El Desarrollo Estabilizador
Mexico's recipe for stable growth
Description
In December 1958, a lawyer-turned-financier named Antonio Ortiz Mena walked into the Mexican finance ministry and stayed for twelve years. That tenure spanned two presidencies and one continuous economic idea. During those years the Mexican economy grew at roughly six to seven percent annually, inflation stayed close to three percent, and the peso held firm at 12.50 to the dollar — a rate that would not move for over two decades. For a Latin American country in the middle of the twentieth century, that combination was not just rare. It was close to unheard of.
Ortiz Mena had a name for what he was doing, and later he wrote a book to explain it from the inside. Desarrollo estabilizador — Stabilizing Development — was the label for a set of choices about currency, credit, taxation and public spending that he and the central bank pursued with unusual discipline. The book is not a memoir of anecdotes. It is the account of a man who spent his career convinced that price stability was not the enemy of growth but its precondition, and who had the numbers, for a while, to prove it.
Read decades later, the account carries a double charge. It is a rare firsthand window into how a developing economy was actually steered — the meetings, the tax reforms, the fights over how much money to print. And it is a quiet argument about what a country gives up, and when, in exchange for the reassuring flatness of a stable currency and a predictable price level.
The question we’re asking : How did Mexico hold on to growth and low inflation for two decades at once, and what did that stability finally cost?What we’ll see : How a finance minister built a model of disciplined growth, why the peso became its anchor, and where the arrangement eventually strained.
Table of contents
01Chapter 1 — The man who ran the numbers
Ortiz Mena did not arrive at the finance ministry as an economist. He was a lawyer by training, and had spent the 1950s running the Mexican Social Security Institute, where he learned to manage a large public balance sheet under pressure. When he took over the treasury at the end of 1958, Mexico had just come through a decade of stop-and-go: bursts of growth interrupted by devaluations, in 1948 and again in 1954, that ate into wages and rattled anyone holding pesos. Each devaluation had bought a little competitiveness and cost a lot of confidence.
His reading of that history, laid out in the book, was blunt. The country had been treating the exchange rate as a lever to pull whenever the economy overheated, and every pull left the public poorer and more distrustful. What Mexico needed, he argued, was not another clever adjustment but a commitment to hold the line long enough that households and firms could plan. Stability, in his telling, was a form of credibility — and credibility, once earned, did work that no policy tool could replicate.
02Chapter 2 — A currency worth defending
The peso at 12.50 was the visible center of the whole arrangement, and Ortiz Mena treats it in the book as more than an exchange rate. It was a promise. Everyone in Mexico — savers, importers, foreign lenders — could act on the assumption that a peso today would be worth the same in dollars tomorrow, and next year, and the year after. That certainty changed behavior. Mexicans kept their savings in pesos rather than fleeing to dollars, which gave the banking system a stable pool of deposits to lend from.
Holding the rate was not free, and the account does not pretend otherwise. It required keeping inflation genuinely low, because a fixed peso against a rising domestic price level would slowly price Mexican goods out of world markets. So the exchange-rate commitment forced discipline everywhere else: on wages, on public spending, on how much credit the banks could extend. The currency was the anchor, and everything upstream had to be arranged so the anchor would hold.
03Chapter 3 — Growth without the printing press
The hardest part of Stabilizing Development, and the part the book dwells on most, was financing a fast-growing economy without inflating the currency. A country building infrastructure and expanding industry needs enormous amounts of capital. The easy route — the one much of Latin America took — was to print money to cover public spending, accept the inflation that followed, and periodically devalue to clean up the mess. Ortiz Mena refused that route on principle, which meant he had to find the money somewhere else.
Part of the answer was the tax system, which he set out to reform. Mexico collected too little revenue relative to the size of its economy, and much of what it did collect came from a tangle of narrow levies. Ortiz Mena pushed toward a more coherent income tax and broader collection, so that the state could fund development out of real resources rather than freshly created pesos. The reforms were partial and politically difficult — he is candid about the resistance — but they mattered because they were the alternative to the printing press.
04Chapter 4 — When the recipe met its limits
Stepping back, Ortiz Mena's account is really about a single, consequential choice: to make stability the organizing goal of economic policy, and to subordinate other aims to it. That choice bought Mexico two decades of the kind of growth most developing countries could only envy. But the book, written with the benefit of some hindsight, is honest enough to hint at what such a choice quietly defers rather than resolves.
Holding the peso and holding down inflation meant holding down other things too. Wage growth was contained. Public spending on social needs competed with the imperative of fiscal balance, and balance usually won. The rewards of the miracle flowed unevenly, concentrating in industry and in the cities while much of the rural population saw less of them. Stability, it turns out, is not distributionally neutral — it favors those who hold assets and can plan, and asks patience of those who cannot. That tension did not show up in the exchange rate, but it accumulated underneath it.
05Conclusion
Antonio Ortiz Mena left the finance ministry in 1970 and later moved to the Inter-American Development Bank, carrying with him the reputation of the man who had held the peso steady for twelve years. His book is the argument he spent a career making: that a developing economy could grow quickly and keep its currency sound at the same time, provided the people running it were willing to accept the discipline that required. For the length of his tenure, the numbers backed him up, and the Mexican miracle became a reference point for economists across the region.
