Documents on Mexican Politics.


Mexico's Financial Crisis Is Political, and the Remedy Is Democracy

Carlos Fuentes


    Mexico's financial crisis is really a political crisis.

   The economic reasons for the debacle are clear. In the wake of the
North American Free Trade Agreement, the Salinas administration opened
trade barriers.Imports shot way above exports, until currency reserves
dwindled from a high of $30 billion to a mere $6 billion, and going
fast. The economy became beholden toforeign investment to sustain the
peso's value and pay for expanding imports.

   But foreign investment was mostly in the stock market and
speculation. Only 15percent was destined for the real economy:
building plants, higher employment, higher productivity. As soon as
investors realized that the peso's value was supported by nothing
real, a crisis of confidence developed. Capital fled, Mexico could no
longer pay for its imports, and the peso was devalued.

   It is a recurring story. At the end of each of their six-year
terms, PresidentLuis Echeverria Alvarez (1976), Jose Lopez Portillo
(1982) and Miguel de la Madrid (1988) had to devalue, leaving a more
impoverished country than they had found. Each man bit the bullet,
took harsh measures and sacrificed his popularity so that the incoming
president could begin with a clean slate and a measure of
hope. President Carlos Salinas broke this golden rule of Mexican
politics.

   First, in an election year, he postponed the bitter decisions until
after the August election.
   
   Then his own personal agenda interfered. Mr. Salinas wishes to head
the World Trade Organization, successor to GATT, and was worried that
an economic crisis at home would bury his candidacy. Ernesto Zedillo,
then president- elect, urged him to devalue the peso by
mid-November. Mr. Salinas was not swayed, and saddledthe incoming head
of state with the burden of devaluation, loss of authority andlack of
popularity.

   Yet, I insist, the problem is political more than economic. None of
this wouldhave happened if two terms that are common in U.S. public
law, "accountability" and "checks and balances," also had currency in
Mexico. As a matter of fact, they are not even translatable into
Spanish.

   As Mexico goes from one traumatic succession to another, it is
obvious that thvast powers and the margin of discretion of the
executive are the root of the problem. The president acts outside the
provinces of accountability and without checks and balances.

   Furthermore, he governs with an ever smaller circle of friends and
"technicians," many of them Ivy League graduates for whom the economy
happens ona blackboard, not to real people. These are elite groups
more and more divorced from public opinion, real information and
legislative oversight. They promise the Adam Smith definition of
economics, the science of human happiness, and end up with Carlyle's
pessimistic appraisal: the dismal science.

   If we cannot have presidential succession without national trauma
in Mexico, isimply means that the system which more or less functioned
between 1934 and 1968, offering development and social peace without
democratic freedoms, is now over.

   It must be replaced by a modern democratic system in tune with the
realities oa nation with 90 million people, a diversified economy, a
vigorous middle class,an amazing cultural continuity - and 40 million
human beings living in poverty.

   Mr. Salinas played with the Gorbachev Ghost - if you have economic reform
(perestroika) along with political reform (glasnost), you end up like the
formerU.S.S.R., divided, diminished and on your back.

   This bogey should now be dispelled. Mexico must take the decisive
step toward full democracy. Its government and parties should meet
very soon and reach a contract for Mexico along the lines of the
agreements made at the Moncloa Palace, in 1977, which allowed Spain to
travel, without shocks, on the road fromdictatorship to democracy.

   There art 10 commandments for Mexican democracy.

   First is electoral reform. This includes the consecration of
alternation in power, an independent electoral organism and clear
rules on party access to funding and the media. Mexico cannot go on
bleeding itself in post-electoral conflict.

   Four more articles of democracy in Mexico: a working federalism, a
true division of powers, an electoral statute for Mexico City, and the
rule of law through reform of the corrupt judiciary.

   The media are the sixth. The comedy of errors will never end if
television - and Televisa, in particular - neither informs nor
criticizes, limiting itself toparroting the presidential line.

   The next three are human rights, respect for civil society and its
organizations, and reform of security agencies to assure safety at the
individual, public and national levels.
   
   Finally, a market economy with a social dimension and balance
between the public and private sectors through developing the social
sector.

   If political reform is at the start of Mexico's solutions, at the
end we are back in economics. The contract for Mexico must lead to a
greater balance between healthy finances, growing production and
higher salaries. We will achieve none of this if the principles of
accountability and checks and balancesare not forcefully set in
place. But we also will not gain anything if the present climate of
vengeance against Mr. Salinas is allowed to get out of hand.

   Mexico should now devote itself to finding laws, rules of
coexistence and tolerance, freedoms and agreements, so that our
present troubles shall never come back to haunt us.