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Honeymoon With an Elephant

Mexico and America's Partnership in Development

By Federico Salas

The recent visit of Mexico's President Jose Lopez Portillo to the United States served as a dramatic warning of the problems facing hemispheric relations and American relations with the Third World as a whole. Lopez Portillo's message to Jimmy Carter was described as an "educational experience" by one of the American president's advisers. Mexico's president made the American government aware that unless more 'sensible' policies were implemented, the fundamental problems plaguing the Third World, and Mexico in particular, would have severe repercussions in this country. Mexico's case is the one that makes this awareness most vivid, because of its 2000 mile mutual border and its long-standing relationship with the leading Western power.

The Mexican-American relationship is one of the best examples of a rich-poor relationship. On the one side is a nation whose world power and concerns allow it to overlook the domestic problems of the developing countries unless they directly affect American interests. On the other hand is a nation on the road to development, whose problems are not entirely a domestic product and whose dependence on a rich neighbor make it impossible to solve its problems without help. Mexico's dependence on the United States is easily seen in the analysis of a Joint Economic Commission released last month. According to the Commission's report, 60 per cent of Mexico's exports go to the United States, and some 89 per cent of Mexico's imports consist of American products. Some 70 per cent of all trade and tourism depend on the United States; foreign companies, most of which have an American base, are the main exporters of Mexican products manufactured with foreign technology. In addition, Mexico pays close to $3 billion a year, including the private and public sectors, to reduce its debt and for the use of patents, technology, and other services.

It is no wonder that this relationship is a very sensitive one. Mexico feels any hardening of policies severely. Or, as Canada's Premier Trudeau described it, it is like having a honeymoon with an elephant: the slightest change in position is enough to crush the poorer country. And it was due to Mexico's past policies that the elephant turned just enough to make its weight felt.

For the past six years, former President Luis Echeverria's policies at home and abroad created a double reaction in the United States: first neglect, then paranoid fear. Echeverria's outspoken nationalism and his attempts to lead the Third World in international forums was not given much importance in the first years of his term. Americans perceived this nationalism as a product for domestic consumption which would not affect their interests. Moreover, the first three years of Echeverria's presidency were characterized by multiple contradictions, so that few Mexicans, and many fewer Americans, knew what Mexico's position was on any subject. Within a few weeks Echeverria went from a position of rejecting any form of birth control program--even going so far as to say that Mexico did not have a population problem--to launching an elaborate, nation-wide program to reduce "our gravest problem", population growth--conflicting stances that undermined his credibility.

But then the panorama changed. There was a law designed to restrict, though not discourage, foreign investment. Echeverria's rhetoric became much more specific: a militant anti-American position in order to gain economic and political independence. Internally, Echeverria managed to alienate the powerful industrial group of Monterrey and, to a large extent, antagonize the private sector as a whole. He drained the treasury to carry out lavish and ill-timed industrial projects in a country that sorely needed to spend its resources only on necessary things such as social development. He toured the world in search of Third World solidarity and to satisfy his personal messianic ambitions while the country slowly deteriorated to a critical point. His commitment to the Third World as a voting bloc obliged him to endorse the U.N. resolution that equated Zionism with racism. This vote cost Mexico close to $200 million in revenue from the tourist industry because of a Jewish boycott.

Echeverria's policies, however, were not ill-intentioned. What he wanted was to reduce the economic and social inequalities that plague Mexico and which constituted a growing threat to the country's stability. But good intentions is not all that was needed. The pouring of millions into the economy, increasing services by 95 per cent and raising wages across the board, created an uncontrollable inflation at a time of global recession that lowered international demand for Mexican exports. His solution was to borrow, and thus he managed to increase the Mexican debt from $13 billion to $25 billion.

Echeverria's rhetoric and his apparent commitment to social change terrified the Mexican bourgeoisie. A group of American congressmen warned that Mexico was becoming a socialist country and that before long a new 'Red Cuba' would emerge south of the border. The general fear created by this situation caused the outflow of a considerable amount of capital, precipitating the devaluation of the peso last August from eight American cents to four. By this time nearly half of Mexico's labor force was out of work or underemployed, and inflation reached an annual rate of 25 per cent. In the three months left before his term was over, Echeverria tried to restore the economy by negotiating three loans worth $2.6 million. But the economic situation kept deteriorating. His political credibility had been hurt by denials earlier in the year that the peso would fall, and the general loss of confidence in the government was nearly total.

Echeverria did little to alleviate the political crisis. Widespread rumors that the President was planning a coup to stay in power were faced by an unexpected, and hardly reassuring, display of power. In November, charging that large landholdings were unconstitutional, he ordered the expropriation of 243,000 acres in the northern state of Sonora. The land was to be given to the landless peasantry; and overnight, 8000 farm families moved into the land. Landowners and the industrial elites all over the country resisted by closing down shops and factories for 24 hours across the nation. On the eve of a second 'invasion' Echeverria balked: the threat of a bloody clash was too real and there were new rumors of a coup, this time against him.

When Lopez Portillo took office two weeks later he faced a nation that was in danger of falling apart. Not only was the domestic situation in chaos, but many problems had already spilled across the border and could only be solved with American cooperation. The growing unemployment in Mexico had increased the number of illegal immigrants to the United States. This unemployment was not only a result of domestic mismanagement, but was also because the United States, Mexico's largest customer, foreign investor and creditor, had reduced these transactions since the recession began. The result: lower employment in Mexico and increased illegal crossing to the United States.

Another effect of Mexico's problems on the United States has been the economic crisis of southern American states, such as Texas and Arizona. The devaluation has made American products twice as expensive for Mexicans, and thus the South has lost a very large number of customers. A third effect on this country has been the fear American bankers with huge portfolios have of Mexico's shaky credit standing.

The United States is clearly not dependent on Mexico, but it is not immune to events south of the border. The stakes that both countries have in improving their relationship are numerous. Lopez Portillo has requested trade concessions to reduce the $25 billion trade deficit. This will help him achieve the income redistribution to which he is committed, lower the inflation rate, and increase employment. Mexico has already begun to reciprocate by showing good will and a more concilliatory attitude toward the United States. Lopez Portillo's diplomatic style is less boisterous and more pragmatic than that of Echeverria. He has already shown his desire for a better relationship by sending gas and oil to areas of the United States where the winter created a shortage. He has also shown some willingness to provide the United States with oil once its newly discovered reserves, estimated at 40 per cent of those of Saudi Arabia, begin to be tapped.

The basic message of Lopez Portillo to the United States was that unless we deal with each other as equals, our mutual problems will get worse. He stated that with good faith "we shall be able to overcome and transcend and solve many of the problems that it is natural should exist between neighbors." But this 'good faith' Lopez Portillo implied, needs to be directed not only to Mexico but to other poor nations. The rich, well-fed industrial North of the globe needs to build a new relationship with the overpopulated, under-developed South if an explosion is to be avoided. In the specific case of Mexico, President Lopez Portillo warned that failure to solve its problems will end in increased terrorism, peasant unrest, and nationalist moves against foreign interests. Off-the-record, Lopez Portillo is reported to have stated that these problems could render him the last of Mexico's constitutional presidents. What would happen then is not a Communist takeover, which the American Congress fears, but a Fascist dictatorship. In his address to the Congress, Portillo stated that: "We do not want the present situation to make us lose our forcing extremes."

The history of the Mexican-American relationship, and America's historic dominance, creates an obligation for the United States to help avert the crisis of which Lopez Portillo spoke. Lopez Portillo asked for additional financial support, investment subject to Mexico's laws and special trade concessions; but behind all this was a request for a more sensitive and responsible approach to the relationship. The United States should not dismiss Mexico's problems as a matter of domestic concern. There is an interdependence, even if it is more like a dependent interdependence.

Many in Mexico have seen Lopez Portillo's position as a selling-out to American imperialism. Rather, it is a very realistic approach to the problem of North-South relations. We have problems, and our problems affect the rich. Imperialism and interventionalism have proved impotent in solving these problems, and simply created time bombs in the underdeveloped world. The solution is, in the words of Lopez Portillo, for the rich to give up their "arrogance, which is easy but sterile" and for the poor to avoid "submission, which is easy but abject." "We have chosen the difficult road of dignity," he added, "based on the liberty that we want to sustain and the responsibility we wish to assume."

The American relationship with Mexico is of particular importance due to its immediacy and impact on the United States. President Carter, however, should use his "educational experience" to extrapolate the situation to a global scale and to see that the same issues and problems exist around the world, with more or less repercussions on the United States. American relations with Mexico show that neglect or aggressiveness backfire quite easily. At the same time they illustrate the possibility of a solution through a dignified relationship. The elephant should learn to move more cautiously; or not only will it crush its mate, but the whole structure of the bed will collapse.

Federico Salas '78, a junior concentrating in Government, is a Mexican citizen.

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