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Mexico: neoliberalism with a human face.

Like the other countries of Latin America, and indeed of the world, Mexico has taken the path of neoliberalism in economic policy; but - like everything Mexico does - it has done so with a difference, and a very significant difference.

Unlike what has happened in so many countries, where the new policies have met with elite dissent and popular resistance, in Mexico the new policies have been generally welcomed. This is because conditions had become so disastrous that everybody felt that a drastic change was long overdue and was willing to suspend disbelief long enough for the benefits of the new policies to become apparent. In fact, things were so disastrous that improvement was all but inevitable, whether new policies had been adopted or not. Nevertheless, it would be not only ungracious but inaccurate to ascribe the success of the policies of the current administration only to luck; a great deal of skill has been involved, skill beyond the level one has any right to expect, and beyond the level one has seen in action in most of the countries of the world. |The economic managers have been so adept ... that they have earned the right to say to their countrymen "Trust us".'(1)

The situation facing the incoming government of Carlos Salinas at the end of 1988 looked horrendous. Real per capita income had fallen to the levels of twenty years before; inflation was running at more than 150 per cent a year; the country had an external debt of almost a hundred billion dollars. Politically, the situation looked equally disastrous for the ruling Institutional Revolutionary Party (PRI). Salinas had just won the presidency with an official figure of 50.74 per cent of the vote, a majority so bare that it was universally believed to have been adjusted upward so that the government candidate would not take office with the indignity of having had a majority of the voters oppose him, by far the lowest proportion of the vote for a winning presidential candidate in this century.(2) The opposition on the left was led by Cuauhtemoc Cardenas, the son of the most popular Mexican president in living memory.

Of course, it's darkest just before dawn, and the sun rose on a beautiful day for the PRI. By the halfway mark in his six-year term, Salinas had negotiated ten billion dollars off the foreign debt - not a relatively large amount by itself, but significant because it helped to restore creditor confidence and began a flow of repatriated capital. Inflation was brought down to under 15 per cent. The public sector deficit was eliminated. The economy was growing at some 3 per cent a year, fuelled by a sharp increase in exports.(3)

The PRI rebounded from its poor 1988 showing to capture 61.4 per cent of the vote in the 1991 mid-term elections.(4) This was a perfectly plausible result in light of the Gallup poll results on party preferences, which showed the PRI at 68 per cent, its 1988 showing having been 55 per cent.(5) Apparently the PRI does better with Gallup than in the actual election; even so, if the 1988 result was |adjusted' upward for moral effect, it cannot have been by much.

Moreover, it appeared that Salinas had found a mechanism for extending economic improvement far into the future. By reviving an old and half-forgotten proposal for a North American free trade area, he opened new and promising horizons for the Mexican economy. A study by the US International Trade Commission projected that NAFTA would contribute to an increase in annual output of as much as 16.2 per cent in Mexico and might increase employment in Mexico by 6.6 per cent.(6) Another study projected the net gain in employment in Mexico as 600,000 new jobs, substantially more than in the United States.(7)

To a large extent, we are talking about neoliberal policies here. Industries are being privatized.(8) Tariffs and other restrictions on international trade have been cut back drastically, so that what is left is predominantly an ad valorem tariff approximating 10 per cent, on the model suggested by the Cambridge school of economics. Most drastic of all is Salinas's reform of the |ejido' system, revising the hitherto sacred Article 27 of the Mexican Constitution to allow the mortgaging and sale of properties distributed under terms of the land reform, which had predominantly been farmed individually but were not owned outright by the farmer and could not be alienated.

But there is a specific Mexican difference in the programme, a difference that enables Salinas regularly to denounce neoliberalism as heartless and as dispensing with an altogether necessary role the state must have in actively promoting social justice - while on the other hand he denounces |populism', or sometimes statist populism, as oppressive, bureaucratic, and economically counter-productive.

What kind of justice do we want in Mexico? The justice that centralizes decisions in a distant and paternalistic bureaucracy that inhibits the initiatives of the people? Or perhaps the justice that limits the state to the role of observer of market regulations while it waits for the market to create opportunities even if this means sacrificing one or more generations? The answer will be found neither in populism nor in neoliberalism. In our country, these two options date back to the days of our independence, but they have never won the people's favour. History and facts show that the justice in which the Mexicans believe, the kind of justice we want to implement, is not that which goes against liberties and rights in its search for equality. In this regard, our justice is characteristically liberal. Our justice does not emerge spontaneously or depend upon the goodwill of the most opulent ones. In this regard, our justice is deliberately of a social nature.(9)

This approach, which is supposed to steer clear of the excesses of both neoliberalism and bureaucratic populism, Salinas calls |social liberalism'. While social liberalism can thus be characterized as a moderate, reasonable, and productive social and economic strategy, it has the merit that it is also the strategy that offers the best chance of maintaining the PRI in power, and with the PRI the political-administrative caste, a post-revolutionary |new class', that has ruled Mexico for two or three generations.

But Salinas does not depend solely on the productive advances of the economy to attract popular support back to the PRI. He has embarked on a wide-ranging social welfare programme, the National Solidarity Programme or PRONASOL, which has raised the |social' portion of the national budget from a third to a half of expenditure.(10) Solidarity, which has been called the |political trademark' of the Salinas administration(11) is a brilliant piece of political-social engineering which grows out of a discovery Salinas made when working on his doctoral dissertation.(12) In correlating attitudes toward the government and the PRI with the amount of money spent by the government in various communities, he was taken aback to discover that the population was more hostile to the PRI the more money the government had spent in the community. The reason, he concluded after some investigation, was that the money spent had been visibly misappropriated and misapplied, leading to resentment, and polarization between the politically well-connected and the mass of the population. Moreover, the projects on which money was spent were generally based on the ideas of what would be good for the people by Mexico City bureaucrats and politicians. Where projects had been initiated by the local people themselves, based on their own evaluations of their needs and guided by local committees, attitudes to the PRI were more favourable.

Drawing on this research, in what must be one of the few instances in which academic research was transcribed almost immediately and directly into government policy, Salinas developed, in Solidarity, a programme in which government provides funds for all kinds of projects - credits for farmers and businessmen, free food and medical care, funding for public works - so long as a plausible project has been developed by an authentic grassroots organization. Not only has the programme been hugely popular, but it has been extremely cost-effective in that funds are not wasted in top-heavy bureaucratic structures or siphoned off by intermediaries. The programme's director, Luis Donaldo Colosio, was first made president of the PRI and then secretary of a new cabinet department of social welfare. This makes Colosio a possible future presidential nominee if the holder of the inside track, the Finance Secretary, Pedro Aspe - or the economic policies with which he is identified - should falter. Of course it is possible to criticize PRONASOL as simply a trick to garner electoral support for the PRI; from the PRI point of view, of course, that is a point in its favour. But it is also a perfectly good reflection of the latest thinking in development strategy, which criticizes traditional top-down approaches in favour of grassroots participation and definition of need. It is also the case that PRONASOL may serve to develop a new generation of political leaders and enable Salinas to bypass many of the old-line regional and sectoral bosses who obstruct his modernization of the party.

|Modernization' has always been one of his themes. Salinas appreciates that today's Mexico is a nation of literate urban dwellers who are increasingly high school and even college graduates, who are not willing to be led in the authoritarian populist style that was perhaps appropriate for the nation of illiterate peasants of 70 years ago.(13) If PRONASOL can indeed provide effective development, generate increased support for the ruling party, and form new leadership elements, all on a reduced budget, it is clearly a political masterpiece.

Of course, it never does for a Mexican president to become overconfident. The pattern for the presidents of the last quarter-century has been for disaster to strike sometime during the second half of the presidential term and force a reversal of all the optimistic prognoses. Gustavo Diaz Ordaz over-reacted to opposition demonstrations in 1968 and produced the infamous Tlatelolco massacre; Luis Echeverria's infantile leftism produced a financial crisis, and his administration ended in a chaos of government-encouraged land invasions and violent clashes; Jose Lopez Portillo mismanged the country's new oil riches in an economic and financial disaster that he tried to escape from with a demagogic and illegal seizure of the banks; while poor Miguel de la Madrid found that a disastrous economic situation could be made even worse by a devastating earthquake. The gods may also tire of Carlos Salinas. But if his luck holds and the economy continues to prosper, he may yet succeed in the culminating achievement of modernizing the ruling party and the political system, and guaranteeing absolutely free and impeccable elections which the PRI nevertheless wins handily because its policies are both effective and popular.


(1.) Sidney Weintraub, |The Economy on the Eve of Free Trade', Current History, February, 1993, p.71. In the same issue of the journal Jorge Castaneda is more sceptical and assigns a larger role to luck; |The Clouding Political Horizon', ibid. (2.) On August 20, 1989, the Los Angeles Times published a poll in which 68 per cent of the Mexican respondents said they believed that Salinas had not actually won the election. (3.) Weintraub, op. cit. (4.) |A Report on the Mexican Mid-Term Elections', distributed by the Embassy of Mexico in the United States, n.p., n.d. (5.) Jorge J. Dominguez and James A. McCann, |Shaping Mexico's Electoral Arena: The Construction of Partisan Cleavages in the 1988 and 1991 National Elections', paper delivered at the American Political Science Association Annual Meeting, Chicago, September 3-6, 1992, p.23. (6.) Keith Bradsher, |Study Says Trade Pact Will Aid US Economy', New York Times, February 3, 1993 page C1. This is a completely misleading headline for the story, which reports that there will be negligible effect on the US economy, though much benefit for the Mexican. (7.) Gary C. Hufbauer and Jeffrey J. Schott, North American Free Trade: Issues and Recommendations, Institute for International Economics, Washington D.C. 1993. (8.) Of course, this is privatization a la mexicana, in which the well-connected and favoured make fortunes - out of which they are expected to show gratitude to the PRI. Tim Golden, |Mexican Leader Asks Executives To Give Party $25 Million Each', New York Times, March 9,1993, p.A1. (9.) State of the Nation Address (Informe Anual), given November 1, 1992; English translation published in the Daily Report of the Foreign Broadcast Information Service, FBIS-LAT-92-214, 4 November 1992. (10.) Ibid, page 13. (11.) Denise Dresser, Neo-Populist Solutions to Neo-Liberal Problems: Mexico's National Solidarity Program, San Diego: Center for US-Mexican Studies, 1991. (12.) The principal results are reported in Carlos Salinas de Gortari, Political Participation, Public Investment, and Support for the System, ibid., 1982. (13.) I discuss this question at some length in |The Future of Mexican Politics', in Michael Howard and Douglas Ross, eds., Mexico's Second Revolution? Centre for International Studies, Simon Fraser University, Burnaby, B.C., 1991.

[Martin C. Needler is Dean of the School of International Studies, University of the Pacific, Stockton, California.]
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Title Annotation:policies of Carlos Salinas de Gortari in Mexico
Author:Needler, Martin C.
Publication:Contemporary Review
Date:Jul 1, 1993
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