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Austerity Plan Hits Poor Hardest

Government's program keeps more capital at home but also spawns vast army of unemployed. MEXICO: WIDENING THE RICH-POOR GAP

By Brook LarmerStaff writer of The Christian Science Monitor / June 21, 1989



MEXICO CITY

INSIDE a restaurant in the elegant San Angel section of Mexico City, afternoon diners in business suits and silk dresses finish their main courses, refresh their palates with sorbet, and then choose from a display of delectable desserts. Outside, Zenon Garc'ia just eats fire.

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With his face painted like a pouting clown, Mr. Garc'ia watches the traffic light turn red. He quickly ignites two kerosene-doused torches, wades into the congested lunch-time traffic, and entertains his captive audience until seconds before the light turns green.

Then the young flame-eater, whose perfect timing betrays seven years of earning a living on the streets, hustles around to collect coins from motorists loaded with pesos.

Garc'ia is far from alone.

Even as some members of the Mexican elite add to their fortunes, the seven-year-old economic crisis here is spawning a vast army of unemployed and underemployed workers unable to survive in the formal economy.

``It's getting worse,'' says Garc'ia, describing how the competition for his intersection has intensified recently. ``Sometimes I lose heart because things don't get any better. It looks like we [street workers] will never get out of here.''

Over the past seven years, as the debt-saddled government has trimmed spending, real wages, and state-financed jobs, poverty has tightened its grip. According to the government-controlled Workers' Congress, the number of Mexicans unable to cover their basic needs rose from 30 million in 1982 to 43 million today - or about half the population.

``Poverty is no longer a marginal phenomenon in Mexico,'' says Armando Bartra, an economist specializing in rural development. ``It's a structural problem rooted in the government's very model of development.''

President Carlos Salinas de Gortari has formed a special commission to attack ``extreme poverty.'' And when he unveiled the six year National Development Plan three weeks ago, he vowed to improve living standards. ``Modernization is opposed to privilege and exemption,'' he said. ``It is also opposed to the conditions of extreme poverty that make freedom and opportunity futile.''

For the moment, however, the government's economic stabilization program - which Mr. Salinas shaped as budget minister in the previous administration - is widening the gap between rich and poor. On Sunday President Salinas signed a pact extending the program until March 1990, ensuring that wages, prices, and the peso would remain stable.

According to a 1985 study done by the National Institute of Statistics, Geography, and Information, the richest 10 percent of all Mexican families enjoyed more income than the bottom 67 percent combined. Economists say that the tight-fisted stabilization program initiated in 1987 has only deepened those divisions.

Speculative investors have been able to milk profits from the booming stock market, an over-valued peso, and high interest rates that pay the equivalent of 35 percent a year. Meanwhile, the government diverts nearly 30 percent of its Gross National Product servicing its two debts - 6.4 percent on its $100 billion foreign debt and 23.4 percent on the $50 billion internal debt created mainly by those soaring interest rates.