Mexico Braces for Broad Effects of Altered U.S. Policy, Economy

Mexico can sympathize with victims of a large-scale disaster: The country lost more than 10,000 people in a 1985 earthquake. But as days go by, Mexicans are also becoming aware of what they stand to lose economically because of last week’s terrorist attacks.

Perhaps more than any other country, Mexico knows that it will feel the effects of changes in U.S. public policy caused by the attacks, so closely tied are the two nations’ economies and cultures. As a result, Mexican expectations on several fronts, from immigration reform to tourism, are being revised downward.

A decline in U.S. consumer confidence and a prolonged U.S. war against terrorism would exact a heavy toll on a Mexican economy that is so dependent on the U.S. market. Since the events of Sept. 11, several economists have reduced Mexico’s economic growth target from less than 2% to zero.

Virtually every sector is under attack:

* Mexico’s auto industry, which employs 11% of the nation’s manufacturing work force, is bracing for steep cutbacks.

“U.S. consumers are not confident, and the first items that are affected are discretionary items, especially cars,” said Isabel Studer, an auto industry analyst in Mexico City.

Auto companies have invested billions of dollars in Mexico in recent years to take advantage of lower trade barriers and lower wages.

* Mexico’s tourism industry, which generates $7.6 billion annually and employs 4 million people, has already registered enormous losses. Following the lead of U.S. air carriers, Aeromexico said it might lay off 1,400 workers--20% of its work force--and cut flight schedules. Travel agents report that U.S. tourists have canceled 30% of their Mexican travel packages since the attacks.

* Border business has plummeted, what with waits of two to three hours at checkpoints in cities such as Tijuana and Ciudad Juarez. Customs agents on both sides are inspecting each of the thousands of vehicles that cross the border each day.

“There are two dimensions to this: the local impact, where the tightening of the border has made interchange very difficult, and on the national level, where we will see a decline in consumption and significant loss of jobs,” said Jorge Santibanez, president of Colegio de la Frontera Norte in Tijuana.

Analysts here have lowered expectations for near-term immigration reform. After President Vicente Fox’s U.S. visit this month, hopes were high that the U.S. Congress might approve a guest-worker program, if not an amnesty for some or all of the more than 3 million undocumented Mexicans believed to be living north of the border.

Now the U.S. government is focusing on sealing its borders against potential terrorist threats rather than opening them to more legal immigrants and workers, said Francisco Alba, an economist with El Colegio de Mexico in Mexico City. “Expectations have changed,” Alba said.

“There is going to be a real hypersensitivity and perhaps overreaction [by the U.S.] to the feeling that the enemy is within and that we have to recapture our borders, which we allowed to be significantly undermined,” said Larry Birns, director of the Council on Hemispheric Affairs, a Washington think tank that has favored the liberalization of immigration laws.

One of the few remaining optimists is Fox, who said in his Saturday radio address that he expects President Bush will keep his promise of getting immigration reform done.

In his remarks, Fox said he had spoken with Bush that morning. Bush, he said, assured him that “we have promises to work toward in regularizing the migrants’ situation, and that despite what had happened, we will see much better conditions in this area.”

Even before the attack, the chance for reform was “no better than 50-50” and dimming because of the U.S. economic downturn, reducing the need for Mexican workers, said Wayne Cornelius, director of the Center for U.S.-Mexican Studies at UC San Diego.

“It’s partly the interaction of the terrorism with the deterioration of the economy. Now it’s going to be more complicated because attention is focused elsewhere and the whole environment has changed,” Cornelius said.

Up in the air are the fate of several proposed Mexican energy investments, including liquid natural gas projects and electric power plants. Big companies might wait to commit to such projects until the geopolitical picture has clarified.

On Wednesday, Fox attended a ceremony commemorating the earthquake that took such a terrible toll in lives and architecture. Those memories--and the loss of 31 Mexican citizens believed to have died in the World Trade Center destruction--have caused an outpouring of Mexican sympathy for the Sept. 11 victims.