Mexico’s Tourism Dilemma: Is Bigger Always Best? : Development: FONATUR’s resorts are financially successful, but some say they trade cultural authenticity for flashy hotels.

In favored locations along the most fetching beaches of Mexico stand roughly 200 hotels. Altogether, their approximately 28,000 rooms accommodated about 2.8 million foreign tourists last year, most of them Americans.

This seems fairly logical, since there are so many Americans who love the beach and so many attractive beaches along Mexico’s 6,000 miles of Atlantic and Pacific coastline. But few American visitors realize that there’s much more than simple supply and demand behind these resorts.

They are the products of a sweeping government program that was created to build and shape tourism in Mexico. Operating since 1974 under the acronym FONATUR (Fondo Nacional de Fomento al Turismo) , Mexican officials have targeted areas for development, acquired land, relocated rural populations, provided financing for international development firms and lured in global names such as Sheraton and Club Med. Government officials have been selling off some of these properties gradually since the Mexican government began its privatization campaign a decade ago--but as an instigator, FONATUR remains the prime force in Mexican tourism.

Government officials say that creating jobs in needy areas is a key element in their mission. But there’s a downside: FONATUR’s five big resorts operate something like stationary cruise ships, their occupants largely insulated from Mexican culture, while exacting a heavy environmental toll.

Mexican officials, wary of this election year’s political uncertainties, haven’t been making predictions about the agency’s future lately. But in June, the Mexican government decided to place much more restrictive development limits on the coastal strip immediately south of Cancun, perhaps signaling a more environmentally sensitive approach to tourism projects nationwide.

Knowing the ins and outs of FONATUR probably won’t help you get a discount on your next vacation, but it might well figure in your choice of destinations: If you’re a traveler who likes manicured beaches and swim-up bars, FONATUR destinations have been laid out with you in mind. If you’re a traveler who speaks Spanish, admires original colonial architecture and seeks unself-conscious Mexico, you’re better off steering far clear of FONATUR’s work so far.

FONATUR’s top-priority site, Huatulco, is the subject of this week’s cover story. Here’s a quick look at the organization’s four other principal resorts:

* Cancun. A sandy crooked finger of an island, in the state of Quintana Roo on the Yucatan Peninsula, Cancun is the 800-pound gorilla of Mexican tourism. It was mostly raw land until the late 1960s, when the government forerunner of FONATUR singled it out for development. Now the crooked finger is connected to the mainland by causeways at either end and occupied by more than 100 hotels. Tourists come for the surf, the pale blue seas, the lagoons, the jungle, nearby Mayan ruins, world-class snorkeling and busy night life. Almost 2 million tourists visited last year (three-fourths of them from outside Mexico), and in 25 years the permanent population has grown from less than 1,000 to about 250,000.

* Ixtapa-Zihuatanejo. This resort, which runs second in revenue to Cancun, lies in the state of Guerrero, 145 miles north of Acapulco on the Pacific coast, and is popular with Mexicans, who make up two-thirds of the visitors there. Ixtapa is a formerly empty coastal strip where all the fancy new hotels and restaurants are; Zihuatanejo is the old town three miles away, with calmer waters, more character and cheaper hotels and restaurants. The resort has 31 hotels and drew about 340,000 visitors last year.

* Loreto. A seaside town of about 7,000, Loreto lies about two-thirds of the way down the sheltered eastern coast of the Baja peninsula. It is known for good fishing, nearby white-sand beaches, and a handsome bay and recently built marina at Puerto Escondido (also known as Puerto Loreto), 15 miles south of town. The town is 297 years old; Junipero Serra began his California missionary campaigns here, and a handful of modest hotels endure in the dusty downtown. But FONATUR’s resort site, the Nopolo area, is five miles south of town, strange and largely empty. The only lodging there is the 280-room Hotel Loreto Inn (formerly a Stouffer Presidente). Last year, Loreto hotels drew only about 32,000 visitors, an occupancy rate of less than 35%. “We’ve been slow” in Loreto, concedes Wenceslao Salas, FONATUR’s representative in Washington. But he points to a new strategy: FONATUR marketers are now looking to court the American senior market--not only to lure older vacationers, but to establish the area as a retirement community.

* Los Cabos. This destination lies at the southern tip of Baja California and is storied as a sportfishing Mecca and partying place for boisterous young Americans. (Four of five visitors there are foreigners, and there are about three dozen hotels.) Development is rapidly merging two towns--the former fishing village of Cabo San Lucas and the larger, but quieter, capital city of San Jose del Cabo--into a 20-mile-long corridor of opportunities to shop, fish, eat, drink, golf and lounge by the pool. Before the peninsular Highway 1 was completed in 1974, the towns’ combined population wasn’t much more than 2,000. Now it’s 20 times that, with about 315,000 visitors annually.