Mexico's Stability Can't Be PRI-Ordained

IN light of recent revelations of huge mysterious Swiss deposits by the Salinas family - $84 million so far - the United States should rethink its praise and active support for the Mexican ''system.'' Such compelling evidence of massive corruption (this time allegedly linked to laundered drug money), also known to exist in previous Mexican administrations, should convince the State Department to pressure the current administration of Ernesto Zedillo to speed reforms. In particular, Mexican governmental credibility needs the enforcement of usually ignored ''inexplicable enrichment'' laws.

For decades, most executives of multinational companies doing business in Mexico have supported the ruling Institutional Revolutionary Party (PRI) and have been scared that any governmental change will threaten ''stability.'' The CEOs' fears are then championed by US ambassadors.

The rationale has been that any change in power, especially to the left, will mean a regression to statist policies, a return to the nationalization of recently privatized businesses and industries, all leading to the usual poor government management and inevitable destabilization of the economy.

Although highly misinformed (especially since the Mexican left has renounced re-nationalization), that explanation is an easy sell to a businessman who has been brought up on cold-war rhetoric. I hate to burst the bubble, but the Mexican left is to the right of Newt Gingrich. When has anyone heard calls for any kind of welfare program in Mexico? In fact, the US is far more socialistic than Mexico.

It must be noted that the foreign tour of duty of an average CEO is three years. To them, stability is strictly a short-term matter. The next quarterly bottom line is their most pressing concern, and to them it's the perception of latent instability that counts.

Those who have been in Mexico for the long haul, however, have seen that equating the PRI with stability has turned out to be a cruel illusion.

An executive who came here 20 years ago found a peso worth exactly eight US cents (12.5 pesos to the dollar). Today, that same peso is valued at around 12.5 thousandths of one US cent. It takes 8,000 of these old pesos to make one US dollar. And the dollar has been devalued, too.

Nor should the fact that Mexico now has $14 billion in its current account fool anyone. More than 90 percent of those funds have been borrowed from foreign lenders.

Last month, when President Zedillo gained brownie points in the US by repaying $700 million ahead of schedule, the total repayment came from a new loan, in deutsche marks, from Germany - not from any Mexican productivity.

The effects of the Mexican economy's drastic decline this year are hard to overestimate. When the automotive and construction industries tumble close to 70 percent and 40 percent respectively, a virtual collapse is indicated. Not only does the rest of the private sector suffer, the government, too, loses a great proportion of its tax base.

When more than a million Mexican workers are laid off, and a similar number of youths entering the marketplace can't find employment, the Mexican government is deprived of the taxes on the incomes they would have earned, too.

All Mexican social programs are now threatened by an acute lack of funds.

Most disheartening of all, there is no relief in sight. Foreign capital has fled because confidence in the Mexican system has been eroded - almost fatally for now.

The whole system has failed so often and with such regularity that Zedillo must rethink where blame should be placed. If foreign (and domestic) confidence is to be restored, he must also be active in the reappraisal of the traditional and current roles of all major decisionmaking institutions, and he must lead the country through the process of change. As I've said before, he can't just pass the reform buck to a usually ineffectual Congress. That's just plain stalling, and foreign capital knows it.

Those in the forefront of Mexican political analysis have concluded that electoral and media reform, though certainly needed, will not go far enough. A thorough political housecleaning - especially to root out corruption - is also necessary.

Jorge G. Castaneda, an esteemed academic, believes that a caretaker coalition government is now the best option if Mexican flaws are endemic, and not situational.

I would go a step further, by abolishing all current political parties (including the PRI, whose dissolution would, in effect, get rid of the current government/ruling party coziness, which accounts for most of the country's corruption).

I would also call for a new constitutional convention both to examine presidentialism and its alternatives and to make a real commitment to justice, accountability, incorruptibility, fairness in the media, and, in short, to true democracy.

That's the kind of change a multinational CEO, the US ambassador, and the US State Department could live with.

P.S. - A message about foreign capital to President Zedillo: If you build a democracy, it will come.

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