FROM THE OFFICE OF PUBLIC AFFAIRS

The Central Bank Governors and Treasury/Finance Ministers of Canada, Mexico, and the United States today convened the fifth annual meeting of the North American Finance Group (NAFG). The Ministers and Governors reviewed recent financial and economic developments in all three countries. They remarked on the success all three countries have had over the past year in preserving stability and growth despite global financial turbulence. They noted the importance of strengthening the framework for economic and financial stability in order to safeguard those achievements as Mexico and the United States enter a transition period marked by national elections in 2000. In that regard, they welcomed the strong economic programs in place for 1999. They also agreed to intensify their consultations on economic and financial issues under the NAFG, and they welcomed Mexico's intention to attain the United States' and Canada's results in maintaining balanced fiscal accounts, low inflation and strong financial systems.

The Ministers and Governors noted that the United States continues to enjoy a period of solid economic growth and job creation, with the unemployment rate near a 29 year low. Prudent fiscal policies and stable GDP growth combined to produce a budget surplus of $69 billion in fiscal year 1998, the first in 29 years. Sound monetary and fiscal policies have also served to keep inflation in check and interest rates low. The Ministers and Governors were optimistic that the U.S. expansion would continue in 2000.

The Mexican authorities stated that their principal economic objectives are to preserve financial stability in the run-up to their presidential elections in 2000 and beyond, and to ensure sustainable and equitable growth. The Ministers and Governors agreed that Mexico has shown a strong commitment to balanced and reform-oriented policies, which helped shield it from the global financial turmoil of the past year. They pointed to adjustments Mexico took in 1998 to meet its fiscal targets despite the sharp decline in oil prices. They remarked that, with a planned budget deficit of 1.25 percent of GDP in 1999 and 1 percent in 2000, fiscal policy remains supportive of growth and internal and external balance. The Mexican authorities stated that monetary policy will continue to be geared towards bringing inflation down to their 13 percent objective for 1999, and for the medium term the objective will be to have an inflation rate similar to Canada and the United States. The Mexican authorities also observed that sound macroeconomic policies supported the creation of nearly 800,000 new jobs in 1998.

The Ministers and Governors noted that the policy framework adopted by the Canadian government has paid off in the form of stronger economic growth and improved job creation. Canada's growth rebounded in late 1998 following a period of moderate growth in the middle of the year. Solid economic growth has been accompanied by strong job creation. In 1998, over 450,000 new jobs were created-the strongest annual gain since 1987. The Ministers and Governors noted that 1999-2000 will mark the third consecutive year that the Canadian federal budget will be in balance or surplus, the first time in almost five decades. This has put the debt-to-GDP ratio on a sharp downward track. Canada's commitment to sound fiscal policies and low inflation, and a flexible exchange rate limited the disruptive effects of recent international economic and financial turbulence, and allowed interest rates to quickly return to levels that existed before the turmoil in financial markets last fall.