US Investors Will Watch Warily as Mexico Chooses Next Leader After Assassination

AS Mexico's ruling party struggles to choose a candidate to replace its assassinated presidential designate, Luis Donaldo Colosio, United States firms are examining their own stake in the outcome.

Many in the US business community have assumed that those holding power will do so permanently and have failed to expect inevitable glitches in Mexico's reform process. (Vote fraud, Page 6.)

``The business community has been betting heavily on whom they know - a small circle of US-educated free marketeers, including President Carlos Salinas, two or three members of this Cabinet, and the anointed [Colosio and others groomed by Salinas],'' says John Yochelson, vice president of economic and business policy at the Center for Strategic and International Studies.

Mr. Yochelson, along with American and other business leaders, met with Mexican President Carlos Salinas de Gortari and his economic team in Mexico City two weeks ago. They assessed the country's potential as both a market for goods and services and as a springboard for exports to the rest of the hemisphere.

Yochelson cautions that ``if succession goes to someone outside of that circle, it will cast a shadow over the irreversibility'' of major transformations proudly pointed to by the Mexican president. Among them: Mexico's move from antagonism to cooperation with the US; shift from confrontation to real dialogue with business; efforts to open Mexican markets; and greater economic and political reforms at the local level.

Yochelson questions whether greater freedom in Mexican politics threatens the political consensus on close relations with the US, privatization, and an open Mexican economy.

Speaking in Buenos Aires after the Colosio assassination last week, US Commerce Undersecretary Jeffrey Garten extoled the virtues of Mexico, ``the fastest growing US export market, averaging an incredible 23 percent increase a year for the last five years.'' He added that ``behind that figure are courageous steps taken by the administration of President Salinas.''

Also behind that figure is social repression and festering economic conditions, asserts Christopher Whalen, a Washington consultant who publishes the newsletter The Mexico Report. Salinas's reforms have produced a stagnant, high-tax environment that not only ``hurts average Mexicans, it's bad for US companies as well,'' he says.

Mr. Whalen challenges what he calls business complacency and the Clinton administration's conventional wisdom. The Indian peasant revolt in Mexico's southern state of Chiapas, the recent kidnapping of a Mexican billionaire, and last week's assassination are ``all symptoms of painful structural changes in the Mexican economy right now,'' he says. ``They will command our attention.''

Despite Salinas's declared intentions to create wealth and boost the standard of living, Mexican Finance Ministry figures show that the nation's manufacturing output shrank by 1.5 percent and the economy grew by a meager 0.4 percent last year. Restive citizens create instability that poses problems for foreign investors and suppliers.

Advocating stronger US-Mexico ties, Mr. Garten remains undaunted. ``With inflation in the single digits, continued fiscal reform, and the entry into force of NAFTA, the conditions are now in place for continued noninflationary growth, projected at 4 percent his year and upwards of 6 percent in years to come,'' he says.

Barry Rogstad, president of the American Business Conference (ABC), whose fast-growth corporate members are eyeing Mexico's market, agrees. ``Have they [Mexico's ruling Institutional Revolutionary Party] got a lock on continued progress? No. But they have turned the corner, and the chances of them turning back are slim,'' Mr. Rogstad says.

ABC member Jay Precourt, head of Houston-based Tejas Gas Corporation, calls the assassination a ``stunning tragedy.'' But Mr. Precourt, who is currently negotiating a ``substantially sized'' natural gas deal with Pemex, Mexico's giant energy concern, doesn't expect trouble.

``We've got a lot of confidence in the highly talented people in the Mexican government,'' says Precourt, who was among the US corporate leaders who met Salinas and his ministers of finance and commerce. ``We're extremely impressed with the depth and the quality of Mexican officials.''

The eventual successor to Salinas will draw from that reservoir of talent, he says, enabling economic reforms and strong relations with the US to continue.

Adam Greene, an analyst with the US Council for International Business, was at a Vancouver, British Columbia, conference attended by US, Mexican and Canadian business leaders when the news broke about Colosio's assassination.

``The general feeling was that there is no reason for concern if Colosio is replaced by one of the [PRI] people groomed by Salinas. But with the [PRI's] older guard [now] putting up a fight [against naming a reform-oriented candidate], there is cause for concern.''