MEXICO : Has Zedillo Been Handed a Mission Impossible? : Stabilizing the peso by calling for more sacrifice may foster the kind of political instability that scares off foreign investors.

Laying out his government’s new emergency plan to stabilize the plunging peso, President Ernesto Zedillo looked pale and fragile. His call for sacrifices from Mexico’s workers and its monied elite had a hollow ring, leeched of authority by a downward spiral of previous devaluations and “economic adjustments”--the last one in 1987--that have widened the gap between the Mexico of dispossessed campesinos and poor urban workers and the Mexico of burgeoning billionaires who seek partnership with the economies of the first world.

Zedillo, a Yale-educated economist, has admitted his presidential bid was premature. Carlos Salinas de Gortari’s dedazo had pointed to Luis Donaldo Colosio as his political heir, and Colosio’s still unresolved assassination opened fissures in the Institutional Revolutionary Party’s agenda, and in Mexico’s psyche, whose gravity is now becoming apparent.

Zedillo would have benefited from direct contact with Mexico’s urban and rural poor--as Colosio had when he headed the government’s civic-action Solidarity program--before walking the tightrope between brass-tacks pragmatism and tough compassion that has become obligatory for a Mexican president. That requirement was raised by an order of magnitude a year ago, after passage of the North American Free Trade Agreement was followed by a peasant uprising in Chiapas. The revolt’s Zapatista trappings, though not its belligerent rhetoric, captured the nation’s heart and soul to a degree most North Americans--and U.S.-trained Mexican technocrats--have yet to comprehend.

Zedillo’s greenness first showed two weeks ago when he tried to tie the peso’s plunge to the movements of a small band of Zapatistas, who set up roadblocks and occupied several municipalities outside their Lacandon jungle redoubt. Their abrogation of a year-old truce between the government and the Zapatistas followed Zedillo’s personal appearance at the inauguration of Eduardo Robledo Rincon, whose election to the governorship of Chiapas is widely regarded as the result of major voting irregularities carried out by the PRI.

The day after Zedillo blamed the Zapatistas, the 18,000-foot Popocatepetl volcano, whose snow-capped crater is visible from Mexico City on smog-free days, began spewing thick smoke and cinders, forcing the evacuation of 75,000 from surrounding villages. The metaphoric import of Popo’s awakening after years of inactivity (its last eruption was in 1802) was not lost on the city’s 20 million residents, whose capital is erected on a lake bottom littered with the ruined palaces and bones of Aztec emperors. The volcano is named after a proud warrior whose kneeling profile guards the corpse of his beloved--Ixtacchuatl, or “sleeping woman” volcano--with an eternal torch. Popo’s belchings and rumblings were a reminder that to a majority of Mexicans, mythology remains more compelling than economic theory. The president’s call for sacrifice has not be paired with a charismatic figure the way, say, revolution and agrarian reform are linked to Emiliano Zapata and Pancho Villa, whose hold on the average Mexican remains undimmed.

Still, Zedillo’s untested credentials and his earnest good intentions may have won him some breathing room from Mexicans cognizant that last week’s Draconian measures were foisted on him by his mentor, Salinas, who resisted authorizing the peso’s devaluation for fear it would damage his chances of heading the World Trade Organization. Opposition parties are drumming for his political trial.

For now, Mexico’s union leaders have agreed to go along with a previously convened 7% wage-rise cap, which may be overturned in the coming year by inflation forecasts of 15%, sparked by continuing speculation and capital flight. The $18-billion credit line guaranteed by the United States, Canada, Europe and a consortium of U.S. banks may shore up the peso in the short term, but the accumulating economic strains could choke off a fledgling recovery. With the peso having lost 30% of its value against the dollar, Mexican capital led the flight from the country, leaving the first generation of post-NAFTA U.S. investors holding the bag in the form of less valuable stocks and bonds.

In Chiapas, meantime, Subcomandante Marcos and his Zapatista Army of National Liberation regained the media attention they had lost in the past months, as despair and disillusionment spread throughout the country. Zedillo defused the standoff with the Zapatistas by naming the controversial bishop of Chiapas, Samuel Ruiz, to head the mediation team in the next round of peace talks. Ruiz led a nationwide fast three weeks ago to bring both sides back to the negotiating table.

In Marcos’ recent proclamations from the jungle, he acknowledged the fast for peace by announcing a six-day cease-fire, beginning Jan. 1, the anniversary of the uprising. The renewed media coverage appears to have revived his gnomic wit, as he couched his call for democracy, freedom and justice in Mayan parables from the “Popol-Vuh.” Marcos lambasted Zedillo for blaming him for the peso’s fall, calling it a “death sentence dictated by money seeking the price of the bullet to eliminate the problem.”

Behind his homiletic anecdotes and his lyrical fatalism, which are taking on mythic overtones as Mexico’s crisis deepens, Marcos remains a tough negotiator. He is demanding the resignation of governor-elect Robledo and the implementation of a land-reform program in the Chiapan Highlands and Lowlands. With land takeovers by Mayan peasants sympathetic to the Zapatistas continuing, this issue is likely to become the biggest bone of contention in the next round of negotiations. The large coffee planters and cattle ranchers have been as obstinately opposed to land reform in Chiapas as their counterparts in neighboring Guatemala, where the land reform that cost Jacobo Arbenz his presidency 40 years ago has yet to be implemented.

Zedillo’s new finance minister rushed to New York this past week to reassure nervous banking officials. Guillermo Ortiz mollified them by speaking their language. He offered new high-yield bonds and pledged to correct trade imbalances by privatizing some of Mexico’s state-owned enterprises. But these concessions may risk another recession. As the nation’s poor see their dreams of economic betterment turn to ashes one more time, the resulting instability may provoke a fresh wave of capital flight.

Given the growing global economic interdependence symbolized by NAFTA, the United States and the European Economic Community will have no choice but to inject more massive doses of capital into Mexico to keep the peso afloat. If Zedillo’s emergency plan fails, as now seems likely, his intractable problems will mark him as a failed transitional president. If he is lucky, he will gain sympathy as the scapegoat elected to take the heat for the PRI’s premature attempts to drag Mexico into the first world. But the country cannot wait six years for a seasoned leader to resolve the deep inequities in land and wealth distribution that continue to fuel the Zapatista uprising in Chiapas, and the unfinished revolution they symbolize.

Zedillo’s failure would raise the crisis at the heart of the PRI’s identity--and of Mexico itself--to a perilous stage.