NEWS ANALYSIS : Mexico Traded Sovereignty for Aid, Critics Say : Crisis: Bailout reminds the country of how dependent it has become on the United States.

President Clinton is portrayed as a lifeguard in a recent editorial cartoon in the independent newspaper Reforma. As he saves a drowning Finance Minister Guillermo Ortiz, Clinton advises, “Don’t worry, be happy.”

The joke is bitter for most Mexicans. Despite last week’s pledge of a huge U.S. bailout package, there is little to cheer and much to worry about.

While the promised U.S. loan guarantees of up to $40 billion appear to have staunched the hemorrhaging of capital out of Mexico and stabilized the battered peso, three weeks of economic crisis have left this country weakened and facing a long recuperation. The outlook is for a litany of woes.

Nor were U.S. leaders the only ones forced to defend the U.S. rescue package. The fact that the United States was able to calm the markets when Mexican President Ernesto Zedillo’s Emergency Economic Program could not was a sobering reminder of how dependent this country has become on its neighbor and major trading partner.

“This confirms to the skeptics, the incredulous and the naive that Mexico is no longer a free and sovereign nation . . . and has become a protectorate of the United States,” said Adolfo Aguilar Zinser, an outspoken member of the leftist opposition Revolutionary Democratic Party.

Indeed, like many critics in the U.S. Congress, Mexicans themselves are questioning why the United States should bail them out.

“In exchange for what?” asked Marcos Chavez, a columnist in the business newspaper El Financiero. “In exchange for pulling the chestnuts out of the fire for the incompetent domestic ruling groups, in the short run saving them and their failed model that does not benefit the majority of the population . . . and for auctioning off the riches of the nation--including oil--and its independence, sovereignty and dignity?”

Such complaints seem sure to continue as Mexico begins the day-to-day work of living with the lower expectations that are part and parcel of the peso devaluation. While politicians debated the price of the rescue, investors, industrialists and consumers worried about the cost of the crisis that precipitated it.

On Sunday, for example, workers at Mexico’s state-owned news agency Notimex took aim at the government’s recovery plan by vowing to strike for higher pay Tuesday, posing the first major threat to wage ceilings agreed by unions after last month’s currency devaluation.

Although the stock market seems to have stabilized, investors say it probably will not truly revive for two years, reflecting the troubled conditions of listed companies, many with dollar debt.

Restoring investor confidence may take just as long and could require further economic reforms, from more timely reporting of financial information to radical changes in the role of the central bank, according to economists.

With less foreign investment, far less credit will be available to modernize factories and to import the raw materials and components needed to make products competitive. And the central bank has firmly signaled that industrialists should not expect an increase in domestic loans to make up the difference.

A tight money supply is the key to Bank of Mexico’s plans for combatting the inflation that routinely follows steep devaluations like that the peso has suffered during the past three weeks.

Already, auto makers have announced steep price increases and more manufacturers are expected to follow. Double-digit inflation--outstripping the wage increases permitted under Zedillo’s recovery plan--means that the domestic market will not expand as quickly as expected, that Mexican workers will remain poor.

And those whose livelihood depends directly on those markets--such as auto workers--are already being hurt. Reacting to the reduction in buying power and resulting slower sales, other manufacturers, notably Volkswagen and Mercedes-Benz, have halted production for periods of one to three weeks.

As last week ended, companies listed on the stock market began disclosing estimates of the bottom-line impact of the currency losses they have suffered and unveiling plans to pay their dollar debt. While citing currency losses, auto maker Dina, health and beauty products distributor Casa Autrey and Banpais, a mid-size bank, all stated that they still expect to be in the black for the fourth quarter.

However, many analysts believe the worst is yet to come from companies with large foreign currency debts--notably the airline Aeromexico, which was troubled before the crisis began. Said one institutional investor, “Aeromexico is up a creek without a paddle.”

Higher interest rates also are expected to hurt smaller, closely held companies that had borrowed heavily to modernize in their struggle to compete on international markets. Banks are urging such clients to renegotiate their payment schedules in order to avoid adding to their already bulging bad-loan portfolios.

The road back is expected to be a long one, both for Mexican businesses and for regaining investor confidence.

One symptom of the potential problems is the skittishness of commercial banks to commit to their $3-billion share of the original $18-billion international rescue package. That line of credit still had not been syndicated when the new, $40-billion U.S. line of credit was offered.

“It seems to be taking rather a long time,” said John Purcell, who heads emerging markets research at Salomon Bros. “There are very, very strong indications that the smaller banks do not want to commit. They probably don’t feel it is their role to lend money noncollateralized to Mexico right now. “

Walter Milano, an economist at CS First Boston, said there is a “strong correlation” between the banks willing to participate in the credit line and those planning to open subsidiaries in Mexico, following the liberalization of a half-century-old law that had forbidden foreign ownership of banks.

Yet even BankAmerica Corp., which recently received permission to open a subsidiary in Mexico, refused to comment on whether it would participate in the credit line. Citibank executives heading the syndication effort canceled a meeting with reporters on Friday.

* SOUTHWARD CAUTION: U.S. retailers prepare to retrench expansion plans. D5