Hope for Mexico In Salinas’ Vision

Carlos Salinas de Gortari--43 years old, balding, schooled in economics and the unglamorous process of budgeting scarce resources--understands how the world works these days. As Mexico’s planning and budget minister in the early 1980s, he looked outward and saw Asian nations developing rapidly while his country languished in depression, debt and poverty.

He saw that Japan, South Korea, Taiwan and others set their sights high. They adapted to modern technologies and geared their production to sell to the world--most especially the United States, a nation that Mexico traditionally regarded with fear, distrust and envy.

So when Salinas became president of Mexico in 1988, he began to reform Mexico’s economy--selling overstaffed state companies to private investors, pushing industries to modernize and enter world markets. And he asked for a free-trade agreement with the United States. “After years of trying to live as far as we could from the United States, we saw the need for change,” Salinas told a meeting of Los Angeles Times executives, editors and reporters Monday.

He has set powerful changes in motion. Mexico is turning toward a free-market economy, almost all of Latin America is following suit and the United States faces the promise and the puzzlement of closer economic ties with a next-door neighbor that it has never taken the trouble to know all that well.

Salinas’ timing was good in bidding for free trade because President Bush had a problem of his own with debt-ridden Latin America: The United States couldn’t afford more aid, and yet it couldn’t ignore the region, either. People were immigrating in greater numbers every year--more than 1.6 million Mexican immigrants in the 1980s, counting undocumented workers given amnesty in 1986. So Bush decided to adopt a policy of “import their goods so we won’t have to import their people.”

It won’t be easy to achieve free trade between a country in which industrial workers make more than $20 an hour, including benefits, and one in which elite industrial workers make $1.50 an hour and casual laborers are paid as little as 25 cents an hour. Opponents of the Free Trade Agreement suspect that U.S. companies will run down to Mexico for cheap labor or lax environmental regulations.

Even those who see the logic of free trade say it won’t stop illegal immigration quickly; early casualties will include inefficient Mexican corn farmers driven to bankruptcy by imports of low-cost U.S. grain.

Salinas, who holds a doctorate in political economy from Harvard among several other degrees, responds that “higher economic growth and job opportunities are the only way” to reduce the flow of illegal immigrants and to bring Mexico’s people out of poverty.

His policies have been doing the job. The Mexican economy is growing more than 4% this year, a sharp contrast with the 1980s, when growth was less than 1% a year while Mexico’s population expanded 3% a year and living standards retreated. Salinas’ policies have brought inflation down, from 50% a year when he took office to 16% now, and attracted foreign investment, which totaled $4 billion in 1990 and will double this year.

Investment is both American and global. Ford is adding an engine plant to its $2.5-billion Mexican auto complex; Nissan is investing $1 billion; Volkswagen plans to make Mexico its center for North American production. In computers and electronics, Hewlett-Packard is building in Mexico; IBM and Xerox have been there for a long time.

It’s not a one-way street. As Mexico’s industry modernizes, it will do so with machinery and capital goods from the United States--as is already evident. Mexico’s imports last year from the United States--far and away its largest trading partner--totaled $23 billion, where in the mid-’80s U.S. exports to Mexico fell as low as $6 billion.

To an extent far beyond the Asian countries, Mexico and Latin America buy U.S. goods. Indeed, before their economic collapse in the ‘80s, the Latin nations had almost surpassed Europe as customers for U.S. goods.

But you’ll hear arguments about free trade often in the coming year as congressional tempers and presidential election politics heat up. Regardless, U.S.-Mexican economic relations are bound to grow closer, because Salinas’ vision of a mutually beneficial relationship is broad and correct.

It is a vision of the changing world economy not as a threat but as a source of opportunity. Salinas has invited U.S. companies to help modernize Mexico’s phone system because he understands that his country must adapt to modern technology or be left behind.

He has set aside shares for employees in formerly state-owned companies because he sees creation of such personal wealth benefiting Mexico today, just as land reform benefited yesterday’s generations.

Latin America has straggled behind for decades, suffering under rulers from Cuba’s Castro to Argentina’s Peron, who were fond of fancy uniforms and blustery speeches about political and economic power.

Salinas, an economist with a degree in public administration, wears no uniform. But he understands power.