De la Madrid Cites Costs of a Bad Economy

In an unusually frank admission of the political cost of Mexico’s prolonged economic crisis, President Miguel de la Madrid said that tensions in this country have risen in recent years but that the Mexican people’s aversion to violence and the “tolerance” exercised by their government have combined to avoid an explosion.

De la Madrid made his comments in an interview with The Times on Wednesday. On Saturday, he is scheduled to see President Reagan in the Pacific resort city of Mazatlan for their sixth meeting. The neighboring presidents are both in their last year in office.

De la Madrid is struggling with severe economic problems that include high inflation and a virtually stagnant rate of growth. Trade and economic issues are expected to dominate the one-day talks in Mazatlan, although the presidents will undoubtedly touch on other foreign policy issues, especially Central America, border problems and the migration of Mexican workers to the United States.

Drug trafficking may be the most controversial subject. U.S. officials have repeatedly charged that corruption in Mexico cripples the joint effort to fight narcotics smuggling. In his interview with The Times, De la Madrid said that such charges are superficial and that the United States has offered no proof to back up recent accusations of drug-related corruption aimed at Mexican functionaries.

De la Madrid was interviewed in a meeting room on the wooded grounds of Los Pinos, the presidential residence in Mexico City. Responding to questions about the likelihood of social upheaval in Mexico, which has long been predicted by foreign and domestic observers, he answered:

“Tensions have risen, but social peace has not broken. I think that Mexican society does not want violence, and the government continues carrying on dialogue, negotiation and acting with tolerance. We hope that it will not reach that point (of violence). We are doing our best to prevent it.”

‘Critical Problem’

De la Madrid admitted to an inability to control inflation or to restore rates of economic growth that would create sufficient numbers of new jobs for Mexico’s growing labor force.

“I think this is Mexico’s most critical problem,” he said.

His government has been engaged in delicate talks with labor unions and business groups to try to slow inflation. Threatened general strikes have not materialized, although marches and protest demonstrations have become commonplace.

He said that the inflation rate, estimated at 150% in 1987, “has reached extremely dangerous levels.”

“At present,” he added, “the government . . . is aiming to reduce inflation substantially over the coming months. I expect that a reduction in the inflation rate will begin to show as of this month of February.”

The De la Madrid government is putting into place a scheme of wage and price controls beginning in March.

Policy ‘Disagreements’

The Mexican leader gave a fairly upbeat account of relations with the United States, although he noted “there have been disagreements on issues of international policy, principally in regard to Central America.”

Mexico has opposed the Reagan Administration’s program of aid to rightist rebels in Nicaragua. For several years, the De la Madrid government spearheaded efforts by Latin American governments to forge a Central American peace pact. That effort, known as the Contadora process, collapsed last year but gave way to direct negotiations among the Central American nations themselves.

The Central American talks, initiated by President Oscar Arias Sanchez of Costa Rica, produced a pact designed to end the fighting in the region as well as to shut off foreign aid for guerrilla movements, including assistance from the United States for the Nicaraguan Contras.

“My opinion is that we must continue doing our utmost to settle the Central American conflict through diplomatic negotiations,” De la Madrid said.

No Reagan Pressure

He said the Reagan Administration has not put pressure on his government to change its Central American policy.

De la Madrid said that “broad and fluid communication” has been maintained with the Reagan Administration on bilateral issues and that “there has been major cooperation in the area of finance, in the programs of restructuring Mexico’s debt.”

The debt problem, he said, remains unsolved. His country owes more than $100 billion to foreign creditors and makes interest payments amounting to about $10 billion a year.

“I think that Mexico needs agreements aimed at greatly extending the time periods (of payments) and that we should also consider ways to reduce the principal of the debt and to place limits on interest rates,” he said.

Mexico recently worked out a formula to buy up $20 billion of its debt, using bonds purchased from the U.S. government. Some banks, however, refused to participate in the plan because it requires them to sell their loans at about half their original worth.

“I hope that this formula will be successful because it offers advantages for all parties concerned,” De la Madrid said. “But I cannot yet give assurances that the operation will succeed.”

‘Important Cooperation’

De la Madrid said that bilateral U.S. relations have been characterized by “very important cooperation in border affairs, programs of environmental improvement, measures for constructing bridges over the Rio Grande.

“I am only pointing this out as an example of many areas of cooperation between the two governments,” he explained.

Mexico has not felt much impact from new U.S. immigration laws that are aimed at slowing the flow of Mexican migrants into the United States, De la Madrid said, and added:

“In fact, we have seen that the application of those laws have been moderated, since broad sectors of the United States economy need Mexican labor to maintain their competitiveness. Moreover, the U.S. government has promoted programs to admit temporary workers.”

There have been some abuses of Mexican citizens as a result of the laws, “but not as a general rule,” he said.

He rejected charges against Mexican officials in connection with drug trafficking and said that when his government asked for proof of the charges, the U.S. government replied “in writing that it has no proof attributing responsibility to those Mexican officials.”

Budget Commitment

A spokesman for the U.S. Embassy here said, “The courts would not have indicted them if there was no basis for charges.”

De la Madrid said that half the budget of the Mexican attorney general’s office goes to fighting drug traffic, plus a quarter of the Mexican army’s, and that “there are no . . . bases” for saying Mexico is not making a good effort.

With only 10 months left in office, De la Madrid listed what he considered his main accomplishments: the maintenance of social peace, “the improvement of democracy,” reduction of government intervention in the economy and the opening of Mexico to increased foreign trade.

This year’s presidential election, which pits De la Madrid’s handpicked successor, Carlos Salinas de Gortari, against a field of five other candidates, will be “a hard-fought battle and probably more intense than in previous years,” De la Madrid predicted.

He said it will be a tougher battle because of “the democratic progress that has been achieved in the country and our economic difficulties.”

Salinas was De la Madrid’s planning and budget secretary and is closely identified with the administration’s economic policies. De la Madrid said he expects Salinas to “obtain a significant majority of the votes.”

The ruling Institutional Revolutionary Party, under whose banner Salinas is running, has not lost a presidential election since it was founded 60 years ago.