Blueprint for Mexico

The most pressing task after Mexico’s recent earthquakes was helping the victims. But the potential exists for long-term social and economic devastation even more severe than the quakes brought last month. For Mexico, the time has come to address the future.

The nation faced difficult problems even before the tremors began. Economic troubles can be measured by the nation’s $96-billion foreign debt and by the runaway inflation and high unemployment that hit the average Mexican much harder than the national debt. There is high population growth, reflected in both the uncontrolled sprawl of Mexico City and the illegal migration of many of Mexico’s best workers to the United States. There is growing cynicism in the country’s middle class about a government that is corrupt, inefficient and losing touch with the average citizen.

Against that background, it is no surprise that most commentators are speculating that the earthquakes will eventually bring the Mexican system tumbling down like the proverbial house of cards, just as major earthquakes in the 1970s presaged the current political turmoil in Nicaragua and Guatemala. A few Mexican leaders have reacted to this suggestion defensively, pointing out that the Mexican system has been a model of political stability in Latin America for 60 years. But others, including President Miguel de la Madrid, are cognizant of the dangers posed by the natural disaster and are seeking ways in which Mexico can learn, and perhaps even benefit, from the quake tragedy.

The most important idea is De la Madrid’s proposal to reverse Mexico City’s incredible population growth. From less than 2 million people in 1940, the Mexican capital has grown into one of the world’s largest cities, with a population of 18 million. In the process it has become an urban nightmare, with noise, smog and congestion that make other cities’ problems seem mild by comparison. De la Madrid talked even before the quakes of trying to reverse this trend by moving some government agencies to other regions of the country. He must now press forward with that campaign.

But decentralizing Mexico involves hazards. One would be failing to move things far enough away from Mexico City. Simply relocating people to cities near the central Valley of Mexico, like Cuernavaca or Puebla, could sow the seeds of worse urban sprawl in the future. Agencies must be moved far enough away to make a difference. De la Madrid must also move the big agencies as well as the small. The relocation of a few hundred clerks will be more than offset by the thousand new arrivals who come into Mexico City each day.

De la Madrid must look beyond government in his effort to get Mexico City down to manageable size. Half of Mexico’s industrial capacity is located in the Mexico City metropolitan area. The president must encourage relocation with incentives like favorable government credit policies and tax regulations, and the construction of roads, power plants and sewage systems in underdeveloped rural areas. The expansion of industrial capacity in Mexico’s northern states and its western plateau, for example, might help reduce the flow of illegal immigrants across the U.S. border. Research indicates that most Mexican illegal aliens in this country come from those two regions.

Because the folly of the Mexican government’s decision in the 1940s to focus growth around Mexico City is already apparent, De la Madrid must now rethink other traditional strategies, such as regulations limiting foreign investment in Mexico and protecting Mexican industry.

As long as the specter of a Mexican default on the nation’s massive foreign debt lingers in the background, it is unrealistic to expect major banks and other lenders to invest in Mexico unless they get more liberal terms and conditions than Mexico has granted in the past. This will be a bitter pill for Mexican nationalists to swallow, but it is absolutely necessary if the nation is to break out of its dependence on two uncertain sources of foreign exchange: tourism and oil. Clearly both of those major industries can be profitable for Mexico in the future, but the dramatic drop in tourism since the earthquake and the recent downturn in the world’s oil prices should convince Mexican leaders that the best hope for economic stability is industrial development.

Development cannot occur, however, until the problem of protectionism is addressed both by Mexico and the United States and other industrial nations. Mexicans often point out that the major industries they already have, such as shoe manufacturing and agriculture, can export only limited amounts of goods to the United States.

We have long favored the dropping of all such trade barriers, but in exchange the Mexicans must give U.S. companies better access to their market. In the short run there will be outcries from businesses in both countries that cannot compete in a truly free market, but better trade relations between Mexico and the United States will help strengthen business in both nations.

Clearly such reforms alone would not be enough to restore the confidence of many Mexicans in their government. But if the Mexican economy is allowed to grow and diversify in accordance with free-market principles, and the benefits of development are allowed to reach all the nation’s people, confidence--and, more important, continued political stability--will follow.

Failure to seize this opportunity for constructive change can only exacerbate the anger and frustration that many Mexicans feel these days. That could bring closer than ever the frightening scenario envisioned by pessimists in this country: Mexico torn by bloody turmoil that would be far worse than the current wars in Central America.

There is much to admire and preserve in the Mexican system. But like any system, it can benefit from reassessment and renewal. The earthquakes killed thousands of Mexicans. They also shook the nation’s political, business and intellectual leaders into thinking about the nation in new ways. If they follow through on provocative ideas like De la Madrid’s decentralization plan, Mexico can emerge from its tragedy a stronger nation, better prepared to face the 21st Century. That would benefit not just Mexico, but the United States and the rest of the world.