Look South for Optimism and Opportunity

“Look South” is the kind of terse advice that Horace Greeley might pass along today if he were updating his famous “Go West” editorial. Young Americans will be well advised to pay attention to the changes that are occurring in Mexico. Remarkable things are happening that have a potential for progress, but not a guarantee, which is one important reason that the United States must follow events thoughtfully and responsibly.

Early in the 1980s, Mexico faced economic collapse. Foreign currency reserves were wiped out and international bankruptcy seemed imminent. Today, Mexico enjoys a foreign currency reserve of more than $14 billion and looks with confidence on its ability to manage its external debt. It is significant that the surplus results from an increase in exports of manufactured goods rather than from a spurt in oil sales.

For the United States, this is much more important than the mere satisfaction of seeing a friend and neighbor succeed. Not enough Americans understand our economic stakes in Mexico. Mexico is now our third-largest trading partner and our primary source of imported oil.

But when I talked with President Miguel de la Madrid in Mexico City recently, it was not so much the statistics that impressed me, as it was the spirit that seems to be animating the country after a long somnolence. Under De la Madrid’s leadership, there has been a changing of the guard that is likely to have a greater impact on his country than did the discovery of oil.

In every important ministry, there are intelligent, aggressive and nationalistic young people who are spinning ideas and making them work. Many of them have had some education in the United States or Europe, so they have objective standards against which to measure Mexican performance; they know it is not yet good enough. They are wrestling with the incompetence and corruption that has been a handicap in every economic effort, but their efforts are beginning to show results. In a nation that years ago nationalized much of the economy, there has been a trend toward privatization. Even when it is politically impossible to make formal changes, the technocrats in government have made adjustments that have renewed private sector initiative and had a positive impact on capital flight.

There are also frustrating problems, among them the Catch-22 that demands a tight money policy to restrain dangerous inflation, but which at the same time inhibits expansion. De la Madrid maintains that a modest, but acceptable, growth is occurring and that he will stick to austerity despite its difficulties.

Critics question whether the government has the time that it will take for a gradual reform and the slow improvement of the economy. They warn that the social and political structure will fall apart first, with chaotic results for the United States as well as for Mexico. They may prove to be right, but such judgments should not be based on criteria that are applied to the United States. De la Madrid is convinced that the Mexican political structure is stable enough to allow the time to work for economic stability that will extend into the administration of his successor.

Whether that happens depends to some degree on the actions of the United States. Two issues will serve to illustrate this.

One is the future of Central America and the resolution of the conflict in Nicaragua. De la Madrid reiterated Mexico’s support for the Contadora plan and viewed the Guatemala proposal as a bridge to the larger solution. It is clear that Mexico is taking a regional role of special concern and involvement. For example, the termination of Soviet petroleum supplies to the Sandinistas will probably be the occasion for Venezuela and Mexico to step in and keep this oil business, and whatever political leverage it offers, within the region.

Mexico not only opposes the United States’ military approach on political grounds but also because of the domestic problems it could create. The trickle of refugees coming into Mexico now from Central America is manageable, but any escalation of the violence might turn that trickle into a flood with unpredictable consequences. With a long memory of the United States’ episodic involvement in the area, Mexicans look warily at our tactics toward the Sandinistas and see trouble if things do not improve soon.

On another front, concern is equally high. Although Mexicans are proud to be a major trading partner of the world’s largest economy, it also puts them at risk. A restrictive trade bill such as the one being debated by the U.S. Congress could put the Mexican economy into reverse, and immense damage could result to the international financial institutions that depend on Mexico to manage its own debts. If the United States adopts the wrong course on trade, the consequences in Mexico could be more significant than a trade deficit.

When the United States “looks south,” it needs dual vision. There is the prospect of a prosperous, populous neighbor contributing to the stability of the hemisphere. Or there is the possibility of a demoralized, poverty-ridden neighbor subject to the influence of any demagogue who promises relief. The ultimate answer, as De la Madrid has made clear to his countrymen, is only to be found within the Mexican people. But the role that the United States plays in coming months can make a profound difference for years ahead.