Peso Plunge Challenges Mexico's Democracy

AMID Mexico's economic turmoil the political shortcomings that have so far played second fiddle are finally moving up to first chair.

When Mexican President Ernesto Zedillo Ponce de Leon announced his emergency plan for overcoming the country's economic crisis Jan. 3, he emphasized the crucial role political reform will play in Mexico's long-term economic stability.

That may be the one point on which the beleaguered president is garnering support. Even as Mr. Zedillo's economic plan hangs under a cloud of doubt his willingness to link a resolution of the country's economic debacle to unsatisfied political aspirations is well-received among many Mexico observers.

The crisis showed no sign of settling as the Mexico City stock market had its worst day in a year on Jan 9. The peso firmed, but only after the government announced it would be drawing from an international emergency credit line of $18 billion and bringing in the United States Federal Reserve.

Observers say that democratization is not only key to giving Mexico the stability its economic development requires, but that a democracy with balanced and decentralized powers will help break the cycle of economic crises afflicting Mexico for more than two decades.

``If we in Mexico are to put an end to these economic crises that accompany each transition from one president to the next, it will be through an honest democratization,'' says noted historian Lorenzo Meyer. ``It's not the only way, but certainly it's the best way for the country.''

What troubles observers like Mr. Meyer is that the breakup of 65 years of state-party rule will paradoxically take a strong president who has both leadership and support for reforms. Many here doubt that Zedillo, a technocrat with little political experience fits the bill.

The economic crisis, which resulted in a near 40 percent dive in the value of the peso, has wasted the legitimacy that accompanied Zedillo into office on Dec. 1 and left him with Clintonesque approval ratings.

Even analysts who differ little with Zedillo's textbook response to the currency crash - steep cuts in spending, negotiation of foreign help to make debt payments, and measures to limit inflation and encourage exports - are worried by the way the plan was developed and divulged.

``It's the form of the presentation that generated so much uncertainty'' and will make the economic recovery unnecessarily difficult, says political analyst Carlos Elizondo.

First, Finance Minister Jaime Serra Puche was fired after bungling the peso's devaluation and showing little concern for foreign investors' anxiety. Then Zedillo raised eyebrows and lowered international confidence by putting off several times a national address detailing his emergency economic plan.

Finally, the Finance Ministry was authorized to send foreign investors and some of the foreign press versions of the emergency plan that offered more details than what was generally released in Mexico. Although that honored a longtime Mexican political tradition of singing different tunes at home and abroad, it fed confusion and doubts about Zedillo.

Longtime political commentator Raymundo Riva Palacio, writing in the Mexico City daily Reforma, blamed Zedillo's ``catastrophic beginning'' on the coterie of under-40, mostly US-trained ``techno-yuppies'' who are advising him.

Yet the barrage of criticism against Zedillo is not seamless, with some observers arguing that he got off to a good start - before the peso crash - that should give Mexicans hope in his potential.

``He made the right noises on Chiapas,'' the southeastern state where a guerrilla army continues its standoff with the Mexican Army. ``[He] defused a situation that could have exploded in his presidency's first weeks,'' says Peter Ward, director of the Mexican Center at the University of Texas in Austin.

Zedillo stood by Chiapas's controversial governor-elect from the ruling Institutional Revolutionary Party (PRI), but accepted a Roman Catholic Church-based commission as intermediary in the conflict. He insists the Army will never ``fire the first shot'' and says no issues will be forbidden from the negotiating table.

Mr. Ward says Zedillo is being unfairly blamed for an economic crisis that should have been addressed by former president Carlos Salinas de Gortari. ``These [economic] adjustments have always been made by the lame duck presidency to leave the incoming president a clean slate, but Salinas refused to take the hit on this one,'' he says.

Many agree that while the current crisis may have put the economy back at the top of Mexico's trouble list, the country's deepest need continues to be political reform.

With the country already embroiled in post-election controversies in five states, this year's heavy schedule of local elections, in such key states as Jalisco next month, will provide a laboratory for how serious the Zedillo government is about guaranteeing credible elections. And the political climate that accompanies those votes will go a long way in determining how the foreign investors Mexico wishes to woo back perceive the country.

``The fundamental problem isn't one of persons, but of institutions,'' Meyer says. ``Only when Mexico's system of centralized power is limited by strong institutions will it be able to respond in time to such red lights as an expanding [trade] deficit and shrinking foreign investments.''

What is needed, he adds, is ``dramatic action'' on Zedillo's part that demonstrates a will to restructure Mexico's political system. ``Despite the current focus on the economy,'' Ward says, ``the challenges of this [presidential term] remain largely political'' and can be summarized into two key elements: reducing the power of the presidency, and a top-down reform of the PRI.