The idea gaining ground in Washington is that Mexico has become an unreliable failure. Congressional Democrats showed so little willingness to back President Bill Clinton’s rescue of the peso that he was forced to rely on executive action. Republican presidential hopeful Pat Buchanan, sniffing a populist issue, rails against the “$50 billion bailout of Wall Street and Mexico City,” while conservative columnist Robert Novak dismisses “the Potemkin village of a progressive, prosperous Mexico, erected to pass the North American Free Trade Agreement.” What nonsense. “People too soon forget,” says Robert Hormats, an economist at investment bankers Goldman, Sachs, “what the Mexican political and economic system used to be like.”
Indeed they do; less than 10 years ago, reporters who wanted to interview “reform” politicians in Mexico would often bump into government goons with muscular armpits. As recently as 1982, Mexico did not just default on its sovereign debt but nationalized its privately owned banks. Ten years ago Mexico’s ruling Institutional Revolutionary Party (PRI) held the country’s politics in a death grip. But after winning this month’s gubernatorial election in Jalisco, the right-wing opposition National Action Party (PAN) now controls four statehouses. In 1985, PAN controlled 40 municipal governments; now it runs 153 of them. Between them, the opposition parties have two fifths of the seats in the lower house of the Mexican Congress.
Meanwhile, a diversifying economy has transformed the country’s prospects. Petroleum’s share of total exports shrank from more than 24 percent in 1986 to less than 12 percent in 1993. Rogelio Ramirez de la O, a leading economist in Mexico City, points to world-class investments in everything from automobiles to cement; to the number of Mexican firms that now have a global presence, and, not least, to a new work ethic in the country. All this has been noticed abroad. “Investors were not coerced into Mexico,” says Hormats. “They went there because the government had gotten the economic fundamentals right.”
Now, this doesn’t make Mexico a utopia. It is plain that, so far, economic reform has widened the differences between the very rich and the very poor – and the devaluation of the peso has savaged the middle class that was beginning to bridge them. Another gap that will need to be closed is the one between economic and political change. The government of Carlos Salinas de Gortari, which left office in December, either misunderstood or just ignored the inevitable connection between the two types of reform. Economic liberalization gave power to new constituencies who then demanded political reform – demands that have been resisted by the PRI’s “dinosaurs” and those who got fat on its largesse. Foreign investors should be clear on one point: there are going to be more political shocks in Mexico, not fewer, as the country continues to lurch toward modernization.
Can that path be made easier? Yes; if everyone learns two lessons from this winter. First, avoid hubris. The claim by Salinas that Mexico was becoming a First World country, not a Third World one, raised unrealistic expectations both in Mexico and outside it. Second, give reforms time. Latin America has seen great economic change since 1982, but perhaps in only one country – Chile – have reforms started to spread prosperity outside an old elite. Economic and political reform takes not months or years to solidify, but decades.
One more lesson, this time for the rich world: keep faith with those who are struggling to do the right thing. Bill Clinton may have received little credit for it in the United States, but his rescue of the peso places him, and not Washington conventional wisdom, on the right side of history. For a century, American presidents have blustered about being “good neighbors” to the rest of the Americas. Clinton, first in Haiti, and now in Mexico, has shown more leadership – and less arrogance – in the struggle for hemispheric progress than any previous representative of the colossus of the north. When, in about 20 years, that, too, becomes conventional wisdom, remember you read it here first.
