Zedillo Works on New Plan as Peso Sinks : Mexico: Government seeks clear strategy in the face of more bad economic tidings. Anger mounts in streets and Congress.

President Ernesto Zedillo’s government labored Wednesday to complete its second emergency economic plan in two months, after the lack of a clear strategy and continuing political upheaval in the ruling class combined to drive the peso to its lowest closing price ever against the U.S. dollar.

A day after Mexico’s Congress approved a $20-billion U.S.-bailout plan following bitter debate--an approval Zedillo said was needed before he unveils his revised plan to save the Mexican economy--the peso broke the psychological barrier of 7 to the dollar, closing at 7.02. The Mexican stock market fell 1.68%.

As the crisis here grew, opposition to the policies of the 43-year-old Yale-educated economist appeared to be mounting in the halls of power and on the streets.

Tens of thousands of protesters converged on the Zocalo, pouring into the main plaza in downtown Mexico City from throughout the country. Protesters demonstrated against everything from skyrocketing interest rates, soaring inflation and frozen wages to the government’s failure to quickly solve the armed rebellion in the southernmost state of Chiapas.

While Zedillo and his advisers worked into the night to make final their long-promised, revised blueprint to restructure and save the economy, interest rates continued to rocket at Wednesday’s weekly Treasury bill auction.

Bellwether 28-day bills, known as Cetes, rose 8.29 percentage points to 57.99%. Despite such lucrative returns, Central Bank officials confirmed that demand for Cetes fell--a clear indicator of lost confidence.

Zedillo had promised to announce the government’s new economic strategy after the Mexican Congress voted on the bailout package that is the centerpiece of his plan. He won that approval from both legislative houses in sessions that lasted well into Tuesday night.

But, in hour after hour of often-bitter debate on the loan program, federal deputies and senators registered an unprecedented display of criticism.

For the first time in 66 years of authoritarian presidential rule, Zedillo lobbied members of his Institutional Revolutionary Party, or PRI, to ensure their votes for the $20-billion plan. And even in their approval of the package--by a partisan vote of 289-159 in the Chamber of Deputies and 111-7 in the Senate--several PRI legislators were hardly sanguine in their support.

“We recognize that we are in a difficult situation,” conceded PRI Deputy Jose Rosas Aispuro Torres after enduring a torrent of opposition charges. “But we also recognize that this is the only viable option, the only realistic option for Mexicans to be able to get out of this economic crisis that has drowned us.”

Few agreed within the opposition left or right, both of which opposed the package in the lower Chamber of Deputies.

Everardo Martinez Sanchez, a member of the leftist Democratic Revolutionary Party, or PRD, predicted “disastrous consequences for many millions of Mexicans” as a result of Zedillo’s policies.

Referring to Chiapas--where Zedillo has made new attempts at dialogue with rebels through the Congress after cracking down on the Zapatista National Liberation Army last month--he asked: “How can one believe a president who speaks of peace and makes war, a president who speaks of initiatives that are going to benefit Mexicans and takes them down the path that is going to make them poorer?

“We have a responsibility that goes far beyond partisan interests,” Martinez said, “the responsibility that, as legislators and as members of an autonomous power of the nation, we must respond to the clamor, to the interests of the majority of Mexicans . . . to the misery of more than 40 million Mexicans.”

Eric Eber Villanueva, a PRD colleague in the Chamber, added: “The Mexican economy has gone in this circle: Shortage of money, contraction of the economy, bankruptcies of businesses, unemployment, poverty, economic instability, political instability, social instability--all getting worse by the day since Dec. 19 (when the latest economic crisis began). The major weakness (of the bailout plan) is to continue asking for loans to pay debt.”

Unveiling his party’s new policy on the economy, he said: “We are going to have to declare a moratorium--a suspension of payments--being against the wall and incapable of negotiating.”

Other legislators linked the economic debate to the president’s unprecedented move last week, when he permitted the arrest of his predecessor’s brother in what has become one of Mexico’s most infamous murder cases.

In what the president insists is part of a new rule of equality under the law, Zedillo’s prosecutors formally charged Raul Salinas de Gortari--the older brother of former President Carlos Salinas de Gortari--with masterminding last year’s slaying of the ruling party’s No. 2 official, Francisco Ruiz Massieu.

“Mr. Zedillo put Raul Salinas in jail, and today he argues that it was done simply to comply with the law, without any political motives,” PRD Deputy Adolfo Miguel Aguilar Zinser said. “I ask you, fellow deputies, are we not equally obligated to comply with the law and reject a document that violates the constitution and the law of nationhood? The president negotiated the terms of this accord badly, ambiguously, because this document speaks lies.”

At the heart of the charge is the opposition assertion that the government is sacrificing Mexican sovereignty by giving the U.S. Treasury Department vast control over Mexico’s future oil exports as collateral for the $20-billion loan program.

The conservative National Action Party, or PAN, delegation in the Chamber also voted against the package, although the party’s economic platform in last August’s presidential elections was similar to Zedillo’s.

PAN Deputy Ricardo Garcia Cervantes blasted the U.S.-Mexico accord and the expected adjustments in Zedillo’s upcoming plan, in which he asserted the president was calling for “very severe economic measures that will carry the economy into a depression.”