01 The Hour
The close
Thursday 12 August 1982. Mexico. Reconstructed to the day.
Deposits held in dollars at Mexican banks were converted into national currency by compulsion that day, at 69.50 pesos to the dollar.
The central bank's own history is specific about where that number came from. It was the quotation observed in the general market at the close of the session on that 12 August.
The market that produced it had opened on 5 August. It was eight days old.
02 The Sequence
5 to 12 Aug 1982 The dual exchange regime ran, and the central bank's history marks it by two things: how briefly it lasted, from the 5th to the 12th, and the great uncertainty released in that week.
12 Aug 1982 The compulsory transformation of the dollar deposits into national currency at 69.50. The reason the central bank records is the danger that a mass run by savers holding dollar denominated deposits would pour into the exchange market and add to a capital flight that was already very voluminous.
18 Aug 1982 The figure of the Mexdollar was created, authorising deposits for individuals withdrawable on pre-established days, at a free rate of interest: two days a week, one day a week, two days a month or one day a month, with the minimum amount requirement removed.
19 to 23 Aug 1982 On the 19th the dollar at the capital's airport moved between 76 and 90 pesos. On the 21st supply had doubled demand and it quoted between 97 and 100. On Monday the 23rd a rise in deposits was recorded at the banks of El Paso, after a day on which 1.5 million dollars had been paid in there.
1 Sep 1982 During the final state of the nation address, the nationalisation of the private banks and the generalised control of exchange. The Presidential Decree establishing the generalised control of exchange was published in the Official Gazette that day and entered into force, fixing the bases of a new system for making payments in foreign currency abroad.
1 Sep 1982 Under that decree the central bank determined that two exchange rates would govern throughout the Republic: a preferential one of fifty pesos to the United States dollar, and an ordinary one of seventy.
4 to 14 Sep 1982 On the 4th the director of the central bank announced the end of the slide and the ordinary dollar fixed at 70 pesos, along with a rise in interest rates. On the 14th the competent Secretariats of State and the central bank issued the General Rules for the control of exchange, setting the minimum regulation of responsibilities, rights and obligations needed to begin operating the new system.
15 Oct to 15 Nov 1982 The principal provisions on exchange control were issued by the central bank to every credit institution in the country by telex circular. Among them: credits granted by the institutions and denominated in foreign currency were not to be renewed in foreign currency.
13 to 20 Dec 1982 A new Exchange Control Decree was published on 13 December, and on 20 December the central bank determined the exchange rates under it, expressed in Mexican pesos per one United States dollar, with exceptions provided for in the decree itself.
03 The Hidden Dependency
The compulsory conversion did not use a rate chosen by anybody. It used a price.
Sixty nine fifty was the quotation in the general market at the close on 12 August. That market had existed since 5 August and did not survive the week. The price at which a country's dollar savings became pesos was the last print of a trading regime eight days old.
A week later the dollar at the airport was between 76 and 90. Two days after that, between 97 and 100. The number that had settled the conversion went on being quoted in the street and nowhere else, moving further from the one in the ledgers every day.
The price was the last print of a trading regime eight days old.
04 What Still Worked
The Preferential Rate
From 1 September, fifty pesos to the dollar applied throughout the Republic alongside the ordinary seventy. Which of the two a payment got was a question the decree answered, not the payer.
The Withdrawal Days
From 18 August an individual could hold a deposit withdrawable on pre-established days, two a week, one a week, two a month or one a month, with no minimum balance required to open it.
The Teleprinter
The rules reached every credit institution in the country by telex circular. A regime that changed from week to week had a channel that could carry it in an afternoon.
05 The Document
The Document 16 November 1982
A notice in the Official Gazette that is itself a list of other notices. Its heading: principal provisions on exchange control, issued by the Bank of Mexico by means of telex circulars to all the credit institutions of the country, from 15 October to 15 November 1982.
It recites the decree of 1 September and the two rates of fifty and seventy, then runs through the month's instructions one by one, each numbered, one of them cancelling a circular of 23 September. A month of a country's foreign payments, administered by teleprinter.
06 The Pattern Library
1 When one retail withdrawal channel closes or fails, demand concentrates on whichever channel is left open, and the capacity of that channel sets what a depositor can obtain.
Observed: Northern Rock 2007, Cyprus 2013, India 2016, Greece 2015, United States 1933, Argentina 2001, Lebanon 2019, Worldpay 2026, TSB 2018, Afghanistan 2021, Nigeria 2023.
2 A currency replacement can require physical work on every unit of the estate before the new money can circulate, whether a modification to each cash dispensing machine or a stamp affixed to each note, so the changeover proceeds piece by piece rather than all at once.
Observed: India 2016, Czechoslovakia 1993.
3 Withdrawal limits imposed on a domestic banking system can be written to exempt cards issued outside it, so one machine dispenses under two rules according to where the card was issued.
Observed: Greece 2015.
4 Domestic payment and deposit channels can continue operating while cross-border payment routes fail, with the central bank standing in as the intermediary for payments to and from the country.
Observed: Iceland 2008, Germany 1931.
5 When the institutions that convert payment instruments into cash are closed, wages and checks already received cannot be spent, and merchants and carriers extend their own credit in place of the missing conversion.
Observed: United States 1933.
6 A public employer short of the national currency can pay wages in an instrument it issues itself, which then circulates alongside the currency it stands in for.
Observed: Argentina 2001.
7 Withdrawal restrictions can be imposed by individual institutions and their trade association rather than by statute, so the limit differs from bank to bank and no law governs it.
Observed: Lebanon 2019.
8 A cash withdrawal ceiling is paid only in the denominations the machine is permitted to hold, so a ceiling and a denomination rule set together decide how many notes a withdrawal is, and a ceiling has to be raised alongside the denominations that pay it when the existing notes no longer carry it.
Observed: Zimbabwe 2008, Nigeria 2023, Venezuela 2018.
9 A payment outage can hit card authorisation and merchant funding as separate faults, so acceptance at the terminal is restored while the money owed to the merchant arrives a day late under its own incident notice.
Observed: Worldpay 2026.
10 A retailer that loses electricity can go on trading by taking cash and rationing goods by hand, so the counter outlasts the checkout system that normally prices and settles the basket.
Observed: Texas 2021.
11 A systems migration can leave account records readable but wrong, including presenting one customer's account to another, so a working login is no guarantee that the balance on the screen belongs to the person reading it.
Observed: TSB 2018.
12 The size of a card processing failure can be counted twice, once on first attempts and once after the same card was presented again, and the second count can be about half the first, so part of the recovery runs through the cardholder at the till.
Observed: Visa Europe 2018.
13 A restriction on access to money can be written by purpose as well as by amount, so a balance that cannot be drawn in general becomes payable when it is used for wages, taxes or relief, and the test applied is what the money is for.
Observed: Germany 1931, Brazil 1990.
14 A deposit freeze can be paired with a transferable certificate issued against the frozen balance, so the deposit becomes a claim that can be sold before it is released, at a price the market sets rather than its face value.
Observed: Ecuador 1999, Argentina 2002.
15 A per head issue of a new currency can be distributed through the administration that issues food rations rather than through the banks, so the ration card is the proof of entitlement and the banks are used to collect the old money rather than to pay out the new.
Observed: Germany 1948.
16 When the persons under sanction become the governing institutions of a country, the prohibition reaches ordinary payments that merely touch the state, and access is restored by successive general licences written by activity, so what decides whether a payment can be made is which licence it falls under.
Observed: Afghanistan 2021.
17 One foreign currency can carry more than one price at the same moment inside a single country, the authority setting them by the use the money is put to or by the date a balance was credited, while another price goes on being made outside the official ones.
Observed: Lebanon 2019, Mexico 1982.
18 A payment abroad can be made conditional on prior approval by a committee working to a ceiling set for the whole country each day, so what a firm can pay turns on the capacity of the approval process rather than on the balance in its account.
Observed: Greece 2015.
19 Scarce foreign exchange can be rationed through the commercial banks under published guidelines, with the central bank selling only the net requirement at a daily auction and checking compliance through reporting after the fact rather than approving each payment in advance.
Observed: Iceland 2008.
20 A payment instrument issued by a bank in a country under strain can be valid and unusable at the same time, because the counterparty abroad requires a second bank to confirm it, so the trade stops at the confirmation rather than at the instrument.
Observed: Sri Lanka 2022.
21 Notes of a single currency can trade against one another at a discount according to denomination, so the same sum is worth more or less depending on which note it is held in.
Observed: Iraq 2003.
22 A compulsory conversion of deposits can be narrowed by further instruments after it is already in force, so what the measure finally takes is settled by the exceptions rather than by the decree that announced it.
Observed: Argentina 1990.
Changed today: Entry 17 was refined and gained Mexico 1982. It had been written around a split by the date a balance was credited, on the Lebanese case alone. Here the authority set a preferential rate and an ordinary rate by the use the money was being put to, while the street went on quoting a third, so the entry now states the several prices and the ground on which they are set.