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Mexico in Crisis

Authored by Dr. Donald E. Schulz. | May 1995

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This study examines the development of the crisis in Mexico, with the primary focus on the 6-year term of President Carlos Salinas de Gortari and the first few months of his successor, President Ernesto Zedillo Ponce de León. It poses the question of how a country with such seemingly bright prospects as Mexico in the wake of the North American Free Trade Agreement (NAFTA) approval by the U.S. Congress could so quickly plunge into crisis. The answer is that these problems had been festering for some time. By 1994, a combination of factors?including recurrent economic crises, a failure to introduce meaningful political reforms, the social devastation wrought by neoliberal economic policies, continuing corruption and mismanagement by Mexican political and economic elites, human rights violations, and the growing power of narcotraffickers?was sufficient to destabilize what had long been considered one of the most stable countries in Latin America.

The prospects for the future are mixed, at best. While some substantive political, judicial and police reforms have been belatedly made, serious doubts remain as to how far President Zedillo will be willing/able to go in challenging the power and perquisites of the traditional governmentPartido Revolucionario Institucional (PRI) elite and the narcotraffickers. A major threat to these elements would probably in itself be destabilizing; it could also be personally dangerous for Zedillo at a time when political assassinations are becoming increasingly commonplace. Moreover, corruption and inefficiency are so ingrained in the political institutions and practices at all levels of Mexican society that nothing short of a wholesale cultural revolution seems likely to solve the basic problem. Such fundamental changes in values are notoriously difficult to carry out and would take years, indeed decades, to accomplish. Thus, while the economy may pick up in a year or two and significant advances in democratization may occur, political violence and social turmoil will continue, at least in the short-to-medium run. In turn, this will pose serious problems for the United States, especially in the areas of illegal immigration, narcotrafficking, and all the costs and dangers they pose for American society.


And so once again we are faced with the question: Whither Mexico? Obviously, much has changed since the heady days of the NAFTA debate, when treaty supporters often waxed euphoric over the prospect of a modern Mexico, vaulting into the 21st century. The preceding pages tell a tale of dashed hopes and betrayed ideals, of corruption, violence, incompetence and instability. On the surface, at least, Mexico does not look like a very reliable partner for the United States as the two countries move hand-in hand toward the next millenium. One cannot but recall the old dictum of realpolitik that you should never ally with weakness lest you debilitate your alliance rather than strengthen it. This has even been tacitly conceded by some U.S. officials who now admit that Mexico?s economic troubles have played a significant role in the precipitous decline of the dollar. In the words of one senior official, it is a ?horribly difficult situation, and there are a lot of reasons to wonder if this [the Mexican economic recovery program] is going to work.? ?At this point,? however, ?we are in so deep that there is no turning back.?116

One recalls similar refrains as the United States trudged step by step ever deeper into Vietnam. We are already committed. If we just increase our investment one more time, we will turn things around. If we quit now, everything that has been done will have been wasted. The danger, of course, is that if we?and, much more importantly, the Mexicans?cannot halt the slide we may end up throwing good money after bad and lose everything.117

?The fundamental problem,? as Jeff Faux has observed, ?is that the Mexican political economy is dominated by an oligarchy that uses the country?s credit to borrow from foreigners and enrich itself, and then periodically demands austerity from the rest of the country on the grounds that it has to pay off the foreign debt.? The risk is that the ?bailout will perpetuate that system, virtually assuring that we will have another crisis in the future.?118 Added to this, moreover, are cultural norms that impede economic and political transformation. Corruption and inefficiency are deeply engrained in the sociopolitical structure, as is a tendency to place immediate gratification/consumption over savings/ investment. The latter problem became graphically clear this Easter when?economic crisis notwithstanding ?Mexican airlines offered consumers special fly-now, pay-later deals strikingly similar to what the banks had offered prospective credit card holders (approval virtually guaranteed) last year. Thus, even as hundreds of thousands of workers were being laid off, many were spending their severance paychecks on vacations.119

This raises the question of whether anything fundamental has changed. Specifically, what are the prospects for the future? And what should the United States be doing to protect itself from the fallout of this and possible future crises? Can we help Mexico make the transition to more stable political and socioeconomic arrangements? Or are we in a no-win situation, with only a very limited ability to promote such change and perhaps an even greater potential for doing precisely the opposite? Put simply, could U.S. policy inadvertently foster the further destabilization of Mexico? If so, with what consequences? And what are the implications for the U.S. Army? These are among the issues that will be addressed in the second part of this report.


116. David E. Sanger, ?Dollar Dips as the Peso Falls Again,? Ibid., March 10, 1995.

117. On Mexico as Clinton? s Vietnam, see Jeff Faux, ?Mexico and Vietnam,? Dissent, Vol. 42, No. 2, Spring 1995, pp. 169-174.

118. Ibid., p. 171.

119. Tod Robberson, ?Mexico Finds Pesos for Holiday,? The Washington Post, April 15, 1995.