Busted coverage.

The New York Times headline ran "Mexico: No More `Miracle'." The story: an abrupt collapse of the Mexican economy. The factors: "growing inflationary pressure, a heavy external debt, and a massive trade deficit." The date: January 28, 1972.

For years, right up to the collapse, the Times and other American papers had celebrated Mexico's imminent emergence as an economic power. Then the bottom dropped out, and the papers delivered a round of preachy post-mortems on what went wrong.

Sound familiar? It should. This cycle repeated itself just recently. The Washington Post, for example, highlighted the benefits of free trade in its profile of a "Mexican boom town" last December. By March it was reciting the Department of Treasury's line that "Mexican Missteps Caused Peso Woes."

Indeed, premature sightings of Latin American booms are a time-honored tradition, dating back at least four decades. The signs are always the same: moderate GNP growth, overtures to foreign capital, reduced trade barriers, and soaring stock markets. In short, U.S. firms and local companies are making a killing. Unfortunately, with the benefits of economic growth flowing to the (often corrupt) elites, "progress" is inherently unstable, and growth inevitably short-lived.

In 1955, for example, The New York Times found Argentina - "her stocks soar" - on the upswing, with government officials "looking forward to another excellent harvest." Peru was "exploiting great resources' " Even the tiny Dominican Republic was "embarking on a huge construction program," helping to explain why the nation's citizens looked ahead "confidently and expectantly."

Two years later, the paper was even more ebullient. Latin America was "forging ahead" with trade "at a peak." Mexico was "prospering despite drought"; Venezuela was exploiting a "growing bonanza"; and Argentina was on "the road to recovery."

Within a few years most of the region had tottered into economic and political crisis. A 1964 military coup in Brazil foreshadowed one of the bleakest periods in Latin American history. By 1976, generals had seized power in seven more of the region's countries: Argentina, Peru, Panama, Ecuador, Honduras, Chile, and Uruguay.

Mexico may provide the most obvious example of lapses in foreign economic coverage. If the press' past predictions had been accurate, Mexico City would today rival New York, Tokyo, and London as a throne of international financial power. In 1964, the Times reported that "[A Mexican] confronted with the phrase `underdeveloped nation' is apt to assume the expression of a man trying desperately to recall something vaguely familiar, but far, far away." It would have been hard to imagine that just eight years later a headline on Mexico in the same paper would read, "No More `Miracle.'"

Brazil is another case of journalistic missteps. Between 1968 and 1974, newspapers hailed the robust growth rates - topping 11 percent - as indicative of economic strength. In 1971, Business Week praised the dictatorship, enthusiastically telling readers that profit opportunities in Brazil were among the best in the world. A Times dispatch the following year ("The Bloom is on the Boom") said that economists considered the country to be a "second Japan" and announced that for Brazil, "the future is at hand."

But this was also the period when Brazil came to be known as "Belindia" - part Belgium, part India - because so much of the newly created wealth went to the top five percent of the population. In 1972, even dictator General Emilio Garrastazu Medici had to admit, "The economy is going well, the people not so well."

The press' focus then was on Brazil's Belgium. But Brazil's India made itself known just a few years later, when its economy entered a severe recession. A Times story in 1976 reported that the country was "trimming its economic sails." Economic planners ordered zero economic growth to fight rising inflation.

Also in the seventies, Time magazine dispatched stories from Venezuela calling the country an "emerging power" and marveling at its "burgeoning economy." Ten years later, its economy in a free fall, Venezuelan per capita GNP had been cut in half. The World Bank reduced Venezuela's status from a "middle income" to a "low income" nation.

The press' naive optimism, though, endured. Even in the late seventies, with the burden of foreign debt having reached staggering levels across the region, the press still found economies strong and futures hopeful. While high debt and inflation had emerged as problems, The Washington Post reported in early 1978, Latin nations had been demonstrating "a remarkable economic resiliency. . . . A healthy growth rate is expected for the region as a whole." The Times, too, acknowledged debt and inflation in February 1980; but businessmen, it reported, were confident that the "credit-card style of growth" could continue.

Two years later Mexico went bankrupt, triggering a 10-year-long, region-wide collapse. Growth resumed in the nineties - no surprise, since the sunken economies had nowhere to go but up - and the press, predictably, called Latin America the world's next Pacific Rim. Heralds of the new boom were remarkably familiar. In 1991, the Times reported that "free market reforms" had injected a "breath of fresh air" into Latin America. That same year the Post said that Latin reformers were abandoning "long-held economic dogma in favor of a new consensus that emphasizes the need to become competitive internationally." The newspaper also applauded the tough measures taken to spur growth, even if such measures meant "short-term pain for millions of people." Business Week was the most effusive, saying in June 1992 that a "market revolution is taking hold across Latin America," with the "shock troops of change [being] a new generation of leaders, many of them U.S.-educated."

Journalists invariably hailed developments in three countries in particular: Venezuela, Mexico, and Argentina. A Reuters story said that those nations were the region's major "success stories. . . . They have tamed inflation, reduced debt loads, and primed their economies for growth."

Recent news has been less encouraging.

Mexico, lauded for years as a "model" for the Third World, is confronting political and economic chaos after the peso's collapse. Inflation for next year is expected to quadruple from its current level of 10 percent, while the country's foreign debt now stands at $166 billion, far higher than in 1982 when Mexico's bankruptcy set off the Latin debt crisis. Venezuela - a "star" not five years ago when annual growth rates hit 10 percent - has hit the skids; free-market champion Carlos Andres Perez was driven from the presidency on corruption charges. Despite appearances of economic well-being, Argentina suffers from the same problems which sank Mexico - overvalued currency and a huge trade deficit.

Why the Surprises?

This need not have been so surprising. The Latin "miracle" has always been somewhat fictive. The question is, why do journalists keep making the same mistakes over and over? Journalists tend to take their cues from local government officials, the World Bank, the International Monetary Fund (IMF), and the White House (via embassy officials and State Department diplomats). They repeat the elites' conventional wisdom, relying heavily on economic indicators like the stock market, but skim over economic reality, particularly the lives of the poor. In part, it's a matter of laziness - calling the IMF is easier than grassroots reporting. Partly, it's a matter of cautiousness - criticism of government policies might jeopardize a reporter's coveted "access" and make it more difficult to cover local politics.

But there's also a fundamental problem with the economic theory upon which this sort of reporting is based. There's very little correlation between a healthy stock market and a healthy overall economy. Venezuela's stocks soared by more than 600 percent in 1990, the year after brutal austerity measures provoked violence in which hundreds, and perhaps thousands, of protesters were killed by security forces.

Indeed, the poor sometimes suffer in direct proportion to "booms." In Mexico, the real minimum wage today is worth less than half of its 1980 value, and more than one-quarter of the country's children suffer from serious malnutrition. In Argentina, President Carlos Menem drastically slashed retirement benefits to help curb government spending, a policy which prompted scores of pensioners to commit suicide. The "miracle" in Venezuela came at the same time that budget cuts eroded public services and while the numbers of people living in poverty climbed from 15 percent to 41 percent of the population.

A New York Times report in February 1994, "Despite Violence, Colombia Surges," is a classic. The reporter, James Brooke, misrepresents narrow economic gain as national well-being, describing "solid growth, surging imports and swelling foreign investment." The country was even "trimming its foreign debt" as it was "flush with $8 billion in reserves."

But not all was well, as Brooke concedes in his closing paragraphs. "Although Colombia's macroeconomic indicators look good, not all boats are rising. The number of people living below the poverty line has increased by about one million since 1990, to include about half of Colombia's population of 33 million people."

Impoverishing local populations is the inevitable consequence of austerity programs favored by Latin governments and applauded by journalists. Social services are slashed and wages for workers held down to attain treasured "investor confidence" - a polite way of saying conditions favorable to corporate profiteering.

With their reporting, American newspapers have often made themselves major instruments of American propaganda. During the Cold War, U.S. presidents applauded conservative Latin regimes, even brutal dictatorships, as a bulwark against communism. The U.S. wanted positive news on its allies' economies, and it got it. In recent years, Latin America has emerged as the fastest growing market for U.S. exports, and Presidents Bush and Clinton have proposed the creation of a hemisphere-wide free trade zone. They issued rosy forecasts for Latin economies (particularly Mexico's) and reporters echoed their enthusiasm.

But what's good for elites and investors isn't necessarily good for these countries as a whole. The newspapers do catch on, eventually, after economic catastrophes. But they never seem to learn from their mistakes.

It's ironic that reporters attribute "booms" to "free-market reforms" supposedly being implemented by Latin leaders at the behest of the United States. A Newsweek story out of Mexico a few years back praised then-President Carlos Salinas for seeking to dismantle his country's "centrally planned economy"' as if Mexico had long been under the Marxist jackboot.

The reality is not that Latin leaders have realized the error of their ways; U.S. governments and multilateral lenders, rather, have changed their minds. The "old dogma," as The Post called it, consisted mostly of high barriers to imports (known in fifties and sixties as import substitution) and was praised by the World Bank. Even activist governments and nationalization of industry - which day are blamed for virtually all of Latin America's ills - were originally supported by U.S. administration and implemented by anti-communist, pro-American dictators. "Giant multinationals are not necessarily unhappy to accept the government as a partner," the Times reported in 1977. "It can help with the taxes and labor trouble."

Today, reporters blame the Mexican government for the economic collapse, saying official stubbornly resisted the lessons offered by their first-world instructors. In a January 2 article, "The World Shifted, but Not Mexico," the Times' Keith Bradsher wrote that Mexico "failed to respond quickly when the economic world around it began to change," and adapted an economic "strategy [which] flew in the face of advice from officials the International Monetary Fund."

Yet no nation has more rigorously followed the IMF line in the last five years than Mexico. During the "boom" years, both the Fund and its sister institution, the World Bank, consistently claimed credit for Mexico's "economic miracle." The relationship between Mexico and the World Bank, according to The Financial Times in March 1992, was one of "growing intimacy": "[Mexico is] the darling of the bank's economists (and of its major shareholder, the U.S.). The bank does not need to force Mexico to do anything; the two sides agree on almost everything . . . World Bank economists and Mexican officials often spend weekends together brainstorming on policy issues."

And in September 1992, a Reuters story, "Mexico Old IMF Hand 10 Years After Debt Crisis," said that Mexico was "almost universally viewed as a model for economic recovery in the developing world," and that the country was assuming a professorial role" at the annual meeting of the IMF. Then-Finance Minister Pedro Aspe (now in disgrace) "was at ease offering advice to Latin American neighbors."

Janet Duncan, the Reuters reporter, conceded that some cynics questioned "how things really are in Mexico," pointing to the mammoth trade deficit. But, "to believers in the so-called Mexican Miracle," she wrote, "the obstacles ahead are par for the course." The deficit, of course, was the root of the current disaster, being the force behind the devaluation of the peso.

A true miracle in Latin America would be if governments rejected austerity programs that punish the poor and made the rich foot the bill for social reform. But since U.S. presidents (and Latin elites) generally prefer the failed strategy of "making the cake grow before dividing it," expect journalists to continue to cheer governments which impose "short-term pain" on populations which are forever waiting to see the long-term gain.

Given American journalists' bizarre sense of priorities, it's not surprising that the strongest economy in Latin America these days is in Brazil, a nation which for years was berated by journalists for its cautiousness toward U.S.-backed economic reforms. In 1990, Nathaniel Nash of The New York Times wrote that while residents of countries like Mexico and Venezuela were reaping the benefits of "free market reforms," Brazilians were sadly lagging behind, a fact Nash attributed to the natives' preference for the "relaxed life on the dole and at the beach."

An update: Since Brazil lowered trade barriers more slowly than its neighbors, it has not suffered the same huge trade deficits as a result of surging imports. The country also moved more slowly in its privatization effort, which in much of the region has amounted to a transfer of state assets into the hands of well-connected cronies at bargain basement prices. (Of course Brazil still faces serious difficulties, and its economic prospects are muddled, particularly with the collapse of the peso.)

The disparities and errors in economic coverage are not exclusive to foreign desks. If everything Americans knew of our own economy came from papers' financial pages, we'd be firmly convinced that massive layoffs are virtue incarnate while a falling unemployment rate is the devil to be feared. Journalists on Wall Street and Washington, as well as in Rio and Lima, are often servile to wealthy sources. But with such thin coverage of foreign countries, the schism between real-life and newspaper coverage is far more dramatic. To paint an honest picture of these economics requires a more vigorous and less sensational approach. The point isn't just that current coverage is spotty and impractical - leading to "surprises" that actually aren't surprising at all - but that it counters the most fundamental rule of journalism: to tell the truth.