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an be observed since 1970's that left Mexico in dwindling financial position.

The internal aspects of Mexico configured a vulnerable scenario and were partially responsible for the debt crisis of the eighties because its macroeconomic instability and fiscal indiscipline drove the economy towards high fiscal deficits that caused its inclination towards foreign borrowing. In the absence of appropriate monitoring mechanisms and laws, most firms, banks and financial markets were incompetent to perform on international setting.

To top it up, there was tremendous misallocation of resources that drained the investment on sophisticated and innovative projects rather the concentration was more on low return assets. For this reason, when government expenditures and number of public sector mounted, Mexico faced high fiscal deficits and thus, even more dependent on foreign borrowing which forms a likely condition for a debt crisis to occur.

Unaware about the forthcoming crisis, Mexico heavily borrowed after the first oil shock which instigates the influence of external events. The primary reason for the debt crisis to take place was the trend of over lending and borrowing by international commercial banks to developing countries like Mexico with the intention of sponsoring development projects but this practice backfired when US Federal Reserve increased the dollar interest rate to curb its oil-based inflation. Debt crisis surged as Mexico its debt-service cost shot up and with falling revenues and huge debt, the nation was unable to meet its debt obligations of August 1982.

Mexico faced a decade long economic stagnation characterized with crippled financial sector, unemployment and uncertainty. IMF and World Bank operated several debt relief strategies that helped Mexico to recover to some extent. However, it is more crucial to restore confidence in domestic producers, labor market and strengthening macroeconomic fundamentals so that resources could be mobilized and capitalized to facilitate economic growth and development.
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