TRADE AND THE DOLLAR : Mexico Nets Huge Surplus With U.S. : But There’s a Price to the Good News: 700,000 Jobs Lost

For the second straight month, Mexico’s trade balance with the United States rocketed into positive territory as economists detected a glimmer of economic stability in the rubble of December’s devaluation of the peso.

But the price Mexico is paying to achieve the trade surplus was also underscored Wednesday as its government reported employment figures indicating the loss of about 700,000 jobs in January and February alone.

U.S. trade figures released Wednesday show Mexico enjoyed a $1.25-billion trade surplus with its northern neighbor in February, nearly wiping out in one month its entire $1.35-billion trade deficit for all of 1994. The February gain followed an $863-million surplus reported in January.

The peso closed Wednesday at 6.1 to the dollar, a 21% gain in value since March 9 but still off sharply from the 3.45 of mid-December. The Bolsa stock index closed virtually unchanged at 1,792.75, but that is up nearly 24% from its Feb. 27 low point.

For the Mexican people, the hardest times might still be ahead as rising prices, interest rates and joblessness put enormous pressure on the social fabric.

Meanwhile, U.S. exporters and their employees are losing business daily.

But the trade figures and other indicators are welcome news to a country desperate for good economic tidings. Economists said they augur well for Mexico’s Draconian efforts to lift itself from the fiscal crisis by boosting exports and cutting the inflow of foreign goods.

“I’m encouraged because stocks are doing better, the peso has stabilized and Mexico is not on the front pages every day,” said Sidney Weintraub, a researcher at the Center for Strategic and International Studies in Washington. “It’s a crisis situation, but within that crisis I have been relieved by the calmness which seems to prevail at the moment.”

The trade turnabout is coming not from any dramatic increase in Mexican exports but because Mexican consumers and businesses are turning away from U.S goods such as electrical machinery, autos and natural gas that the devaluation has made prohibitively expensive.

U.S. exports to Mexico in February totaled $3.5 billion, the lowest figure since December, 1993, and down $300 million from the previous month. U.S. imports from Mexico rose only slightly to $4.77 billion from $4.70 billion the previous month.

Analysts expect the northward flow of goods to accelerate as Mexican companies establish U.S markets.

The trade surplus with the United States shows Mexico is on target to reach its goal of bringing its worldwide trade deficit of $29 billion in 1994 to zero in 1995, said Jeff Schott, a senior fellow at the Institute for International Economics in Washington.

Mexico earlier reported a worldwide trade surplus of $235 million in February, its first monthly surplus since November, 1990, after a $530-million deficit in January.

But Schott said the economic jolt of the devaluation could cost Mexico 1 million jobs this year and that the value of Mexican goods and services will shrink by 4% in inflation-adjusted terms.

Government figures released Wednesday show the overall unemployment rate of 5.3% in February is the highest in Mexico since 1987, indicating a loss of about 700,000 jobs during the first two months of 1995.

But the figures do not take into account all Mexican workers, and the real unemployment rate is thought to be as high as 25%.

Most Mexicans’ standard of living will decline because inflation will exceed 50% in 1995. Inflation is already being felt in price hikes of basic commodities such as tortillas and gasoline, said Abel Beltran del Rio of Ciemex/WEFA, a Philadelphia-based group that forecasts Mexican economic trends.

“The only question is whether the price we are paying to get this trade surplus is not going to create other problems such as the general impoverishment of Mexico’s middle class and the paralysis of business,” Beltran del Rio said.

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Peso’s Silver Lining

The peso devaluation has caused a complete reversal of trade flow between the U.S. and Mexico, helping Mexico to a surplus over the first two months of the year that wipes out last year’s $1.35 billion deficit. Monthly U.S. trade balance with Mexico, in millions of dollars:

* Trade Ballence

1995: February: -1,251

* Pesos per dollar

1995: April, Wednesday: 6.07

Source: Commerce Department.