Abstract
From the 1940's until the 1960's there was a strong economic growth in Mexico. This strong economic performance proceeded into the 60's. Manufacturing was the country's dominant growth sector and attracted many foreign investors. Although there was a growth in Mexico, there was fiscal mismanagement which also resulted in a sharp deterioration of the investment climate. During the leadership of José Lopez Portillo during the mid 70's, Mexico became a huge petroleum producer. At the end of his term of leadership Mexico had a huge external debt, because of Mexico's huge governmental borrowing due to the high amount of incomes from petroleum.Oil and petrochemicals became the economy's most dynamic growth sector. In 1973, the oil shock combined with fiscal mismanagement caused a huge disequilibrium in the balance of payment in Mexico. It even became unmanageable as capital flight intensified, forcing the government to devalue the peso by 45%. This action ended Mexico's twenty year fixed exchange rate and started the popular Mexican Sexenio crisis. Between 1978 and 1981, the government spent heavily on energy, transportation, and basic industries.
