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³ Fox, Jonathan, “The Difficult Transition from Clientelism to Citizenship: Lessons from Mexico,” World Politics 46 (January 1994), 153CrossRefGoogle Scholar; Hamilton, Nora, The Limits of State Autonomy: Post-Revolutionary Mexico (Princeton: Princeton University Press, 1982)CrossRefGoogle Scholar; Collier, Ruth Berins and Collier, David, Shaping the Political Arena: Critical Junctures, the Labor Movement, and Regime Dynamics in Latin America (Princeton: Princeton University Press, 1991)Google Scholar; Cornelius, Wayne A., “Nation-Building, Participation and Distribution: The Politics of Social Reform under Cardenas,” in Almond, Gabriel, Flanagan, Scott, and Mundt, Robert, eds., Crisis, Choice and Change: Historical Studies of Political Development (Boston: Little, Brown, 1973)Google Scholar.

⁴ See Ugalde, Francisco Valdes, “From Bank Nationalization to State Reform: Business and the New Mexican Order,” in Cook, , Middlebrook, , and Molinar, , eds., The Politics of Economic Restructuring: State-Society Relations and Regime Change in Mexico (San Diego, Calif.: Center for U.S.-Mexican Studies, 1994)Google Scholar; Teichman, Judith, “The Mexican State and the Political Implications of Economic Restructuring,” Latin American Perspectives 19 (Spring 1992)CrossRefGoogle Scholar.

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⁶ Poitras, Guy and Robinson, Raymond, “The Politics of NAFTA in Mexico,” Journal of Interamerican Studies and World Affairs 36 (Spring 1994)CrossRefGoogle Scholar.

⁷ During his candidacy Salinas angered many old-guard politicians by declaring his approval of the end of the PRI's monopoly, while as president he frequently stated publicly that the party's days of clien-telism and patronage were numbered. See Molinar, Juan and Weldon, Jeffrey, “Elecciones de 1988 en México: Crisis del autoritarismo,” Revista Mexicana de Sociologia 52 (October-December 1990), 230–31CrossRefGoogle Scholar; Cornelius, Gentleman, and Smith (fn. 2), 14–36.

⁸ See Sikkink, Kathryn, Ideas and Institutions: Developmentalism in Brazil and Argentina (Ithaca, N.Y.: Cornell University Press, 1991)Google Scholar.

⁹ The técnicos emerged as highly skilled, insulated economic bureaucrats who took over the policymaking process from old-guard polítkos. See Smith, Peter, “Leadership and Change: Intellectuals and Technocrats in Mexico,” in Camp, Roderic, ed., Mexico's Political Stability: The Next Five Years (Boulder, Colo.: Westview Press, 1986)Google Scholar; Lindau, Juan D., “Schisms in the Mexican Political Elite and the Technocratic/Politician Typology,” Mexican Studies/Estudios Mexicanos 8 (Summer 1992), 217CrossRefGoogle Scholar; Centeno, Miguel Angel and Maxfield, Sylvia, “The Marriage of Finance and Order: Changes in the Mexican Political Elite,” Journal of Latin American Studies 24 (February 1992), 83–84CrossRefGoogle Scholar.

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¹¹ Bhatt, V. V., Financial Innovation and Credit Market Development, Working Paper WPS 52 (Washington, D.C.: World Bank, August 1989), 16Google Scholar.

¹² For example, when the U.S. innovated short-term debt securities to finance its deficit in the 1980s, countries all over the world followed suit to remain attractive to global investors. See Philip G. Cerny, “Financial Market Deregulation and the Competition State” (Discussion paper, American Political Science Association, Washington, D.C., September 1988), 43–46.

¹³ Elsewhere among Latin America and Asian reformers, exchange rates today range from fixed to floating, while foreign bank penetration varies from less than 5 percent in Indonesia and Taiwan, to about 10 percent in Mexico and Brazil and almost 25 percent in Chile and Argentina. See “How Far Is Down?” Economist (November 15,1997), 20.

¹⁴ See especially Haggard, Stephan and Maxfield, Sylvia, “The Political Economy of Capital Account Liberalization,” in Reisen, Helmut and Fischer, Bernard, eds., Financial Opening: Policy Issues and Experiences in Developing Countries (Paris: OECD, 1993)Google Scholar.

¹⁵ Frieden, Jeffry A., “Invested Interests: The Politics of National Economic Policies in a World of Global Finance,” International Organization 45 (Fall 1991), 440–41CrossRefGoogle Scholar.

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¹⁷ On labor relations, see Collier, Ruth Berins, The Contradictory Alliance: State-Labor Relations and Regime Change in Mexico (Berkeley: International and Area Studies, 1992)Google Scholar; Enrique de la Garza Toledo, “The Restructuring of State-Labor Relations in Mexico,” in Cook, Middlebrook, and Molinar (fo.4).

¹⁸ Crespo, José Antonio, “Crisis Económica: Crisis de Legitimidad,” in Bazdresch, Carlos et al. , eds., Mexico: Auge, crisisy ajuste (Mexico City: Fondo de Cultura Económica, 1992), 31Google Scholar.

¹⁹ Cornelius, Gentleman, and Smith (fn. 2), 27–28.

²⁰ Loaeza, Soledad and Stern, Claudio, eds., Las closes medias en la coyuntura actual (Mexico City: Centro de Estudios Sociales, Colegio de México, 1990)Google Scholar.

²¹ Meyer (fn. 16), 121–22.

²² See Molinar and Weldon (fn. 7); Camp, Roderic Ai, Politics in Mexico (New York: Oxford University Press, 1993)Google Scholar; Peritore, N. Patrick and Peritore, Ana Karma, “Cleavage and Polarization in Mexico's Ruling Party,” Journal of Developing Areas 28 (October 1993), 72–73Google Scholar.

²³ Highly educated Mexicans voted for the PAN at twice the national average; see Camp (fn. 22), 81.

²⁴ Author interview, Mexico City, December 10,1998.

²⁵ Morris, Stephen D., Political Reformism in Mexico (Boulder, Colo.: Lynne Rienner, 1995), 72Google Scholar.

²⁶ Basañez, Miguel, El pulso de los sexenios: 20 años de crisis en México (Mexico City: Siglo Veiniuno, 1990), 225–29Google Scholar.

²⁷ For the success of neo-cardenismo among the popular sectors, see Tonatiuh Guillen Lopez, “The Social Bases of the PRI,” in Cornelius, Gentleman, and Smith (fn. 2), 256–58.

²⁸ Bruhn, Kathleen, “Social Spending and Political Support: The ‘Lessons’ of the National Solidarity Program in Mexico,” Comparative Politics 28 (January 1996), 155CrossRefGoogle Scholar.

²⁹ Molinar and Weldon (fn. 7), 252.

³⁰ Camp (fn. 22), 156–57.

³¹ Not coincidentally, this group had bought virtually the entire banking system. See Fernando Ortega Pizarro, “El proyecto económico de México,” Proceso (September 9,1991), 24–27.

³² For example, J. P Morgan floated a $1 billion bridge loan to the group that successfully bid on Bancomer, Mexico's second-largest bank. See “The High Price of Bank Sell-Offs,” Euromoney Supplement (January 1992), 20.

³³ Martínez, Guillermo Ortiz, La reforma financiera y la desincorporación bancaria (Mexico City: Fondo de Cultura Económica, 1994), 220Google Scholar.

³⁴ A major reason was that the banks had primarily invested in high-yield, low-risk government securities. See Economia Mexicana (1986), 56–57.

³⁵ A central element of deregulation was the elimination of controls over interest rates. See Moore, Robert R., “The Government Budget Deficit and the Banking System: The Case of Mexico,” Financial Industry Studies (1993)Google Scholar; Ortiz (fn. 33), 297. Selective credit requirements were also eliminated. See Aspe, Pedro, Economic Transformation the Mexican Way (Cambridge: MIT Press, 1993), 80Google Scholar; Lustig, Nora, Mexico: The Remaking of an Economy (Washington, D.C.: Brookings Institution, 1992), 108Google Scholar. The reserve requirement, which was eliminated in 1989, dramatically increased credit to the private sector. See Laurie, Samantha, “Oxygen of Recovery,” Banker 140 (April 1990), 50Google Scholar.

³⁶ Sergio Sarmiento, EINorte (April 5,1989).

³⁷ A major reason was to enable domestic banks to compete for global capital. See Marray, Michael, “Growing Pains,” Euromoney (September 1992), 148Google Scholar; Aspe (fn. 35), 89. Gomez, José-Ramon Palencia, “Evolution of the Mexican Financial System towards a Universal Bank,” Money Affairs 5, no. 1 (1992)Google Scholar; Academia Mexicana de Derecho Bursátil, “Actualización sobre las adiciones a las leyes del mercado de valores y sociedades de inversión” (Mexico City, 1990), 24.

³⁸ “A Latin Big Bang,” Mexico Survey, Economist (February 13,1993), S16; Jameson, Kenneth, “The Financial Sector in Latin American Restructuring,” in Baer, Werner and Birch, Melissa H., eds., Privatization in Latin America (London: Praeger, 1994), 126Google Scholar.

³⁹ Pérez, Antonio Gutiérrez and Perrotini, Ignacio, “Liberalización financiera y estabilización macroeconómica en México: Dasafíos y perspectivas,” Investigación Económica 209 (July-September 1994)Google Scholar; Gavito, Javier and Trigueros, Ignacio, “Los Efectos del TLC sobre las entidades financieras,” in Kessel, Georgina, ed., Lo negociado del TLC (Mexico City: McGraw-Hill, 1994)Google Scholar. Mexico also argued that because American legislation prohibits national retail banking, U.S. branch ownership and “financial group” status would be prohibited. See Fuentes, Rossanna, “Serios peligros para el sistema de pagos,” El Financiero (February 13, 1992), 3Google Scholar; Isabel J. Mayoral, “No modificará EU su legislación bancaria,” Uno Más Uno (June 12,1992), 18.

⁴⁰ No single U.S. or Canadian banking subsidiary could initially gain a market share larger than 1.5 percent of the total capital. Furthermore, the combined total of all foreign banks could not exceed 8 percent of net capital until the year 2000, after which the ceiling would be raised to 15 percent. By 2004 the banking sector was to be completely liberalized; however, a safeguard clause allowed the Mexican government to extend a grace period to the market share ceiling until 2007 if foreign bank penetration reached 25 percent. See , Paul et al. , North American Free Trade Agreement: Summary and Analysis (New York: Matthew Bender, 1993), 67–72Google Scholar. Following the 1994 peso crisis Zedillo raised market share ceilings in order to provide foreign capital for local and regional banks facing insolvency.

⁴¹ Gruben, William C., Welch, John H., and Gunther, Jeffrey W., “U.S. Banks, Competition and the Mexican Banking System: How Much Will NAFTA Matter?” Financial Industry Studies (October 1993).Google Scholar

⁴² Gutiérrez Pérez and Perrotini (fn. 39), 93.

⁴³ “Banca '93: Impulsarán nuevos bancos competencia,” El Norte (September 6,1993).

⁴⁴ Alberto Musalem, Dimitri Vittas, and Asli Demirgüç-Kunt, “North American Free Trade Agreement: Issues on Trade in Financial Services for Mexico” (Washington, D.C.: World Bank, 1993). By comparison, charter minimums for American banks are between one and five million dollars.

⁴⁵ McComb, Robert P., Gruben, William C., and Welch, John H., “Privatization and Performance in the Mexican Financial Services Industry,” Quarterly Review of Economics and Finance 34 (Summer 1994), 226CrossRefGoogle Scholar.

⁴⁶ Vega, Gustavo, “NAFTA and Financial Services” in Castillo, Gustavo del and Vega, Gustavo, eds., The Politics of Free Trade in North America (Ottawa: Centre for Trade and Policy Law, 1995)Google Scholar; Catherine Mansell, “The Internationalization of the Mexican Financial System” (Paper presented at the Conference on the Global and Comparative Analysis of Financial Institutions, Rockefeller Foundation, Bellagio Conference and Study Center, May 1994), 31.

⁴⁷ Excélsior (October 6,1993).

⁴⁸ Asociación Mexicana de Bancos, “La banca mexicana en transición: Retos y perpectivas,” Comercio Exterior 41 (February 1990)Google Scholar.

⁴⁹ El Financiero (November 21,1991), 15.

⁵⁰ Janine Rodiles and Mauricio Flores, “Garantiza TLC protección financiera,” El Norte (August 14, 1992).

⁵¹ El Financiero (February 13,1992), 3.

⁵² Arturo Hanono, Expansión (December 11,1991).

⁵³ Antonio Gershenson, La Jornada (February 16,1992), 5.

⁵⁴ Author interview with Julio Alfredo Genel, Mexico City, November 28,1994.

⁵⁵ Author interview with David Vargas, PAN deputy, Cámara de Diputados, Mexico City, March 10, 1995.

⁵⁶ See especially Dávila, Francisco Suárez, “Liberación, regulación y supervisión del sistema bancario mexicano,” Comercio Exterior 44 (December 1994)Google Scholar.

⁵⁷ Author interview, on condition of anonymity, Mexico City, April 4,1994.

⁵⁸ See Dresser, Denise, Neopopulist Solutions to Neoliberal Problems: Mexico's National Solidarity Program (San Diego, Calif.: Center for U.S.-Mexican Studies, 1991)Google Scholar; Cornelius, Wayne A., Craig, Ann L. and Fox, Jonathan, “Mexico's National Solidarity Program: An Overview,” in Cornelius, , Craig, , and Fox, , eds., Transforming State-Society Relations in Mexico (San Diego, Calif: Center for U.S.-Mexican Studies, 1994)Google Scholar; Bruhn (fn. 28).

⁵⁹ Centeno (fn. 2), 65–66.

⁶⁰ It is impossible to calculate exactly how much of the bank sale revenue went to Pronasol, because the Mexican government has long kept major items of discretionary spending secret. In December 1997 opposition members of Congress, who accused the PRI of using the budget for political purposes, demanded that President Zedillo make all public spending transparent.

⁶¹ Enrique González Tiburcio, “Social Reform in Mexico: Six Theses on the National Solidarity Program,” in Cornelius, Craig, and Fox (fn. 58), 72.

⁶² Matt Moffett, “Barrio Brigades,” Wall Street Journal, January 8,1993, A7.

⁶³ Juan Manuel Alvarado, “Usará Pronasol fondo de la venta de bancos,” El Norte (March 11,1992).

⁶⁴ Mexico on the Record (July 1992), 4.

⁶⁵ Carlos Acosta, “El dinero no viene y Salinas vende casi lo único que quedaba: La banca,” Proceso (May 7,1990), 9.

⁶⁶ Cornelius, Craig, and Fox (fn. 58).

⁶⁷ In 1992 number two Bancomer enjoyed 108 percent growth in profits, while number one Ba-namex had an 84 percent surge. See Marray (fn. 37), 148–50. See the following examples of the extensive literature on high Mexican bank profits: Geri Smith and Wendy Zellner, “The Gringo Banks Are Drooling,” Business Week (September 13, 1993), 84; and Girón, Alicia, “La banca comercial de México frente al TLC,” Comercio Exterior 44 (December 1994), 1074Google Scholar. Data obtained from Banamex shareholder reports demonstrated that even a moderate decline in interest rates posed the threat of firm failure. See Ram6n Pieza, “Banamex, dificil llegar al bicentenario,” El Financiero (November 28, 1994), 14A.

⁶⁸ See Expansión (August 18, 1993), 349; Juanita Darling, “Privatized Mexican Banks Get Ready for Foreign Competition,” Los Angeles Times, September 8,1993, D4.

⁶⁹ These obstacles were later overcome by outrage and insolvency. In 1995 a national debtors' movement called El Barzón, including hundreds of thousands of consumers, businessmen, and farmers, faced real interest rates of 40 to 50 percent and threatened a moratorium on loan payments until there was some serious relief from the high rates.

⁷⁰ In the early 1990s customers applying for the basic credit card at either of the country's largest banks needed to show proof of a salary of only about $335 per month. See Geyer, Anne, “Credit Card Surge,” Business Mexico (June 1991), 4Google Scholar.

⁷¹ In 1992 banks charged businesses real interest rates over 20 percent, three to four times higher than U.S. levels. See Pizarro, Fernando Ortego, “La banca quedó en manos de mexicanos, pero muy pocos,” Proceso (July 13, 1992), 9Google Scholar. Over two years after reprivatization, medium-size firms in Mexico paid 25 percent interest and had difficulty obtaining loans for longer than six months. See Juanita Darling and Chris Kraul, “U.S. Banks Eager to Enter Mexico,” Los Angeles Times, December 13, 1993, D1. A. 1993 study revealed that real interest rates for small industries in Nuevo Leon ranged from 19.8 to 21.5 percent, while the U.S. variation was between 4.5 and 5 percent. Lara, Juan Antonio, “Demanda caintra acelerar la compentencia bancaria,” El Norte (May 21,1993)Google Scholar.

⁷² El Financiero (October 19,1992), 40.

⁷³ El Financiero (June 3,1992), 14.

⁷⁴ Alvarez, Carmen, “Molesta a empresarios negociación financiera,” El Norte (October 8, 1992)Google Scholar.

⁷⁵ El Financiero (December 9,1994), 30A.

⁷⁶ See Davis, Diane E., “Mexico's New Politics: Changing Perspectives on Free Trade,” World Policy Journal 9 (Fall-Winter 1992), 664–66Google Scholar; Shadlen, Ken, “Corporatism and the Associative Logics of Business: Small Industry and the State in Post-Revolutionary Mexico” (Ph.D. diss., University of California, Berkeley, 1997)Google Scholar.

⁷⁷ A month before the 1994 election, PRD candidate Cuauhtemoc Cardenas promised that his administration would pressure the banks to lower interest rates. However, when asked to openly support a greater opening to foreign banks, he declined. El Financiero (June 12,1994), 45.

⁷⁸ Author's interview, Mexico City, March 10,1995.

⁷⁹ Carlos Salinas de Gotari, “Economic Highlights of the Sixth Annual Presidential Report,” Mercado de Valores (January-February 1995), 13.

⁸⁰ For a commentary on the technical flaws in Salinas's economic model, see Lustig, Nora, The Mexican Peso Crisis: The Foreseeable and the Surprise (Washington, D.C: Brookings Institution, 1995)Google Scholar; Ramírez de la O, Rogelio, “The Mexican Peso Crisis and Recession of 1994–1995: Preventable Then, Avoidable in the Future?” in Roett, Riordan, ed., The Mexican Peso Crisis: International Perspectives (London: Lynne Rienner, 1996), 18–22Google Scholar. Mexico's impressive export growth, which was largely based on production from foreign corporations, was thus inextricably linked to increasing imports. Exporters outside the maquiladora (maqutla) sector (foreign-owned assembly plants that export back to the home country) also relied increasingly on intermediate goods from abroad. From 1989 to 1993, while Mexican non-maquila exports rose 31.9 percent, from $22.8 billion to $30 billion, an annual increase of 7.2 percent, non-maquila imports rose by an astonishing 109 percent, from $23.4 billion to $48.9 billion, an average of 20.2 percent per year. See El Inversionista Mexicano (August 29,1994), 1.

⁸¹ Carlsen, Laura, “La bolsa mexicana de valores,” El Cotidiano 59 (1993), 112Google Scholar; Laurie (fn. 35), 49.

⁸² Carstens, Agustín, “Foreign Exchange and Monetary Policy in Mexico,” Columbia Journal of World Business 29 (Summer 1994), 75CrossRefGoogle Scholar.

⁸³ Ajustabonos (adjustable bonds) offered real interest after covering for inflation, while tesobonos (treasury bonds) guaranteed payment indexed to the exchange rate. See Ana Laura de Coss, “Instrumentos de inversión que ofrecen protección cambiaria,” El Economista (October 7,1994), F16.

⁸⁴ Expansión (November 21,1990), 59.

⁸⁵ Mercado de Valores (November-December 1994), 31.

⁸⁶ Latin Finance (July 1992), 58.

⁸⁷ See especially “Deficit comercial de México: Sostenible?” Este País (May 1993), 26.

⁸⁸ Fear of inflation following moderate U.S. growth led the Federal Reserve to almost double interest rates in 1994, from 3 percent to 5.5 percent. For a discussion of the effect of U.S. interest rates on emerging markets, see Ahmed, Masood and Goopta, Sudarshan, “Portfolio Investment Flows to Developing Countries,” Finance and Development (1993), 11Google Scholar.

⁸⁹ For an evaluation of the unsustainable buildup of tesobono debt accumulated in 1994, see the special isue on debt of El Inversionista Mexicano (July 25,1994). For economic analyses of the peso crisis, see Journal of International Economics 41 (November 1996)Google Scholar; Cypher, James, “Mexico: Financial Fragility or Structural Crisis?” Journal of Economic Issues 30 (June 1996)CrossRefGoogle Scholar.

⁹⁰ Juan José Hinojosa, Proceso (March 1,1994), 34.

⁹¹ Dornbusch, Rudiger and Werner, Alejandro, “Mexico: Stabilization, Reform and No Growth,” Brookings Papers on Economic Activity (1994), 253Google Scholar; Hanke, Steve H. and Walters, Alan, “The Wobbly Peso,” Forbes (July 4, 1994), 161Google Scholar. Guillén, Gregorio, “Reforma económica, mecanismos de financiamiento y procesos de inversion,” Comercio Exterior 44, no. 12 (1994), 1062Google Scholar; Mexico Insight (May 1,1994), 19; El Financiero (November 26,1992), 8; Griffith, Victoria, “Growing Pains,” LatinFinance 45 (1993), 38Google Scholar.

⁹² See Kaufman, Robert R., Bazdresch, Carlos, and Heredia, Blanca, The Politics of the Economic Solidarity Pact in Mexico: December 1987 to December 1988 (Washington D.C.: World Bank Project on the Political Economy of Economic Reform, July 1992), 43Google Scholar.

⁹³ Alejandro Márquez, “Tipo de cambio: No lo toques, por favor,” Expansión (June 1993), Gobierno Mexkano (April 1991), 39.

⁹⁴ LatinFinance (March 1993), 67.

⁹⁵ LatinFinance (May 1991), 19.

⁹⁶ Garrido, Celso, “National Private Groups in Mexico, 1987–1993,” Cepal Review 53 (1994)Google Scholar.

⁹⁷ See Velasco, Luis F. Stein, “Menor carga financiera,” Alto Nivel (November 1988), 15Google Scholar; El Financiero (November 25,1991), 87.

⁹⁸ A widely cited 1990 UNAM study reported that Mexico's real minimum wage had fallen by more than one-third since 1987 and was worth less than half its 1982 value. In 1994 a government commission calculated the nation's average real salary at 25 percent below 1982 levels. See El Financiero (November 25,1994), 24.

⁹⁹ Salinas, Carlos, “El nuevo pacto para la estabilidad, la competitividad y el empleo (PECE),” Mercado de Valores 21 (1992), 3–5Google Scholar.

¹⁰⁰ Patricia Nelson “PECE with the Peso,” Mexico Business News (June 1990), A7.

¹⁰¹ The National Industrial Chamber, the Confederation of Industrial Associations, and the National Council of Foreign Commerce all supported the maintenance of the peg through 1994. See El Financiero (November 16,1994), 28; La Jornada (August 31,1994), 43; El Norte (April 3,1993).

¹⁰² Part of the government's justification for maintaining the peg was to avoid price increases on imported machinery and inputs. See El Financiero (November 25,1991), 87. While exporting maquiladoras have long imported virtually all inputs, the domestic non-maquila sector also relied increasingly on intermediate goods from abroad. From 1989 to 1993, while Mexican non-maquila exports rose 31.9 percent, from $22.8 billion to $30 billion, non-maquila imports rose by an astonishing 109 percent, from $23.4 billion to $48.9 billion. See ElInversionista Mexicano (August 29,1994).

¹⁰³ El Economista (April 14,1994), 48.

¹⁰⁴ See Te'an, Chen, “Lessons from Financial Crisis in Southeast Asia,” Beijing Review 40 (September 29, 1997)Google Scholar; Brian Bremner and Joyce Barnathan, “Who's Really Pounding Asian Economies?” Business Week (September 22,1997), 52; “Lessons for Thailand, et al.” Economist (July 12,1997), 16. For a more formal analysis of the regulatory causes of the Asian crash, see Paul Krugman, “What Happened to Asia?” (http://web.mit.edu/krugman/www/DISINTER.html).

¹⁰⁵ On the role of cronyism and corruption, see Newman, Peter C., “Something Rotten in the State of Asia,” Macleans (December 29, 1997), 96Google Scholar; “Asia's Stockmarket Nightmare,” Economist (December 20, 1997), 107; Butler, Steven, “Living Dangerously,” U.S. News & World Report (January 19, 1998), 55Google Scholar.