A New Mexico

Mexico is moving quickly toward a free-market economy. President Carlos Salinas de Gortari, the 41-year-old Harvard-educated economist inaugurated last December, is cutting government spending, continuing to privatize state-owned companies, and installing like-minded people in key government positions. The big question for Mexico's future is whether these reforms can produce positive results before anything happens to shatter Mexico's fragile economy.

The trend toward privatization that began under former President Miguel de la Madrid will clearly continue and expand under Salinas: the country's two state-owned airlines, Mexicana and Aeromexico, are in the final stages of conversion; the banking system, nationalized in full in 1982, is now split evenly between private investors, the government, and bank executives, who must surrender their stock when they leave their jobs; and there is talk of full privatization of the country's telephone company in the near future. Hundreds of smaller state-owned ventures have already been closed or sold.

As for government spending, Salinas's first budget, already approved by the Mexican Congress, includes real reductions in all items except debt payments. (Mexico's foreign debt amounts to $112 billion, or 75 percent of GNP. The annual interest is around $10 billion.) In addition, new laws enable the executive branch to cut or cancel spending programs in the future without congressional approval. The goal: to bring inflation down from 51.7 percent in 1988 to 18 percent this year and reduce the sizable budget deficit while maintaining at least 2 percent growth in GNP.

Salinas does not plan to accomplish these miracles by himself. He has appointed an economic cabinet composed mostly of thirtysomething, U.S.-educated economists with strong free-market orientations. As secretary of the treasury, he chose Pedro Aspe, 38, who has a doctorate from MIT and has been a major proponent of privatization. As budget and planning secretary, he picked Aspe's long-time deputy, Ernesto Zedillo, 37, who has a doctorate from Yale. As secretary of commerce, he named Jaime Serra Puche, 37, who has graduate degrees from Yale and Stanford, and as comptroller general, 34-year-old Maria Elena Vázquez, who has a strong reputation for tight cost-control and bureaucratic simplification. To add some experience, Salinas appointed, as head of the country's largest bank, Antonio Ortiz Mena, who was the principal architect of Mexico's attempt to create a free-market economy in the '60s.