The Peso and the President: Mexico's Leadership Crisis

WASHINGTON'S optimism on developments in Mexico City is belied by the peso. Its chronic devaluations underscore serious concerns about the leadership ability of President Ernesto Zedillo Ponce de Leon.

No one doubts the president's good intentions. But in a country whose political system still centers on an all-powerful presidency, Mr. Zedillo's failure to assert his authority contributes to uncertainty and instability. Foreigners respond by dumping pesos, and Mexicans by switching votes to the opposition National Action Party (PAN). With five years left in Zedillo's term, this only compounds his problems at a time when the country desperately needs firm leadership to confront formidable social and political challenges.

The social challenge is symbolized by the stalled peace talks in Chiapas, reminding the country of the wider problems of poverty and discrimination against the indigenous peoples that make up more than one-quarter of Mexico's population. Contributing to the most recent market jitters was the arrest of an alleged Zapatista leader in Mexico City, just as the government announced the talks were making progress. Though he was released six days later, the incident left everyone wondering how it could have happened in the first place. Especially worrisome was the prisoner's description of interrogation by Army officers before he was turned over to police, suggesting that Zedillo has trouble exercising authority over the armed forces.

The political challenge, dramatized by disclosures that former President Carlos Salinas de Gortari's brother Raul stashed more than $100 million dollars of presumed drug money in European bank accounts, is to restore confidence in the government. Zedillo made an early effort with Raul Salinas's arrest on charges of masterminding the assassination of a prominent politician. Yet, worried about exposing the complicity of more prominent power brokers and shattering the fragile unity of the ruling Institutional Revolutionary Party (PRI), the president allowed the assassination inquiries to stall. Raul Salinas was on the verge of release by the courts for lack of evidence when the US Justice Department rescued Zedillo by tipping off the Swiss police about the clandestine bank accounts.

A similar failure of presidential nerve contributes to the spread of lawlessness throughout southern Mexico, undermining Zedillo's pledge to build ''a nation of law.'' Naively, Zedillo believed he could lead by example by relinquishing the informal powers of the presidency, which derive from his leadership of the PRI. However laudable in principle, the effect in a system short on democratic checks and balances and long on authoritarian tradition has been to create a power vacuum. That vacuum is filled by PRI governors, who are acting against reform.

In Tabasco, Roberto Madrazo spent $70 million - 60 times the legal limit - to buy the governorship, yet he remains in office. In Yucatan, party boss Victor Cervera Pacheco resorted to old-fashioned patronage and electoral fraud to obtain the governorship. In Guerrero, Governor Ruben Figueroa used state police to massacre members of a peasant organization that refused to cut a political deal. The peasants have struck back, murdering police.

To restore a semblance of stability to southern Mexico, Zedillo must crack down on corrupt and lawless subordinates. That need not compromise his promise to abide by the rule of law. Cracking the party whip to force the resignation of wayward governors is in no way illegal. The governors have broken the law, jeopardizing the nation's stability.

Ideally, governors would be checked by the legislatures and the people of their own states. But such checks and balances still do not exist in southern Mexico. Effective leadership therefore calls for a two-pronged reform strategy: firm action to counter lawlessness by lower-ranking PRI officeholders while building democratic checks and balances on executive authority at the state and federal levels. Zedillo has so far proven unequal to the challenge.

With the PRI unable to address Mexico's problems, voters are switching to the center-right PAN party, whose platform centers on democracy, decentralization, and fiscal responsibility. Once confined to pockets in northern border states, the PAN now holds four governorships, including two in central Mexico. It also governs most of Mexico's large cities. The PRI is left with little more than Mexico City, which it stands to lose when the Federal District holds its first-ever municipal elections.

As the PRI loses its more urban, modern constituency, it is increasingly forced to rely on its rural bases. That is a recipe for electoral disaster in a country already overwhelmingly urban and becoming more so every day. It also greatly magnifies the influence of southern Mexico in the PRI, and with it opposition to reform.

Zedillo has two options. He can forge a new base consisting of the PAN and reformist members of the PRI and the center-left Party of the Democratic Revolution. Or he can continue to rely on the shrinking PRI as the relative weight of its southern, antireform wing increases. As long as he sticks to the latter option, there will be little reason to have faith in Mexico's immediate future or its currency.