Snarls Across the Border : Mexico Needs Economic Growth, Not U.S. Pressures

The second of Sen. Jesse Helms’ public hearings on Mexico last month proved much more moderate than the first, where charges of drug-trafficking against a Mexican governor had been made and then retracted. This time Assistant Secretary of the Treasury David Mulford testified about steps that Mexico had taken to adjust its economy, and he expressed confidence in its return to sustainable growth. “When it comes to Mexico, “ he observed, “there is a tendency to be quick with criticism and cautious with praise.”

At the third hearing, Helms again went on the offensive, with accusations of massive electoral fraud in Mexico. And at the final hearing, on June 24, outgoing Ambassador John Gavin alleged drug dealing by two Mexican governors, whom he did not name. Another witness at that hearing, Gov. Bruce Babbitt (D-Ariz.), responded: “I cannot imagine what has impelled the use of this forum for ungrounded charges of criminal behavior, and for sweeping accusations, on undisclosed evidence, of electoral fraud on a scale that bears on the legitimacy of the Mexican government.”

In Mexico the popular backlash against what was being said in Washington pulled the rug out from under those in the De la Madrid government who had been pushing for economic and political opening--precisely what the Reagan Administration had been demanding. Criticism of the hearings became a barometer of Mexican patriotism, and the resurgence of nationalism had two immediate, if perhaps temporary, results: It strengthened the hand of the ruling party, which has been discomforted by opposition challenges in state elections, and it reduced President Miguel de la Madrid’s room for maneuvering with his public, as evidenced by the sustained jeering that he received at the opening of the World Cup series. The government was trapped between popular demands for a more assertive response to Washington and U.S demands for reforms that would further alienate the Mexican public.

The Mexican political system, long regarded from the outside with a mixture of amazement and envy, has remained stable largely because it has been able to provide the people with substantial basic goods and services, thanks to a long history of average yearly growth rates of 6%. Today, real wages are below 1965’s level; the standard of living has dropped 30% to 40% since De la Madrid took office in 1982; 100% inflation and a negative growth rate are possibilities this year. A political system that does not deliver cannot survive indefinitely, and without growth the Mexican government cannot deliver.

Until now, Mexico has been a leader of the debtor nations in terms of both the magnitude of its problems and the search for constructive solutions. De la Madrid has made stringent adjustments, but the rewards for economic good behavior have paled beside the domestic political costs of compliance with U.S. pressure. Eventually even technocrats must pay attention to demands for social equity. Thus adjustment programs fail not because of any technical weakness but because they are not politically sustainable. Politically, Mexico cannot afford to buy each dollar at the price of one reform.

The bilateral relationship is now in a state of extreme tension. But crises, like the hangman’s noose, have an uncanny facility for concentrating the mind. The United States must begin to appreciate Mexico’s status as our most important neighbor and partner in the hemisphere, and show informed understanding of its problems. Federal Reserve Chairman Paul A. Volcker gave a heartening glimpse that this may be forthcoming when he said on June 11, “The question here is the pace of (Mexico’s debt) adjustments and the ability to manage those adjustments within a political context.” On the same day, President Reagan affirmed his personal commitment, saying that Mexico and the United States “are linked on many fronts, so we want to be of as much help as we can.”

There is a general lack of public appreciation north of the border that the U.S. economy suffers when Mexico’s growth declines. U.S. exporters lose, and export-related jobs are lost; U.S. firms with investment in Mexico lose, and commercial banks face a greater chance that interest payments will be suspended.

The Helms hearings, in bringing popular U.S. attention to Mexico’s problems, gave the U.S. government room to expand its role as interlocutor between the Mexican government, the banks and international financial institutions.

The key problems between our two nations--immigration, narcotics, corruption, debt and protectionism among them--are wed to economic decline. Beating Mexico with the stick of its past mistakes will not reverse that decline.

Mexico is not looking for sympathy; it is looking for money. The debt that it took on during the oil-boom years can never be fully repaid as now structured. Short-term adjustments do not help; only long-term capital flow, primarily in investment that creates jobs and exports, will give Mexico what it needs: a dependable growth rate.

There is a direct link between economic development and the other goal that is wished for in the United States: an opening of Mexico’s political structure. There is significant domestic pressure for political pluralism in Mexico, and there have been encouraging signs of progress in the new-found strength of the Mexican congress and more open public debate. But the implementation of political reforms requires an environment of confidenceand growth. If the United States tries to influence the speed and content of reform, the Mexican system will close ranks, and authoritarianism, not democracy, will be the result.

The lesson from the Helms hearings is clear: U.S. interests in Mexico’s future will be served not by meddling or muddling, but by an enlightened, farsighted policy--one that will endure past the administrations that are now incumbent in Washington and Mexico City. Continued brinkmanship instead of statesmanship will keep both of the nations scrambling to extinguish successively larger bilateral fires. There will always be divergent interests in two countries of such diverse cultures and asymmetrical powers. It is the convergent interests that we should attend to.

Great power must be tempered by even greater tolerance and responsibility. Mexico should be at the top of the United States’ agenda because the health of the United States is inextricably linked, forever and in many ways, to the health of Mexico.