Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.
What Happened? On this day in 1976, Mexico devalued the peso by 50%.
Where The Market Was: The Dow Jones Industrial Average closed at 985.95 and the S&P 500 traded at 104.06.
What Else Was Going On In The World? In 1976, Democrat Jimmy Carter was elected U.S. president. NASA publicly unveiled the Enterprise, the first space shuttle. The average American income was $16,000.
Mexican Economic Crisis: Under the Institutional Revolutionary Party, Mexico generated solid economic growth for roughly three decades following World War II. However, PRI management of the economy has also led to several major economic crises.
In September 1976, the value of the peso dropped from 8 cents to 4.9 cents overnight and then dropped even lower as Mexico struggled to repay its debts.
At the time, the devaluation was seen as a boon for the country’s slumping tourism industry. Perceived overvaluation of the peso was also leading to increasing flight of money from Mexico.
The devaluation was a painful blow to Americans who had invested an estimated $6 billion to $8 billion in high-interest peso notes offered by Mexican “financieras” at the time.
Mexico elected José López Portillo as president in 1976, and Portillo took advantage of the boom in oil prices to spend aggressively on oil-related projects. However, Portillo also ramped up Mexico’s debt levels from around $20 billion to $50 billion during his time in office.
The Mexican economic crisis of 1976 was followed by another crisis in 1982. In the end, Mexico nationalized its banks, which were blamed for creating the problems.