Mexican Vote of Confidence for Economy : Politics: Technocrats cite favorable economic accomplishments despite the most closely contested presidential election in decades.

On the eve of the most closely contested presidential election in six decades, Mexico’s famed technocrats are campaigning for the economy. And the message they are putting out is clear: that economic stability can be maintained here despite the growing likelihood of political change.

Indeed, in this year of uprisings and assassination, the Mexican economy appears to have stabilized.

Stock prices are up, the rise in interest rates has reversed and the peso is slowly regaining strength. Manufacturing has finally begun to register growth after months of sluggishness and, as a bonus in this oil-rich nation, oil prices have risen to their highest levels since Saddam Hussein invaded Kuwait.

Today, Mexico expects to complete the first non-U.S. highway bond offering ever sold on international markets, highlighting the country’s role as a leader in innovative financing among developing countries.

“This is the reverse of what you might expect this close to an election” with such possibilities for radical change, said one government official.

Of course, by U.S. standards, interest rates--15.8% on Wednesday--are still too high, and other indicators, such as a projected trade deficit, seem less than favorable. And uncertainty remains a watchword. Yet this is the most favorable economic climate Mexico has enjoyed in a decade.

Those accomplishments are carefully noted when officials talk about why outgoing President Carlos Salinas de Gortari should head the new World Trade Organization being formed as a successor to the General Agreement on Tariffs and Trade. They have also become effective counterpoints to dire warnings of collapse, linked to the outcome of the Aug. 21 presidential election.

Campaign bumper stickers for ruling Institutional Revolutionary Party candidate Ernesto Zedillo with the message “I Vote for Peace” carry a thinly veiled threat that an opposition victory will mean instability. Businessmen such as Roberto Hernandez, president of both the Mexican Bankers Assn. and Mexico’s largest bank, have been more blunt.

Hernandez was widely lampooned last month after he told an agribusiness seminar that of the nine presidential candidates, only Zedillo provides the certainty needed to bring interest rates down to their February level of 10%.

Typical of the scorn his comments incurred was a cartoon in the independent newspaper La Jornada that depicted the banker threatening: “We have the country’s capital held hostage. If Ernesto does not win, there could be instability and uncertainty.”

The technocrats make it clear that they expect Yale-educated economist Zedillo--who is, after all, one of their own--to win. But they dispute the possibility that an opposition victory will mean economic disaster, as some U.S. economists insist.

For example, the respected CIEMEX-WEFA economic group based in Pennsylvania, referring to the center-left Democratic Revolutionary Party (PRD), in third place in most polls, warned that “a PRD victory may cause capital outflows, loss of international reserves and strong pressures on the peso that could force a devaluation.”

The economics group forecasts fewer problems if the second-place National Action Party, which has supported free-market reforms, were to win.

Certainly, the possibility of an opposition victory after 65 years of one-party rule is inherently somewhat unsettling. However, changes via election seem tame compared to what Mexico has already been through this year, from a Jan. 1 Indian uprising in the southern state of Chiapas to the March 23 assassination of ruling party candidate Luis Donaldo Colosio.

The murder, especially, provoked devaluation jitters. The central bank spent up to $9 billion from international reserves to keep the peso from crashing in April, according to an estimate by the Mexico City-based economic analysts Grupo de Economistas y Asociados.

To slow the exit of dollars, the government decided to relieve investors of currency risk by stepping up its offering of dollar-denominated treasury bonds, called Tesobonos. The bills rose from 3% of the government’s debt on Jan. 1 to 42% last month.

“We managed to give investors a hedge (against devaluation) without capital flight,” said Treasury Minister Pedro Aspe.

As evidence of renewed faith in the peso, the government plans to cut the offering of Tesobonos to 37% of the treasury debt auctioned next month. Economic officials are adamant that a devaluation is not imminent, whatever the election outcome, and cite a spurt in exports as proof.

“Our exports have increased 27%,” said another high-ranking government official, who, like many others interviewed, spoke on condition that he not be identified. “Where can you see this kind of increase when there are exchange rate problems? When there are exchange rate problems, there are also export problems.”

Further, they are certain that ongoing free-market reforms--which trimmed the triple-digit inflation of 1987 to a projected 6% this year and reduced government debt to 10% of the gross domestic product from 75% in 1986--are so clearly the right course for this nation that they will be followed by whoever is elected this month.

All three major presidential candidates have said they favor the North American Free Trade Agreement, the cornerstone of Mexico’s new economic program. A resulting surge in U.S. exports to Mexico, economists here say, has helped lower inflation and made Mexican manufacturers more competitive by giving them access to better and cheaper machinery and raw materials.

Government economists even look to free-market economics to resolve the problems of poverty that led to the Indian uprising in Chiapas that was timed to upstage implementation of NAFTA.

“There is no way to solve the problem of Chiapas without attracting investment,” said one official.

The Mexican Economy

With inflation in check and a growing gross domestic product, the Mexican economy is enjoying a relatively stable period.

CONSUMER PRICE INDEX

Compound annual growth rate by quarter:

1994: 6.49%

GROSS DOMESTIC PRODUCT

Percent change from previous year:

1994: 1.82% (projected)

THE PESO

Pesos per U.S. dollar, weekly closes except latest:

Wednesday: 3.403

Source: WEFA Group