THE crisis of confidence brought about by the sudden devaluation of the Mexican peso has shaken the world's financial system. It threatens to again reverberate through the global economy if the United States Congress does not quickly approve a $40 billion package of loan guarantees to help Mexico obtain credit on international markets.
But preventing Mexico's economy from going down the tubes is not the only reason why obstructionist forces in Congress should step aside and let the US lend Mexico a helping hand. By giving Mexico the loan guarantees, and without imposing interventionist conditions, the US promotes economic stability and advances the cause of democracy in Mexico.
We can guess that a prolonged depression in Mexico would cause a migration to the US similar to that seen during the dark economic days of the 1980s. Experts say that if Mexico isn't given help to meet its short-term obligations, a disastrous chain reaction could be triggered - as in 1982, when it was the first country in Latin America to default on its debt.
Critics of President Clinton's plan understand these arguments and see the importance of rescuing Mexico. But by stalling they hope to get concessions from the government that they can later claim credit for, such as having Mexico curtail trade with Cuba or patrol its own border.
What congressional naysayers don't realize, however, is that by rejecting or attaching strings to the Clinton plan, they could derail Mexico's slow but steady move to democracy. Already, prices are soaring and traditional pillars of the economy, such as the auto industry, are slowing down production and even temporarily closing their gates. If the US Congress fails to approve the loan guarantee package - and soon - Mexico's currency will undoubtedly fall much further, triggering greater inflation and leaving the country in an even worse economic predicament. That could easily fuel instability and embolden antidemocratic forces.
Some might think that a US bailout that doesn't address Mexico's internal politics will just serve to shore up the country's corrupt and oppressive old order. But consider the alternative. While the US clearly has a right to demand fees and collateral, any political conditions it imposes could scuttle reform in a country that has always been obsessed with defending its own sovereignty. Even seemingly reasonable demands by Congress could give members of the Mexican ``old guard'' an opportunity to wrap themselves in the Mexican flag and decry US meddling.
And if the loan guarantees were to be rejected, hard-liners could also try to convince President Ernesto Zedillo Ponce de Leon that a military crackdown against rebels in the southern state of Chiapas would be the swiftest means of bringing a stable investment climate back to Mexico. Already, Wall Street has expressed its preference for a military approach, but so far Mr. Zedillo has judiciously chosen a path of peaceful negotiation.
If Mexico reverts to its old political system, inscrutable to outsiders and tyrannous to Mexicans, then the instability of 1994 -
which saw a peasant uprising and the assassinations of two high ruling-party officials - will continue. And if Zedillo's presidency is weakened by Congress's recalcitrance, Mexico will lose a democratic-reform program that has won respect from the opposition and angry protests from the ruling Institutional Revolutionary Party.
That would be a tragedy for Mexico; it would also exacerbate looming US problems over Mexican trade and immigration.
The loan-guarantee program should be passed, free from political conditions, so that Mexico can build on its first faltering steps toward democratic and economic reform - and not be plunged back into chaos. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.