Working in the Mexican government's public relations department must be quite difficult these days. Practically every article on Mexico in the American press focuses on drugs, corruption, murder, pollution, guerrilla insurgencies, or other issues that paint a less than flattering picture. Indeed, if one relied exclusively on the press for information on Mexico, it would be easy to believe that the country was on the verge of total collapse. Yet, lost within the sensationalism is the compelling story of President Ernesto Zedillo's courageous political and economic reform agenda.
Most observers agree that Mexico's ability to respond to the 1994 peso crisis with alacrity and firmness allowed the country to emerge from the depths of economic turmoil much sooner than initially predicted. The Zedillo administration's economic policies immediately targeted the causes of the crisis - overvaluation of the real exchange rate, short-term volatile capital flows, inadequate reporting of foreign reserve levels. Export promotion initiatives - coupled with a more competitive exchange rate - turned an egregiously large current account deficit into a surplus. And the new laissez-faire approach to the exchange rate stopped capital flight cold.
But while the initial post-peso crisis policies were admirable, they were relatively easy to implement since the severity of the crisis allowed the government a tremendous amount of leeway to implement the requisite reforms.
So, even while the Mexican economy has rebounded from the trauma of 1994 and is growing at a healthy pace, many structural issues still need to be addressed if Mexico is truly going to be able to completely rule out another peso crisis. And today, reform isn't nearly so easy to implement as it was during the immediate aftermath of the peso crisis.
As is usually the case with economic reform, in Mexico it is much harder to muster consensus around economic reform in "good times" than "bad times." Indeed, the old adage "if it ain't broke, don't fix it" deludes many.
For the Zedillo administration, the difficulty in combating this sense of complacency is compounded by the fact that the lower chamber of Congress is in opposition hands for the first time, and many members of the Party of the Democratic Revolution, the main leftist party, are vehemently opposed to what they see as more "neoliberal" economic voodoo.
Yet Zedillo has moved forward and enacted a comprehensive economic reform package intended to prevent the next peso crisis. Knowing a healthy banking sector is an essential pillar of long-term prosperity, Zedillo has initiated legislation whereby the regulatory agency that oversees the banking industry will be reformed. Emphasis will focus on the banks' balance sheets so that these documents are more investor-friendly and provide an accurate snapshot of each bank's assets and liabilities.
The calm of multinational banks in Argentina during the 1995 "tequila effect," when several Latin American economies were also broadsided by international investor sell-offs, has fueled a growing consensus among economists that multinational banks are more stable than national banks in times of economic crisis. Thus, Zedillo soon hopes to remove all limits - the current cap is 20 percent - on foreign ownership of Mexican banks.
The reform package also includes giving complete control of exchange-rate policy to Mexico's central bank. This is calculated to calm skittish international investors, still seething over the lack of candor in the weeks leading up to the 1994 peso devaluation. Moreover, the appointment of the well-respected former finance minister Guillermo Ortiz to be the bank's new governor is yet another sign that Zedillo is serious about fundamental reform.
Zedillo realizes that Mexico's economic fortunes will ultimately rest on its democratic evolution and he has done much to bolster democratic institutions.
While Mexico is still far from truly democratic, Zedillo's recent reforms to the judiciary, police force, and electoral system are signs that the Mexican political system is undergoing dramatic change. The many scandals and murders that the US press so avidly reports shouldn't be seen as signs of an imploding society, but rather as the unsightly by-products of a painful yet indispensable reform process.
Zedillo's achievements on the economic and political front have been impressive and deserve the vocal support of the US in order to provide some balance to the media's sensational portrayal of Mexico. If we fail to support the Mexicans as they undertake this daunting task of trying to reform their economic and political systems during the "good times," we may well end up being forced to help them during future "bad times," which will undoubtedly be much more costly and disruptive. What's more, we would deeply regret it if we woke up someday and realized that due to our single-minded fascination with Mexican drugs and bandits, we had failed to see that this country had undergone a silent revolution.
* Riordan Roett is professor of Latin American Studies at The Paul H. Nitze School of Advanced International Studies (SAIS), The Johns Hopkins University. Russell Crandall, a PhD candidate there, is a former human rights worker for Catholic Relief Services in Colombia.