Next Step : Chiapas Revolt Puts Mexico’s Economic Future on Hold : Forget a balanced budget. The government must spend more on social programs to ease poverty, experts say.

The story was not supposed to end this way.

The script written by econometric forecasts and approved on Wall Street called for President Carlos Salinas de Gortari and his team of U.S.-educated technicians to fade from the screen in 1994 as pin-striped revolutionaries.

Salinas would bow out as the great modernizer who stabilized the economy and led Mexico toward the 21st Century as a First World country. He would be forever linked to reforms so profound they justified the seemingly contradictory name of his Institutional Revolutionary Party.

Instead, on New Year’s Day, a real revolution started. Armed, impoverished Indians in ski masks occupied four county seats on the Guatemalan border in a distinctly Third World rebellion. Their fight for Indian rights and land quickly became Mexico’s bloodiest uprising since the 1930s.

A fragile truce has stopped the killing for the moment, and tentative negotiations between the government and the Zapatista National Liberation Army appear to have begun. But the insurgency that left well over 100 dead has made computer-generated economic projections of Mexico’s future all but useless.

A lame-duck president must now ad-lib new economic, social and political policies. For the 10 months Salinas has left in office, he will have to use his waning influence to end a rebellion that threatens to spread throughout the nation’s impoverished enclaves.

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The grinding poverty and constant land disputes that produced the Chiapas revolt characterize most of southern Mexico, and the government was put on notice as to the potential scope of the uprising when a group claiming to be part of the Zapatistas blew up electrical towers in the center of the country.

“Extension of the violence beyond Chiapas made a military solution unfeasible,” said Mexican political scientist Denise Dresser. That means the government will have to find a political solution that will necessarily have repercussions well beyond Chiapas, she added.

Salinas has been compared unflatteringly throughout his term to Porfirio Diaz, the 19th-Century dictator whose hospitality to foreign investment and refusal to open the political system led to the 1910 revolution. That rebellion unleashed a series of civil wars that ended only a generation later, when the feuding factions were united into the single party that has ruled the country ever since.

Now, Salinas is facing his own revolt, declared by a guerrilla group named for an Indian leader of the 1910 revolution. Failure to quell the uprising carries the threat that he will be remembered as the technocrat whose textbook economic policies disrupted the delicate balance struck in the 1930s, causing civil war again.

To stabilize the country, the president must radically change his administration’s priorities, say economists and business people as well as political observers.

The political structure is already being shaken up. Both the interior minister and the governor of Chiapas, the state where the rebellion took place, were replaced with human rights activists.

The economic structure is sure to be next, as the administration increases spending on social programs such as education and on projects that will generate jobs quickly in impoverished regions where more violence is feared.

Technocrats now scattered throughout the government will be isolated in the Treasury Ministry and the central bank, predicted economist Rogelio Ramirez de la O. Departments that deal with people will be turned over to those with political experience.

The desire for peace now overshadows the drive to balance the federal budget that was once Salinas’ pride, noted Ramirez. Deficit spending--already predicted as part of efforts to generate support for the ruling party in the Aug. 24 presidential election--is expected to equal 2% or more of the national economy.

“The conflict has buried the long-held notion that in Mexico you can operate without anesthesia,” said Ramirez. The government is going to have to ease the pain its free-market economic reforms have inflicted on Mexico’s poorest citizens.

That will require massive federal spending.

Even independent business groups that generally supported Salinas’ reforms, such as the Business Coordinating Council and the Mexican Employers Federation, are calling for change.

“We would be very obstinate if we were to close our eyes to this warning and ignore the poverty in this country,” said Luis German Carcoba, president of the coordinating council.

But pork-barrel politics will not be enough. The rebels’ demands for political and social reform struck a chord throughout the country. A call for political change has been the subtheme of peace marches in most major cities after the rebellion began.

“The social agenda has suddenly become far more important than the economic agenda that was always Salinas’ priority,” said Dresser.

Back-room deals--acknowledging an opposition victory in one governor’s race in return for a crucial Senate vote, or trading a few city halls for the governor’s mansion--will no longer pass for a political opening. Indians and peasants are demanding a truly democratic system that gives them access to the government, Dresser said.

Salinas will have to rediscover the art of compromise that has kept a country as diverse as Mexico stable for so long, she said.

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However, writer and social critic Homero Aridjis warned that finding a new balance will require rooting out corrupt interests that have benefited from the policies of the current administration. That would be a difficult task at any time, but it is an especially formidable undertaking in the last year of a president’s term.

That final year is known as “the year of the Hidalgo,” a double entendre that refers both to a silver coin and to a vulgar curse on any bureaucrat “stupid” enough to leave anything of value behind when he departs office.

“It is late to attempt a restructuring,” Aridjis acknowledged.

In fact, it is late for reform generally. “It is not as if in the next 10 months Salinas is going to be able to change the situation in Chiapas or other poverty-stricken areas,” said Dresser.

Still, it seems he has little choice but to try.