COLUMN ONE : Caught in the Middle in Mexico : Like many others, the De Buens’ hopes were shattered by the peso’s drop. ‘We talk about what we’ve had to give up to survive--and about our anger,’ says the family’s frustrated father.

As he sat recently in his three-bedroom condominium--a symbol of Mexico’s relatively new middle class--Luis Eduardo de Buen stared at a computer printout that spelled out life’s grim bottom line for the rest of this year.

Living expenses: 95,474 pesos. Debt due: 45,555 pesos. Income: 109,966 pesos.

They were cold figures, based on a stringent family budget. De Buen, who has a master’s degree in economics, works three jobs because his wife, Monica, who also holds a postgraduate economics degree, was laid off from her job as assistant manager of a photo shop. An administrator at an air-conditioning and heating contracting firm, he also teaches at night and works as a volleyball referee on weekends.

Even so, De Buen’s projected income this year--the equivalent of $18,365--will fall far short of debt payments and living expenses that will total at least $23,550.

That bottom line includes a list of sacrifices that promises to remove nearly every semblance of middle-class luxury from the De Buens’ daily lives: There will be no more dining out, no more vacations, no more English classes for the children, no new car to replace the battered 1978 Volkswagen Beetle, no more cable TV.

And still the De Buens will be seriously in debt--about $5,000 this year, part of a soaring total likely to haunt them for years to come.

Their painful dilemma suggests the size of the hole that one of Mexico’s worst economic crises in modern history has blown through its middle class--the engine that was driving the nation into the First World until the peso’s fall stopped it cold in December. Multiplied by the millions of families in similar situations, the De Buens’ deficit illustrates both the severity of the crisis and its greatest cost--the blow to the layer of society that symbolized the economic miracle of former President Carlos Salinas de Gortari.

“The First World paradise promised by Carlos Salinas was transformed in a moment into one more chapter of our Third World hell,” Mexican historian Lorenzo Meyer said.

Now this class--largely anonymous behind its quiet hard work and, until recently, its dreams of a better future--fears that half a decade of progress under Salinas could be completely erased.

The former president, in the late 1980s and early 1990s, privatized the banks and built a booming consumer economy by inflating the peso, encouraging credit spending and implementing the North American Free Trade Agreement. That accord reduced tariffs on imported products that soon became the rage among the new buying class.

The bottom fell out when Salinas’ successor, Ernesto Zedillo, stopped supporting the peso after it drained the nation’s foreign-exchange reserves by more than $10 billion. Buying power plummeted. Interest rates soared as high as 120%. At the end of 1994, about $7.2 billion in consumer, commercial and industrial credit nationwide was officially classified as “problem debt.”

While the nation’s wealthy fell back on a cushion of savings and investments, the debt-burdened middle class bore the brunt.

Most of Mexico’s 40 million poor, including the 17 million who live in extreme poverty, were left untouched by Salinas’ economic revolution. Few borrowed. Most simply subsisted, as analysts say they will likely do through this crisis.

By contrast, most of the middle class, estimated to include at least 10 million and possibly up to 20 million, had just recovered from the bitter economic crisis of 1982--one that also followed a radical peso devaluation. Many were wiped out then, and they had rebuilt their lives largely on dreams--which again have been dashed.

“The new crisis . . . has been especially difficult for us Mexicans, because expectations had changed,” economist Sergio Sarmiento said in a recent newspaper essay. “The great question Mexicans must ask themselves at this moment is whether there is reason for a more optimistic future. The history of collapse already has been recorded a thousand times. But we wonder if, in this version, a happy ending is possible.”

The De Buens wonder, as do other families. But their story is also one of determination and fortitude. Mexico’s rich, complex culture includes a tradition of remaining strong in the face of adversity, and there is a Spanish word that embodies this fortitude: aguantar . The closest translation: to endure.

Sarmiento underscored the importance of that trait--and the risk that it too is now endangered. “The worst cost of the crisis cannot be measured by economic or financial indicators,” he said. “It’s about a hidden factor. . . . It’s what the Mexican people call courage, and what the psychologists and philosophers define as despair.

“The worst damage we are suffering is the loss of hope.”

As Monica de Buen prepared a lunch of boiled chicken and rice in her small, modern kitchen, her husband contemplated the extent of his family’s endurance and the future of his class as a whole.

“I don’t think the middle class is dying, because we are many,” the 34-year-old De Buen said in near-fluent English. “We grew very fast in the last few years, with the help of credit and government policies we thought were working in our favor.

“But since the devaluation last December . . . we are becoming poorer faster. The bottom line is, (many of us) have less money for our children right now than our parents had for us, and what we can give them is less than we got.”

De Buen paused as his two young children, well dressed and giggling, scrambled in for lunch. Suddenly he smiled, glanced down at his printout and said: “But we will not die out so easily, this middle class. At the moment, it seems we can survive for another month.”

Several days earlier, he had visited the credit department at Palacio de Hierro, one of the swanky department stores that have mushroomed in Mexico in recent years. He went to see a company representative to restructure the credit card debt that will loom over him at least throughout this year.

The card, he explained, belonged to Monica. She used it for personal expenses--clothes, shoes, accessories--and paid it off in monthly installments with her salary. When the economic crisis detonated, Monica was laid off, just as the interest on her credit card debt began to swell.

“After Monica lost her job, she gave me the credit card and said, ‘Help me to pay this,’ ” De Buen recalled, fidgeting in the waiting room. “She said, ‘I just can’t pay it anymore.’ ”

The store’s credit representative led him into a small, stark room and closed the door. The conversation that ensued is one that consumer groups say has been repeated tens of thousands of times.

“You are two months behind,” Gerardo Franco, the credit representative, told De Buen. After a lengthy discussion, he offered De Buen an emergency repayment plan.

“OK,” De Buen said, staring at Franco’s figures. “So under this plan, I start with a balance of 6,521 pesos (about $1,100). I pay 2,282 pesos. That leaves me with a balance of 4,239 pesos. And now you’re charging 10% a month for that. That’s 120% a year.”

There were two alternatives. One was a repayment schedule that gave him more time to pay but at a higher monthly rate, boosting his annual interest to 170%. The other was for the store to take legal action to collect the debt, most likely by a court order that in the end could cost De Buen everything he owns.

“You know, until the last decade, you paid for everything in cash in Mexico,” De Buen said outside the negotiating room. “Then the government started promoting credit. And this is where it got us.”

A recent poll by Mexico City’s Reforma newspaper underscored the problem: 380 randomly selected debtors said they were paying 43.5% of their monthly income to cover bank debt; 29% said they were behind on home mortgage payments, and 43% said they planned to sacrifice something from the monthly budget to make their interest payments--36% of those citing entertainment and other leisure activities.

De Buen, when asked over lunch in his home whether he and his friends feel betrayed, said it is worse than that. It is difficult to explain, he said. But it goes far beyond his credit card debt and even his condo mortgage--which will grow by 21,423 pesos ($3,575) this year at his current interest rate of 65%.

The De Buens’ home was part of the promise of a new future built largely on the potential benefits of NAFTA, ticket to the nation’s growth and security. For De Buen, it was a future built on foam.

Through contacts at the contracting firm where he works, De Buen had started a side business that he hoped would fund his future prosperity. He established a relationship with an Ohio manufacturer of insulating-foam products.

When it became clear that NAFTA would pass, the U.S. company signed him on as its exclusive sales agent in Mexico. Buoyed by the low import taxes NAFTA brought and an increasingly consumer-oriented Mexican market, De Buen’s sales soon took off.

Last year alone, he sold more than 10,000 cases of Fomo, a canned insulating spray that he marketed to large retailers throughout Mexico. As the end of 1994 approached, De Buen said, he finally started thinking seriously about replacing his beat-up car--and possibly taking an extra family vacation this year.

Then came the devaluation. Zedillo’s government let the peso float freely against the dollar. After months of heavy government spending under Salinas to support the currency at an inflated value, the nation’s dollar reserves were almost depleted and its debt was soaring--just as De Buen’s is now.

The peso’s subsequent fall of more than 40% against the dollar was a personal disaster for De Buen and millions of others involved in small and medium-sized businesses who had bought into NAFTA through dollar-credit financing. For De Buen, it meant paying in dollars at an exchange rate of more than 6 pesos to the dollar for a product that he sold here at 3.45 pesos to the dollar.

The result: a $30,000 loss he still owes the Ohio manufacturer.

“When the devaluation happened, I fell sick--I mean really sick,” De Buen recalled. “I couldn’t get out of bed for three days. . . . I owed all this money, and there was nothing to pay it with.”

De Buen finally got back on his feet with the help of traditional resilience-- aguantar .

As the De Buens finished serving lunch, the conversation turned to still other regrettable cutbacks the family is forced to make daily. Their children, 5-year-old Andrea and 3-year-old Diego, were asked to choose between a daily English class and gymnastics. For Andrea’s last birthday party, De Buen recalled with emotion, they had to limit the number of guests.

Monica continues to mourn not only the loss of her job but also the disappearance of the little luxuries it bought. “We used to travel all the time--the Caribbean, skiing weekends, Argentina,” said Monica, whose Argentine father, a professional soccer player, settled the family in Mexico when she was young. “Now, I can’t even shop.”

Her husband explained that he canceled his life insurance because he could no longer afford the premiums, resoled his shoes rather than buy new ones, took a night teaching job in the economics department where he and his wife both earned master’s degrees at the National Autonomous University of Mexico.

“Look at this. I’m laughing,” Luis de Buen said, seeming closer to tears. “. . . This can’t be happening. The pressure is incredible.”

One thing has helped, he said--the fact that his friends are living through the same hell.

“Before, we used to get together and we’d talk about a new car, show off new clothes, try out a new restaurant,” he said. “Now, we get together at someone’s house because we can’t afford to go out, and we talk about what we’ve had to give up to survive-- and about our anger.”

Like most middle-class Mexicans these days, the De Buens and their friends routinely savage former President Salinas in conversation. And they wonder whether Zedillo is strong enough and sufficiently wise to lead them out of the crisis; after all, he led them in.

“What is my main concern?” De Buen responded when asked what he would say to Zedillo if he could meet him face to face. “I would say, ‘I’m worried about the economic situation, the social situation, the possibility of violence.’ I would say, ‘I don’t believe what you say anymore.’

“The problems of Mexico are so great, so complex. . . . What I want is impossible. . . . I want a change of attitude, a change in the system. We want confidence, certainty.”

In the meantime, life for the De Buens is a month-to-month exercise.

“If there’s a medical emergency, we don’t know what we’d do,” he said. “If I lose my job, we’re sunk. We have no savings.

“This is the main problem in Mexico. We have no internal savings. We only have debt and more debt. And yes, a somewhat unique ability to endure.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

What’s Middle Class in Mexico?

The Mexican government does not classify its population according to lower, middle and upper class. It uses a formula to determine general categories based on family income.

Classifying the Masses

The segments of Mexico’s population categorized according to how each is able to meet basic needs:

THOSE IN POVERTY: 40 million

Extremely poor: Cannot meet their basic nutritional needs: 17 million

Poor: Can meet their basic nutritional needs but not such necessities as electricity, gas and potable water: 23 million

THE REST: Those who live above these poverty levels: 50 million

Earning Power

Here’s a percentage breakdown of family earnings among Mexico’s working, urban population at the end of 1994:

FAMILY INCOME More than 5 times minimum wage: 13.2% 2 to 5 times minimum wage: 38.8% Up to 2 times minimum wage: 32.5% Less than minimum wage: 7.2% None: 5.2% ***

Why the Struggle May Get Harder

The recession in Mexico is hitting middle-wage workers the hardest. Some examples of why:

* Small businesses failing: More than 20% of the nation’s 1.5 million registered small businesses are expected to declare bankruptcy this year, costing hundreds of thousands more jobs in the sector that employs the majority of Mexicans.

* Restaurants in trouble: An estimated 10,000 restaurants are expected to go bankrupt this year, costing 70,000 jobs, as the middle class cuts back on dining out. Already, restaurants reported a 40% decline in sales during the first three months of 1995.

* Car sales plunge: New car sales already are down 58% nationwide. Tens of thousands of auto workers have been laid off as factories cut back on production.

* Consumer credit woes: Families in the capital are spending an average of 43% of their income to pay off credit cards and other bank debt as interest rates have soared as high as 120% for consumer credit. Consumer groups estimate that 6 million credit card holders have simply stopped making their payments, forcing banks to renegotiate outstanding consumer debt and threatening the banks themselves with insolvency.

* Private school enrollment down: Enrollment at private schools, the last item most middle-class families cut from their budgets, already is down 10%. Hundreds of those schools are expected to go out of business later this year, leaving thousands of well-paid teachers out of work.

Sources: Mexico’s National Institute of Statistical and Geographic Information