Mexico Returns to Coping With Economic Woes : After Hosting World Cup, Nation Focuses on Soaring Prices and Foreign Debt

With the World Cup soccer finals behind it, Mexico returns today to the harsher pastime of trying to cope with enduring hard economic times.

Street fiestas, rah-rah chants and the friendly wave gave way to worry over higher prices, meager job prospects and snail’s-pace reconstruction from last year’s earthquakes. The bread-and-circus formula has been sorely tested here; few could afford to attend the soccer matches--ticket costs were high--and the price of bread just doubled.

Meanwhile, negotiations over relieving Mexico’s $97-billion foreign debt are well into overtime. Mexican government talks with the International Monetary Fund, aimed at opening the way to more loans and easier credit, have been stalled for months.

“The euphoria is over,” said Pedro Madero, a doorman in the Polanco neighborhood. “If we take to the streets, it won’t be to cheer our team but to complain.”

Rose From the Rubble

Mexico literally rose from the rubble to host the World Cup. Last September’s pair of devastating earthquakes left parts of the city in ruins and thousands of residents homeless.

Although walls were erected to hide lingering signs of destruction from visiting soccer fans, problems left over from the earthquake are harder to hide. Ten months after the back-to-back quakes, the homeless remain in squatter camps waiting for replacement housing. Rebuilding efforts have lagged; the first handful of permanent homes for displaced residents are set to be assigned this week.

In addition, some neighborhood groups have accused the government of following lax safety standards in rebuilding homes.

The capital’s 17 million inhabitants also face sudden price rises for many basic consumer goods. The prices of tortillas and bread doubled last month. Eggs cost 25% more than they did two months ago, and the cost of cooking gas is expected to rise monthly for the rest of the year.

The price of a subway ride in Mexico City, proudly kept at one peso for the past 20 years, is expected to be raised to as high as 50 pesos. The fare will still be remarkably cheap; one Mexican peso is worth less than one-fifth of a U.S. penny, so 50 pesos is less than a dime. But for a populace that has seen a series of sharp price increases for daily necessities during the first six months of the year, any increase is painful.

“Our reality is we are paying more and more for everything,” said Carmen Jurado, a housewife in the working-class Tepito neighborhood. “I kept telling my husband that, but he kept watching soccer on television. Let’s see if he notices in July.”

This year, the inflation rate for Mexico will range between 65% and 100%, economists say. The big state-owned oil company, Pemex, is considering laying off thousands of workers, as are other government firms.

Another sudden drop in the value of the peso last Friday reflected the economic insecurity here. Early Friday morning, it took 615 pesos to buy a single U.S. dollar; a half-hour after exchange houses opened, buyers needed 64O pesos to purchase a dollar.

Seeking IMF Agreement

In Washington, Mexican negotiators are trying to hammer out a new agreement on debt payments with the IMF. Mexico is trying to reduce its debt burden so that some treasury money can be diverted from interest payments abroad to investment at home.

The $97 billion that Mexico owes is equivalent to $150 for every Mexican citizen, or a month and a half’s minimum wage.

The Mexican negotiating team is lead by Finance Minister Gustavo Petrocioli and by Planning and Budget Minister Carlos Salinas de Gotari. Petrocioli recently replaced Jesus Silva Herzog as finance minister, following an apparent dispute between Silva Herzog and President Miguel de la Madrid over the debt negotiations. Salinas de Gotari, a political rival of Silva Herzog, is expected to take the lead in the current negotiations.

Despite the government shake-up, no significant change in Mexico’s position on the debt has been voiced. The government is willing to make its interest payments to foreign banks but only as long as Mexico’s economy wins enough breathing space to resume growth, either through new loans or easier terms, officials say.

Threat of Delayed Payments

The threat of Mexico’s stopping or delaying interest payments is still hanging over the negotiations.

“A dead man cannot pay a debt,” Petrocioli said last week, referring to the country’s difficult straits and the need for help from abroad.

The IMF is pressing Mexico to reduce government spending so that any new loans will not be eaten up by inflation or by waste in unproductive projects. U.S. officials also have promised to help Mexico win new loans from bankers, but only if Mexico restructures its economy, a polite way of saying that the government should live within its means.

Under a plan promoted by Treasury Secretary James A. Baker III, banks and government lenders would lend Mexico more money in return for assurances that the country will reduce government spending and permit more foreign investment.

The money would be used to maintain payments on the debt, finance the import of equipment and invest in public works.

In any case, the Mexican economy is unlikely to benefit much for the remainder of the year. The newspaper El Financiero, quoting official sources, said Friday that even with a loan of $6 billion injected into the economy, economic activity will shrink by 3% in 1986.