Mexico has been practicing fiscally-prudent stable macroeconomics to protect its economy and exchange traded fund (ETF), but now it looks like it was not enough to shield against the long reaches of recession.

Economists have lauded the shrewd economic policies that reduced debt and inflation, reports Elisabeth Malkin for The New York Times. But this has not saved them from the effects of global recession as investors pull billions away from emerging markets.

The Mexican government forecasts a growth of 1.8% for 2009 while private analysts say it will stagnate and not grow at all. The more ardent pessimists predict a contraction of 1.7%.

As global oil prices plunged, the finance ministry has dealt with their dependence on oil export revenues which has financed around 40% of the country’s budget.

Next year the government will begin to run its first deficit in five years and take in new loans from financial institutions like the World Bank to support social and environmental projects. The central bank has $85 billion in reserves to further defend the peso and changes in interest rates.

  • iShares MSCI Mexico (EWW): down 41.1% year-to-date

ETF EWW performance

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