The Peso and the Uncertainty Principle

Mexico’s President Ernesto Zedillo took a risky, but probably necessary, gamble in moving from negotiation to confrontation with the rebel Zapatista Army of National Liberation in Chiapas.

Zedillo went on national television last week to announce that his two-month-old government had identified the leaders of the Indian uprising that stunned the world when it broke out on New Year’s Day, 1994--the same day the new North American Free Trade Agreement with Canada and the United States was supposed to mark the formal entry of Mexico into the first rank of nations.

Zedillo sought to undermine the rebels’ popular support, and even the romanticism surrounding an articulate, ski-masked leader known as Subcommander Marcos. Zedillo announced that Marcos and other Zapatista leaders are not poor descendants of the Maya. Rather they are urban Mexicans with well-to-do families and good educations. In ordering the Mexican army to enter rebel enclaves in Chiapas to arrest the Zapatista leaders, Zedillo also made a point of offering amnesty to any rebels who willingly surrendered, a clear attempt to split away their Indian followers.

Zedillo’s strategy is risky because it could spark a renewal of the violence that occurred in early 1994, before the rebellion was contained. Almost from the start of the fighting it was obvious that the better-equipped Mexican army could crush the guerrillas. But it was also obvious that a military victory would be politically and diplomatically costly.

Mexicans are aware of the plight of their nation’s poor Indians, and sympathetic to at least some of the Zapatista demands. They would not see a victory over the Zapatistas as anything to be celebrated. Even the Mexican army was reportedly reluctant to wage all-out war against the rebels.

And human rights violations that allegedly occurred during the brief 1994 fighting--the official death count was 145 but the Zapatistas claim there were many more casualties than that--caused acute embarrassment abroad for then-President Carlos Salinas de Gortari. That is why Salinas ordered a unilateral cease-fire and began trying to negotiate with the rebels.

When Zedillo assumed the presidency last December, he kept the Chiapas negotiations going. But the longer the Chiapas crisis went unresolved, even peace talks contributed to the inaccurate perception that Mexico is politically unstable. The consequences of that perception became painfully obvious late last year when a devaluation of the peso set off a panic among international investors, who sent the Mexican economy into a tailspin by pulling their money out of the country.

It was that financial panic as much as anything that forced Zedillo’s hand. A Yale-trained economist, Zedillo knows he must try to end Mexico’s political uncertainty so that he can better focus on ending its economic uncertainty.