Looking for answers to Mexico's economic chaos

As Mexican President-elect Miguel de la Madrid Hurtado surveys Mexico's massive economic chaos, he must be asking himself, ''How did I ever get into this mess?''

Although he didn't make the mess, it will be his to grapple with Dec. 1. That's the day he receives the green, red, and white sash of Mexico's highest office from outgoing President Jose Lopez Portillo, who is widely blamed for the financial troubles.

There is a sense of uncertainty on the part of most Mexicans as they wait out Mr. Lopez Portillo's lame-duck period. Many here feel the situation is out of control, that there is no effective leadership coming to grips with the problems Mexico faces.

''It is a situation of utter chaos,'' says a longtime Mexico City resident. ''The situation can only get worse by (Dec. 1) because so little is being done now.'' This indictment of the Lopez Portillo government is widespread.

From all sides of Mexico's diverse political spectrum come calls for action on the economy. Most everyone is agreed that some sort of belt tightening is necessary and indeed the Lopez Portillo government has instituted some tightening in exchange controls that make it difficult for Mexicans to obtain dollars.

But these controls, while looking good on paper, have so far not worked well. Complaints about them are growing. Many administrative problems have arisen. Government offices give varying interpretations of what the controls are and what effect they have. The rules on dollar-peso exchange have been altered frequently - sometimes as often as three times a week.

''It all seems an experiment, with Mexico the laboratory and Mexicans the victims,'' says a leftist political leader who applauded the idea of the controls and indeed wants substantially more state control of the economy.

His complaint is echoed by a more conservative Mexican, a businessman, who sees the exchange controls as ''necessary for a time'' but wonders ''if we Mexicans have the ability to carry this off with equanimity.'' He adds: ''I doubt it.''

Despite all this doubt, confusion, and uncertainty, some Mexicans are trying to grapple with the economic trauma here. One of these is Jesus Silva Herzog Flores, the incumbent Treasury minister.

In fact, in August Mr. Silva Herzog appeared to be putting together an economic package that would tide Mexico over until Dec. 1, allow it time to get its financial house in order by imposing belt tightening, and launch a recovery program that might have an opportunity of success. That was before Mr. Lopez Portillo's surprise bank nationalization, which many here feel has at least temporarily aggravated Mexico's financial situation and put the Silva Herzog program in jeopardy.

That program included some bailout money and credit from the United States - imports and $1 billion advance payment on oil to be held in the ground by Mexico for eventual shipment to the US strategic petroleum reserve.

In addition, Mr. Silva Herzog was working with New York banks and other lenders, owed more than $80 billion by Mexico, to get a postponement on payment of principal with only interest payments due before the year is out.

He also was working with the International Monetary Fund (IMF) on a $4.5 billion credit, which required Mexico to make some onerous efforts at austerity.

Some of the Silva Herzog package was politically unpopular here, but it appears that most Mexicans, except the most strident leftists, saw it as perhaps the only viable solution.

Whether the package will come together before the Lopez Portillo government goes out of office is uncertain, due at least in part to the unwillingness of his government to take the politically difficult steps outlined by the IMF.

With much fanfare the Lopez Portillo government did announce this week a $715 million program to aid small industries, but it is not expected to get off the ground before Lopez Portillo leaves office. Actually the program was announced last June, then reannounced in July - the difference this time around is that the amount of money being made available has been increased by 20 percent.

''It is all a sham,'' says Roberto Estevez Gonzales, a small businessman with a factory in suburban Tlanepantla that makes blue jeans and other textile products. ''What we have here is a vacuum.'' He continues:

''De la Madrid cannot enter the vacuum, but Lopez Portillo can - and what worries us is that in addition to announcing worthless programs like that for small business, he'll do something stupid in the interim.''

There is little indication, moreover, that the outgoing government has a handle on the situation.

''We're a little baffled by it,'' one official admitted.

By the end of the year, Mexico is going to need $13 billion to take care of interest on loans and those loans that cannot be rolled over to another year. Yet income will probably reach no more than $7 billion in the same period.

Mr. de la Madrid never expected to face that problem. He knew Mexico was facing increasingly severe economic difficulties, but the magnitude ''apparently escaped him,'' admits one of his close aides, who adds, ''as it escaped most everyone including President Lopez Portillo.''

There are not many Mexicans who realized how bad things were becoming until the crisis struck in June. That was when Silva Herzog gave President Lopez Portillo a detailed rundown on the problem.

Silva Herzog had been named to the Treasury post in late March and it took him, say those around him, ''a good month to see how badly things were going.'' He apparently began sounding the alarm bells, but not until June did he have his report ready. By then the crisis was already engulfing Mexico and Mexicans.

''It was like a giant tidal wave that hit us without warning,'' says Pedro Ojeda Paullada, president of the Institutional Revolutionary Party, Mexico's dominant political force.

What to do about this tidal wave was something else. Lopez Portillo advisers were divided. They still are. For a time, Mr. Silva Herzog, who probably more than anyone else fathomed the severity of the crisis, was the only official to come up with proposed solutions.

By now most Mexicans are aware that their nation is virtually bankrupt. The reasons for the financial crisis are many, but they boil down to this: The Lopez Portillo government during the past five years overspent, overborrowed, and overcommitted itself in confident expectation that Mexico's bountiful oil reserves would somehow pay the bill.

But world oil prices have gone into a slump in the past 18 months - and anyway spending simply outran income.

Despite huge resources in oil and other minerals, great manufacturing capability, and an increasingly skilled work force, the nation no longer is paying its bills.

Many of the bills, in the form of huge foreign loans, come due as Mr. de la Madrid becomes president. Unless the Lopez Portillo government in its final two months comes up with the money to pay at least the interest on those loans, the whole problem will fall to Mr. de la Madrid.

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