Question

Are off-shore banking centers set up to deal primarily with illegal money? Describe the international debt crisis which began in 1982 with Mexico defaulting on its international debt. Trace the origin to the early 1970’s. does this crisis compare in anyway with the collapse of the 2007-2008.

Answer 1

An offshore bank can be a bank anywhere in the world that accepys deposits solely on behalf of non residents.

Offshore banking centres are home to more than $5000 billion in assets, $1000 billion in bank deposits and $4000 billion held in the form of stock, bonds, real estate and commodities.

The incentives of business to be registered in offshore heavens is to escape the severe tax and registration regulations on domestic companies.

There are two main myths about offshore banking. First of all, the public mistakenly links offshore banking to criminal activities, terrorism financing and money laundering. Secondly people think that offshore banking services are only for high income class.

Offshore banking has often been associated with the underground economy and organised crime via tax evasion and money laundering, however legally offshore banking doesnot prevent assets from being subject to personal income tax on intrest.

Offshore bank is simply a bank located outside your country of residence, usually in a low tax jurisdiction and legal advantages.

In August 1982, Mexico was the first of many Latin American countries to default on its sovereign debt.

From the mid 1950s to the beginning of 1970s, Mexico enjoyed a period of macroeconomic stability and economic growth. The inflation rate never exceeded, while annual economic growth averaged 7%.

In 1970, Mexico economic policy changed radically when Luis Echeverria was inaugurated as a president. An enormous fiscal expansion took place and public debt started to increase. Consequently budget deficits soared to 10% of Gdp in 1975 and 1976. In 1982 a wide ranging stabilisation program was agreed with IMF. The program also included structural reforms. In december 1982 Mexico started far reaching structural reforms, which were a condition for receiving the IMF Loan. The reforma included fiscal austerity, privatisation of state owned companies, reductions in trade barriers, industrial deregulation and foreign investment liberalisation.