Opposition, Anger Rising Over Mexico Austerity Plan : Latin America: Opponents predict social unrest. Key organizations move to distance themselves from Zedillo.

Despair and anger set in throughout Mexico on Saturday as virtually every sector of society began distancing itself from the government of President Ernesto Zedillo and the severe economic medicine it prescribed last week.

As Zedillo prepared to address the nation tonight, he told a gloomy assembly of business leaders that there is no alternative to an emergency economic plan that will make every Mexican poorer overnight when it takes effect April 1.

“Under any other economic model or social system, this act could not be avoided,” he told Mexico’s largest business group, which--along with every major labor group--flatly refused to endorse the government’s plan for the first time in eight years of cooperative economic reform.

Opposition leaders--and even some ruling party members--in the Congress also were gearing up to fight the new economic strategy when Congress reconvenes this week. Specifically, they vowed to defeat the proposed 50% increase in sales taxes, which the government conceded will help push inflation to at least 42% this year when combined with a 35% increase in gasoline prices and 20% increase in electric bills.

And organized labor, a key government partner for decades, was concerned about its very survival after Zedillo unilaterally imposed a 10% cap on wage increases.

Typical of the response of a nation that analysts say is gripped by its worst economic crisis in modern history was a resolution passed by the state legislature in opposition-ruled Jalisco: “This isn’t bitter medicine; it’s vomit.”

As religious, social and educational groups predicted soaring street crime, plummeting school attendance and declining quality of life in the middle and lower classes, political analysts concluded that Zedillo is taking the biggest risk of his administration with a plan he insists is vital to attract foreign investment needed to stabilize an economy gone mad.

“The president of the republic took a very risky decision, and the costs could be very high,” said political analyst Jaime Sanchez Susarrey. “The increases in the prices of goods, services and taxes are winning the general reproach of every sector of our society.”

An inevitable recession under the new austerity plan is likely to fuel social unrest, or worse, if the harsh measures do not succeed in stabilizing Mexico’s battered peso and sparking a recovery “in a reasonable time,” he said.

“To ask the population to make new sacrifices, without having given an adequate explanation for the devaluation and the subsequent problems, is absurd,” he said. “Within 60 days we have stopped being a country on the brink of entering the First World and we have fallen into a crisis worse than any before it, including 1981-82.”

During Mexico’s devaluation-driven crisis of 1982, he and other analysts have observed, at least the nation’s political system was stable--although authoritarian. But this crisis is driven by political instability in the wake of two major assassinations and an Indian rebellion in the south. And Zedillo’s commitment to dismantle the ruling party system through internal reform has compounded the uncertainty.

But other analysts said Zedillo’s plan will succeed only if he sharply accelerates his campaign to bring a new era of democracy and restore national security by cutting corruption and crime.

“The cause of the Mexican financial tragedy are the incompetents, the thieves and assassins who have exhausted us all these years, who have come to us with the absurd dream of development, of a development beyond our capacity, only to seek satisfaction for the exaggerated egos of our ruling class,” political analyst Felipe Diaz Garza wrote in a column in Saturday’s Reforma newspaper.

One of the most dramatic rebuffs to Zedillo’s plan was from the group he addressed late Friday night. Known as Coparmex, the Mexican Employers Confederation, which has committed itself to every government economic plan since 1987, rejected the new measures. It was the first such rejection since Zedillo’s predecessor, Carlos Salinas de Gortari, set up the “pact” system, in which business, labor and the government agree on wage and price increases after negotiations.

With a single act Thursday, Zedillo committed that system to history.

But Carlos Abascal Carranza, Coparmex’s leader, cautioned that his group’s opposition “doesn’t mean a confrontation or a rupture” with Zedillo’s government.

The second powerful reaction came from organized labor, one of the ruling Institutional Revolutionary Party’s staunchest and most powerful vote banks, but one that appears similarly estranged.

Fidel Velazquez, the legendary 94-year-old head of the Mexican Workers Confederation, appeared so irked by the government’s decision to impose a 10% ceiling on wage increases--without consulting his organization--that he called it “authoritarian.”

“This is very bad,” Velazquez told the Mexico City daily Excelsior. “There will be more unemployment, the threat of businesses being closed, perhaps even the demise of labor unions.”

In a nation where unemployment already is chronic and a threat to law and order, Labor Secretary Santiago Onate conceded Friday that as many as 500,000 people may lose their jobs in the next six to seven months.