Introduction
Recent events in Iran have brought to mind the figure of Mohammad Reza Pahlavi, the last Shah of Iran, who lived in exile in Mexico from June 1979 to March 1980. His stay in Mexico was facilitated by Henry Kissinger and with the approval of President López Portillo. After being forced to leave Mexico for health reasons, including cancer treatment in the U.S., Pahlavi was denied reentry during the U.S. hostage crisis in Iran, which lasted from November 1979 to January 1980.
Mohammad Reza Pahlavi and the Fall of Jimmy Carter’s Presidency
Pahlavi played a significant role in the downfall of Jimmy Carter’s presidency (1977-1981), which faced inflation and fuel shortages due to the Iranian Revolution, Ayatollah Khomeini’s rise to power, and the petrodollar crisis.
- The Iranian Revolution led to a decline in global oil production, causing high oil prices and severe fuel shortages in the U.S.
- Petrodollars, similar to CDOs during the 2008 crisis, exacerbated inflation, reaching 14% during Carter’s presidency and contributing to his electoral defeat.
- Paul Volcker’s appointment to the Federal Reserve and his subsequent increase of interest rates to a record 20% in 1981 eventually brought stability.
The Butterfly Effect: A 1979 Crisis Involving Mexico, the U.S., and Iran
The butterfly effect, a concept from chaos theory, is evident in the 1979 crisis involving Mexico, the U.S., and Iran. This complex situation, akin to a gripping crime novel by Henning Mankell, has had lasting consequences over the past 47 years.
- During Reagan’s presidency, the Iran-Contra affair emerged, with Mexico attempting to mediate through the Contadora Group (1983-1990) to mitigate Central American armed conflicts.
- Recent events in Iran, such as the current crisis and Mexico’s diminished international presence, highlight the need for a more active foreign policy.
Mexico’s Changing Foreign Policy and Current Challenges
Mexico, which has signed 14 free trade agreements with over 50 countries and whose foreign trade accounts for more than 80% of its GDP, has chosen minimal participation in strategic forums like the World Economic Forum (WEF).
- Mexico’s limited presence at the WEF contrasts with Argentina’s active engagement, aiming for a 90% export-to-GDP ratio.
- In the current protectionist climate, with international trade shrinking from 21% to 14% of global GDP, Mexico seeks T-MEC ratification.
To address the energy sector’s solvency and liquidity issues, opening Mexico to foreign investment could be beneficial. However, the current path suggests increased fiscal deficits and debt without visible PIB growth. While Mexico’s debt-to-GDP ratio of 50% is lower than Japan’s or the U.S.’s, debt capacity remains crucial.
