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Betting against time.

Mexico's president, Carlos Salinas de Gortari, is in trouble. After staking his regime's credibility on achieving a North American Free Trade Agreement (NAFTA), he has lost his two principal political allies, the former leaders of the United States and Canada. Now Salinas finds himself gambling with the explosive lessons of Mexico's past. With barely a year left in office, he is betting against time, a self-serving U.S. Congress, Canada's shifting political mood, and an uncertain world economy. At risk is his party's future, Mexico's political stability, and his mission to bring Mexico into the ranks of First World economic powers. The stakes are high; Salinas's time is short.

No one knows this better than Salinas himself. He must leave office next year. Since the 1930s, no one other than a member of the International Revolutionary Party (PRI) has served as Mexico's president, and the power of each has been limited only by the prohibition against serving more than one six-year term. Given the enormous stakes involved for Mexico, and the unpredictable changes in the political mood of the United States and Canada, would this reformist leader of the PRI dare tamper with the Mexican constitution's sacred "no-succession" clause, one of the few promises of the Mexican Revolution he has not broken?

Salinas's 1988 election was at best a tie; it was popularly perceived as a fraud. No matter what the official polls say, he hasn't shaken that stigma. His opponent in 1988, Cuauhtemoc Cardenas, has announced he will run again in 1994. A victory by Cardenas, a former PRI president, would probably mean a reversal of Salinas's market-oriented reforms and a return to Mexico's protectionist past. The last Mexican president who pursued development by opening Mexico to foreign capital--Porfirio Diaz (1875-1911)--was overthrown in this century's first great social revolution. More than a million people, an estimated 10 percent of Mexico's population, died in the Mexican Revolution, between 1910 and 1917. Even if the PRI manages to stay in power, the failure of NAFTA would discredit Salinas's program of liberalization and strengthen the party's old guard.

So while the foreign press hails him as "Man of the Decade," a "miracle worker," Salinas sees signs that his miracle is slipping away. Worst of all, there is little he can do about it except remain outwardly confident about his policies and the peso's value, ponder a dramatic new economic strategy, and wait on events north of the border.

It is said that three things unite all Mexicans: faith in the Virgin of Guadalupe, Mexico's patron saint; belief you will one day win the national lottery; and distrust of the United States. With his aggressive pursuit of NAFTA, Salinas is promising the second, working against the third, and, by now, probably praying to the first.

Each Mexican president has virtually unlimited power but only six years to establish his place in history. A critical test of his success is how he manages the U.S. government and U.S. capital. The easiest posture is anti-Yankee, nationalistic, and populist.

When Salinas took office in 1988, Mexico presented a formidable challenge. In the face of crippling inflation, rising unemployment, an enormous foreign debt, decreasing exports, and increasing political discontent, Salinas seized the opportunity to shift the course of Mexico's modern development.

He quickly launched an ambitious program to liberalize Mexico's domestic economy, financial system, and foreign-investment policies. He opened Mexico to outside capital, privatized state-owned firms, cut state subsidies and government spending, and dismantled Mexico's agrarian reform policy. Such measures were necessary, he said, to establish Mexico's credibility among the world's developed nations, gain the confidence of business, and increase investment. NAFTA would be Mexico's ticket into the First World.

Salinas's critics charged he was selling Mexico's out-putting capital before people and national interests, mortgaging the country's future for a quick fix. Even worse, they claimed, his program required complicity with "Yankee capitalism" and the brute force of the United States, a country that stole over half of Mexico's territory more than a century ago.

For support, Salinas astutely turned to four influential Texans with extensive interests in Mexico: U.S. President George Bush, Secretary of State James Baker, Commerce Secretary Robert Mosbacher, and Democratic Sen. Lloyd Bentsen. In early 1990, shortly after the U.S.-Canada Free Trade Agreement was signed, Salinas formally requested negotiations for a similar pact with the Bush administration. Canadian Prime Minister Brian Mulroney immediately asked that Canada take part in these discussions, and NAFTA emerged as the policy by which Salinas's presidency would be vilified or praised.

Salinas accelerated his economic reforms. Since negotiations with the United States and Canada began, the Mexican government has sold more than 1,000 state-owned firms for more than $21.5 billion, restructured its debt, and cut inflation. These actions have helped repatriate Mexican capital and bolster the confidence of international business leaders while winning the applause of the U.S. and Canadian governments.

Through late 1992 capital poured into Mexico, the Mexican stock market boomed, and Mexican consumers purchased imported goods at a record pace. Internal critics were silenced by economic euphoria (or, on occasion, by the government). Everything seemed on course, and Salinas found himself touted as a visionary and genius for implementing a real solution to Latin America's chronic economic problems. On September 18, 1992, Bush notified Congress of his intent to sign NAFTA. Bush, Salinas, and Mulroney initialed the agreement on October 7.

Since then, things have changed dramatically. As the world recession drags on, Mexico's economic recovery is grinding to a halt; the peso is shaky, exports are falling, and investors grow edgy. Mexican consumers, responding to tariff reforms, are buying U.S. goods at record rates, and Mexico's balance-of-payments gap is widening.

Still, those aren't Salinas's major concerns. Mexico's most powerful citizen faces critical problems that are out of his control. Most conspicuously, his main cheerleader and major political backer, George Bush, is now living in a rented Houston hotel room. Meanwhile, Canadian Prime Minister Mulroney stepped down in June, leaving his successor, Kim Campbell, facing fall elections with an unpopular government and fragmented party. Canada is suffering from a weak economy, high unemployment, and domestic division, especially over Mulroney's free-trade policies.

Opinion polls ranked Mulroney the most unpopular prime minister in this century. Although Mulroney claimed the successful negotiation of NAFTA as one of his main achievements, more than half of Canadians believe NAFTA will hurt their country. A change in government could jeopardize Canada's support for the treaty, and Canada can walk away from NAFTA if the United States backs out. All of these uncertainties complicate Salinas's strategy in preparing for Mexico's 1994 elections.

In the United States, the battle lines in Congress, among lobbying groups, and in popular opinion are already drawn. No one has exploited this better than Ross Perot, constantly referring to the "giant sucking sound" he claims we will hear as jobs move south to Mexico. Perot has gained substantial popular support and press coverage by articulating the job-loss fears of many wage-earning Americans.

And NAFTA is not Bill Clinton's agreement. Since Clinton converted to a pro-NAFTA stance during the campaign, he has insisted that any ratification must include "side agreements" to upgrade environmental regulations, improve labor conditions, provide for displaced workers, and enable the United States to cope with import surges, especially as they affect small businesses. In mid-August U.S. Trade Representative Mickey Kantor announced that these agreements had been completed. The agreements require that the United States, Canada, and Mexico each strictly enforce its own labor and environmental laws, under threat of sanctions or fines. Completion of the agreements cleared the way for Congress to consider ratification of NAFTA in the fall.

Clinton is working with a Congress different from the one that approved a "fast-track" review procedure for NAFTA. The NAFTA debate does not follow party lines, and with job loss a concern that hits every constituency, congressional opposition could be strong. House Majority Leader Richard Gephardt (Mo.) and Majority Whip David Bonior (Mich.) have announced their opposition. On the other hand, NAFTA is one of the few issues where the president has GOP support.

In mid-August, rumors abounded in Mexico that Salinas would delay the cherished "laying of hands" on his successor until he sees how things play out in the U.S. political arena. Traditionally, the president makes his choice in the late summer or early fall to smooth the transition process.

All this waffling by the United States is hard for Mexicans to comprehend. Why are affluent Americans so preoccupied with job loss? An estimated 40 percent of Mexicans are underemployed. Salinas can't wait on the vagaries of our Congress, our courts, our presidential transition, our special-interest lobbying. He must make some decision about the future of his country and his party. He has already gambled enough.

Both Salinas and Clinton are in their mid-40s, Ivy League graduates facing the practical challenge of backroom politics. Both are ambitious and driven, and, beneath their exterior cool, preoccupied with their place in history. While Salinas is maneuvering to assure the future of his party and Mexico, Clinton is striving to restore his party's mission. One has unlimited power but not much time. The other may have eight years but immediately faces a challenge that requires him to pick his way through the minefield of partisan politics, congressional approval, and public opinion.

Clinton has little time to balance the competing interests and give NAFTA the enthusiastic endorsement that will be needed to pass the agreement before January 1, when it is supposed to take effect. Washington's rejection of Mexico's overtures would severely undermine Salinas's legitimacy and his ability to transfer power to his chosen heir. If NAFTA fails or requires further negotiation, Mexico will have to amend its laws, which will revive charges of compromising national sovereignty, selling out to foreign capital, and betraying the revolution's ideals--all in an election year.

Mexico's politicians, businessmen, and intellectuals know NAFTA will happen but that the United States will determine when and in what form. That is a compromise they are willing to accept. After all, never has there been a greater disparity between two economies attempting to form a unified market. In the United States this point is constantly made as an argument for proceeding with caution.

Salinas is wagering the past against the future. It is not a question of how long Mexico is willing to wait, but how long Salinas can wait. Mexicans look to the indirect signs, and in a year when salsa outsold ketchup in the United States, the prospects seem good. It is now only a question of time.
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Title Annotation:Mexico; Mexican President Carlos Salinas de Gortari's barely one-year-term left in office
Author:Meyers, William K.
Publication:Reason
Article Type:Column
Date:Nov 1, 1993
Words:1776
Previous Article:Protectionist racket.
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