Mexico Worries U.S. May Stall Trade Pact : Economics: Officials are concerned that the accord may become an issue in the American presidential campaign.

While U.S. officials insist that North American free trade negotiations are continuing on track, the Mexican government is bracing for the likelihood that American electoral politics will prevent President Bush from signing an accord next year, as planned.

President Carlos Salinas de Gortari is expected to press Bush for a strong commitment to go forward with the agreement on schedule when they meet Saturday at Camp David, Md.

But a senior Mexican official acknowledged that there is little Mexico can do if U.S. political considerations overtake the negotiations. “The ball is in their court,” said the Mexican official, who asked not to be identified. “Our margin to maneuver is very narrow.”

Salinas has made a free trade agreement the centerpiece of his economic reform program, as well as the foundation of a new alliance with the United States. Both governments and Canada have been aiming for a 1992 signing of the agreement to lift tariffs and other trade barriers.

In recent weeks, Bush, Commerce Secretary Robert A. Mosbacher and Trade Representative Carla A. Hills have sought to reassure the Mexican government with public statements of their intention to complete the treaty as soon as possible.

But Mexican officials have concluded that the recession in the United States and Bush’s drop in public opinion polls could make it difficult for the Administration to sign a treaty and submit it to a congressional vote before the November, 1992, presidential election.

Opponents of free trade argue that a treaty will cost American jobs--a potentially explosive campaign issue in the middle of a recession.

Privately, U.S. officials acknowledge there could be a delay. But they say it is the Democrats who favor free trade who may not want to vote on a treaty during an election year. They suggest Mexico would go along with postponing the signing of the measure if it would facilitate its passage in the U.S. Congress.

“Mexico and Canada don’t want to give the impression they are doing this on the U.S. political calendar,” said an American official. But, he added, “if, in order to get a good agreement enacted, it is best to wait until early 1993 instead of 1992, not much is lost.”

The Mexican government is preparing itself for a delay with a cautious 1992 federal budget. Badly needed public spending will increase only at the rate of economic growth, despite a drop in debt service payments.

Officials already are talking about creating incentives to attract investment while waiting for an accord. They argue that a delay would not stymie Mexico’s economic recovery as long as an agreement is perceived as imminent.

But independent economists note that much of the $14-billion private investment in Mexico this year was made with the expectation that a free trade agreement will be signed in 1992, and they warn of a setback if it is not.

Mexican officials “are very nervous,” said economic analyst Rogelio Ramirez de la O. “The moment you tell companies that an agreement will not be signed in 1992, but in 1993, you introduce a year of uncertainty. It is like someone asking you to marry him but saying that first he’s leaving on a safari for a year. At that point, you really don’t know if he will come back or not.”

Mexico needs the investment to counterbalance its trade deficit of about $9 billion this year. Ramirez said the country needs another $12 billion in investment next year to continue its economic recovery but that Mexico could see only half of that without a trade agreement.

A government official conceded a delay could cost $5 billion in investment that Mexico otherwise might get. He said Mexico’s economic liberalization will continue with or without an agreement.

“We have not put all our eggs in that basket. A free trade agreement is important, but if there is no agreement, we will continue with the same economic policies,” Ramirez said.

Salinas’ leftist opposition has argued that free trade, like the rest of the president’s neo-liberal economic program, will make Mexico too economically dependent on the United States. Salinas says free trade will force Mexican industries to become more competitive, provide better consumer goods and contribute to a better standard of living for Mexicans.

Bush is likely to give Salinas the assurances he is seeking at Camp David. But some political observers suggest that the White House will leave the door open to a shift in policy if the political situation requires it. They say U.S. negotiators have toughened their stance.

The Mexican official said it is possible that negotiations will slow down or even recess during the political campaigns.

U.S. Rep. Jim Kolbe (R-Ariz.) told Mexican reporters in Washington last week that even if, in the best of cases, a draft accord is ready in January, it could not be presented to Congress before July. That, Proceso magazine quoted him as saying, would be “in the middle of the political conventions and at the beginning of the electoral campaign, and I don’t think even those of us who support the (free-trade agreement) want to make the decision under these political conditions.”