of which $20 billion was contributed by the United States, $17.8 billion by the IMF, $10 billion by the BIS, $1 billion by a consortium of Latin American nations, and CAD$1 billion by Canada.
These successfully implemented programs after a few years saw the Mexican economy turning around. “One of the priorities after the turnaround was to pay back the loan that we obtained from the USA with interest in just 2 years. This increased investor confidence.”
He also recalled that they signed several FTA with Canada, USA and Mexico and these too helped towards increasing their exports and helping towards the economic revival.
“I observe that Sri Lanka is also following the same successful routine that we did and I am confident that the nation will come out of this economic crisis soon.”
He said the true potential of Sri Lanka-Mexico bilateral trade is yet to be exploited as it is hovering around the USD 240 million mark with a trade balance in Sri Lankan favour. (USD 220 million) this is despite Mexico being the largest Latin American business partner with Sri Lanka’s neighbour India.
“We plan to set up a Business chamber and also lead a business delegation to Sri Lanka to increase bilateral trade.” He also met President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardane, Minister of Trade Nalin Fernando, and Chamber heads and business leaders. Mexico is one of the largest buyers of Sri Lankan Cinnamon and our investors are keen on setting up a JV with Sri Lankan partners for Cinnamon value addition projects aimed at re-exports.