Can Zedillo Push Democracy And Keep The Lid On?

The debate rages in Mexican cafes, taxicabs, and corporate boardrooms: Many people say President Ernesto Zedillo Ponce de Len is the weakest, most pathetic leader in Mexico's post-revolutionary history. But others defend him as a hero determined to deliver long-awaited democracy to his country.

While Zedillo badly fumbled the peso crisis, he is proving a much more democratic leader than his predecessor, Carlos Salinas de Gortari. Zedillo has brought a member of the opposition into his Cabinet and ordered a sweeping remake of the corrupt justice system. He has also begun to curb the near dictatorial power of his own Institutional Revolutionary Party (PRI).

In the short term, such moves have blunted criticism. But the question is whether Zedillo is digging himself into an even deeper hole. By cracking down on the PRI, which has long kept Mexicans in line, he could be crimping his ability to manage the country's troubled economy. And he may be opening the way for an explosion of protest over social inequality, supposed U.S. interference, and job losses resulting from privatizations.

Zedillo's advisers are pmndering these questions as they try to win back investor confidence and begin turning the economy around. They are planning to maintain strict fiscal and monetary discipline and hold the line on inflation. They want to move quickly on privatization--to raise money and reassure investors on Mexico's direction. "We've lost 90% of the credibility we built up over the last six years," says one senior government official. "We want to send a clear signal that the Mexican government means business."

But the inner circle is also hotly debating how much painful orthodoxy Mexicans will swallow. They know there is huge resentment over Mexico's pledging its oil revenues as collateral for the $50 billion U.S.-led bailout and suspicion of secret conditions on such issues as drug trafficking and immigration.

The government's plans to sell off railroads, power plants, and petrochemical units are already drawing flak from the PRI, including Zedillo's own Energy Secretary. That is not surprising, since these state industries have long been used to provide cushy executive posts for PRI higher-ups, as well as tens of thousands of jobs for the party ranks.

WIDER TROUBLE. Resistance is also stiffening from the normally compliant PRI-backed unions, which fear that privatization will bring massive layoffs. In recent weeks, angry oil workers have blocked fuel deliveries to gas stations in Tabasco state. Unrest could escalate quickly as the predicted 1.5% decline in gross national product this year begins to bite and inflation soars to 25% or more. Workers are already chafing at the 7% wage ceiling the government wants. In what could presage wider trouble from long-quiescent Mexican labor, some 5,000 workers at a Thomson Consumer Electronics TV components plant in Ciudad Jurez recently struck for a week, forcing the shutdown of Thomson's main U.S. television plant. They wrangled a 20% settlement that could undermine the government's anti-inflation efforts if other workers demand similar treatment.

Several upcoming state elections, such as one in Jalisco state, could also pose big problems for Zedillo. If, as expected, the center-right National Action Party (PAN) wins, PRI stalwarts could go on the rampage as they did a few weeks ago in Tabasco state, when Zedillo caved in to demands for new elections after a fraud-tainted PRI victory.

So the bailout is unlikely to end Mexico's troubles. Zedillo is arranging a demanding agenda for himself. And he hasn't proved he is up to it.