Mexico: A Harvard Man Takes Charge

Mexico has some good news and some bad news. The good news is the emergence of a democratic trend that promises to have great political significance in the near future. After 70 years of one-party life and one-party rule, the 1988 presidential elections were the first to feature three powerful and charismatic candidates from three political parties spanning the ideological spectrum. The bad news is that the electoral process and outcome were riddled with corruption and fraud and that misinterpretation of the results by the Mexican government could seriously hinder the country's economic progress.

Nobody really knows who really won the presidential elections. "Official" results, published by the government-run electoral commission, kept the ruling Institutional Revolutionary Party (the PRI) in power with a 50.7 percent majority, its lowest ever. Yet the documented instances of fraud at every level and the results of various independent polls (as well as the government's ban on such research, especially exit polls), indicate that PRI candidate Carlos Salinas de Gortari may have actually placed third, behind the socialist Cuauhtémoc Cárdenas and the conservative Manuel Clouthier. Voter turnout was the highest ever.

Regardless of the validity of the official results, Salinas is Mexico's new president for the next six years, and he will make perhaps the most important choice in Mexico's recent history. On the one hand, he can expand the economic liberalization policies started in 1985 by his predecessor, Miguel de la Madrid. Through privatization, spending freezes, and the lifting of export/import restrictions in recent years, de la Madrid was able to revive some investor confidence and keep fears of hyperinflation at bay. Alternatively, he can follow the populist borrow-spend-and-nationalize course taken by earlier administrations in need of expedient political support, as well as by de la Madrid early in his term. Salinas's decision will depend on his interpretation of the country's new-found democratic current.

The PRI has been comfortably in power for a longer time than any other political party in the Western world. Few effective opposition candidates and organizations have materialized in an environment rife with corruption, censorship, and outright violence. More importantly, however, the PRI has ruled for so long because it could afford to purchase loyalty from the Mexican people.

When oil prices were high, the government-owned oil industry prospered and the PRI, which controlled the government, rewarded its supporters with free public services from nationalized industries, price subsidies, and other typical forms of government largess. When oil prices tumbled in the mid-'80s, the statist framework carefully built by previous administrations could no longer satisfy the population's needs.

The government then turned to the private sector, only to find out there was none left. With the government owning over 85 percent of the economy—including all of the country's prime materials, basic industrial production, banking and transportation—and all except the oil industry operating in the red—it had effectively edged out all private enterprise.

The ensuing recession in 1985 quickly paralyzed the few remaining private strongholds: retail sales, small business, and construction. Other than a few transnational corporations such as IBM and Ford, and the beer, tobacco, and soft-drink industries, there was little left.

The de la Madrid government decided to reverse the tide. It began selling government-controlled businesses deemed "nonstrategic." In the past six years, it has liquidated over 700 public businesses out of a total 1,155. It has sold or merged large businesses, such as the state airline, Aeromexico, as well as numerous state-owned hotels, restaurants, movie theaters, and even a bicycle factory.

The de la Madrid reforms, which were orchestrated by Salinas as minister of budget and planning, also involved a revamping of securities regulations. Companies now find it much easier to raise capital through public offerings. And the government tried to liberalize foreign trade by lifting currency exchange controls and joining the multinational General Agreement on Tariffs and Trade.

These policies began to have some impact. After 1983–84, the rate of inflation declined from over 100 percent to about 60 percent, the country's trade deficit has become a surplus, GNP growth is now 3 percent in real terms after being negative for quite some time, and the government's direct control over the economy has decreased to about 60 percent.

Unfortunately for the PRI, these improvements did not reach the bulk of the population in time for the election. Various political factions began shifting their alliances, leading to the hotly contested presidential race of 1988.

Certainly many Mexicans agree with de la Madrid's final assessment: "We did not come close to solving all of our difficulties, but we leave behind a basis for traveling the very difficult roads toward efficiency and modernization." Yet the election results did not produce a political mandate of any kind.

Each of the three parties received a substantial number of votes, as various factions previously identified with the government aligned with other parties. Voters realized that government programs had failed to satisfy their needs. Some veered to the left, hoping the socialist plans to suspend foreign debt payments would produce needed cash, while others turned to the right in search of further privatization and lower taxes. The PRI, however, had the experience and organization necessary to ensure "victory." It controlled the media, spent lots of money, and, many believe, rigged the voting.

Despite these questionable election tactics, Salinas has not encountered much violent protest. The Mexican people seem willing to give the PRI one last chance to revive the economy. But most independent observers agree that they will not tolerate another major fraud in a presidential election. And economic conditions must improve. "Unless Mexico is a nation of masochists, it is illogical that the people will support further erosions in their purchasing power," says economist Luis Pazos. "The country's politics have begun to change profoundly, at its roots," writes journalist Ernesto Teissier in a current bestseller titled Never Again. "General submissiveness and the ensuing governmental disregard for public opinion will never again take place here."

Salinas's basic choice is this: he can attempt to "buy" some political support with government handouts, financed somehow (loans, taxes, inflation, the hope of higher oil prices for the government-owned oil industry) and ultimately resort to violence to keep his party in power, or he can give democracy and the free market an opportunity to produce longer-term results.

It is unlikely that world oil prices will increase considerably or that major new loans can be obtained from already reluctant international creditors, so the government will probably be unable to fuel the economic advances needed for genuine popular support. Therefore, it is in the best interest of the Salinas administration to allow the private sector to assume its traditional role of economic engine and provider. "If he does not want to see the country slowly crumble," observes writer Mauricio Gomez Mayorga, "Salinas will have to bear right." At the same time, he should refrain from resorting to fraud in the many upcoming local elections. Any other strategy, while perhaps able to create the illusion of prosperity among key groups for a short time, will likely polarize the country and produce great harm in the long run.

Salinas, with a doctorate in government from Harvard University, is widely regarded as a very intelligent man. He has never before run for office, but he does seem to have acquired the skills of a politician. In his inaugural address, he made encouraging statements to both the left and the right. He pledged to continue de la Madrid's general policies and said that Mexico might suspend payments on foreign debt (though some optimists think this could be mere talk to placate opposition). If he can revitalize the economy before the Mexican people lose their patience, then further news from south of the border could be good.

Julio Marquez is REASON's Mexican correspondent.