PERSPECTIVE ON LATIN AMERICA : Do-It-Yourself Recovery : Mexico, which set off the international debt crisis, now leads in developing strategies for solvency, investment and growth.

It was almost 10 years ago that the international debt crisis began with Mexico’s disclosure that it could no longer service its external debt obligations. During the next eight years, any inventory of global economic problems would include most Latin American countries.

Over the past year, however, we have seen a sea change in how the world’s investors look at the region. That change is evident in the performance of Latin America’s internal markets, as well as in the region’s access to new, voluntary capital flows from international markets--both debt and equity.

Latin America, once a pariah, is now an area of great interest to investors. Mexico, Chile, Venezuela and, most recently, Argentina have demonstrated the ability to stick to a viable economic reform plan, including privatizations, in order to attract capital from residents and non-residents alike, achieve growth and return to the international market.

A closer look at the experiences of those countries reveals several common measures they’ve undertaken in order to successfully implement their programs. While not necessarily a litmus test for all developing economies, the following five elements indicate what is necessary for a government to carry out economic reform and return to the market:

--A head of state who demonstrates political will and strong leadership.

--A viable, coherent and comprehensive economic plan.

--A motivated and competent economic team that works together, not against each other.

--A belief in the plan and a shared commitment to stay the course on the part of the president, his cabinet and other senior officials.

--An integrated media program to win public acceptance of the plan.

These components are significant because they’re not some kind of “wish list” put together by developed countries as a blueprint for Latin America. Rather, they represent attributes of successful programs developed by the countries’ own leadership.

In looking at the individual economies, an appropriate place to begin is Mexico, which crossed its economic Rubicon in 1985 when the government of Miguel de la Madrid applied for membership in GATT (the General Agreement on Trade and Tariffs). At the same time, the Mexican government began to accelerate programs to reduce the role of the public sector through privatization and the closing of a number of inefficient and money-losing state institutions.

When Carlos Salinas de Gortari succeeded De la Madrid in December, 1988, he continued implementing economic reforms with a program that consisted of settling the external debt, privatizing state-run industries, moving the country to a market economy, restoring investment and growth, opening the political system and announcing a far-reaching agricultural reform package. These efforts underscored the importance of continuity in leadership in order for an economic program to be a long-term success.

The results of the Mexican reforms are substantial, and the benefits to Mexico in the world marketplace are becoming more apparent every day. Among the examples:

--The budget deficit has been reduced from 16% of gross domestic product in 1986 to 3.5% in 1990 and 1.3% in 1991. The 1991 budget would actually have been in surplus if the proceeds from current privatizations were included.

--There has also been substantial savings on financing internal debt, with government bonds called Cetes yielding 16%, versus nearly 60% around the time the negotiations began between Mexico and its foreign commercial bank creditors in April, 1989. The resultant savings from the lower interest rate is about $10 billion a year.

--Inflation is down significantly, at year-end running around 16% from a high of more than 200% in 1988.

--Economic growth reached 3.9% in 1990 and slightly more than 4% in 1991; forecasts call for roughly the same level of growth in 1992.

--Foreign investment into Mexico continues to rise, with about $10 billion of net new private investment, including portfolio investment, flowing into the country in 1991. In addition, $3 billion to $4 billion of flight capital returned to the country last year. International reserves have now risen to $18 billion.

Chile and Venezuela are also good examples of countries that have successfully implemented structural economic reforms, including privatizations, as a means of achieving sustained growth and returning to the voluntary capital markets.

Argentina’s economic reform program, while not in place as long as the others, also is beginning to show results. The government has begun negotiations with its commercial bank creditors, and the International Monetary Fund has announced that a new medium-term IMF loan should be in place in Argentina by March.

In conversations with the senior members of the countries’ economic teams, there is clear agreement that the components of this five-point formula can lead to successful economic reform. What makes the formula even more appealing, though, is that it’s derived from the experiences of the countries themselves, rather than being formulated and imposed from outside. That, I believe, is a point especially worth making when you consider the state of economic reform in other developing countries, particularly those in Eastern and Central Europe.