California Western School of Law

Baer, Delal

THINKING ABOUT THE UNTHINKABLE: CONTINUITY
AND CHANGE IN MEXICAN POLITICS
Delal Baer*
I. MEXICO AND U.S. SECURITY INTERESTS
Mexico's future political and social stability is a matter of direct
concern to the national interests of the United States. Since the
Mexican economic crisis erupted in 1982, a visceral anxiety about
Mexico's political future has exacerbated the traditional friction in
bilateral relations. Issues that had perennially complicated bilateral
relations-immigration and drugs-have acquired new dimensions
stemming from preoccupations about the basic security of the
United States vis-a-vis Mexico.
Many are concerned that drugs and immigration are sympto-
matic of deeper structural problems in Mexico. On the heels of
these anxieties is concern regarding the potential for another 1910
style revolution in Mexico. These anxieties are compounded by our
increasing awareness of the vulnerability and uncontrollable nature
of our southern frontier. The initial dilemmas posed by the frontier
are unconventional security challenges resulting from the
destabilization of Mexican society. These include massive immigra-
tion, narcotics traffic, and low intensity border conflict. Californians
and Texans are more sensitive to this reality than any other re-
gional constituencies.
Even more serious, the interface between an undefended U.S
frontier and Mexican stability is fraught with East/West implica-
tions. Mexican crisis and instability would be a windfall to Soviet-
Cuban calculations and interests in the hemisphere. Clearly, no
event could more rapidly force a reordering of U.S. global strategic
priorities than a major change in the political status quo or the
appearance of instability in Mexico. The scope of U.S global com-
mitments and the nature of the U.S. force structure presuppose
peaceful and friendly borders.
This delicate issue must be approached by balancing the oppos-
ing views of alarmism and complacence. It is essential to avoid
* Fellow, The Mexico Project, Center for Strategic and International Studies (CSIS).
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alarmism and its potentially counterproductive repercussions in
Mexico. Questions of confidence when raised on this side of the
border tend to have deep political resonance on the other side, and
potentially undermine stability and confidence in Mexico. On the
other hand, the United States may not complacently assume that
Mexican political stability is guaranteed. This type of an assump-
tion leads to lack of preparation and contingency planning. Thus, it
is extremely important that we walk the fine line of quiet realism
and preparedness, pursuing a constructive approach.
Efforts to calculate the odds of significant instability in Mexico
or elsewhere are uncertain at best. Optimistic estimates regarding
Mexico are bandied about in respectable policy and scholarly cir-
cles. However, we have not had tremendous success in predicting
instability in other countries. Iran is a prime example of a predic-
tive intelligence failure. The United States' predictive track record
being dubious, it may be useful to pursue an exercise in political
seismology, outlining the potential faults and fissures in the Mexi-
can political system. After acknowledging our analytic pitfalls, we
must be prepared to think about the unthinkable; if only to be bet-
ter equipped to prevent its occurrence or manage its consequences.
II. THE FORCES OF STABILITY
The case for continued stability is quite strong. The majority of
the policy and academic establishment share the belief that Mexico
will somehow muddle through, relying upon the residual strength in
the system. Mexico has been stable for almost fifty-seven years, a
track record not lightly disregarded. Mexican government officials
continually remind U.S. officials, that there are no on-going insur-
gency or terrorist movements in Mexico. Mexico continues, by and
large, to enjoy social peace. The memory of the 1910 revolution has
made Mexico afraid of its own potential for violence, and therefore
encourages a certain political caution. The nearby examples of
Central American social instability restrain those who might take
political risks. While Mexican discontent may be on the rise, the
costs of destabilization are far too great to risk. United States' pol-
icy makers also realize that political experimentation and the decay
of the status quo in Mexico will not necessarily result in a transi-
tion to democracy or an outcome favorable to U.S interests.
Furthermore, some argue that there is no mature alternative to
the current Partido Revolucionario Institutional (PRI) dominated
system. There are no credible or charismatic opposition figures-no
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POLITICAL CHANGE AND STABILITY
Corazon Aquino, for example, on the horizon. Nor is there a Ferdi-
nand Marcos to serve as an easy political target. It is hard to take
aim at a tentacular and bureaucratic institution such as the PRI.
Furthermore, the political party structure, at least that of the oppo-
sition, is relatively weak and underdeveloped. Living in the shadow
of the PRI for fifty-seven years has not resulted in a well organized
dynamic system of electorial opposition in Mexico.
There are five "P's" that have served as the glue that holds the
system together. The first is prosperity: in the thirty years prior to
1982, economic growth has rarely sunk below six percent. The sec-
ond is patronage: the system has effectively distributed benefits to
just about every member of society, and insured the loyalty of most
of the important actors of the Mexican society. Third is presiden-
tialism: in the past, the president was almost a mythic figure and
sustained a sense of respect and hierarchy in the system. Fourth is
pragmatism; a non-ideological approach to problems and questions
that gave the system flexibility, creativity, and initiative in dealing
with its challenges. And finally, there is the PRI; the single party
that has maintained effective control of Mexican politics by con-
structing a grand coalition which incorporates every social sec-
tor-business, labor unions, the middle class, the peasants-in an
organized fashion in the political system.
III. THE FORCES OF CHANGE
Despite the preceding list of strengths, weaknesses exist in the
system that are becoming increasingly apparent. The coalition de-
scribed above is showing serious signs of erosion: significant social
actors have begun to drop out or waiver. The first of these waiver-
ing actors has been the private sector. The nationalization of the
banks in 1982 struck a severe blow to business confidence in Mex-
ico, upending the traditional rules governing the relationships be-
tween the state and industry. As a result, leading elements in the
private sector began to question their security within the system.
Another symptom of the disintegration of the traditional coali-
tion is dissent among the left wing of the PRI. Leftism ideologues
within the party are challenging not only the wisdom of economic
policies in the fact of crisis, but the very modus operandi of Mexi-
can political life. Rumblings are heard within the restive and in-
creasingly independent labor union movement. The decrease in eco-
nomic resources flowing through the system has made it harder to
buy the political loyalty that the PRI traditionally enjoyed. Eco-
1987)
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nomic austerity has strained the patronage-based Mexican consen-
sus and introduced zero-sum calculations that exacerbate long-
standing ideological fissures.
Finally, we have seen an impressive upsurge in electoral distur-
bances in Mexico. The electoral process is the institutional mecha-
nism through which discontent over the crisis has been most fre-
quently expressed. The corruption associated, rightly or wrongly,
with recent administrations has tarnished the image of the presi-
dency and undermined the credibility of political institutions. Dis-
content with specific government actions and poor economic per-
formance have diminished electoral support for the PRI.
Broader forces are also at play. In the entire northern tier of
border states, as well as in major central highland cities such as
Puebla and San Luis Potsi, the PRI's electoral margins appear to
have diminished dramatically since 1982. PRI support is strongest
in the rural areas and weakest in the cities, polling an average
twenty percent lower in urban areas across the nation. This pattern
indicates an overall loss of support in middle class, modern constit-
uencies, where the political future of the nation rests. In Mexico
City, a sprawling capital of eighteen million, official statistics ac-
knowledge a PRI plurality of just under fifty percent. Unreleased
opinion polls are reputed to suggest even greater deterioration.
Should Mexico City's population ever attain the degree of electoral
mobilization achieved in Chihuahua in 1986, the future of Mexico
could change overnight.
Socio-demographic changes have accumulated over a twenty year
period, making Mexico increasingly urban, middle class, and edu-
cated. This new society eludes effective control within the formal
scheme of corporate interest representation. The increasing dissatis-
faction and political maturity of a growing middle class is the prin-
cipal challenge to the PRI, which has seen its support decay in
those states that are most urban, populated, industrialized, and
modern. An emergent democratic, civil culture, based mostly in the
modern sectors of society, bears the greatest challenge to the future
of the Mexican single party state.
CONCLUSION
The 1988 Mexican presidential election inevitably raises ques-
tions regarding continuity and change. Understandably, U.S. atten-
tion is most clearly aroused by bleak scenarios of dramatic change
such as a protracted insurgency or a sudden collapse of authority
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1987] POLITICAL CHANGE AND STABILITY 145
leading to a Marxist-Leninist regime. There must be a middle
ground between the alarmists and the somnambulists, between
scare stories and reasoned concern, for the wide range of scenarios
that are clearly within the realm of probability. The policy making
community should be sensitive and respond positively to the wide
variety of subtle transformations and opportunities. The risk of
change may be great, yet the costs of resistance to change may
ultimately be greater. Hardened immobilism and explosive decom-
pression are not inevitable in Mexico. A wide range of creative and
positive scenarios may yet emerge out of what has been generically
labeled "la crisis," with Mexico finding unexplored opportunities
for positive economic growth and political evolution.
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English

Thinking About the Unthinkable: Continuity and Change in Mexican Politics

Cox,, Barbara, Reviewer

BOOK REVIEW: Legal Writing: Getting It Right and Getting It Written.By Mary Barnard Ray and Jill S. Ramsfield, Minneapolis, West Publishing Comanany: 1987.

Rubio F., Luis

Economic Structure of Mexico: Changing Economic Structure of Mexico

Siqueiros, Jose Luis

MEXICO AND THE UNITED STATES:
STRENGTHENING THE RELATIONSHIP
Jose Luis Siqueiros*
During the last four years there have been numerous new strate-
gies to alleviate the economic crisis in Mexico. This crisis arose
from the huge external debt, the plunge of international oil prices,
the increasing fiscal deficit, and other problems that have plagued
the Mexican economy.
Several measures aimed at strengthening the course of the econ-
omy have been adopted by the Mexican Government. However, the
promotion of direct foreign investments to encourage investment
and productivity, has not been given special emphasis.
Mexico enacted a new set of foreign investment rules in 1973.
The law regulating foreign investment is the juridical framework in
the field; its text and related regulations have not been amended.
However, the Mexican Government's current policy in this matter
is one of flexibility. The administrative construction of the statute
by the National Commission of Foreign Investment (FIC) has
taken a change of course. The FIC has established new guidelines
for the selective promotion of foreign investment. Although certain
activities in strategic areas are still reserved to the state or to Mexi-
can nationals, other fields where foreign investors were previously
restricted to a 49% equity limit, are now accessible to higher partic-
ipation. In some cases, this participation may reach 100%.
The selection criteria being followed by the FIC include the
following:
a) new and sophisticated technology;
b) an export program and a favorable balance of payments;
c) creation of a significant number of new jobs;
d) localization of industry in less congested areas, preferably des-
ignated by the Government as priority zones; and
e) investment in the production of certain capital goods or the
manufacture of products not available in Mexico.
A list of activities deserving such priority has been published.
* Former Lieutenant-Governor of Chihuahua Mexico. Former Professor of Law,
Universidad de Mexico. L.L.B. Universidad Autonoma de Mexico.
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When receiving authorization to carry out a project, the foreign
investor is sometimes requested to comply with the above
parameters.
Direct foreign investment in Mexico amounted to sixteen billion
dollars as of December 1986. The United States is the most impor-
tant foreign investor, contributing 67.3% of the total. West Ger-
many ranks second, investing 8.1%, and Japan third with 6.1%.
There are approximately 7,000 corporations established in Mexico
with foreign capital participation. Manufacturing represents 78% of
the foreign investment, with merchandising and services comprising
19%, extractive industry 2% and agriculture about 1%.
Periodically the FIC issues General Resolutions which establish
guidelines and criteria for the acceptance of new investments and
structural changes of those already in existence. These resolutions
are aimed at reducing formalities and red tape for both new and
old companies. The influx of foreign capital has increased allowing
us to conclude that even if the letter of the law has not been
amended, these policies have changed the investment climate to
welcome foreign investors.
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Mexico and the United States: Strengthening the Relationship

Margadant, Guillermo F.

Stability and Political Change: The U.S.-Mexican Relationship Between Hope and Fear

Smith, Steven R.

Law, Behavior, and Mental Health: Policy and Practice

Troiano, Kenneth

Law Enforcement Use of High Technology: Does Closing the Door Matter Anymore?

Inbau, Fred E.

Manak, James P.

OPINION OF A SCHOLAR -- Miranda v. Arizona -- Is it Worth the Cost? (A Sample Survey, with Commentary, of the Expenditure of Court Time and Effort

International Law Journal, California Western

1988] INDEX ix
TABLE OF CASES
INDEX FOR VOLUME 18
Alfred Dunhill of London, Inc. v. Cuba ....................................... 365
Banco Nacional de Cuba v. Sabbatino ..................................... 362, 364
Bernstein v. N.V. Nederlandsche Amerikaanische, etc ........................ 364, 365
C arrera v. C arrera .................................... .................... 36 1
E li L illy C o. v. B renner ..................................................... 352
Ex Pare Republic of Peru .................................................. 360
Filartiga v. Pena-Irala ...................................................... 371
First National Bank v. Banco Nacional de Cuba ................................ 365
F isheries C ase ............................................................. 328
G arcia-M ir v. Sm ith ........................................................ 189
G uevara v. F lores .......................................................... 189
G uintos v. M arcos .......................................................... 372
Immigration & Naturalization Service v. Cardoza-Fonseca ... 179, 180, 190, 200, 203-05
Immigration & Naturalization Service v. Stevic ............................. 187-190
In re S cherico ............................................................. 34 5
In re M ono Containers, Ltd .................................................. 345
In re H ilm er .............................................. 333-35, 337-42, 345-53
Jim enez v. A ristequieto ................................................. 366, 367
Kalamazoo Spice Extraction v. Provisional Mil. Gov ............................. 367
M atter of A costa ....................................................... 188, 197
Nasser v. Immigration & Naturalization Service ................................ 189
North Sea Continental Shelf Cases ........................................... 328
O rtigas v. M arco s .......................................................... 37 1
Paquete H abana, T he ....................................................... 363
Republic of the Philippines v. M arcos ......................................... 369
Republic of M exico v. Hoffman .............................................. 360
S ankan v. IN A ............................................................ 189
Schooner Exchange v. M 'Fadden, The ......................................... 358
Sim on v. M arcos ............................ ........ .......... 371, 376, 378-380
Verlinden B.V. v. Central Bank of Nigeria ..................................... 375
Victory Transports v. Comisaria Geralde Abstecimientos y Transportes ............. 378
1
International Law Journal: Table of Cases
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Table of Cases

Douglas, The Honorable H. Eugene

BACKGROUND AND OVERVIEW
REMARKS BEFORE THE CONFERENCE: MEXICO AND
THE UNITED STATES
The Honorable H. Eugene Douglas*
Leaders in both Mexico and the United States act with courage
and wisdom in responding to the mounting pressures of current
events, whether the topic is the vital monetary questions now facing
us, bilateral trade and investment, security in Central America, or
the price of oil. Mexico's current problems are as staggering as its
prospects. Much of Mexico's history is a record of lost opportunity,
of failing to mobilize the vast human and material riches of the
country for the common good. There is no room for illusions, but
there is hope. Few countries with such natural wealth have citizens
who have shown such patience and forbearance in not partaking of
that wealth.
Mexico's continuing 1982 economic crisis has presented its Gov-
ernment with its most serious challenge since the 1930s. At that
time the current pattern of a single party regime was consolidated.
Although the current crisis is principally economic in origin, its so-
lution requires substantial political change. In capitals around the
world, leaders are asking if the successor of President de la Madrid
will be able to implement the right policies to restart sustainable
economic growth and insure social peace for the 1990s and whether
the major power brokers who operate under the Partido Revolu-
cionario Institutional's (PRI) aegis will permit the new President to
do so. Implementing the right policies will require difficult political
choices and affect the groups whose support is crucial to the gov-
ernment's success. Additionally, the U.S. presidential succession in
* This article is adapted from remarks made by the author on February 6, 1987, as
part of the Conference on "Mexico and the United States: Strengthening the Relationship,"
held at California Western School of Law.
President and Chief Executive Officer of Alpha Environmental, Inc., C.B. Smith Professor
of U.S.-Mexican Relations, University of Texas at Austin. Formerly United States Ambassa-
dor at Large and Coordinator for Refugee Affairs. M.A. Columbia University.
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1988 will have a major effect on the PRI's efforts to revitalize itself
and the troubled ruling coalition.
Demands for a political opening of the system have been echoed
for some time now, from the opposition as well as from within the
PRI. It is likely that the PRI will remain the major force in Mexi-
can politics for the 1990s. However, it is possible that should the
economic and social woes persist past 1989, the party's hold on the
electorate will begin to unravel.
I. THE HISTORY OF MEXICAN POLITICS
Frequent and impassioned references to history play a large role
in Mexican politics. The PRI likes to portray itself as the continua-
tion of a great tradition. It can trace its roots back to the Revolu-
tion of 1910 when the gradual process of consolidating political fac-
tions into organizations resembling contemporary political parties
was initiated.
The precursor of today's Partido Revolucionario Institutional
(PRI) was the Partido Nacional Revolucionario (PRN), established
in 1929. This in turn gave way in 1937 to the Partido de la Revolu-
tion Mexicana (PRM). The PRM was perhaps best known for in-
stituting the state corporatist structure that was so popular at that
time in Italy, Spain and Austria. It lasted until 1945 when the PRI
was officially proclaimed.
Today over fifty percent of Mexico's adult population belongs to
PRI organizations which consist of three major groups: the popular
(CNOP), the labor (CTM), and the agrarian (CNC) groups.
Until the late 1970s, the PRI skillfully maintained a functional
coalition of bureaucrats, employees, businessmen, trade union
members and campesinos. By 1982, the PRI had, through national-
ization, extended the state's control to more than two-thirds of the
country's output. The larger business and banking activities have
traditionally cooperated with the PRI even before the sudden na-
tionalization of the banks ordered by President Lopez Portillo, in
his desperate efforts to salvage the end of his term. The PRI has
not always been good for business. However, the PRI's patronage
system has fostered one kind of stability by giving the ambitious
and the obedient a stake in the maintenance of the status quo. Ru-
ral Mexico is among the pillars of the party's support, but this
group benefits the least from the PRI's most recent policies. De-
spite the fact that decades of PRI control have given the electoral
masses of the country a kind of institutional status, they are the
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BACKGROUND AND OVERVIEW
object of effective and unceasing manipulation, coercion and
control.
II. INTERRELATIONSHIP BETWEEN MEXICAN AND UNITED
STATES ECONOMICS
When the issues of widespread electoral raid and corruption sur-
faced in the U.S. Senate hearings in 1986, Mexico City was stung
by the source and the frank substance of the testimony. There were
the expected diplomatic expressions of outrage and objection. Addi-
tionally, among the media and officials who commented there was
the restatement of a recurring theme in U.S.-Mexican relations;
namely, that Mexico is off limits to the kind of foreign commentary
and sharp criticisms which mark the relationships between the
other democratic states of the West. Mexico's claim for a special
immunity from criticism is really remarkable. To appreciate this,
one only need recall the American public commentary about Spain
and France withholding overflight permission for the U.S. military
aircraft in route for the air strike against Libya, or the extensive
and continuing coverage of the recently elected President of Aus-
tria, former U.N. Secretary General Kurt Waldheim.
Whether Mexico likes it or not, the difficulties of its own national
economy and the behavior of its political system have caused Mex-
ico to join its fortunes with those of the outside world in a manner
that represents a significant departure from the past. The world, in
turn, has taken a heightened interest in Mexico, having finally rec-
ognized its geopolitical importance. The interest in Mexican events
will result in more foreign political commentary, sometimes contro-
versial, in the world press. The PRI leadership may not always en-
joy the attention, but chances are that the overall effect will help
nudge the country toward needed changes.
In addition to a more open political system, positive relations
with the United States encourage economic recovery and political
stability. The issues on the agendas of the two countries show that
there are more permanent issues than transient disputes. We are
still working on issues that have been asserted, in one form or an-
other, for at least fifty years: immigration, water and fishing rights,
energy policies, trade and investment questions. The issues persist,
but the emphasis changes over time, and few major bilateral issues
are subject to much control from Washington, D.C. or Mexico
City. The two governments can set an institutional or legal frame-
work. They can affect the atmosphere of the moment, but the vast
1987)
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geographic scale of the two countries and the complex interrelation-
ships between the two economies and societies make control diffi-
cult at best.
Mexico, as opposed to the United States, has a highly centralized
system of government. This contrasting governmental philosophy
often makes life difficult on both sides of the border. Substantial
changes in the philosophies of the governments are not likely in the
near future. Therefore, the test of the U.S.-Mexico relationship is
whether we, in the United States, can devise policies and means of
implementation that serve our national interest and security, but
that also reflect an understanding of the realities and legitimate in-
terest of Mexican society. Whatever the merits or strengths of the
temptations, it simply does not serve our fundamental interest to
become involved in Mexican domestic politics, or to act as mentor
for new political groupings inside Mexico.
At the same time, wholly indigenous forces are at work within
Mexico testing the strength, political vision, and stability of the
PRI and its current leadership. Inevitably, U.S. actions will influ-
ence those forces in an indirect fashion. The United States has a
genuine fundamental interest in Mexico's continued development as
a free and prosperous economy with a democratically elected gov-
ernment which promotes the blessings of freedom, security, and so-
cial justice for all citizens.
The Mexican people can use the help of their North American
neighbors in building a better life for themselves and their children.
Prosperity is mutually reinforcing. An affluent Mexico can contrib-
ute to American prosperity, but a poor Mexico will have little to
offer to America's future except a distracted Mexican government,
potential security problems on our southern border, and an even
larger stream of immigrants.
Mexico's long range stability depends heavily on its economic de-
velopment, the ability to feed itself, and the ability to provide em-
ployment for its growing population. The only long term solution
for the problem of illegal immigration from Mexico to the United
States is the successful expansion of economic opportunities inside
a free and dynamic Mexico. Border control, like economic control,
will increasingly become a matter of insulation (if not confronta-
tion) and negotiation between nations.
It is becoming obvious throughout the hemisphere that without a
dynamic free enterprise system governments can neither stimulate
economic growth nor diversify their economies. In the past we often
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BACKGROUND AND OVERVIEW
encountered the excuse that before taking concrete steps to facili-
tate the growth of a private sector economy, you had to have the
proper infrastructure. This concentration on infrastructure has
often led to overblown bureaucracies of government-owned means
of production. These reached far beyond basic infrastructure re-
quirements of roads, utilities and communications. Private enter-
prises are unlikely to fully contribute to development and com-
merce, in the absence of an efficient and limited public sector. The
lack of an overall environment conducive to sound investment also
forestalls their private development.
III. THE CONDITION OF THE MEXICAN ECONOMY
Mexico's political and economic options are now inextricably
linked. There is no real prospect for modernizing and liberalizing
the economy without modernizing politics. President de la Madrid
has failed to accomplish any significant redirection in the conduct
of Mexican politics despite a campaign against corruption in public
life. Mexico's once vibrant private sector, which has been trauma-
tized by blows from Presidents Echeverria and Lopez Portillo, is
needed to transform the national economy. Many businessmen
would prefer a decentralization of power in Mexico's political sys-
tem. They resent the government's discretionary latitude and the
excessive authority of the Mexican presidency.
The economic growth model which worked so well for Mexico
during most of.the postwar period began to disintegrate in the
1970s. Echeverria fostered continuing growth by an ever heavier
reliance on government spending and foreign debt. Lopez Portillo
permitted the borrowing of massive amounts of funds from abroad,
spent oil wealth, and failed to curb the theft of billions of pesos. He
left Mexico virtually bankrupt. During this time, Mexico seemed to
be growing economically, but it was changing dramatically from
within.
Wealth and power moved from agriculture to industry, although
it was an industry which was organized not for export but to supply
the demands of the politically important emerging urban middle
and lower middle classes. Throughout the 1960s and 1970s, despite
all the manifestations of social and economic change in Mexico and
in the world economy, the PRI continued to do business in the same
old ways.
In 1982, the overseas loans ran out precipitating the first debt
crisis. This financial drama changed the scenario and added a new
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cast of characters. This culminated in declining oil income which
worsened in 1986 with the decrease in the world price of oil.
Mexico is a country of vast geographic scope with a current pop-
ulation of over seventy-five million, but it cannot feed its own peo-
ple. Mexico is also a country that cannot employ its own people and
is falling further and further behind as the population increases to
a projected total of over 110 million by the turn of the century. The
American journalist Alan Riding, in his book Distant Neighbors: A
Portrait of the Mexicans,1 describes the significance of the coun-
try's explosive population growth, the dramatic shifts from a rural
nation to an urban nation, and how the neglect of the countryside
by a succession of governments in effect forced peasants to migrate
in order to survive.
Unless the overseas friends of Mexico stand with it and en-
courage it to embark on a new path, the future of improved social
justice and economic gains inside the country looks bleak. The stag-
nation and regression makes the northward immigration pressures
on the United States even more serious. The governing elites in
Mexico City understand what needs to be done. The talent is there.
The question is whether there is the political will and the courage
to act.
IV. ENCOURAGING ECONOMIC GROWTH IN MEXICO
There are several kinds of policies that might encourage economic
growth. The first would be to increase reliance on the private sector
and decrease reliance on government. This would increase employ-
ment, production, and efficiency. The second policy direction would
be to mobilize domestic savings and facilitate efficient domestic and
foreign investment by means of tax reform, labor market reform,
and development of financial markets. Finally, there should be
measures to reduce direct and indirect subsidies in order to en-
courage direct foreign investment and capital inflows, as well as to
liberalize trade. Any mix of such policies needs to be instituted in
phases, but it is essential to begin.
Many of these prescriptions for the economy are similar to those
arising from the 1982 debt crisis and subsequent negotiations. At
that time, many of the structural impediments which contributed to
the crisis were recognized. Reducing state ownership continues to
merit attention at the highest levels of the Mexican government.
I. A. RIDING. DISTANT NEIGHBORS: A PORTRAIT OF THE MEXICANS (Knopf 1984).
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BACKGROUND AND OVERVIEW
One cannot overemphasize the need for Mexico to strive for an im-
proved balance between government and free enterprise, which con-
tinues to be slanted toward state control.
While the administration of President de la Madrid has made a
great public show of interest in selling off the huge inventory of
state-owned enterprises, performance has fallen short of rhetoric.
Mexico City says that the number of state-owned enterprises has
been reduced; however, the number of state employees has risen.
According to available data, in 1972 Mexico had only 84 govern-
ment-owned enterprises. By 1982, there were 760 under state con-
trol. During the same period, total Mexican government spending
as a percentage of gross national product increased from twenty-
three percent to forty-six percent. Someone has missed the point of
the whole exercise. The idea is not to set off minor, often unprofita-
ble, business holdings while retaining the major industrial and
banking ventures. By 1982, following President Lopez Portillo's
desperate act of bank nationalization, the great majority of Mex-
ico's major industries were under some form of government control.
The government's share of total capital formation had reached
forty-five percent.
It is still questionable whether Mexico is better off as a result of
the elevation of government presence and whether technocrats or
bureaucrats are better entrepreneurs than businessmen, whose for-
tunes will rise or fall with the markets. They probably are not.
CONCLUSION
The United States has a fundamental interest in Mexico's pro-
gress toward a more prosperous, growth-oriented economy within a
just and democratic structure. We have a large stake in Mexico's
future. In the first place, we are neighbors, and it is in our nature
to want to get along amiably with the states on our borders. Fur-
ther, the interaction between our people is already extensive and is
growing daily. America has a legitimate concern for the security of
Mexico. An unstable Mexico has far-reaching implications for U.S.
national security and the scope of our overseas commitments. Im-
migration concerns are just one of the associated issues. Any sus-
tainable long-term solution to the issue of large scale illegal immi-
gration rests on Mexico's successful economic development. While
it is technically conceivable that we could essentially interdict all
northward movements, the domestic consequences would likely
prove far more harmful to U.S. interests than maintaining the sta-
1987]
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Douglas: Background and Overview: Remarks Before the Conference: Mexico an
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CALIFORNIA WESTERN INTERNATIONAL LAW JOURNAL [Vol. 18
tus quo.
The current state of the world economy demonstrates that pros-
perity is mutually reinforcing. An affluent Mexico will contribute to
U.S. prosperity, and vice versa. A poor Mexico serves neither coun-
try. It will only drain the people of hope, weaken the democratic
prospedts of Mexico, and create a cascade of new problems for both
the United States and Mexico.
To a considerable degree, Mexico's longer range stability de-
pends on its economic development and the openness of its society
to advancement from below.
Along with many Mexicans, I believe that by unleashing the free
market, rewarding initiative, and encouraging investment and
thrift, Mexico can create the conditions not only to solve its current
financial difficulties, but also spur regional growth at rates not seen
since the late 1960s. In the process, the dedication of the Mexican
entrepreneur and the Mexican worker will lift the spirits of the en-
tire hemisphere.
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Background and Overview: Remarks Before the Conference: Mexico and the United States