Mexico Gets Bashed, and Now It May Be Our Turn

Misperceptions and crossed signals have often made the difficult U.S.-Mexican relationship more complicated than necessary. A recent case in point is the Senate hearings on Mexico chaired by Sen. Jesse Helms.

Last month’s hearings created a major stir in bilateral relations. Further hearings scheduled for today and next week could well be the straws that break the proverbial camel’s back: Mexico could react by suspending payments on its foreign debt. As so often happens, matters that seem minor in the United States become major issues south of the border. The link between the North Carolina Republican’s minor antics and the major upheavals that a Mexican default would provoke is an excellent example.

The timing of the hearings was uncannily well chosen. Deeply rooted economic pressures and the superficial but not negligible political fallout from the Helms affair have forced Mexico into the situation that it wanted to avoid: Unilateral action on the debt issue has become inevitable, though imposed on the country for the wrong reasons, at the wrong time. Ever since oil prices plummeted in January, it has been clear that Mexico would have to obtain an enormous infusion of new loans or drastically reduce interest payments on its debt. Either option would be accompanied by a drop in economic growth of at least 3% this year, leaving the economy stranded at 1981 levels. On Feb. 21 President Miguel de la Madrid asked--practically pleaded with--the nation’s creditors for understanding and vision in dealing with Mexico’s financial plight. He received neither. The international commercial banks, the Reagan Administration and agencies such as the International Monetary Fund and the World Bank turned a deaf ear to what many Mexicans considered their president’s exceedingly reasonable pleas for sympathy. The banking community’s reply was that Mexico should get its own financial house in order before thinking of more loans. Moreover, interest relief was out of the question.

This stalemate lasted longer than many expected. In fact, for various technical reasons, including a credit squeeze in Mexico, hard-currency reserves remained stable through May. But by mid-May imports had dropped less than expected, non-oil exports failed to grow quickly enough, dollar repatriation waned and reserves began to dip. All of this coincided with Helms’ Mexico-bashing--a minor coincidence in the United States that looked like a major anti-Mexican conspiracy in Mexico.

There are valid reasons for believing that Mexico refrained from taking unilateral steps on its debt until now partly out of fear of U.S. political retaliation. What with charges against its leaders and institutions, overt pressures to bring about changes in the Mexican political system, and U.S. federal entities of one sort or another fishing in troubled waters to satisfy their own agendas, it was thought that if Mexico defaulted on its debt it would face not only economic reprisals but political destabilization.

After the first Helms hearing, Mexico already had the worst of both worlds. On the one hand, it faced a perceived U.S. threat to its stability; on the other hand, it was still meeting interest payments on its debt. The first hearings brought a crisis in U.S.-Mexico relations; if, after Mexico’s demands for an apology and after some Administration gestures to placate Mexico, things continue to deteriorate and new hearings are held, there is little doubt of what will have to happen.

Economic necessity would have forced De la Madrid into a de facto suspension of payments very shortly, anyway. But the Helms affair has brought things to a crisis sooner than expected. In Mexico it is both a reason and a pretext for action. Yet it will not occur on Mexico’s terms. What with the soccer World Cup in full swing, giving Mexico’s middle class an opportunity to vent its anger at the government and boo the president; with difficult gubernatorial elections coming up in three northern states with a strong conservative opposition, and with the peso exchange rate crumbling daily, it is not the best of times for confrontation with one’s creditors.

But all these factors, and Jesse Helms, did not leave Mexico much choice. Nor did those who could have done something about Helms give Mexico reason to believe that the few friends that it had left in Washington would venture beyond ceremonial gestures in their effort to limit the damage. If no further hearings had been held, high-level phone calls and protocol meetings at the White House probably would have sufficed. But, given the economic downturn, a repeat Helms performance and the Administration’s silence and passivity are too much for Mexico to countenance.

Since 1981 Mexico’s foreign debt has been its greatest problem. The Helms hearings are small-time static in the United States, and should not have been much more in Mexico. Things worked out differently, as they often do in different countries with different priorities and perceptions. This is perhaps the lesson to be learned, as U.S.-Mexico relations enter one of their most troubled periods in recent memory.