Mexico on the Brink

If you think your three week's between Thanksgiving and Christmas are the epitome of pressure, think again. Think of the pressure now facing newly-inaugurated Mexican President Carlos Salinas de Gortari.

Salinas, the 40-year-old economist and former foreign minister of Budget and Planning, finds himself immediately confronted with an economy which many observers say is on the verge of wholescale collapse. Inflation is nearly 60 percent, per capita income is rapidly declining and the country's foreign debt is roughly $104 billion. Service and interest payments on this debt alone demand more than 40 percent of Mexico's export earnings, money desperately needed to revitalize the country's industrial base.

The country's debt crisis has also forced the government of outgoing president Miguel de la Madrid Hurtado to pursue a widely unpopular austerity program to revitalize the private sector. Social services such as health, education and nutrition have deteriorated or stagnated during the last few years, as a result.

To no one's surprise, Salinas in his inaugural address last week promptly called for a renegotiation of his country's $104 billion debt. While saying that he wished to "avoid confrontation," Salinas urged that negotiations begin immediately with foreign banks, governments and international lending agencies to reduce Mexico's payments on the debts.

"The priority will no longer be to pay, but to return to growth," Salinas told a cheering crowd. "This is not demagoguery or an admonition. It is a reasoned argument that derives from the needs of my people."


The 40-year-old Harvard-educated technocrat, who was responsible for implementing the unpopular austerity measures undertaken by the Madrid government during the last six years, has effectively argued that the country needs a smaller, less cumbersome bureaucracy, along with freer trade and increasing incentives for private industry. He has also called for further long-overdue reforms such as returning highly efficient state-run enterprises to private control and removing a wide range of consumer subsidies.

UNFORTUNATELY for Salinas, his troubles don't end with the foreign debt crisis and the drastic measures it has imposed on the Mexican people. He finds himself in a climate of political turmoil, with no clear mandate for himself or his Institutional Revolutionary Party (PRI) and a bigger and more vocal opposition in Congress than ever before. Having won what the opposition charges was a fraud-laden election, with a bare majority of 50.7 percent--the worst showing ever for a PRI candidate (who always wins)--Salinas enters office with a less than impressive political mandate.

While Salinas has pledged to "modernize" the highly-centralized, corporatist political system in which the PRI has come to monopolize political control, he has yet to give any clear indication as to how he will open up the system to competitive party politics and insure that candidates for public office will be those who demonstrate broad popular support, rather than those who slavishly follow the dictates of the PRI hierarchy. As it now stands, the PRI fields the slate of candidates, meaning that those public officials who dare to buck the party establishment quickly find their careers in jeopardy.

So far, Salinas has yet to show any such independence in his Cabinet appointments. He was putting young, foreign-educated technocrats in top economic positions, while maintaining the intransigent old guard of PRI leaders, who will resist any attempts to weaken the party's hold over the state in key political positions.

A recent $3.5 million loan from the U.S. government gives Salinas some breathing space as he attempts to promote economic reform and market-based growth as a way out of Mexico's financial quagmire.

But such attempts to keep the dam from bursting are not enough. What Mexico now needs is a commitment by the U.S. and other governments, along with bankers and multilateral organizations, to extend the repayment periods of the existing loans, so that Mexicans are not forced to postpone badly-needed services and internal investment to pay off the debt and to keep the U.S. dollar down. Foreign governments must also resist pressure for protectionist legislation which would cripple the export possibilities of Mexico and the other debtor nations in Latin America.

At the same time, Salinas must go beyond mere rhetorical fluorishes in making a commitment to democracy, take on the entrenched "dinosaurs" and bureaucrats of his own party and enable opposition parties to compete on an equal basis in the electoral process after more than a half-century of authoritarian PRI rule. By reneging on his promises for political democratization, Salinas would give his opponents every reason to sabotage his economic policies and threaten the country's future political stability.