With fingers tightly crossed, Mexican officials are now saying the worst of their financial crisis is over. The peso is up 25 percent from its early-March lows, the stock market has rebounded 65 percent, exports are zooming 29 percent while imports have dropped 3.4 percent. Finance Minister Guillermo Ortiz fully expects his government will be able to meet its foreign debt obligations through a tough period ending in June.
What pulled Mexico back from the brink of bankruptcy was a massive $50 billion international support program, 40 percent of which was pledged by the Clinton administration in an executive power move bypassing Congress.
While statistics confirm a respite in Mexico's financial crisis, its deepening economic and social problems have scarcely been touched. Massive May Day anti-government demonstrations erupted in Mexico City. The rebellion in Chiapas is in a stand-off phase. Leftist opposition parties have abandoned talks with President Ernesto Zedillo's administration on political reforms. Unemployment is soaring, engendering much bitterness in the middle classes. The Mexican masses, though still docile, sink deeper into poverty. Domestic business activity is almost at a standstill in many sectors due to interest rates as high as 80 percent.
Because Mexico's troubles erupted as the North American Free Trade Agreement took effect, protectionists in both countries have been quick to place blame. But in our view, the situation would have been even worse if the U.S. and Mexico had not moved toward closer economic partnership -- a process made possible by the dramatic free market reforms launched by the now discredited former president, Carlos Salinas.
Chile, the emerging Latin economic tiger, has signaled its readiness to negotiate its entry into NAFTA even without assurance that the U.S. Congress will not change agreements accepted by U.S. diplomats. Such is the momentum toward hemispheric trade cooperation since ratification of the new World Trade Organization.
rTC In the months ahead, critics will find it easy to challenge Mr. Zedillo. But if financial numbers continue to improve, Mexico's inherent strength and ability to accommodate class tensions may see it through these bleak times. For the United States, there is little choice other than to keep helping its neighbor south of the Rio Grande. The alternative would be a complete cutoff in outside investment, far greater immigration pressures northward, less cooperation in fighting the drug trade and, always, the danger of civil strife that would have wide ramifications throughout the hemisphere. A stable, prospering Mexico is in the U.S. interest.