THE MEXICAN SHOCK
Its Meaning for the U.S.
By Jorge G. Castaneda
New Press 254pp $23
Turn-of-the-century Mexican dictator Porfirio Diaz lamented: "Poor Mexico. So far from God and so close to the United States." How things have changed. For President Ernesto Zedillo Ponce de Leon, close ties to the U.S.--as a market, source of investment, and lender of last resort--are nearly his only hope of rescuing Mexico from economic collapse. To achieve that, says the conventional wisdom, Zedillo must continue, and deepen, the free-market reforms launched by his predecessor, President Carlos Salinas de Gortari.
A cautionary note is in order, however. Before Salinas, Mexico's last great modernizer was Diaz. He opened the market and attracted investors from the U.S. and Europe to upgrade industry and infrastructure, with considerable success. Nevertheless, he was overthrown in 1911, and a chaotic revolution ensued. His pursuit of economic growth had widened the gulf between rich and poor. And he had built no political consensus among Mexicans to support his reforms and legitimize his rule.
Much the same dilemma faces Zedillo and the long-ruling Institutional Revolutionary Party (PRI). Poverty is spreading in Mexico, and it's not clear that Zedillo is willing and able to democratize the PRI and hold fair elections. Failure to do so will eventually trigger a backlash against market reforms, says political scientist Jorge G. Castaneda. The possible consequences are a central theme of his book, The Mexican Shock: Its Meaning for the U.S.
When the North American Free Trade Agreement was approved in 1993, few Americans fully realized what it meant. The pact tightly linked the U.S. to the least democratic major nation in the hemisphere, with enormous economic and social problems and no working political mechanism for resolving conflicts through normal democratic processes: free elections and the alternation of political parties in power.
What NAFTA did achieve for the U.S., says Castaneda, was one of its "oldest and most persistent aspirations--Mexico's full incorporation into the American economic sphere and the subsequent political and international alignment of Mexico with Washington." Although NAFTA triggered an initial spate of U.S. exports to Mexico, unforeseen costs to the U.S. are rapidly mounting. President Clinton had to lend $12.5 billion to Mexico following the peso's collapse, and cheap Mexican imports are now displacing American-made goods in the U.S. market, costing a number of American workers their jobs. In Castaneda's view, greater strains in U.S.-Mexican relations may be in store.
Castaneda, 42, a professor at Mexico's National Autonomous University and a columnist for the Los Angeles Times, is a former leftist who, like many in Latin America, has moved toward the center. He also is a well-placed observer--a member of the elite, drawn from all political tendencies, that influences opinion and policies in Mexico. His book is sprinkled with name-dropping anecdotes, such as the discussion that he and novelist Carlos Fuentes had with Salinas about election reforms over an eight-hour lunch.
NAFTA was a key part of Salinas' strategy. A major flaw, Castaneda argues, is that it was designed to hold down inflation, not make Mexican producers more competitive. And politically, Castaneda sees Salinas as a "sorcerer's apprentice"--who only partly dismantled the PRI's system of political control, from patronage to intimidation, but kept such unfair advantages as TV coverage biased in favor of the PRI. As a result, the August, 1994, national elections "did not help create the spaces and channels necessary for popular discontent, and the deep fractures among Mexican elites, to find free and accurate expression."
That's dangerous. "Still ahead," Castaneda warns, "are the repercussions of thirteen years of economic stagnation, a brutal concentration of wealth and income, and the lack of any escape valve for the resentment that must inevitably ensue."
It's easier, of course, to forecast trouble than to lay out solutions. Castaneda's book, mostly stitched together from articles originally written for magazines, is not a coherent road map for Mexican er U.S. policymakers.
Castaneda is most illuminating in his insights into Mexico's political processes and their significance for the U.S. Whether or not the PRI reforms itself, its monopoly seems likely to erode. The charismatic former mayor of Mexico City, Victor Manuel Camacho Solis, for example, recently quit the PRI in what could be a move to launch an opposition party with more populist leanings. And as Mexican parties compete for votes, Castaneda says, "any sustained alternation in power through elections" will "almost unavoidably" bring about a redistribution of wealth.
What the U.S. has been supporting in Latin America are policies intended to spur investment and create wealth, not to spread it. But if democracy does not coincide with economic growth and redistribution, warns Castaneda, "in all likelihood it will not last in Latin America during these last years of our century." Despite the Chiapas uprising, there's no sign of a broader backlash among Mexicans. But then, few saw the 1911 upheaval coming. Indeed, Castaneda quotes another wry maxim attributed to Diaz as he headed for exile: "In Mexico, nothing happens until it happens."