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Technocracy under Threat Mexico’s Democratic Awakening The previous chapter presented the Chilean central bank reform of 1989 as a strong case of institutional insulation in the transition from authoritarian rule. Faced with an impending regime change under the helm of the center left, conservative authoritarian elites insulated monetary policy against the threat of an interventionist future. By creating a central bank with considerable authority across a series of policy domains, they attempted to bind successor governments to a neoliberal policy agenda. The Mexican case illustrates a different dynamic. Like Pinochet’s Chile (1988–89), Mexico under Carlos Salinas de Gortari (1988–93) can also be classi‹ed as a conservative authoritarian regime confronting a democratic opposition with populist overtones. As in Chile, the ruling elite would respond to this challenge by safeguarding its preference for macroeconomic stability in the form of an autonomous central bank. But while a transition to democracy was virtually a given in the Chilean case, in Mexico this threat was considerably more tenuous. While the authoritarians in Chile thus had incentives to create a fully autonomous central bank, the autonomy afforded the Mexican central bank was only partial. Chapters 6 and 7 elaborate upon this comparison. While chapter 6 establishes the similarities between the Mexican and Chilean cases, chapter 7 underscores their differences. The present chapter thus examines the origin of the democratic threat prompting Mexico’s authoritarians to insulate, while the following chapter looks at its magnitude and corresponding consequences for the 1993 central bank reform. This chapter unfolds as follows. The ‹rst section, “Reform Background: Mexico’s Neoliberal Revolution,” offers an overview of the economic project enacted under the Salinas administration and the capitalist constituency underlying it. After a vested interest in macroeconomic stability on the part of the ruling elite has been demonstrated, the second section, “Reform Timing: Challenging the Conventional Wisdom,” considers the timing of the 1993 central bank reform in light of these policy preferences. While many have attributed the timing of the reform to the government’s need to demonstrate its credibility both domestically and internationally, I show why a straight 139 CHAPTER 6 credibility story would have argued for implementing the reform much earlier . Having thus cast doubt on the singular ability of various economic arguments to explain the reform’s timing, in the third section, “Reform Motive: The Onset of the Democratic Threat,” I attribute its motive to more decidedly political factors. I argue that after the extraordinary political events surrounding the Mexican presidential elections of 1988, the Salinas government realized that it was only a matter of time before democracy made its way to Mexico. Recognizing that its days in power were numbered, the Salinas clique began to worry about how an eventual transition to democracy might compromise its neoliberal economic project in the future. As noted in chapter 1, any depiction of a partial insulation outcome is inherently murky, as—by de‹nition—partial insulation only occurs at that “in-between” stage where a democratic threat is present but not yet overwhelming . While the 1993 Mexican central bank reform thus represents a much messier case than that in Chile, the ways in which it deviates from the full autonomy baseline are both interesting and important—particularly for a more complete understanding of the political and economic events that ensued in Mexico throughout 1994. A closer look at this case thus allows us to explore some interesting permutations on the central insulation theme advanced in this book without abandoning its fundamental logic. Reform Background: Mexico’s Neoliberal Revolution Before entering into a detailed analysis of the events surrounding the Mexican central bank reform of 1993, it is important to begin by identifying the authoritarians in question and those interests they sought to protect. Accordingly , this section will establish the profoundly market-oriented nature of Mexico’s authoritarian regime and the capitalist support base underlying it. The Economic Model: The Origins of Salinastroika Most analysts date the current era of Mexican economic policy to the ‹nancial crisis of 1982. Like so many of its Latin American counterparts, the Mexican government took full advantage of the ›ush international economic environment of the 1970s to ‹nance large ‹scal de‹cits at home. But as was also the case for so many other developing country governments, the unsustainability of this situation eventually came home to roost. In the early 1980s, high world interest rates together with a sharp decline in the price of oil combined to create much less hospitable...

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