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Mexico: Time to Treat a Next-Door Neighbor

<i> Norman Kempster is a Times' Washington correspondent. </i>

With Mexico’s economy in disarray, its treasury facing debts that it can never hope to repay, the nation has abruptly become a top priority for Reagan Administration thinkers who are more attuned to fashioning policy toward far-removed trouble spots.

President Reagan is inviting President Miguel de la Madrid to visit this August for a review of mutual problems. Mexico not only shares a continent with the United States, but it is this country’s third-largest trading partner and its leading supplier of foreign oil. Yet most of the time U.S. policy-makers seem to view Mexico as a political blank space between Texas and Nicaragua.

All that changes in times of urgency like the present, when this country’s southern neighbor is being rocked by a falling peso, mammoth foreign debt and reduced earnings from sales of its leading export, oil.

Perhaps inevitably, this sudden concentration on Mexico is reflected, according to specialists outside government, in the Administration’s failure, so far, to devise a coherent policy. In recent weeks, some U.S. officials have made slashing rhetorical attacks on the Mexican government while others have spoken soothingly and promised to help solve the debt crisis.

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“The relationship between the two countries hasn’t received much organized attention in policy terms,” said Georges A. Fauriol, a senior fellow at Georgetown University’s Center for Strategic and International Studies. “The Administration has adopted a hot-and-cold-shower treatment. We hit them on the head because we are angry about something, then we realize we have gone too far and we don’t want to overdo it, so we try to repair the damage.

“It is a tactical, put-out-the-fire approach. We haven’t planned the grand strategy. We haven’t developed the kind of framework that we have with Western Europe, the Soviet Union, Japan or others,” he said.

Washington may never have a better opportunity to influence events in Mexico than it has now. The Mexican government owes almost $100 billion to foreign lenders, about one-fourth of that to American banks. Interest payments alone on the debt, the second-largest in the Third World, come close to $15 billion a year, about 60% of the country’s annual export earnings. The domestic economy is in a deep slump that has steadily reduced the standard of living of most Mexicans.

This gives the United States a clear opening to demand economic and foreign policy reforms in exchange for economic help. But, according to sources both in and out of government, the Administration has not reached a consensus about how to use that leverage.

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From an ideological standpoint, the direction is clear. The Reagan Administration supports democracy and free enterprise around the globe. Treasury Secretary James A. Baker III, in a speech last October, made it clear that an embrace of free-market concepts and a willingness to accept foreign investment would be necessary for any Third World debtor seeking U.S. assistance.

But Mexico’s economy is largely state-controlled; foreign companies are barred from whole industrial sectors and the political system is dominated by the Institutional Revolutionary Party, known by its Spanish initials, PRI. Moreover, Mexico has been free with its criticism of U.S. policy in Nicaragua although--on a more practical level--it has stopped supplying the Managua government with oil.

Some segments of the Administration, goaded on by Sen. Jesse Helms (R-N.C.), have begun to push for fundamental changes in the Mexican economic system.

“In broad strokes, the Reagan Administration is putting a lot of pressure on Mexico to change both its economic and political structure,” said Bruce M. Bagley, associate professor of Latin studies at Johns Hopkins University’s School of Advanced International Studies. Some Administration officials, he added, seem to want these changes “overnight.”

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At the same time, other Administration officials are concerned that if Washington applies too much pressure, the Mexicans will default on their loans, possibly starting a chain reaction that could break international banks, including several in the United States.

Even worse, these officials are afraid that incessant pressure could destabilize the Mexican government. What would follow is a matter of debate; some experts foresee a leftist takeover, some say there would be social disorder on a scale that the Mexican army could not control.

“I think we are playing with fire when we put De la Madrid’s feet to the flames,” Bagley said. “Ultimately that kind of Mexico-bashing is counterproductive and only causes the Mexicans to dig in their heels and ignore some pretty good advice.”

Some of Bagley’s concerns are shared among Administration policy-makers. Thus, efforts to develop long-range policy are hindered by a split between the get-tough approach advocated by hard-liners like U.S. Customs Commissioner William von Raab and a more conciliatory stance supported by Atty. Gen. Edwin Meese III, along with much of the State Department bureaucracy. In the absence of a coherent policy framework, the focus of U.S. Mexican policy seems to shift across a broad range of unrelated issues, including immigration, drugs and imported winter vegetables.

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“Each issue has a policy (of its own) that is driven by whatever special interests are at work on that issue,” admitted a State Department official who asked not to be named. “Our job here is to try to make sure those policies don’t always--or too often--or ever come into conflict with each other.”

But the State Department’s hope of managing through quiet diplomacy was dashed earlier this month by Helms, who turned his Senate Western Hemisphere subcommittee into a forum for disgruntled officials to voice complaints about Mexico and to urge a tougher U.S. line.

Von Raab charged that narcotics were grown on ranches owned by the governor of the Mexican state of Sonora--although the Treasury Department later issued a statement that it had no corroborative evidence. Helms charged the PRI with falsifying the returns in the 1982 election that brought De la Madrid to power.

Elliott Abrams, assistant secretary of state for inter-American affairs, would normally be the man in charge of damage control, but even he seemed carried away by the tenor of the Helms hearings. Although his prepared testimony avoided sensational criticism of the Mexican government, Abrams’ answers to Helms’ questions added to an overall impression of a government attack on de la Madrid, his party and his administration.

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After the hearings, Meese issued a public apology to Mexico and State Department bureaucrats sought to cushion the blow. “We tried very hard to tell them,” said one official, “what was coming and to advise them that the worst thing they could do would be to overreact and give Helms a credibility that he doesn’t deserve. But they went into a nationalistic orgy the likes of which we haven’t seen for some time.”

Helms insisted that he was not trying to undermine the Mexican government or damage U.S. relations with its neighbor. “What happened was that some of these witnesses came up here and committed the truth,” he said.

Most non-governmental specialists believe that the most sensational charges to emerge from the Helms hearings were wildly exaggerated. But the issue for U.S. policy-makers is not really whether the accusations of corruption, drug dealing and vote stealing in the Mexican government are true or false.

All of those things have been going on--although probably on a much smaller scale than the Helms hearings implied--for decades. The key question, not yet fully answered, is how Washington should react to its southern neighbor, warts and all.

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