At that time, the background was that in order to curb inflation, Mexico implemented a policy of stabilizing the exchange rate, that is, using the inflow of foreign capital to support the already weak domestic currency, so that the exchange rate between the new peso and the US dollar was basically stable and fluctuated only within a narrow range. However, due to the deterioration of the foreign trade deficit, the confidence of foreign investors has been shaken. Under the pressure of continuous capital outflow, the Mexican government had to announce the depreciation of the new peso 15.3% on February 20th. However, this measure caused the panic of foreign capital, and the massive outflow of capital intensified. The Mexican government lost $4-5 billion in foreign exchange reserves in two days. By February 22, 65438, foreign exchange reserves had almost dried up, falling to the level of less than one month's import. Finally, the Mexican government was forced to announce that the new peso would float freely and the government would no longer intervene in the foreign exchange market. The new peso fell by 40% in a few days.

1. If Mexico's foreign trade is at a disadvantage under market conditions, it is mainly because the influx of foreign capital has pushed up the exchange rate, and domestic products have no price advantage, which leads to trade imbalance and a large loss of the country's foreign exchange reserves, which will seriously affect its economic development in the long run and make a large number of domestic manufacturers go bankrupt and unemployed.

2. The purpose of foreign exchange depreciation is to reverse the trade imbalance, but the sharp and sudden depreciation will cause panic among foreign investors, and they will even lose confidence in Mexico's economic development. Once investors lose confidence, they will sell the peso crazily and accelerate the devaluation of the peso, leading to out of control. In fact, there are also financial speculators shorting pesos, similar to the Asian financial crisis.

3. Actually, the floating exchange rate shows that the government has lost its control ability at that time. If it does not float freely, the government will have to spend more foreign exchange to buy pesos sold by foreign investors, even from international banks, which will soon empty the government's foreign exchange reserves and even increase foreign debts, leading to more violent turmoil. .....