NEWS ANALYSIS : Mexico Savors Role as Mediator of Central America Conflicts : Diplomacy: Helping to bring peace to El Salvador and Guatemala could strengthen the regional role of their neighbor to the north.

At two hotels here, enemies from two seemingly interminable Central American conflicts have laid the groundwork for talks this month that offer the best hope yet to finally end the fighting.

Mexico’s low-profile role in bringing Salvadoran and Guatemalan negotiators together is indicative of a new kind of regional leadership. Providing a venue for talks between warring factions is one way Mexico has found to further its political, economic and security interests in Central America without straining relations with the United States.

Foreign Relations Ministry officials here are tight-lipped about their country’s involvement. But clearly, Mexico has a lot riding on the talks.

To a peaceful Central America, Mexico would be a logical economic model and source of technical assistance, strengthening a leadership role the nation takes seriously. Despite its own austere economic policies in the past decade, Mexico has continued to provide development assistance to Central America--$1.3 billion over the past 11 years.

The success of Mexico’s effort would have the added benefit of providing the United States with a subtle lesson in less heavy-handed ways to influence smaller neighbors.

In contrast, the failure of the talks and an escalation of fighting in Central America could be disastrous for Mexico.

An estimated 300,000 people enter southern Mexico illegally each year, the vast majority of them Central American refugees. Mexico also maintains refugee camps for Guatemalans--sites that have been the source of border disputes with Guatemala, whose well-equipped army has periodically crossed into Mexico and raided the camps looking for rebels.

Not only would intensification of the civil wars in Guatemala and El Salvador be a security threat for their northern neighbor, it could once again force Mexico into conflict with the United States over regional policy. Should negotiations break down, Mexico is likely to be pressured by its own political left to take sides--and to take the opposite side from the United States as a way to assert its independence in foreign policy.

That scenario could put Mexico back into the same bind it faced in the late 1970s and early 1980s, when it was one of the four Latin American nations in the Contadora group, seeking solutions to Central American conflicts. Contadora, which also included Colombia, Panama and Venezuela, emphasized the socioeconomic roots of the conflicts, while the United States focused on the Communist support some factions received.

Differences with the United States over Central America undermined Mexico’s chance for a diplomatic solution to the debt crisis that began in 1982, said Cheryl Eshbach, assistant professor in the government department at the University of Virginia.

Nor did Mexico win points in Central America for its efforts. “Central Americans resented what they perceived to be Mexican domination,” said Eshbach, who has extensively researched Mexican policy in Central America. The Contadora nations set the negotiating agendas and wrote up the conclusions after the talks.

The legacy of Contadora led Mexico to rethink its Central America policy. The national development plan announced at the beginning of the administration of President Carlos Salinas de Gortari two years ago outlined the current policy: “In Central America, Mexico will continue to support every effort to reach a solution to the area’s problems that is based on respect for the right of self-determination; this solution should be the product of negotiations of the Central American countries themselves.”

But Jorge Castaneda, political science professor at the National Autonomous University in Mexico City, observed: “If the United States does not oppose its actions, it is in Mexico’s interest to maintain a role in Central America. That is obvious even to someone as bent on breaking with that past as Salinas is.”

Eshbach agreed that “Mexico has fundamental political, security and economic interests in Central America. Mexico is trying to defend those interests through a more circumscribed policy.”

That has required innovation. Besides hosting the peace talks, Mexico has: recycled $42 million in Guatemala’s payments on oil-related debt into development efforts in that country; signed pacts providing Central American development projects with up to $65 million in financing; opened a second free-trade zone on its southern border and offered to negotiate an agreement leading to a regional free-trade zone by 1996; provided professional development courses at Mexican universities for 200 Central American students, and advised individual Central American countries in negotiations to restructure their foreign debt.

Meanwhile, Mexico has patched up relations with the United States to the point that this year, the countries hope to conclude talks that will bring Mexico into the U.S.-Canada free-trade agreement.

If an agreement is signed, and peace with economic development can be achieved in Central America, Mexico could find itself a conduit for trade, rather than refugees, between Central and North America.

“In a pacified Central America, Mexico could establish the kind of privileged trade and investment relationships that it wants with the United States,” setting an example of how a more prosperous country should treat a less developed neighbor, Castaneda said.

Still, peace for Central America is still an elusive goal. The outcome of this month’s two sets of peace talks will go a long way toward showing how feasible it is.