Manuel Sánchez: Expectations for the Mexican economy Remarks by Mr Manuel Sánchez, Deputy Governor of the Bank of Mexico, at the 2015 Business Forecast, Chicago Booth Alumni Club of Mexico, Mexico City, 22 January 2015.
That spread reflects not only the risk of dollar credit default but also the underlying strength of the domestic currency. Exchange-market pressures on the latter obviously reduce dollar debt-raising capacity. Debt capacity, by this model, is reached before rising nominal interest rates and, hence, payments on government debt threaten a vicious fiscal cycle of ever-growing deficits and debt.