Mexico's External Relations in the 1990s 9781685853235

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MEXICO'S

External Relations in the 1990s

MEXICO'S

External Relations in the 1990s edited by

Riordan Roett

Lynne Rienner Publishers • Boulder & London

Published in the United States of America in 1991 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London WC2E 8LU © 1991 by Lynne Rienner Publishers, Inc. All rights reserved Library of Congress Cataloging-in-Publication Data Mexico's external relations in the 1990s / edited by Riordan Roett. Includes bibliographical references and index. ISBN 1-55587-238-7 1. Mexico—Foreign relations—1970- I. Roett, Riordan, 1938F1236.M4871991 327.72—dc20 90-29996 CIP British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. Printed and bound in the United States of America The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.48-1984.

Contents

List of Tables and Figures Foreword, Anne McKinney Acknowledgments Parti 1 2

vii ix xiii

INTRODUCTION

Mexico's Strategic Alternatives in the Changing World System: Four Options, Four Ironies Riordan Roett Mexico and the World: Opportunities and Risks in the 1990s Jesus Silva-Herzog F.

3 23

Part 2 NEW A P P R O A C H E S T O F O R E I G N RELATIONS 3 4

North American Interdependence: Mexico's New Paradigm for the 1990s Clark W. Reynolds Mexico's Definition and Use of "National Security": Toward a New Concept for the 1990s Sergio Aguayo Quezada

39 59

Part 3 R E G I O N A L ALTERNATIVES 5 6 7 8

9 10

Mexico's European Policy Agenda: Perspectives on the Past, Proposals for the Future Roberta Lajous Mexico and the European Community: Toward a New Relationship? Wolf Grabendorff Mexico and the Pacific Rim: Toward a Foreign and Domestic Policy Agenda Jorge Alberto Lozoya The Dynamics of Pacific Rim Industrialization: How Mexico Can Join the Asian Flock of "Flying Geese" Terutomo Ozawa Mexico and Latin America: Prospects for a New Relationship José Miguel Insulza Mexico's Relations with Central America: Changing Priorities, Persisting Interest Cheryl L. Eschbach

v

75 95 123

129 155

171

vi 11

Contents

Mexico in the New Era of the United Nations: Continuity and Change Olga Pellicer

195

Part 4 THE PRIMACY OF RELATIONS WITH THE UNITED STATES 12 13 14

Forging a North American Economy: Issues for Mexico in the 1990s Gabriel Szekely Mexico and the United States: A New Convergence of Interests Sally Shelton-Colby Mexico and the "Hegemony" of the United States: Past, Present, and Future Laurence Whitehead About the Contributors Index About the Book

217 229 243 263 265 279

Tables and Figures

Tables 5.1 Mexican Nonpetroleum Exports to the European Economic Community 5.2 Total Mexican Exports to the European Economic Community 9.1 Exports from Latin America to Countries Within the Region, the United States, and the European Economic Community 9.2 Imports to Latin America from Countries Within the Region, the United States, and the European Economic Community 10.1 Central America's Oil-Related Debt to Mexico 10.2 Mexican Trade with Central America 10.3 Estimated Value of the Economic Cooperation Programs that Mexico Presented to Central America

77 78

164

165 183 185 188

Figures 3.1 Distribution of the North American Population 3.2 Distribution of the Combined Gross National Products of North America 3.3 Gross National Products per Capita in the Three North American Countries 3.4 Annual Percentage Growth in the Three North American Countries 8.1 "Flying Geese" Formations in the World Economy 8.2 Japan's Postwar Economic Transformation: Industrialization, Constraints, Overseas Investment, and Investment in Mexico 8.3 The Asian Pacific "Flying Geese" Formation

vii

41 42 43 45 132

135 140

Foreword

Fundamental changes in Mexico and throughout the international system during the 1980s call for a fresh look at the country's relations with the world. Adverse economic conditions, domestic and international, over much of the decade served to facilitate Mexico's efforts to transform its economy and society. In taking dramatic steps to liberalize its economy in particular, Mexico has opened its doors to a world in flux. By the start of the 1990s the world system had witnessed both political and economic transformations. The Cold War tensions that had dominated postwar global politics were on the wane following political and economic reforms in the Soviet Union. Systems demonstrating greater political pluralism were taking hold in Latin America among nations undergoing a transition from military to civilian rule, and in Eastern Europe among countries bringing to an end one-party communist governments. Directing the economic realm were such trends as the ever-heightening influence of Germany and Japan, movements toward regional integration, and the p r e d o m i n a n c e of m a r k e t - o r i e n t e d economics. The purposes of this volume, then, are to examine the various components of Mexico's external relations—both political and economic—in the light of these domestic and international transformations and to set forth the possible scenarios for Mexico's positioning in a new global framework as it evolves over the 1990s. The fourteen contributors to this book are uniquely qualified to accept the dual challenge posed by the editor at the outset: to analyze Mexico's external relations in the present and recent past and to speculate, boldly if warranted, on the direction of those relations in the coming decade. Geographically and professionally diverse, the contributors are experts in their respective fields—policymaking, diplomacy, political science, and economics—and they offer perspectives both from Mexico itself and from other parts of the world, including South America, the United States, Europe, and Japan. The volume begins with an overarching look at the world system in which Mexico will have to maneuver during the 1990s. International political and economic factors, the outcome of Mexico's modernization

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Foreivord

plan, and the prospects of a North American trade bloc define the parameters of the discussion of Mexico's strategic alternatives. The authors also lay out the challenges Mexico faces in adopting new strategies for its relations with the principal actors on the world's economic and political stages. Part 2 of the book addresses the question of whether, given internal and external change, the traditional principles of Mexican foreign policy are outdated. The first chapter here defines guiding principles for Mexican action in an increasingly interdependent world, while the second traces the recent evolution of "national security" as a concept and practice in Mexico, with an eye to predicting how the country's security interests may be altered in the changing international framework. Part 3 offers paired chapters on Mexico's strategic alternatives—both opportunities and risks—in each of three regions of critical importance to Mexico's external relations: the "new Europe," the dynamic Pacific Rim, and neighboring Latin America. The section ends with a chapter on an important component of Mexico's overall strategy in the 1990s, namely, the objectives it will pursue in the global forum of the United Nations, as this organization assumes new roles and new prominence in the 1990s. The volume concludes with three perspectives on Mexican-U.S. relations. Historically a primary focus of Mexico's foreign relations activity, the relationship gained increased salience with the announcement in June 1990 of the joint decision to pursue negotiations for a free trade agreement. Mexico's dramatic policy decision to go beyond de facto economic integration to seek a legal framework for integration with its northern neighbor reaffirms the bilateral relationship as a point of departure for all discussions of Mexico's regional alternatives in this decade. It was in recognition of the increasingly interdependent nature of relations between the two countries that the Program on U.S.-Mexican Relations was established in 1986. Operating at the Nitze School of Advanced International Studies at the Johns Hopkins University, with the generous support of the William and Flora Hewlett Foundation, the program brings together scholars and policymakers from Mexico, the United States, and elsewhere to analyze the complex issues shaping the bilateral relationship. Mexico and the United States: Managing the Relationship, the first publication resulting from this ongoing collaborative effort, set forth priorities and strategies for the two countries at the onset of new presidential administrations in both. This second publication, Mexico's External Relations in the 1990s, thus represents a continuation of our preferred method of analysis but expands the topic to place the bilateral relationship in the context of Mexico's strategic alternatives in other regions of the world. Is convergence between Mexico and the United States a given? The authors present diverse

Foreword

xi

perspectives on this issue. On one issue, however, there is a consensus. Mexico faces a variety of options, and the time is ripe for Mexico to assess those options carefully and pursue its national goals as an active participant in the changing world system. Anne McKinney Coordinator SAIS Program on U.S.-Mexican Relations

Acknowledgments

My sincere appreciation goes to my fellow authors for their contributions to this project and for their cooperation and patience during the invariably time-consuming publication process. The contributors were brought together by the SAIS Program on U.S.-Mexican Relations, and the views expressed herein belong solely to them and do not necessarily reflect those of the organizations they represent. I am very grateful for the efforts of those individuals who have worked so diligently for the successful realization of this book. A few deserve special recognition: Wendy Campbell, for her conscientious and thorough editing of the English-language manuscript, which is reflected in the improved style of all our chapters; Sergio Aguayo for his coordination role in Mexico and his capable direction of the publication of the Spanishlanguage edition; and A n n e McKinney, the coordinator of the Program on U.S.-Mexican Relations, who has overseen this project with diplomacy and good humor and to whom we are all deeply indebted. In addition, special thanks to Rita Clark-Gollub and Julian Brody for their translations for the English-language edition; Bertha Ruiz de la Concha for her translations for the Spanish edition; and Maria T. Gutierrez for her assistance with typing parts of the manuscript. I wish to dedicate this volume to Clint Smith and the William and Flora Hewlett Foundation, for ultimately it has been their ongoing commitment and support that has brought all of our efforts to fruition. Riordan

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Roett

PARTI INTRODUCTION

1 Mexico's Strategic Alternatives in the Changing World System: Four Options, Four Ironies Riordan Roett The opening of the Mexican economy, begun during the 1982-1988 administration of President Miguel de la Madrid Hurtado, has continued under the direction of his successor, Carlos Salinas de Gortari. If international economic and financial factors, such as oil prices, private investment flows, interest rates, and access to markets, remain relatively benign in the 1990s, the Mexican government will have a historic opportunity to redefine the nation's external relations. The principles of foreign policy established over the decades following the end of the Mexican Revolution in 1917 are increasingly viewed as antiquated and inadequate for Mexico's insertion in the rapidly changing global system of the 1990s. As the country approaches the next century, its political elites will need to discard old shibboleths and slogans. Pragmatism and common sense dictate that the new global system will require new—and nuanced—responses from Mexico. To set the stage for the remainder of this book, this chapter and the next attempt to define the global context in which Mexico will be maneuvering during the 1990s. This chapter examines four options for Mexico's external relations, namely, its ties with the United States, Japan, Western Europe, and Latin America. No one option is exclusive of the others. Each offers different opportunities—and risks. The challenge for Mexico will be to assess and carry out the options based on a clear sense of its national interest. Although all four options have been widely considered during the last few years, the imperative to deal with them simultaneously will challenge the ingenuity and the resources of Mexico's foreign policy leaders in the next few years. Moreover, to each option attaches an irony of current political realities—a pitfall waiting for a misstep on Mexico's part that would threaten the very progress Mexico is working so hard to achieve. Mexico's political and economic elites will therefore need to pick and choose among the options over time, basing their strategic decisions on a realistic understanding of which option best suits Mexico's foreign policy goals at any given time. Decisions regarding Mexico's role in world affairs, postponed during the 1980s because of the country's economic crisis, can no longer be 3

4

Introduction

delayed. And to the extent that the nation has surmounted the crisis, it has acquired and will continue to acquire international goodwill and the economic resources needed to formulate a new approach to its international interests. The selection of an appropriate regional or geographic partner (or partners) needs to be integrated with an understanding of Mexico's strategic needs and priorities in the decades ahead. Critical will be the country's access to technology, to new capital investment flows, and to world markets for its exports. The matrix formed by the appropriate geographic or regional partner and the priorities for development will serve as the blueprint for the evolution of Mexico's external relations in the future. The U.S. Option: How Much Is Too Much? Controversial though they are, Mexico's ties with the United States are always the first point of departure in analyzing a possible change in the country's external orientation. For better or for worse, the bilateral linkage is a dominant factor for Mexico and will remain so in the future. President Salinas's visits to Washington, D.C., in June 1990 and October 1989 (as well as his prior meeting with then President-elect George Bush in Houston in November 1988) confirmed an emerging pattern of good relations, devoid of many of the suspicions and misperceptions of the past. The highlight of the successful 1989 visit was the signing of an "Understanding Regarding Trade and Investment Facilitation Talks," which mandated negotiations aimed at liberalizing Mexican-U.S. trade and investment flows. During the same ceremony Salinas and Bush also signed an environmental agreement, which called for their two governments to deal with air and other pollution problems in Mexico City and in urban areas along their shared border. The trade understanding established a concrete timetable for bilateral discussions that are to continue well into the early 1990s. The Bush-Salinas summit addressed other points of friction as well, such as Mexican steel exports to the United States, intellectual property rights, and trade in textiles and apparel. In fact, the 1989 announcements were the natural outgrowth of the productive negotiations that had led up to the earlier signing, in 1987, of an "Understanding Concerning a Framework of Principles and Procedures for Consultations Regarding Trade and Investment Relations." The discussions also responded to recent realities, of course. In 1988 two-way trade between Mexico and the United States had surpassed 44 billion U.S. dollars. The United States continues to be Mexico's primary export market and its largest supplier of imports; Mexico, in turn,

Strategic Alternatives in the Changing World System

5

is the third largest U.S. trading partner. But it was the June 1990 meeting in Washington, D.C., that yielded a major breakthrough in the bilateral relationship. The two chief executives agreed in principle to move toward negotiating a "comprehensive free trade agreement." Negotiations are to begin in early 1991, following President Bush's visit to Mexico in November 1990. It is now widely expected that a draft agreement will be ready to send to the U.S. Congress in mid- or late 1992 and that it will focus on the phased elimination of import tariffs, the withdrawal or fullest possible reduction of nontariff trade barriers, and binding protection for intellectual property rights. President Salinas stated during the meeting that oil and electricity would be excluded from the agreement, as provided in Mexico's constitution. Under a 1988 U.S. trade law, any country desiring a free trade agreement with the United States must make a formal request to that effect, which is then submitted to the House Committee on Ways and Means and the Senate Finance Committee. The two panels then have sixty legislative days in which to determine whether the proposed agreement is in the interests of the United States and to authorize the president to proceed. The possible successful conclusion of an agreement between Mexico and the United States is seen by many observers as the first step—not the last—in an emerging pattern of cooperation and integration in the coming years. The issue of a broader North American unit, to include Canada and possibly the Caribbean, remains to be examined by all the participants. But that option was given a strong boost with the announcement by President Bush in late June 1990 of his "Enterprise for the Americas Initiative," which addresses issues of debt, investment, and trade. On the last point, the president called for a comprehensive free trade area for the entire Western Hemisphere. The discussions with Mexico will be at the forefront of that longer-range foreign policy objective for Washington and will provide valuable guidance in future negotiations. The rapprochement between the two states on the topics of trade and investment was made possible, first, by the impressive strides in Mexico's willingness to open its economy and, second, by the U.S. realization, finally, of the critical importance of its bilateral ties with its southern neighbor. After a period of rabid Mexico-bashing in the mid-1980s, Washington came to understand that a continuation of that approach would result in polarization and conflict of a high order. It is important to recognize, however, that this rapprochement is broad but not deep. Underlying friction over such sensitive issues as immigration and illegal drugs will not disappear any time soon.1 Moreover, although the issue of Mexican political liberalization is now dormant, 1991 will bring important state-level and congressional elections. An escalation

6

Introduction

of violence, repressive methods by the government, or efforts to disguise fraud will be widely covered by the international media. Any such efforts will result in calls for democratization in Mexico by U.S. Congressmen, scholars, editorial writers, and others perplexed by the anomaly of Mexico's de facto single-party political system within a hemisphere that is otherwise nominally democratic. Predictably, Mexico will state that such comments represent an attempt to infringe on its sovereignty. That, or any of a number of other possible flash points, could easily derail the current improvement in relations. When all is said and done, the prevailing—but unspoken—assumption underlying the rapprochement is that Mexico will indeed, with economic liberalization, soon become "more like the rest of us" politically. But it is fair to say that is not a working hypothesis of the Mexican political elite now in power. It is also evident that the rapprochement is inseparably linked to the perception of economic liberalization—and the success of that program. Another scenario, one that posits a slowdown or a breakdown of the Salinas economic program, would dramatically reverse U.S. perceptions about Mexico and open a very different chapter in the bilateral relationship. There is a sense of inevitability about the Mexican program in the United States: that it cannot, and therefore will not, fail. That may be correct, but Latin American history is replete with stabilization and adjustment programs—the Austral Plan in Argentina and the Cruzado Program in Brazil being but two—that began in earnest but later collapsed as the result of both economic misjudgment and political strain. Any breakdown of the economic liberalization program in Mexico, along with any attendant social or political crises, would open again the discussions of the early 1980s about the vulnerability of Mexico and the threat it poses to the United States. All these factors must be remembered in evaluating Mexico's options in the future, even though the moment is one of discovery anew, on both sides of the border, of the importance of close ties. President Salinas captured the dynamics of the moment, of the rapprochement, in his address to the Joint Session of the U.S. Congress on October 4,1989, in stating: The time has come to build a new relationship free of myths and mistrust, abuses and recriminations; a relationship of ongoing dialogue between our two nations, respectful of our inherent differences, imaginative, to find the cooperation that benefits us, inspired in the ideals of democracy, justice and freedom which we share. My country's aim is to make this new relationship a respectful and mature process, at once valuable and useful. 2

Although relations between the two countries have improved, Mexico must carefully evaluate the utility of a stronger, more integrated relation-

Strategic Alternatives in the Changing World System

7

ship with the United States—not simply because it will be very difficult to meet the heightened U.S. expectations that Mexico will eventually become "more like us," meaning that it will succeed in introducing competitive democracy and eliminating the preponderant role of the Institutional Revolutionary Party (PRI). The irony of the current situation is that just as the United States is beginning to recognize the strategic importance of Mexico to its future, the former is becoming a weaker world player. Mexico must coldly evaluate the implications of its neighbor's relative decline for its own entry into world affairs. It is true that the decline noted by many observers may be reversed. 3 If so, the two states will be able to proceed in widening and deepening the linkages across their common border. It is also true, however, that a "renewed" United States might make far greater demands on Mexico than it now does. A reinvigorated United States of the 1990s might behave far less benignly toward Mexico—both politically and economically. Mexico will indeed need to proceed with caution if it proves true that in the United States "politics and power have gone offshore. Despite [President Bush's] endless diversionary fireworks, it is clear that the U.S. is of less and less account," as the Financial Times avers.4 A very different source, the New Yorker, reinforces the need for caution: Not since before the Second World War has the United States been as peripheral on the world stage as it is now. A major drama is taking place in the Soviet Union and in Europe, and we are not involved in it. Now we are just who we are, without a leading role to justify and enhance our actions.5

In fact, there are many signs that the United States may be less than an ideal partner for Mexico in the decades ahead. Not only have various deficits—budget, trade, and skills—limited the U.S. capacity for leadership and innovation, but its will to lead and create has waned. In commenting on the September 1989 announcement that, for the first time in three decades, the United States showed a deficit in the so-called services trade account, Lester Thurow warned: What we have been doing is moving our real standard of living from the present period to a period in the future. Between 1982 and now we have consumed $800 billion in products we have not yet paid for and did not produce. In addition, stock dividends that come from owning companies like Firestone or RJR Nabisco now go to Japan and to Europe. 6

In January 1990 it was also reported that for the first time in fourteen years, spending on corporate research and development in the United States had not even kept pace with inflation, raising concern that the

8

Introduction

nation is faltering in its efforts to hold a competitive edge in high technology. Discussions surrounding the finding emphasized that the drop in R&D is particularly troubling because, at the same time, research money is increasingly being shifted from basic research to the development of specific products, reducing the chances of fundamental breakthroughs. And a smaller portion of research is being done in large laboratories where resources can be pooled, further limiting the opportunity for significant advances.7 In inquiring "Whatever happened to thrift?" the Economist last year revealed that net national savings have fallen among virtually all the members of the Organization for Economic Cooperation and Development (OECD), from an average of 15 percent of gross domestic product (GDP) in the 1960s to only 9 percent in the 1980s. In comparing the OECD countries, though, the journal found it was the United States that showed the most precipitous drop over the last thirty years, far exceeding the declines in other major industrialized countries.8 Japan and Germany, with their private and public sectors combined, now invest more than the United States in R&D. The two countries will spend an estimated 2.9 percent of their gross national product (GNP) on R&D in 1990, while in the United States the figure will be 2.5 percent. America has been sliding down this scale since 1985, whereas Japan and Germany continue to climb. A critical difference is in the amount spent on defense-related research: in Germany it is less than 15 percent of the R&D budget; in Japan, 3 percent; in Great Britain, about 50 percent; and in the United States, over 70 percent. There is no doubt that military R&D can have its spin-offs and benefit civilian research. But economists studying innovation tend to agree that spending on military research is a wasteful way to buy scientific progress. Thus, although Germany and Japan spend relatively less government money on R&D than the United States does, they probably get a better return on their investments, according to the Economist So it is that the U.S. option is a complex one for Mexico. While integration between the two economies is proceeding apace, there are danger signs. U.S. innovation and leadership in the high technology field are in decline. The propensity of people in the United States to overconsume and underproduce is demonstrable. And the political stalemate in Washington between a Democratic Congress and a Republican White House precludes movement on the nation's various deficits. Mexico will need to carefully assess how long these trends may last and, if they do, what their overall impact will be on Mexico's future growth and development. The trade relationship is such that these trends are bound to have a significant impact on Mexico's economy in the decades ahead. Does Mexico have other options, or is it locked into a relationship with a country

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9

that is growing more marginal to the world economy and unable to invest in those areas that will return its own economy to high levels of competitiveness and innovation? All told, given the volatility of its relationship with the United States, both economically and politically, Mexico has to identify other options beyond its relationship with the United States.10 In calls to create greater diversity in Mexico's external political and trade relations, the alternative perhaps most frequently mentioned is that of Japan.

The Japanese Option: Friend or Friend's Competitor? On numerous occasions the Mexican president has stated that he considers his country a "Pacific nation." In the strategic thinking of Salinas and his closest advisors, the country's linkage with Asia in general, and with Japan in particular, is crucial. It provides a logical counterbalance to the U.S. option, and it promises to be an important outlet, over time, for Mexican exports and for the country's access to advanced technology. The Japanese trade surplus, estimated at some 77 billion U.S. dollars in 1989, has increasingly been targeted for development assistance abroad; and Mexico, intelligently, believes its economic reform program justifies increased Japanese investment and support. Japan is in fact Mexico's second largest trading partner after the United States, primarily because of oil transactions. Japan is also the second largest investor in the maquiladora program in northern Mexico, which allows Mexican factories to assemble products with duty-free foreign components and raw materials, and then to export the products with duty charged only on the value added in Mexico. Newly elected Prime Minister Toshiki Kaifu of Japan visited Mexico in September 1989. During his visit it was announced that Japan had decided to speed up the disbursement of 1.4 billion U.S. dollars in loans to Mexico by early 1990. The money, part of a 2.05 billion U.S. dollar package offered by the Japan Export-Import Bank, was originally to be paid out over three years. The prime minister also revealed that Japanese oil companies and power utilities had agreed to purchase 180,000 barrels a day of Mexican crude oil for an additional five years, after a ten-year contract expired at the end of 1989. During Salinas's reciprocal visit to Japan in June 1990, part of his larger tour of the Pacific Rim countries, the Kaifu government agreed to extend development loans worth the equivalent of just over 1.6 billion U.S. dollars. The loans will be used to fight Mexico City pollution, to support Mexican exports, and to finance electricity generation at Lázaro Cárdenas on the Pacific coast in the state of Michoacán—the site of the Sicartsa steel

10

Introduction

plant, which the Mexican government has earmarked for privatization in hopes that Nippon Kobe Steel will buy the plant. President Salinas also announced at the National Press Club in Tokyo that his administration had received thirty Japanese investment proposals, concentrated in the automobile, electronics, high technology, and tourism industries. Salinas did not receive specific pledges of financial support on his other stops during the tour, but he did receive a commitment from the Pacific Economic Cooperation Conference (PECC) that it would look favorably on Mexico's membership. The conference brings together, intermittently, representatives of the governments, business communities, and professional groups of its fourteen member nations to discuss common development themes. Mexico hopes that favorable action on its membership in 1991, at the next meeting of the conference in Singapore, will provide an opening to join the more powerful Asian Pacific Economic Cooperation (APEC) group, which meets at the ministerial level. Australia has been the moving force behind this group, and its willingness to sponsor Mexico's membership in the conference may facilitate Mexico's entry into APEC in the next few years. But as Mexico seeks to expand its Pacific Rim linkages, particularly with Japan, it faces another irony of international relations. To the degree that Japan's interest in Mexico, and in the Western Hemisphere, is partially based on its perception of its security interests vis-à-vis the United States, a deterioration in Japanese-U.S. relations may have a negative impact on Mexico. The state of Japanese-U.S. relations currently is poor, and most observers expect it to worsen before it gets better. That fact confronts Mexico with a set of stark questions. Will the pursuit of a closer link with Japan ultimately threaten Mexico's political and economic ties with the United States? Will the poor relations between Tokyo and Washington disincline Japan to continue its cautious expansion of economic and financial ties with Mexico and other countries in the hemisphere? Ultimately, is Mexico's relationship with Japan a hostage of the U.S. decline and its identification of Japan as a scapegoat? By 1990 Japan-bashing had replaced Mexico-bashing in official and nonofficial circles in the United States. An early 1990 poll dramatically confirmed the general impression that the percentage of people in the United States expressing negative views of Japan had increased significantly. Analysts are more concerned with the trend than the raw numbers, which show that a quarter of U.S. respondents now say their feelings about Japan are "generally unfriendly," up from 19 percent in June 1989 and 8 percent in 1985.11 The New York Times reported that in follow-up interviews Americans made it clear that highly visible Japanese investments here

Strategie Alternatives in the Changing World System

11

are feeding an anxiety that they are losing control of their own country and culture. Furthermore, the collapse of the Soviet bloc has freed them from their fears of Communism and allowed them to turn their anxieties toward what they see as their own nation's slipping economic strength. 12

Indeed, reports that "frustration with Japan in the United States and resentment of America in Japan are near the flash point" are increasingly common.13 The resentment in Japan appears at times to skirt a disdain for Americans' inability and unwillingness to deal with their multiple problems. And as more Americans come to view the Japanese as the dominant actor in the relationship, their frustration will grow. The origins of the ill will are too complicated to enumerate here, but they are real and will sharply influence how the two nations work together in the future. In the high technology field, critical to future economic development, the Japanese are perceived to be ahead. One oft-cited example of recent months is the race to develop new X-ray technology to make semiconductors, or computer chips, that will be many times more powerful than those in use today. The outcome of that race, Japanese and U.S. business executives agree, will significantly affect industrial competitiveness in the many fields that depend on the chips. It is generally agreed that Japan "has a widening lead over the United States."14 Japanese leaders tend to counter Americans' concerns over their poor showing with a twofold criticism of R&D in U.S. corporations: that American companies fail to foresee the long-term harm in giving up on specific products that are test vehicles for new technology, and that they remain far too reluctant to invest in projects that may not pay off for a decade, if ever. 15

Whether the current state of affairs is the fault of one or the other nation is not the relevant question here. The important issue for Mexico is how much further the relationship will deteriorate. To what degree will Americans' fears about the decline of their society, and its "takeover" by the Japanese, further escalate in the next few years? Will the Bush administration then view Mexico's efforts to strengthen its trade and investment ties to Japan as a betrayal of the special relationship it so recently established with the United States? In short, can Mexico legitimately seek to build an Asian option, in which Japan will play a preeminent role, if Japanese-U.S. relations become even more poisoned? There are no easy answers to these questions, but Mexico must address them as it seeks to define its own degree of autonomy in the world system of the 1990s. On the one hand, a sovereign government in Mexico

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Introduction

cannot accept the dictates of Washington regarding "good" and "bad" partners. On the other, it cannot ignore the reality of its 2,000-mile border on the north. Mexico's need for sophisticated high technology will grow exponentially in the next few decades. If the United States is falling behind Japan, does Mexico City have any choice but to play the Japanese card, disregarding the impression it will create in Washington? Or can Mexico follow a two-track policy of working with both Tokyo and Washington, adroitly avoiding any serious contamination in either of the two relationships?

The Western European Option: If Not Now, When? It is now apparent to most observers that Western Europe's economic growth in the 1990s will exceed that of the United States. For much of the 1980s, the fast-growing U.S. economy had been the envy of West Europeans, who seemed to think that the high unemployment and sluggish growth plaguing most of their nations were insurmountable. But in 1989 the Western European economy as a whole outpaced that of the United States, with a growth rate of 3.5 percent to the U.S. rate of about 3 percent. Economists expect growth in Western Europe to continue to outpace that in the United States for at least two years and possibly much longer. Whereas annual U.S. growth rates are widely expected to average 2.5 percent in the 1990s, many economists expect Western Europe to grow by 3 percent to 3.5 percent. But while Mexico is poised to be more appealing to Western European investors, who look with favor on its economic reforms, those investors have turned their sights East—not West and South. President Salinas, in his January-February 1990 visit to Western Europe, acknowledged this irony, expressing his concern that interest in Eastern Europe not cancel out interest in the Third World. Commenting on the changes in Eastern Europe, and the greater competition for capital as a result of those changes, he stated, "This does not frighten us, but we would not like the fascination with what is happening in the east to be translated into indifference towards what is occurring in the west." 16 The president argued persuasively for a more open attitude toward removing nontariff barriers to Mexican exports. He called for higher levels of European direct investment in Mexico and sought to win support for an upgrading of the existing 1976 European Economic Community ( E E C ) agreement with Mexico. Salinas also expressed concern that the current international negotiations over trade policy—the Uruguay round of the General Agreement on Tariffs and Trade (GATT)—might be moving against the interests of Mexico. In a speech at G A T T meetings in Geneva

Strategic Alternatives in the Changing World System

13

in early 1990, Salinas argued that Mexico has been discriminated against in world trade in spite of having opened its economy. Mexico's products have been barred by what he called "voluntary restrictions." He continued, "This is in violation of the principles of non-discrimination and prevents us from fully exploiting our productive assets." Trade barriers are giving way, he commented, to nontariff barriers. "Objective concepts such as 'free trade* have been replaced by subjective ones such as 'just trade,' which facilitate commercial harassment and the application of arbitrary and selective measures hurting performing exporters." 17 Despite these difficulties, Mexico has a logical place to turn in any efforts to expand its ties with Western Europe. West Germany happens to be the third largest investor in Mexico after the United States and the United Kingdom. And in the first half of 1989 alone, Mexican exports to the former Federal Republic of Germany (FRG) rose by 35 percent, with 42.6 percent of them accounted for by auto parts and only 4 percent by oil. On the other hand, the former FRG's preoccupation with the process of unification with East Germany, and its premier role in the revitalization of Central Europe, does not bode well for an expansion of economic and investment ties with Mexico specifically, or with the Third World in general. In 1989 the FRG posted a record trade surplus, surpassing Japan's for the first time since the 1970s. Behind the surplus was a 5 percent leap in exports, to 134.7 billion FRG marks, equivalent to about 81 billion U.S. dollars, caused by intensified world demand for its quality-engineered goods. (Japan's trade surplus was equivalent to 77 billion U.S. dollars in 1989.) The FRG's 1989 current-account surplus (which includes such services as banking and insurance as well as goods) rose by 16 percent, to 99.1 billion marks, or about 60 billion U.S. dollars.18 Although these numbers are expected to decline with the growing influx of emigrants from the former German Democratic Republic (GDR), the German economy clearly merits the headline "Germany: The New Superpower." 19 As Mexico seeks to find a way to tap into the prosperity of Western Europe in the 1990s and beyond, protectionism within the European Community, and the high priority it has assigned to Eastern Europe, will dominate Bonn's thinking, and much of the rest of Europe's, in the foreseeable future. Mexico will need to stand out from the pack of Third World countries that need Western European investment, and are prepared to accept it on competitive terms. Moreover, the trade surplus of Germany, combined with that of Japan, will be critical for any enlargement of the lending capacity of the international financial institutions, such as the World Bank and the International Monetary Fund. Much will depend on those institutions' being able to provide significantly greater aid in the years ahead if Mexico is to find the investment monies required to capitalize on the reforms of the last few years.

14

Introduction

The Latin American Option: Asset or Liability? The 1990s pose a fourth important option for Mexico's place in world politics and the global economy: its role in Latin America. Is it helped or hindered by being a part of Latin America? Some would argue that Mexico, like other countries, stands to gain from a regional approach to development or, alternatively, that the time has come for Mexico to pay more than lip service to the common history, culture, and language of Latin America, while still crafting an indigenous strategy for inserting itself into the developed world. Others would argue that Mexico is a case of a "good neighbor in a bad neighborhood." The final irony facing Mexico, then, is that just as it has reached the takeoff stage in its relations with the industrialized countries, it may find itself hindered, at least to some degree, by its identification with Latin America. The 1980s were a devastating "lost decade" for Latin America. Although the countries of the region were able to return to civilian democracies—by early 1990 all of South America had democratically elected governments—the accumulated toll of their debt, protectionism, and inefficient public sectors was ominous. As the UN Economic Commission for Latin America and the Caribbean reported in late 1989: The economic crisis that has affected Latin America and the Caribbean during most of the 1980s persisted during the last year of the decade, as the average per capita product fell for the second year running, this time by 1%, while inflation averaged the unprecedented level of almost 1,000%. . . . The region's expanding trade surplus continued to be insufficient to cover the huge burden of debt service, and only five Latin American and Caribbean countries managed to meet those commitments fully and timely in 1989. 20

Indeed, the region's fortunes are inextricably chained to the management of its external debt of 416 billion U.S. dollars. Although the net capital inflow to the region increased to 14 billion U.S. dollars in 1989, 9 billion more than the year before, half of that inflow was accounted for by Mexico. As of this writing, Mexico is the only Latin American country to have concluded a debt-reduction agreement with its creditors, under the initiative laid out by U.S. treasury secretary Nicholas Brady in 1989 (the so-called Brady initiative). The net resource transfer abroad from Latin America reached nearly 25 billion U.S. dollars in 1989—the equivalent of almost 18 percent of the value of the region's exports of goods and services and of approximately 3 percent of its combined gross domestic products. If Mexico is excluded from these figures, almost $23 billion of the net resource transfer abroad remains, up from less than $18 billion in 1988.21 The early negotiation of a debt-reduction package by Mexico does

Strategie Alternatives in the Changing World System

15

not necessarily mean that the other major regional debtors will either receive a Brady package or receive it on the terms offered to Mexico. President Salinas, well aware of the controversy over whether the Brady initiative would make a difference or not, has reaffirmed his belief that it was significant: "The net result is not only important in the saving of national resources but it has also been very important in providing confidence to Mexicans."22 But he was also realistic in stating: It did not solve our problems. . . . Our problems will continue and we shall have to put additional effort into making the economy more efficient But without the agreement, no matter what effort we put into it domestically, we wouldn't have been able to recover growth.23 Among the largest countries of the region, Mexico, Chile, and perhaps Venezuela stand in sharp contrast to Argentina and Brazil, although the economies of Chile and Venezuela are much smaller than those of Mexico and the other two countries. Thus, in many ways, Mexico is a Latin American anomaly. Until Argentina and Brazil are able to undertake the critical internal reforms needed to adjust their economies to the modern world, the Latin American image will continue to suffer. And given the flows of resources to Eastern Europe and Asia, and the inability of the industrialized countries to confect anything more imaginative than the Brady initiative, the fortunes of Latin America will continue to be precarious. If, as now predicted, world oil prices will rise much more rapidly than previously expected—by about 50 percent within the next five years— Mexico will reap a bonanza similar to that of the early 1970s.24 The expectation, of course, is that the current government will manage the revenue flows very differently from its predecessors. Any rapid increase in oil prices will be a boon to Mexico, but at the same time it will shock the economies of the major oil consumers—including the United States, Japan, and West Germany—with rising inflation, higher interest rates, and slower growth or recession as the result. Meanwhile, the demand for oil will continue to rise in Asia and perhaps in the Eastern European countries as well, while oil production is falling in both the United States and the Soviet Union. Thus, there is a strong uncertainty whether the Organization of Petroleum Exporting Countries (OPEC) can expand its ability to pump oil to match the demand of the 1990s. As a major oil producer and exporter, particularly to the United States and Japan, Mexico could find itself within a few years in a very different negotiating position from the one it occupies today. Petroleum needs in both those countries, together with the flow of new oil revenues, will give the Mexican administration bargaining chips barely imaginable in the last few years. This highlights, once again, the need for carefully timed strategic choices of allies and partners in the coming decades.

16

Introduction

Any rapid increase in oil prices will affect the rest of Latin America as well—in different ways. In the case of Brazil and Chile, the impact will be devastating. Venezuela will benefit. Argentina should prove to be a wash-out unless it is able to rapidly increase investment in the petroleum sector and enter the world oil markets. Most observers are pessimistic that Buenos Aires will be able to do so, however. Most estimates put Mexican oil reserves at another fifty-seven years, but recent reports have indicated that "even with extensive investments in exploration, [its] crude exports will halt completely by the end of the century." 25 If these reports prove to be true, Mexico's economic liberalization program will need speedy and significant adjustments in the 1990s. The country's reputation has been predicated, in part, on extensive oil reserves that were expected to last well into the middle of the next century. If they do not, the world's assessment of Mexico will switch gears; and Mexico will have to switch gears itself, replacing its petroleum reserve bonanza with other goods and services. The petroleum factor is only one issue that illustrates the fragility of the economies of Latin America. Mexico will need to think seriously about its ties to the region as it considers its strategic options in the 1990s. Mexico as a major oil exporter will play one role; Mexico as a country that is self-sufficient but no longer a major exporter will be a different actor, globally as well as regionally. Finally, with the apparent relaxation of East-West tensions, the primordial fear of the United States that Marxism would penetrate the hemisphere may diminish. That may well be accompanied by the United States distancing itself from Central and South America, which pose no apparent security threat. The United States is more interested in the emergence of a North American common market. Interestingly, the withdrawal of a strong U.S. presence south of Mexico's borders could provide Mexico with opportunities that were not feasible in the past. The Rio Group—formerly the Group of Eight, which worked together on peace negotiations for Central America—may assume a greater regional prominence. Trade and investment opportunities to the south may emerge, especially if the economic adjustment processes now under way in Argentina and Brazil succeed.

Strategic Policy Issues for the Future In addition to its need to assess the intricate web of its strategic partners in the coming decades, Mexico must identify those policy issues in which one choice or another will make a difference. Among the most critical of these issues are technology, investment capital, and trade opportunities.

Strategie Alternatives in the Changing World System

17

Adopting new technologies from other nations will be central to the success of any permanent reorientation of Mexico's economy. As discussed earlier, one key issue is whether the United States is the best possible source, given its declining levels of R&D, the competitiveness of Japan, and the burgeoning funds available for research in Europe. To these concerns must be added the unwillingness of the United States to invest in the infrastructure that is essential for technological innovation, namely, basic education. Recent reports on the subject concur that the competitive edge of U.S. industry is fast being eroded by the inferior quality of the nation's educational system. Does Mexico have better options elsewhere? If so, at what cost? What are the trade-offs for Mexico in exploring closer ties with other R&D centers in the global system? Investment capital will also continue to be of highest priority. President Salinas, in his early 1990 visit to Europe, stated emphatically: The message we are bringing to European investors is that Mexico is in a strategic position. It is a big market of 85 million people, which by the end of my administration will have grown by another 10 million. Mexico borders with the world's biggest market and has access to two oceans. 26

The general expectation is that Mexico will continue to attract major investment flows from the United States. But continued growth in the U.S. economy is a sine qua non for that assumption. A dramatic increase in oil prices, a recession separate from oil price increases, a push on interest rates—any or all of these conditions would depress the U.S. economy and put a damper on further investment. Salinas is obviously thinking strategically and pragmatically in holding out the promise of access to the North American market while also seeking to diversify the Mexican investment portfolio with both Japanese and Western European capital. The third issue, trade, looms large in the thinking of Mexico's strategic planners for the coming decades. A successful conclusion of the Uruguay round of the GATT talks late in 1990 will indicate the general lines that world trade will follow into the next century. President Salinas is concerned: We find too many barriers [in the European Community and the United States], Reciprocity is not there. 1992 looms as a date for an inward-looking Europe, so we are working today so that with efficiency and competitive prices our products will be able to be part of the European market. 27

Mexico is currently negotiating a trade agreement with Canada, similar to the one it is discussing with the United States. The decision to proceed with common market discussions with Washington heightened the importance of pursuing simultaneous discussions with Ottawa. Mexican busi-

18

Introduction

ness leaders are becoming increasingly aware of the need not to be left out by protectionism from their two northern neighbors. And the prospect of guaranteed access to the U.S. and Canadian markets also enhances Mexico's attraction for European trade. Looking Beyond the 1990s The government of Mexico faces a complex set of strategic options and issues in the coming decade. It must carefully evaluate the world players and identify those that both share interests and offer the best means for Mexico to further its national development goals. Foreign policy has little to do with nostalgia; it has everything to do with a cold and calculating identification of the nation-state's needs in the future. The rapidly changing international political and economic environment offers Mexico a rich set of choices. The surplus countries of Japan and Western Europe offer the possibility of investment and technological transfers. The United States and Canada offer the possibility of linkage to the world's largest market for exports and a powerful regional economic bloc, which may also include the Caribbean Basin by the year 2000 or soon after. And Central and South America pose an interesting (though much less attractive) alternative, especially if the U.S. presence there dwindles. The oil factor remains a key card in the Mexican hand. Any sharp increase in oil revenues must be managed extremely carefully at home to avoid the rampant inflation, corruption, and other ills that accompanied similar bonanzas in the past. At the same time, an oil boom would place Mexico in a strategically advantageous position with regard to a number of its major trade partners. It would mean that the bargaining that accompanies possession of a scarce commodity can—and should—be translated into concessions on technology or trade, or both. Conversely, if proven correct, reports that the country's petroleum reserves are quickly running out will require a different set of decisions regarding economic and financial arrangements with the industrialized countries. Mexico's political leaders must not forget that the recent emergence of the country on the world stage has been directly correlated with its economic liberalization efforts. A slowing of that program would quickly limit Mexico's options. In the United States, and to some degree in Western Europe, the unspoken assumption is that the success of the economic adjustment process will ultimately bring political democracy. If Mexican politicians insist on postponing an opening of the political system, which has made little progress to date, they may face less understanding partners in the future. In an era in which the one-party state has all but disappeared in Eastern Europe, and in which competitive party politics is

Strategie Alternatives in the Changing World System

19

a fact of life in most Latin American countries as well, the Mexican system is fast becoming a throwback to another era. Political scientists generally argue that internal change and reform are totally domestic in nature. That is, a nation-state's decisions regarding its political and economic systems are autonomous. But in the economic and financial arenas, Mexico has admitted that the external component is critical. So, too, will it need to understand that foreigners' perceptions of the evolution toward democracy inside will influence and ultimately intermingle with the financial and economic strategies pursued by the regime. The need to think strategically is not to argue for crass Machiavellianism as the guide for Mexico's external relations in the coming decades. It is a call for realism. Mexico has never before been in a position to explore multiple strategic options. Indeed, the fact that the country may be emerging from the overhang of the 1980s debt crisis, and successfully implementing fundamental institutional and economic reforms, is a novelty in the nation's history. With the fast-changing realities in the international system—the relative decline of the United States; the sudden predominance of Germany, the escalating hostilities between Tokyo and Washington; and a myriad of other structural changes (or global ironies, if you will)—rapidly developing countries such as Mexico need to be cautious and vigilant. But they can also afford to be more audacious than in the past, by challenging old myths and experimenting with new opportunities. This is the challenge for Mexico in the 1990s and beyond.

Notes 1. Witness the controversy in April 1990 surrounding the apprehension of a Mexican doctor, brought to the United States to face charges in the 1985 slaying of U.S. Drug Enforcement Agency agent Enrique S. Camarena. The Mexican government asserted that it might curtail joint drug-control operations with the United States if it were proven that the U.S. government was directly involved in the doctor's capture. See Philip Shenon, "Mexico Says Suspect's Seizure Imperils Aid to U.S. on Drugs," the New York Times, April 20,1990. 2. "Address by the President of Mexico, Carlos Salinas de Gortari, to the Joint Session of the Congress of the United States of America, Washington, D.C., October 4,1989," photocopy. 3. See, for example, Joseph S. Nye, Bound to Lead: The Changing Nature of American Power (New York: Basic Books, 1990), who argues the United States is still the dominant world power, with no challenger in sight. 4. Anthony Harris, "A Clear View into the Financial Abyss," Financial Times, February 19,1990.

20

Introduction

5. "The Talk of the Town," The New Yorker, February 5,1990, p. 33. See also Barry P. Bosworth and Robert Z. Lawrence, "America's Global Role: From Dominance to Interdependence," in Restructuring American Foreign Policy, ed. John D. Steinbruner (Washington, D.C.: Brookings Institution, 1989), pp. 12-47. 6. "Prospects—A Brand New Deficit," the New York Times, September 17.1989. 7. "A Corporate Lag in Research Funds Is Causing Worry," the New York Times, January 23,1990. 8. "Whatever Happened to Thrift?" The Economist, October 14,1989. 9. "Ein Wissenschaftswunder?" The Economist, November 11,1989. For Mexico's technology needs, see Cathryn L. Thorup and contributors, The United States and Mexico: Face to Face with New Technology, U.S.-Third World Policy Perspectives no. 8, Overseas Development Council (New Brunswick: Transaction Books, 1987). 10. For a discussion of the emerging interest in Latin America in new economic and political options, see Robert Graham, "A Continent in Search of a Role," Financial Times (London), July 23,1990. 11. "Poll Detects Erosion of Positive Attitudes Toward Japan Among Americans," the New York Times, February 6,1990. 12. Ibid. 13. "Rights and Wrongs of Blaming Japan," the New York Times, October 16, 1989. Perhaps the prime example of U.S. sentiments is the title of a recent Fortune magazine cover story, "Fear and Loathing of Japan," February 26,1990. 14. "In Computer Research Race, Japanese Increase Their Lead," the New York Times, February 21,1990. 15. Ibid. 16. "Mexico 'not afraid to compete with E Europe for investment'," Financial Times (London), January 30,1990. 17. "Mexican president seeks fair trade deal," Financial Times (London), February 2,1990. For an excellent overview of the dilemmas of export diversification, see Gabriel Székely, "Dilemmas of Export Diversification in a Developing Economy: Mexican Oil in the 1980s," World Development, 17, no. 11 (1989): 1777-1797. 18. "Germany: The New Superpower," The Washington Post, November 19, 1989. 19. Ibid. 20. "Preliminary Overview of the Latin American Economy in 1989," CEP Ah News, 9, no. 12 (December 1989), p. 1. 21. Ibid., p. 3. 22. "Salinas hopes to sell a country come of age," Financial Times, January 30.1990. 23. Ibid. 24. "Doubts on Supply Spur Predictions of High Oil Prices," the New York Times, February 24,1990. 25. Jane Bussey, "Adios! Black Gold," The Miami Herald, November 19, 1989. 26. "Salinas hopes," Financial Times (London), January 30, 1990. For a

Strategie Alternatives

in the Changing World

System

21

comprehensive overview of Mexico's position on foreign investment, see José I. Casar, "An Evaluation of Mexico's Policy on Foreign Direct Investment," in Mexico and the United States: Managing the Relationship, ed. Riordan Roett (Boulder, Colo.: Westview Press, 1988). 27. Ibid. Contrast Salinas's comments on Europe with the analysis of Clark W. Reynolds and Robert K. McCleery, "The U.S.-Mexican Trade Relationship: Past, Present, and Future," in The Newly Industrializing Countries in the World Economy: Challenges for U.S. Policy, ed. Randall B. Purcell (Boulder, Colo.: Lynne Rienner Publishers, 1989), pp. 115-139.

2 Mexico and the World: Opportunities and Risks in the 1990s Jesus Silva-Herzog

F.

This last decade of the twentieth century and the millennium has begun amid a series of political and economic changes unprecedented in the modern world, and perhaps in history. Amazement was the prevailing reaction to the news from Eastern Europe in particular during late 1989 and early 1990. No one could have anticipated the changes being wrought, nor their pace and scope. There is no question that the world is today, and will be tomorrow, vastly different from the one we had only a year or so ago. Meanwhile, other, more gradual, but equally important trends are working together to set a new world stage for the coming years. The formation of regional economic blocs, the crisis in multilateralism, and the growing practice of a bilateral approach to political and economic relations—all will unquestionably alter the behavior of each nation vis-à-vis the others. For each, the challenge of the future is twofold: anticipation of this formidable process of transformation, which is tearing down both economic barriers and political borders, and adaptation to the new global system that eventually emerges. Isolation must be avoided at all costs. Those who fail to recognize that nothing is foreign, and act accordingly, will be left behind and become merely passive actors. For the prospect of "One World" is on the horizon. Recognizing and Anticipating Global Trends The changing global environment offers Mexico a unique opportunity to determine its external relations with a nationalistic spirit and a long-term perspective. This determination is not, of course, a matter of choosing one path and discarding others. A variety of opportunities will have to be taken up simultaneously as we seek the best possible position. But the emphasis, the relative importance that foreign policy places on one field or another, will be of monumental importance. As in previous decades, Mexico's foreign relations during the 1990s will be conditioned by internal as well as external factors. On the one hand, 23

24

Introduction

the external environment is subject to a process of profound transformation, with direct implications for potential foreign activity in our country and for potential expansion of Mexican participation in world markets. The fiscal, trade, and skills deficits of the United States, its relative weakening in the world economy, the leadership role that Japan and Germany will play, the formation of regional blocs, détente and the transmogrification of the Eastern European economies, and finally the developing countries' loss of relative importance—all these will affect Mexico's foreign relations and pose behavioral alternatives about which fundamental decisions must be made. But on the other hand, Mexico is going through a profound transformation process of its own. Various traditional attitudes on fundamental aspects of economic and political development are giving way to new truths. Mexico's foreign policy, in general and over the last decades, has not closely corresponded to domestic policy. There has always been talk that what we Mexicans do at home is quite different from our basic foreign policy positions. One hypothesis is that this will change in the 1990s. The essential nature of the current economic model will demand a closer parallel between domestic and foreign policy. In fact, current economic policy—with the predominant role it has assigned to the private sector, both domestic and foreign, along with Mexico's need to create a general climate of trust for investors—may seriously inhibit foreign policy activity. More specifically, Mexico will be obliged to avoid frictions, particularly with its northern neighbor, that could somehow hinder national efforts at collaboration with private, foreign economic initiatives in the country. Implicit in this hypothesis of a transformed Mexican foreign policymaking process, one with closely linked domestic and foreign concerns, is the assumption that Mexico will stay the fundamental course of the current economic policy. Several factors, however, could change the course mapped out in this scenario and oblige the country to maintain an activist international policy that reflects Mexico's traditional international concerns: 1. The tremendous disparities between Mexico and the United States will constrain Mexico's foreign policy from becoming simply a mirror of the economic policy that places a priority on closer economic ties with the United States. Mexico has a different style from its neighbor's, its way of approaching world problems is different, and its basic foreign policy positions are at wide variance with U.S. positions in many instances. Economic integration with North America will not change these fundamental differences. Indeed, they are unlikely to disappear any time soon. 2. Maintaining Mexico's current economic policy may become dif-

25

Mexico and the World

ficult in the medium term, not only because of a less favorable external environment—such as changes in oil prices or interest rates or slower growth among the industrialized economies—but also because of domestic constraints. Among these is the evolution of our economic relations with the rest of the world, primarily the growth in imports, problems in securing foreign capital, and lower domestic economic growth rates than expected. Additionally and very importantly, lags in the social sphere may lead to growing political pressure that could seriously threaten the maintenance of austerity and economic and financial discipline. If these eventualities occur, Mexico's foreign policy decisions would certainly be affected. 3. The process of economic reform that has occurred in Mexico is far ahead of the necessary political opening. Our political system is backward. Mexico now has a complex, pluralist society that wants to participate more in making important national decisions. The 1990s will surely witness progress in that direction. Greater participation by society in decisions over what path to follow will no doubt affect important aspects of economic policy, leading to economic solutions that are less orthodox and more sensitive to social concerns. And it will likewise affect vital aspects of our foreign affairs—diminishing the concentration of our relations with one single country, encouraging the search for and attainment of closer economic relations with other world decision-making centers, and ultimately resulting in political positions more closely linked to autonomy and independence. Thus, not even the current course of our economic policy is guaranteed. These caveats should therefore be borne in mind in examining the complex menu of opportunities and risks that will face Mexico in the coming decade. The next section briefly describes some of the key opportunities for Mexico now arising in the principal regions of the world. The subsequent section offers some alternative ways Mexico may respond to these opportunities, previewing the topics in the remainder of this book. Finally, the chapter ends with a summary perspective of Mexico's place in the changing world scene. The Industrialized

Countries

During the past few years the economies of the industrialized countries have benefited from a long period of unprecedented expansion, with relative price stability. Marked imbalances among these nations have also arisen, however, and these will be difficult to correct in the short term. Indeed, they are likely to prevail for at least a good part of the 1990s. For example, as Riordan Roett points out in the previous chapter, the United

26

Introduction

States is now the foremost debtor country in the world. Its productivity and technological innovations are lagging behind those of other industrialized countries, while its fiscal, trade, and skills deficits have grown to alarming levels. Nonetheless, the United States maintains a clear position of political, cultural, and military leadership, especially since the Soviet Union's public acknowledgment of its many internal crises. Thus, how well and how soon the U.S. authorities handle their financial, economic, and labor force problems will have tangible repercussions on the economies of the rest of the world, particularly in those countries most vulnerable to external factors, and those most closely tied to the U.S. economy. Tipping the scales on the other side of the U.S. situation are Japan and Germany, the foremost creditor countries of the world. In spite of their efforts to stimulate demand domestically, the trade surpluses of these two countries remain high and are likely to stay that way for the next few years. Thus, crucial questions for the future of the world economy during this decade of the 1990s are how, where, and to what extent those surplus financial resources will be utilized. The new Europe will be, in the medium term, an important pull for the development efforts of countries like Mexico, especially in their efforts to expand markets and introduce new technologies. Mexico's efforts to strengthen its economic ties with the United States may be seen in Europe and Japan as an attractive alternative for additional investment. In the case of the Soviet Union, the profound changes taking place there will have to take a clearer course before we can establish the possibilities for future economic, trade, and political relations. Nevertheless, much of the attitude of the new Europe, Japan, and the Soviet Union will depend on the general environment of the developing countries themselves. In that respect Mexico is well positioned. The Developing Countries While economic expansion has been the rule in the industrialized countries, the developing countries have endured a long period of stagnation or even deterioration. Both internal and external factors gave rise to the current situation of economic crisis in most of the poor nations. Although this group has become more heterogeneous in recent years, making some generalizations risky, the standard of living in Africa and Latin America has severely regressed (with Southeast Asia the exception). External debt has placed serious limitations on the availability of domestic and foreign resources for the nations in these regions. At the same time, however, many of their leaders have come to recognize mistakes in the design and implementation of domestic economic policy, and quite a few are promoting transcendent changes in economic thought.

27

Mexico and the World

The most crucial fact facing the developing nations is not simply the economic adversity of recent years but the fact that prospects for the coming years are not any more favorable. The burden of external debt will not disappear in the short or medium term. The 1989 Brady initiative for debt reduction is going to require fundamental modifications in the economic policies of these countries. Orthodox economic policies will be pitted against the accumulated effects of the debt crisis and domestic political resistance. Any reforms will take a long time to institute. And foreign capital flows will not resume easily or soon. Meanwhile, the social decay of the past few years will put severe constraints on future development efforts. All told, then, the medium-term outlook for trade is strictly unfavorable. Not only has the strategic and economic importance of the developing countries declined, but this group is effectively in danger of being pushed aside and forgotten in the global marketplace. In short, the developing world faces a new decade fraught with difficulties. The social and political risks of continued stagnation and decline cannot be ignored. Only a few countries—the exceptions—will be able to avoid falling into this pessimistic scenario. Mexico is and shall be one of these exceptions. In the coming year the North-South dialogue is likely to be replaced by a more cooperative approach, with many of the developing countries trying to reinforce their linkages with the powerful countries of the North. In this regard Mexico will face the challenge of also maintaining its traditional role among the developing countries, especially in Latin America. Given the trends just identified, it will be imperative to help call global attention to our own Latin American region, on both economic and political fronts. Globalization

and the Formation

of Regional

Blocs

Today's process of globalization—moving toward a single world exchange market, stock market, financial credit market, and so forth—coincides, in apparent paradox, with a strong tendency to form regional trade blocs. Europe of 1992, the United States and Canada, Japan, and the Southeast Asian countries are the most prominent examples. This trend, concentrated in the North and growing stronger each year, poses one of the most serious challenges to the economic health of the countries not included in any of these blocs—in most cases the developing countries. How they respond to the challenge will have direct and fundamental repercussions on their chances for further development. It is true that these integration efforts do and will have both positive and negative consequences for the rest of the world. The augmented gross national products of the integrated economies can yield positive results

28

Introduction

for many other countries outside of each bloc. But the prevailing effect, at least in the beginning, will most likely be reduced opportunities for trade given the increased protectionism vis-à-vis those outside the bloc. Developing regions may be left out if the potential "fortress effect" dominates. Opportunities to counteract this effect through joint action by groups of developing countries, have been and will probably continue to be weakened, in part because of the crisis of multilateralism and increased bilateral action.

Metamorphosis in the Socialist Economies One of the most dramatic transformations observed in recent times is the political and economic change in the countries of Eastern Europe. On the one hand, the citizens' desire to become more involved in national decisions brought about the collapse of the old autocratic, closed regimes and paved the way toward democracy. On the other hand, deficiencies in domestic methods of production, the excesses of the bureaucratic state, the inability to become competitive in the global marketplace, and the need to seek a better position in the increasingly integrated world economy have led to an abandonment of many of the socialist policies of the past. A new, more competitive process has been started in which private initiative and market forces will play a bigger role. This is not, as some observers assert, the death knell for socialism and the coming of salvation. The conversion toward a "market socialist economy" (I am not quite certain of the precise meaning of that expression myself) will be a gradual, difficult process that will take most of this decade, if not longer. The transition will not be spared its critical moments of progress and setbacks. There is no doubt, however, that the incorporation of these economies into the Western world, or vice versa, will have significant and far-reaching effects on the rest of the world, particularly the developing countries. Together the economies of Eastern Europe are 50 percent larger than those of Latin America, and their skilled populations, with their depressed wages, represent an enormous draw for trade and movements of capital and technology from the large industrialized countries. Europe's integration of 1992 will have to adjust to this new scenario, particularly in the case of Germany. The modest attention that Latin America and Africa received in the past few years will continue to wane, with a negative impact on investment and trade decisions. Already the changes in Eastern Europe have resulted in important shifts in public- and private-sector policies in Japan, Germany, and the United States, with cuts in the funds previously earmarked for Latin America and hikes in the general interest rates for the developing countries. All told, this process is certain to affect the

Mexico and the World

29

developing countries' chances for growth, and it will be present throughout the decade. In turn, it means that these countries must become more competitive and productive by international standards, or else they will be left out of the game. Mexico is moving on its own, through a number of macroeconomic measures, to create an adequate environment for becoming more competitive and attracting new investments. In some cases, however, a more cooperative attitude among Latin American countries would, without question, improve the possibilities of obtaining a number of benefits from the industrialized countries. From a political point of view, isolation and individual action is not the best strategy, particularly in dealings with the North. The United States and the Soviet Union

Despite the monumental significance of all the changes referred to so far, perhaps the most outstanding development of recent years for the future of the world is the rapprochement between the two superpowers and the concomitant ending of the Cold War. The thawed relations between the United States and the Soviet Union, and the prospects for an eventual reduction in their military spending, open endless possibilities for greater prosperity both within and outside their national borders. The two nations now have the opportunity not only to address their own economic and social problems with greater resources, but also to contribute more, and more effectively, to the development of the poorer nations of the world. Moreover, the rapprochement between these two superpowers is likely to eliminate a variety of the traditional frictions between Mexico and the United States over issues of both global and regional significance, thus further opening the door to a more favorable, reciprocal attitude between the two neighbors.

Adapting to the New Opportunities and Risks Mexico's economic crisis of the early 1980s led to deep structural changes in its economy and, to a lesser degree, in its political apparatus. In fact, the Mexican economy at the start of the 1990s is quite different from what it was just a few years ago. The most fundamental changes, effected since 1982, were the opening of the economy to foreign trade and investment, through radical reductions in protectionist measures, and enhanced efficiency and competitiveness, in search of a better position in world markets. These transformations are likely irreversible, except for some possible short-term adjustments. In a certain sense, they also represent a

30

Introduction

reaction to the profound changes in the world economy in the 1980s—as much to adapt to those changes as to institute a more effective development strategy. Another array of recent and soon-to-be-initiated policies can be interpreted similarly, namely, those aimed at streamlining the Mexican government, privatizing public enterprises, and increasing market participation and private initiative as mechanisms of resource allocation. Here, Mexico is admittedly in fashion. Public Policies

The Mexican government has made an extraordinary effort to solve its long history of problems in public sector finances. From 1982 to 1989 the fiscal deficit dropped from 17.6 percent to only 6 percent of the gross domestic product (GDP), and further reductions are projected for 1990.1 Over the same period Mexico turned a primary deficit (the total deficit minus interest payments on the domestic and external public debt) of 7 percent of the G D P into a 7 percent primary surplus.2 This remarkable improvement is essentially the result of cuts in public spending, unfortunately and perhaps inevitably concentrated in investments in social programs. The Mexican public is growing increasingly aware that a healthy economy demands healthy public finances. That is an important lesson in times of crisis. Over the coming years it is quite possible that this conviction will be upheld and consolidated, preventing future repetition of such dangerous fiscal deficits as those of the early 1980s. At the same time, however, these fiscal adjustments have meant a serious deterioration of the nation's infrastructure and of the living conditions of broad sectors of the population. By several social indicators— such as health, education, nutrition, and housing—the Mexican people have suffered serious setbacks. This deterioration will place severe constraints on current efforts to resume the path to economic growth, and it will also likely result in escalating political and social ferment. But resuming growth is undeniably the government's priority for the next few years. Failing to do so would only jeopardize Mexico's political and social stability over the long term. For despite its economic reforms and improved fiscal situation, Mexico at the beginning of the 1990s continues to reap the ill-starred inheritance of eight years of economic stagnation. Over those years the population grew by some 12 million, reaching over 84 million in 1989. At the same time a fair number of those millions saw their real wages decline. That is why the country's economy must grow, why deferred social needs must be met, and why the tremendous disparity in the distribution of income, which was exacerbated by both the economic crisis and the

Mexico and the World

31

measures to counter it, must be diminished. Thus, the financing of development, based on more efficient methods to encourage domestic savings and to make more appropriate use of them, must be of primary importance in the 1990s. It will be crucial to modernize the financial system and introduce the necessary tools for this process, along with maintaining realistic interest and exchange rate policies. Likewise, maintaining a climate of stability and increasing confidence will logically be decisive in attracting internal and external funds. The recent process of financial liberalization—eliminating excessive governmental regulation, freeing up interest rates, eliminating quantitative credit controls, and an initial opening to foreign competition—are all working in that direction. The announcement in May 1990 of the reprivatization of the Mexican banking system has been a very important step toward establishing a more modern and efficient financial sector.

Investment and Trade Mexico ranks as one of the largest debtor countries in the world. In August 1982 its inability to continue to fully meet its external financial obligations gave rise to the debt crisis. In early 1990 it entered into a formal agreement with the international banking community, becoming the first debtor country to make progress under the Brady initiative. That initiative calls for reduced principal and interest payments and the extension of new loans. However, the commitments made by foreign banks to contribute new resources over the coming years were modest and below expectations. In spite of the progress marked by Mexico's debt agreement and the reduced transference of resources abroad, the problem of accumulated overindebtedness will hinder development efforts for many more years. The success of the agreement essentially depends on its indirect effect on foreign and domestic economic agents. The repatriation of capital and inflows of foreign investment have become fundamental variables if Mexico is to balance its foreign accounts. And these mutually contingent factors, largely beyond the control of Mexico's economic policymakers, will have a decided influence on important aspects of the nation's economic and foreign policy. Regulations on foreign investment have in fact become more flexible of late. Broad domains, such as financial services, communications, and transportation, are still subject to discretionary authority, however, which discourages some foreign investment. It is quite possible that in the next few years there will be more flexibility and greater efforts to attract investment, particularly given the growing competition for world capital among the regional blocs and the new demand for capital in Eastern Europe.

32

Introduction

With regard to trade flows, Mexico's traditional geographic concentration of trade with the United States warrants reassessment. The problem has been recognized for decades, and the need for Mexico to diversify its trading partners is often mentioned. There have been many attempts to do so, but the fact remains that by the start of the 1990s Mexico's trade with the United States had become much more concentrated, in both directions, than in the past. Whereas in 1970 and 1980 around 60 percent of its trade was with its northern neighbor, in 1989 the proportion had risen beyond 70 percent, reflecting a similar trend for the rest of Latin America. During the 1990s Mexico will seek a better position in world markets and is, in fact, already doing so. Industrial protectionism, the pillar of development designs for the previous four decades, was never effective. Encouraging foreigners to purchase products made with Mexican steel priced at double the international norm was a difficult, if not impossible, task. Mexico is now, however, one of the most open economies in the world, with imports growing at a rate that will be difficult to maintain in the medium term. Mexican tariffs on textiles, for example, are lower than those in the United States and Canada. Some import policies, such as very low tariffs and the lack of protection against illegal trade practices, may need to be reevaluated very soon. Nevertheless, most observers seem to agree that exports of goods and services will be the most important device to stimulate the country's economic growth. The export model will dominate in the next decade. Meanwhile, however, a greater openness to the outside naturally increases an economy's vulnerability to external markets. One key to minimizing this vulnerability will be to exploit our geographic proximity to the United States as fully and aggressively as possible, while still seeking to diversify our trading partners. Although many Mexicans have traditionally viewed our neighbor to the north with mistrust, we must concede its market is the largest in the world—and accept and take advantage of it as such. Despite its political weakening and loss of economic superiority, the United States will continue to grow as a magnet for trade into the foreseeable future. Moreover, the formation and strengthening of regional blocs has piqued U.S. interest in expanded trade south of its border, as evidenced by President George Bush's announcement in June 1990 of an interest in a hemispheric trade zone. Mexico already ranks as a leading supplier of parts and components within the overall system of world production, as well as a significant target market for world exports in its own right. All these factors, not to mention the planned negotiations for a Mexican-U.S. free trade agreement, are drawing Mexico into a closer relationship with its northern neighbor. This is real; it is happening. It is

Mexico and the World

33

an integration that may be happening without much fanfare, but behind the scenes the two economies are forging stronger linkages in a multiplicity of ways. The risk, given Mexico's low wages, is that this relationship may become another name for dependency, not interdependency. This is just one of many good reasons (beyond the caveat, noted at the outset, that further integration with the United States is not guaranteed) why we must continue to diversify our relations by seeking out other economic partners. Canada is a prime alternative for closer trade, financial, and political ties. By acting in concert on certain issues, Mexico and Canada could together exert some influence on the United States in negotiations for a free trade agreement. It is without a doubt a positive sign that talks about a trilateral trade agreement have already begun among Mexico, Canada, and the United States. And much could be done to expand economic relations with Latin America, which have traditionally been minimal. The southern nations of the hemisphere view Mexico as closer to the United States than to them, and they are right, as José Miguel Insulza demonstrates in his chapter. Nonetheless, Chile and Mexico have recently agreed to liberalize their trade relations over the medium term—an example that could be followed elsewhere in the hemisphere. I do not suggest this diversification purely for economic reasons. Any strengthening of ties with Canada and Central and South America will only enhance Mexico's negotiating capacity with its powerful neighbor. In addition, it will also enhance the influence throughout the Americas and indeed the rest of the world that stems from our relationship with the United States. From the other side of the Pacific Ocean, Japan, through its strategic selectivity, is aiming its sights at expanded preferential relations with Mexico and Brazil, and to a certain degree with Argentina and Chile. Mexico, beyond its status as an important supplier of several varied commodities and as a large consumer market, also has the capacity to become a key point for reexport into the larger market of the United States. All of this presages a considerable increase in overall relations with the Land of the Rising Sun. Of necessity, however, Japan will be the one to instigate and encourage this process, coordinating and seeking the blessing of Washington in order to avoid aggravating the frictions that already exist between those two powerful nations—frictions that could very well intensify in the future. Thus, here as elsewhere, in becoming part of this difficult and complex relationship between the United States and Japan, Mexico faces both risks and opportunities. The Mexican-Japanese relationship in the 1990s will grow significantly, making it one of Mexico's prime options during the decade. Mexico's ties across the Atlantic to Europe are old and strong. Mexico

34

Introduction

enjoys a certain prestige in Europe, and its recent changes in economic management have been well received there. Improving ties of all sorts with an integrated Europe is both promising and necessary. In particular, Spain, for historical and cultural reasons, can be a powerful vehicle for making those ties stronger and more dynamic. But because of its predominant role, Germany is likely to be the real key to Europe. President Salinas has acknowledged the difficulty in shifting European attention to the developing countries, given the spotlight now being trained on the political, ideological, and economic changes in Eastern Europe. Nonetheless, Salinas and many others in our country recognize that much will depend on what we ourselves do within the basic framework of our diplomatic and commercial strategy—namely, diversification.

A Global Perspective The trends observed over the past few years and the prospects for the next few suggest that over the course of this decade relations among the large industrialized countries throughout the northern world will be further strengthened. Dominating the world stage will be the United States and Canada, along with the rest of their sphere of influence; Europe, with both a predominant role for Germany and expansion through the incorporation of Eastern European countries; and Japan and the Pacific Rim, including the great potential of China. In other words, as was true during the 1980s, North-North relations will prevail, only now even more so. As a result, the South—always marginal in the concert of nations— will unfortunately decline in importance even further during the 1990s. In Latin America and Africa the debt crisis, previous mistakes in domestic economic policy, and the effect of an unfavorable international climate will be difficult to overcome in the medium term. As noted earlier, however, within this complex and heterogeneous universe of developing countries, there will be some exceptional countries to receive preferential attention by the great centers of economic decision making. Mexico is one such country in Latin America. Now more than ever Mexico will be under great pressure, internally and externally, to detach itself from the problems of underdevelopment and from the other Latin American countries with which it has strong historical and cultural ties. Consequently, the strongest temptation will be to look more and more to the north and to strengthen its ties with the United States in particular. In Mexico, these trends may accelerate the increasing integration with the United States. At that same time, however, these same trends offer Mexico an opening to diversify its relations, an option that Mexico should strive for. The same factors that predicate closer ties with the United States

35

Mexico and the World

also support a rationale for integration to be curtailed. In part as a response to the changing global economy, Mexico has undergone radical economic changes of its own. But economic growth in itself is not the sole answer. Political change is not moving at a similar pace. It is a political opening—one that allows the Mexican people to determine how their economic resources are being allocated and to ensure that social demands are met—that is the necessary prerequisite for all of Mexico's economic reforms and trading alliances to take hold and flourish.

Notes This chapter was translated from the Spanish by Rita A. Clark-Gollub. 1. Poder Ejecutivo Federal, "Criterios Generales de Política Económica para 1990" (Mexico City: Presidencia de la República, December 1989). 2. Ibid.

PART 2 NEW APPROACHES TO FOREIGN RELATIONS

3 North American Interdependence: Mexico's New Paradigm for the 1990s Clark W. Reynolds Mexico has entered a stage of economic liberalization at a time when the international system is caught between greater openness to trade and investment and the rebirth of regionalism. The increasing global attention to domestic and regional adjustment is less a reaction to the spirit of free trade than an attempt to deal with the pressures it has created. For the Mexican system the challenge is particularly relevant, since the opening of its economy to international trade comes after a difficult period of debt-imposed stagnation that already carried severe adjustment costs. The new opening promises even further dislocations for Mexican society and additional headaches for policymakers. And since Mexico's opening has not yet generated major benefits in terms of wages, productivity, or profits, potential winners remain skeptical, while losers anticipate scant compensation. Liberalization assures increased interdependence. The concept of interdependence as used in this chapter is descriptive rather than normative. It refers to the conditions under which economies interact, giving rise to feedbacks, so that output, productivity, investment, and employment are mutually determined between the economies. T h e more two economies exhibit such interdependence, the more not only economic but also political and social behavior in one becomes a matter of concern to the other. In the case of Canada and the United States, such de facto linkages led to de jure accords, most recently in the form of the free trade agreement ( F T A ) , signed by the two countries in 1989. Within the framework of a treaty there is less scope for unilateral action on the part of one member that might adversely affect its partner and greater opportunity for the pursuit of joint gains from trade and investment. One Canadian justification for an F T A , for example, was the concern that in a political climate of increased pressure for protection, the United States might raise barriers against Canadian exports, distorting the pattern of production and employment. On the U.S. side there was recognition of the potential benefits from a regionwide market in the form of future investment, productivity, and global competitiveness. Mexico and the United States have exhibited growing de facto

39

40

New Approaches to Foreign Relations

economic interdependence throughout their respective histories, despite periods of temporary reduction in linkages (the Great Depression) and upward economic distortions (World War II and the oil boom). Even before Mexico's liberalization of trade and investment in the 1980s, the U.S. share of Mexican trade and financial flows was increasing, and a rising proportion of the Mexican labor force was finding temporary or permanent employment in the United States. Indeed, by the early 1980s, U.S. macroeconomic policy was having a major impact on the Mexican economy through soaring interest rates and recession-induced oil price declines; likewise, the subsequent Mexican debt crisis had repercussions in the United States in terms of output and employment in key sectors, regions, and income groups. In deciding to pursue an opening of its economy, Mexico chose the path of increasing international interdependence. Despite the general nature of the liberalization and the preference for diversification, geographic proximity, historical ties, and market size have made the North American market (formally cemented by the F T A ) the major locus of increased trade and the main source of additional investment for Mexico. (Whatever the ultimate position of Québec with respect to the rest of Canada, it is even more committed to free trade with the United States than its provincial neighbors.) For all practical purposes, continued liberalization for Mexico in the 1990s means North American interdependence. Moreover, this strategy calls for growth through economic restructuring, in the direction of dynamic comparative advantage, (whereby each nation chooses exports and imports that will make the most efficient use of the nation's resources over time). As a result, the pattern of trade and investment, as well as employment, is bound to be uneven, with some segments of the market gaining and others losing. Economic policy will play an important role in this process, since no changes are instantaneous, and what appear to be minor decisions in terms of degree and timing may have a major influence on the future structure of Mexico and its trading partners. Whether or not the economy is able to recover and grow in the 1990s, the direction Mexico takes is certain to have a major effect on the rest of North America—an effect that will grow in time, for better or worse. No matter how free the market, it works within a framework of laws and institutions that, however mutable, are adapted with a lag and have implicit if not explicit political content, reflecting a long historical process of compromise and balancing of interests. Since one of the principal goals of Mexico's modernization strategy is democratization, taken at face value for this chapter, the social impact of the new directions of economic change will have an even greater influence than they would if the country were politically monolithic. Wage and employment growth in Mexico calls

North American

41

Interdependence

for a major new development thrust. Given the current domestic conditions, the initial stimulus must come from abroad, involving a much greater insertion of Mexico into the North American market. And that calls for new investment on both sides of the border, if wages are not to be depressed in the United States and Canada. The remainder of this chapter examines some of the more likely economic and social implications of a strategy of increased interdependence on the Mexican side, along with some consequences for the United States and Canada. First, however, it is important to understand several key demographic and economic facts about the three countries of North America.

Basic Dimensions of the North American System Together, the countries making up the North American continent (including Mexico) comprise less than 7 percent of the world's total population but the world's largest economic agglomeration. Figure 3.1 shows the distribution of the total population of the region, an estimated 357 million in 1988, roughly equal to the expected population of the European Community after its integration in 1992. The United States contains 70 percent of the continent's population; Mexico, 23 percent; and Canada, only 7 percent. Figure 3.2 indicates the distribution of the combined North

Figure 3.1 Distribution of the North American Population, b y Country, 1988 Canada

Mexico

United Slates

Total: 357 million people (est.), 1988. Source: World Bank, World Development Report, 1989 (New York: Oxford University Press, 1989).

42

New Approaches

to Foreign

Relations

Figure 3.2 D i s t r i b u t i o n o f the C o m b i n e d G r o s s N a t i o n a l P r o d u c t s of N o r t h A m e r i c a , b y C o u n t r y , 1988 Canada

Source: World Bank, World Development Press, 1989).

Report, 1989 (New York: Oxford University

American gross national products (GNPs), which total 5.9 trillion U.S. dollars. It is this total that makes the region the world's greatest economic conglomerate. In 1988 Mexico accounted for a mere 3 percent of the region's output, or approximately 170 billion U.S. dollars; Canada represented 9 percent; and the lion's share, 88 percent, was that of the United States. The reason why Mexico has such a small share of the income pie, even though it accounts for almost a quarter of the North American population, is its low per capita output, despite more than three decades of postwar development through 1982. The United States and Canada are about equal in GNP per capita: $19,800 for the former and $18,600 for the latter, as shown in Figure 3.3. Their equality is both cause and consequence of the long-standing de facto integration of the two adjacent economies with their comparable resource endowments, technologies, social structures, and democratic institutions—again, an integration that was in process long before the 1989 FTA. (Indeed, the degree of parity between the two countries served to reduce the adjustment costs of the formal agreement, easing passage of the FTA despite strong opposition from many quarters in both countries.) Mexico, on the other hand, still had a per capita GNP in spring 1990 of only $1,900, a lower figure than in 1981. This decline has occurred even though the population grew at an estimated average annual rate of 1.92 percent over the 1980s.1

North American

43

Interdependence

Figure 3.3 Gross National Products per Capita in the Three North American Countries, 1988 U.S. $25,000

20,000

_

$19,800

$18,600

p u m p u p ^

•ííííiiíiíxSiílKSÍ:

15,000

MSSmMXM

PPM1M

10,000

_

5,000

_

WMmWM*

WÊÊÊÊËê wmmxíiivm*

IBs

îïîïîîî

$1,900

0 U.S.

Canada

Mexico

Source: World Bank, World Development Report, 1988 (New York: Oxford University Press, 1989).

This decrease in output reflects an average decline in the rate of population growth of about 3.5 percent annually over the 1970s.2 After a fall in Mexico's mortality rates during the postwar period, it took another generation to see a comparable fall in fertility rates, yet they still remain quite high. As Mexico's population continues to grow, the labor force is expanding at an even higher rate, reflecting earlier demographic trends and rising participation rates, with the number of job seekers currently growing at a rate of 3.6 percent annually. 3 There is a relentless "Iron Law" of labor-supply increase that will affect the Mexican economy, and by implication its North American partners, into the next century. Population growth must be reconciled with the provision of gainful employment at steadily increasing rates of productivity and income, if stability is to exist on our continent. It is not possible to achieve the goals enshrined in our respective constitutions, including the pending Canadian constitution, without regionwide convergence in income levels. By 1988 Mexico's population had topped an estimated 86 million people. 4 For all practical purposes the Mexican-U.S. border is much more open, permeable, and peaceable than might reasonably be expected. For it is the longest border between a major industrialized country and a developing country, whose average GNPs per capita differ by a 10:1 ratio and whose wage rates in areas along the border differ by ratios ranging from 4:1 to 8:1.5

44

New Approaches to Foreign

Relations

Prospects for Economic Convergence in North America Although the economic gap between the north and the south of the continent gradually narrowed in relative terms through the 1970s, it widened dramatically in the 1980s. In absolute terms it grew even during the boom years early in the decade, because the disparities in income and wage rates between Mexico and its northern neighbors were so large at the start of the decade. Given the size of the initial disparities, even relative convergence in income levels permits absolute divergence in per capita income levels over a longer period. And what drives migration, social unrest, and the ultimate destabilization of political regimes is not a relative gap in income but an absolute gap. The whole process of convergence and divergence must then be examined to determine what is required to bring about some degree of income equality between Mexico and the rest of North America. For political as well as economic stability, convergence must be consistent with improved conditions for all. This means that Mexico has to grow much faster than its North American partners. If not, wage rates in the United States and Canada would have to come down for convergence to take place, and that would be devastating for the political stability and economic welfare of all three countries. It is not surprising that concern is beginning to grow throughout North America, and not only over the Mexican-U.S. border region, about the implications of sustained continental divergence and whether it is realistic to expect an eventual end to the divergence through policies favoring trinational development. 6 Regarding recent patterns of regional growth, the picture is mixed. Both the U.S. and the Canadian economies expanded during the 1980s, while Mexico experienced secular stagnation for the first time since 1940. The United States invested a decreasing share of its GNP over the decade, around 15 percent, whereas Canada's investment share increased to 22 percent. Both countries, but especially the United States, continued to borrow from abroad to finance their ongoing government deficits, although Canada was able to cover its deficit with the rest of the world by running a trade surplus with the United States. As indicated in Figure 3.4, slow growth continued in the two countries at the end of the decade, despite modest concern about the possibility of stagflation in the 1990s. The worst part of the picture is that Mexico's adjustment to earlier disequilibria lasted much longer than expected, enduring almost to the end of the decade, as shown in the figure. The pattern of economic performance was mixed over the 1980s, with income from the maquiladoras and other nontraditional exports rising while many industries serving the domestic market languished. Indeed, in per capita terms the Mexican economy did not really begin to recover until 1989. That slight

North American

45

Interdependence

F i g u r e 3.4 A n n u a l P e r c e n t a g e G r o w t h i n G N P in t h e T h r e e N o r t h A m e r i c a n C o u n t r i e s , 1987-1989 Percent 5 j 4.5 . 4 .

•

U.S.

H

Canada

B

Mexico

3.5 . 3 • 2.5 •

2• 1.5 •

1 . 0.5 •

0 1987 Source: World Bank, World Development Press, 1989).

1988

1989

Report, 1989 (New York: Oxford University

upturn, expected to continue through 1990, is associated in the minds of many observers with the awakening of fresh hope for investment and productivity growth that accompanied Mexico's new policies of increased openness to trade and foreign investment, deregulation, and privatization. In fact, as the figure shows, Mexico began to pick up just when the United States and Canada were slowing down. Nevertheless, some observers are concerned that the government's stabilization program (the Economic Solidarity Pact, introduced at the end of 1987 and still in effect), which calls for a slow, preannounced rate of peso devaluation, could lead to an overvalued peso—inhibiting exports, encouraging imports, and draining foreign exchange reserves. (The trade balance, which had been in surplus, already moved negative early in 1990.) Others hope that this possibility will be offset by sufficiently positive expectations about future North American trade and financial linkages to permit a net inflow of direct investment to cover the trade gap. And so, as the divergence remains, so does the fear of convergence. No one believes that the task of achieving harmonious growth among increasingly interdependent sectors, regions, and income groups, so that the benefits may spread throughout the populations of the respective countries, will be easy. The concern is particularly real within the United States, given its much closer proximity to Mexico. And now, with negotiations over a Mexican-U.S. FTA in the planning stages, Canada is also closely watching the evolving Mexican position in the North American

46

New Approaches to Foreign

Relations

system. Canadian prime minister Brian Mulroney visited Mexico at the invitation of President Salinas in March 1990, to sign a framework agreement between the two countries. His visit can be interpreted as a reasonable step in the pursuit of a more direct voice for Canada in the Mexican-U.S. negotiations.

The Costs of Non-North America What would be the opportunity costs of continued continental divergence? Several years ago, the Cecchini Commission of the European Community produced a report originally entitled "The Cost of Non Europe." (The name was subsequently changed to the more positive "European Challenge: 1992.")7 The report made a rough estimate of the costs and benefits that would accrue to Europe from economic integration. Its analysis showed significant gains in productivity and income from the more efficient utilization of resources and technology and from the expanded opportunities for exchange. A case was made that the costs of a non-Europe would be large enough that the decision of all partners in the European Community to go ahead with integration by 1992 made sense economically as well as politically. What would the costs of non-North America be? And the benefits of more formal economic integration? We cannot yet predict the answers. The questions deserve careful analysis through a collaborative effort on the part of private- and public-sector institutions, academe, and the best technical experts and policy analysts in the three countries. For without answers, the debate will only delay action; and if action is called for, it would be best to take place simultaneously with European and Pacific Rim integration. There are many in our three countries who believe that the costs of Non-North America, through failure to incorporate Mexico into a regionwide system, would massively outweigh the benefits. I share the view that much more can be gained from increased North American integration than would be lost by it, as long as a reasonable share of the considerable benefits from productivity growth are used in part to compensate the losers and in part to assure a balance in participation among the three countries. That scenario would obviously require trilateral cooperation in the integration process, with foresight and extreme care, to make it consistent with the political and economic interests of each partner. Foresight requires us to do our homework on the adjustment costs as well as the benefits of fuller integration. Initial exploratory research suggests the possibility of an enormous potential for gains in combined GDPs from expanded U.S. and Canadian trade and investment with

North American

Interdqjendence

47

Mexico. For example, Richard Harris, an expert contributor to the Macdonald Commission Report that evaluated the potential impact of the F T A on Canada, 8 has estimated that the potential gains from Mexico's integration into the North American system would actually greatly surpass those likely to arise from the Canadian-U.S. F T A . But he also stresses the likelihood of significant adjustment costs and the possible diversion of trade and investment toward Mexico that would otherwise have passed over the U.S.-Canadian border. 9 Whatever gains do arise, their distribution will be a matter of great political significance both within and among the countries, as will compensation for those who are adversely affected by integration—compensation that will be extremely difficult to distribute without much greater regional cooperation than has existed to date. A n d beyond the strictly economic dimensions of the adjustment is the matter of reconciling different cultures, values, institutions, and political alliances among the three countries as their markets become increasingly integrated. Despite the lack of hard estimates, we can speculate about some of the more specific costs and benefits. For Mexico, whose average earnings per worker are about one-eighth of those of the United States, barriers to exchange between the two countries act as an immense dike. We have already seen an outpouring of growth in trade and investment where that dike has been breached, in the case of the so-called border industries or maquiladoras. A visit to the J u á r e z - E l Paso, T i j u a n a - S a n Diego, Mexicali, or Nogales areas provides compelling evidence of the wildfire growth of such assembly plants, which has occurred since the 1982 crisis cut Mexican wages by more than half (in U.S. dollar terms). Not since World War II, except perhaps in such high-tech boom areas as California's Silicon Valley, has there been such a proliferation of industry, with hundreds of acres of new plants and hundreds of thousands of newly hired workers employing the most modern machinery to process imported goods for reexport to United States and other foreign markets. But the maquiladoras as they are now configured represent more a breach in the dike between the labor markets of the two countries than a model for the organic integration of their respective economies. T h e plants operate in special in-bond zones with largely foreign capital, provided by parent firms that view them as cost centers rather than profit centers, benefiting from liberal tax incentives. A relatively small share of the "gains from trade" that they provide stays within the Mexican economy, most of it in the form of direct wages and benefits to local labor. Production sharing tends to be limited to assembly operations, with little cross-border linkage in terms of more vertical and horizontal integration of production processes, shared research and development, or movement to progressively higher skill levels or administrative or entrepreneurial

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responsibility for the Mexican personnel. And because of restrictions on domestic sales, almost all of the maquiladora output is reexported instead of being sold within Mexico—although new regulations permit additional exports to be matched by domestic sales. As mentioned before, the wage differentials between plants north of the border and those to the south are between 4:1 and 8:1. Working conditions in Mexico, though not as bad as some might expect, seldom conform to U.S. standards. Housing for many of the hundreds of thousands of migrants from the south consists of cardboard and corrugated tin;10 opportunities for labor to organize and bargain collectively are limited; and young female workers are preferred for their dexterity and docility. These "offshore" assembly plants thus have characteristics that would not be politically acceptable to U.S. and Canadian citizens as part of an integrated North American industrial (and employment) grid. But as a breach in the dike, the maquiladoras illustrate the potential that exists for convergence in productivity between north and south. And many firms based north of the border are discovering through their experience with maquiladoras the potential that Mexico offers for a much fuller degree of production sharing and market sharing in the future. Mexico has a 30-million-strong labor force (notwithstanding its extremely low rate of female participation in the formal labor market). This contrasts with 120 million workers in the United States. In Mexico millions are "underemployed"—living in impoverished conditions and willing to work for six dollars a day or less—and this fact suggests an enormous potential for growth. However, the remaining limitations on trade and investment and the lack of incentives for technology transfer act as barriers to a more effective deployment of Mexico's labor and resources. The three countries therefore are debating opposing scenarios to result from a breach in the dike: one could be a flood of labor migration north and capital migration south, which would threaten both systems; and the other could be a staged release of productive potential through trade, investment, and shared technology, which would raise productivity, income, and welfare throughout the continent. The United States has never had much of a history of working on economic integration with other countries, although its policymakers have recommended it to others, such as the Europeans. The Canadian-U.S. FTA was therefore a calculated risk. If we look at the various raw estimates of the static gains to be had from the agreement—a 2 percent, 3 percent, or even 5 percent increase in GNP—they are not huge. Five percent of the 500 billion U.S. dollars that make up Canada's G N P amounts to very little from the point of view of the United States, equaling only a fraction of its fiscal deficit. Such magnitudes were not the inspiring, mobilizing force behind the free trade agreement.

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In the case of Europe, the Cecchini Commission calculations, as useful as they are, relied on comparative static models that could scarcely anticipate the flood of investment that has followed the announcement of Europe 1992. What will the benefits of that Europe be? Again, most would agree that they do not know. And the answer is even more elusive now that it is necessary to factor into expectations the impact of 16 million workers from the former G D R with much lower wages joining the F R G and the entire European economy. Yet one does not have to look far to see how the anticipation of Europe 1992 is energizing expectations and driving up national and foreign investment in the region's plant, equipment, technology, education, and infrastructure. Such activities, because they are based on the solid foundations of a widening market with an expanding labor force, tend to render the expectations self-fulfilling. By the same token, the dividend of the Canadian-U.S. F T A is more likely to be in expectations and their self-fulfillment than in static gains from trade. Expectations are the dynamic motivating force that drives investment, innovation, and social development; and, given its low income and productivity rates, once Mexico is brought into the system, there are enormous complementarities possible from the combining of regional resources and technology. Another major dividend from Mexico's fuller participation in the North American economy will be in productivity gains that depend less on a static reallocation of resources than on massive new investments, driven by optimistic expectations at home and abroad. If Mexico's per capita output were to rise to half that of the United States today, implying a wage level that would still be less than half the U.S. average, its GNP would be 40 percent higher than Canada's today. Both back-of-the-envelope calculations and simple computations of general equilibrium models indicate that the cumulative benefits from incorporation of Mexico into a regionwide economy would amount to hundreds of billions of dollars within a few decades. Much of the gain from such convergence would be shared among Mexican labor and domestic and foreign capital (including that of the United States, Canada, and other countries) invested in Mexico, as well as consumers and those with technical skills throughout the region. A stable relationship would require that provision be made to apply some of the gains from Mexico's participation in a regionwide market to compensate for related adjustment and infrastructure costs not only in Mexico but elsewhere in North America. In other words, convergence would give new importance to the economy to the south, even as it would raise the difficulty of allocating the proceeds of shared development— again, an issue that must be explored realistically in terms of both the problems and prospects of North American integration. Notwithstanding the difficulties that lie ahead, there is no way that the leaders of the United

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States or Canada, much less those of Mexico, can avoid the subject of regional convergence in income and productivity. Yet it is unrealistic for the three countries to pursue any goal that does not provide assurances that regional development policies will be consistent with improvement in the quality of life of all their citizens, respecting their very different cultures and institutions and their common desire for national autonomy.

Implications of Mexico's New Paradigm for the North American Continent I have argued that the increased G N P that can be realized in Mexico by raising its level of development toward that of its northern partners is both enormous and attainable, as long as provision is made for an equitable sharing of the gains. Mexicans are fast coming to recognize the opportunity they face and the need to take advantage of their privileged position on the North American continent, notwithstanding the risks of closer links with their powerful neighbors to the north. (Indeed, Canada's inclusion in a regionwide market holds out some offset to a strictly binational power relationship with the United States.) The Salinas administration, the ruling Institutional Revolutionary Party (PRI), and at least one of the major opposition parties (the centerright National Action Party, PAN) have made clear their recognition of the dangers of reverting to earlier policies of "import-substituting industrialization," important as such policies were historically in providing the incentives for investment that were needed to raise the economy to its present level. As early as December 1982, when Miguel de la Madrid became President, a 180-degree revolution in Mexico's foreign and domestic economic policy was begun. Severe fiscal adjustment and economic opening characterized his administration. But although foreign investment was welcomed, many legal and regulatory inhibitions remained, and the shadow of foreign debt and domestic uncertainty, along with severe and rising inflation through 1987, limited the amount of capital inflow. Carlos Salinas de Gortari, de la Madrid's planning and budget minister and his handpicked successor, has shown a commitment to stay the course and intensify the liberalization measures, albeit in the face of strong political opposition. Under de la Madrid, Mexico joined the General Agreement on Tariffs and Trade (GATT) and negotiated a framework trade agreement with the United States. Subsequently, it has steadily reduced its tariff and nontariff barriers (although with less progress in agriculture). The Salinas administration has relaxed many of the remaining regulatory and administrative obstacles to foreign direct investment. The government has

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expanded its commitment to privatizing most of the parastatal enterprises, especially those established in recent years (such as telecommunications), and in early 1990 announced the intention to reprivatize some of the commercial banks nationalized in 1982. Overall, the object is to encourage export-oriented investment to respond to the new openness and pull the economy forward, permitting the domestic economy to recover as well. How is the United States responding to the new realities of greatly increasing economic and social interdependence with Mexico? The Bush administration, with bipartisan support, is moving in a positive direction, step by step, through trade negotiations, the recently announced plans for negotiations over an FTA, and the provision of modest debt relief for Mexico, involving not inconsequential help from Japan at the multilateral level. The debt negotiations that were signed in February 1990 provided some breathing space but not by any means the amount of debt relief or capital inflow needed for Mexico to turn the economy around and grow at a rate that would foster convergence. What about migration? One of the things we are discovering as we study the political economy of interdependence is that where contiguous markets face severe policy-imposed disequilibria (as Mexico and the United States do), if you slam one economic door, another flies open. Slam an investment door or a trade door from either side, and you are going to have more migration. To avoid dealing with the place of migration in their theories of convergence, economists often apply what is called the "factor price equalization" theory, which states that if the right conditions apply, including free trade and incomplete specialization, wages for the same skills will be equalized by trade without migration. The theory is usually honored in the breach, however, because its logic tends to be marred by unrealistic assumptions. Despite a long period of relatively peaceful coexistence between the United States and Mexico, the wage gaps between the two are as large today as they were in 1810. When wage equalization does not occur between two adjacent economies—and as information improves, transport costs decline, and savings become available to cover the cost of migration—workers are going to vote with their feet as to where the opportunities are greater. Divergence caused by wage declines or political repression against labor organizations in low-wage markets can increase the pressures on the supply side. When the Immigration and Naturalization Service cracked down on undocumented Central American and Mexican immigrants to southern Texas in 1989 with forced stays in overcrowded and unsanitary detention centers before deportation, the flow was diverted to Canada, and that country is now reconsidering its own sanctuary policies. And meanwhile, the pressures arising from economic imbalances, which are also linked to the lack of political democracy,

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continue unabated. For two decades now, the United States has been experiencing an enormous and increasing flow of immigration, which the Immigration Reform and Control Act of 1986 has not succeeded in stemming. Some say that the numbers are a bit smaller than they would have been without the law, but we certainly are not seeing any significant decline in absolute levels. Yet for most Mexicans, migration is an unwelcome alternative to jobs created through trade and investment. Regional imbalances in North America are likely to increase in relative terms and are certain to increase for a time in absolute terms whatever the three countries do to alleviate them. And the large and growing Hispanic population in the United States is not only in the Southwest; Chicago, for example, is one of the largest Mexican population centers in the country. Mexico's new strategy of openness appears to recognize the interactive nature of trade and factor movements. By opening the trade and investment door, its policymakers hope that the resulting growth in the economy will tighten labor markets and reduce pressures for outmigration. But of course the goods shipped north will embody the services of Mexican workers, whose labor will compete, in processed form, with that of workers in the United States and Canada. Trade is a two-way street, however, and Mexico's expansion will provide an enormous and growing market for those goods and services (especially capital and intermediate goods and technology-intensive activities) in which the two northern countries have a comparative advantage. In addition, there will be a growing Mexican demand for immigration of technically skilled labor and management. Without regional integration that involves a steady growth in the demand for labor north, as well as south, of the border, the low productivity of Mexico is going to pass over into the U.S. and Canadian markets, affecting the wages of their labor forces. This would exacerbate what has been called the "great U-turn" in U.S. wages since the late 1970s, a term coined by researchers who found that minority and underclass wages were going up until 1977, after which they reversed course.11 The United States is witnessing a decline in real wages at the lower skill levels, affecting in particular youths, minorities, and the underclass. This situation flies in the face of the constitutional mandate to promote the general welfare. Obviously, bringing into the game the new and large population of Mexicans—at very low wages—but without a significant investment in productivity growth is likely to exacerbate the inequalities that are already growing in the north. An alternative to migration is improvement in the domestic economy of Mexico, but as we have seen, this will depend on its ability to restructure and grow in the direction of greater productivity and competitiveness,

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which in turn will depend on less protectionism and greater openness to the external market. In practical terms this means accessing the North American market. The trade relations between the United States and Canada and between the United States and Mexico are already extensive. Canada and the United States are the largest trading partners in the world. In 1987, for example, 76 percent of Canada's exports and 69 percent of its imports were to and from the United States. In 1989 the shares were 74 percent and 69 percent. Those shares are much larger than was the case after World War II or during the 1960s. And the same is true for trade between the United States and Mexico. The share of trade with the United States has risen to over two-thirds of Mexico's total, a much larger share than at the beginning of its process of import-substituting industrialization in the 1940s. Mexico discovered that the more it tried to substitute domestic production for imports, the more dependent it became on imported inputs for those same "substituting" industries. One element in Canada's successful transition from being an exporter of raw materials and primary products to an economy with more diversified trade and investment has been the enormous amount of two-way trade and exchange fostered with the United States. Well before the FTA, tariffs and quotas were minimal between the two economies; and for one key sector—autos and auto parts—the countries signed a pact (the United States-Canada Automotive Products Agreement, in 1965) that provided for a greatly increased flow of trade in both directions, allowing each country to benefit from the price and quality advantages of the other, with both enjoying economies of scale from the larger market. By 1980 autos and auto parts represented more than one-fifth of Canada's exports and almost one-fourth of its imports to and from its neighbor. As a result of the Auto Pact, trade between the two countries in this sector is about equal. Yet you will not read about this sort of trade in most textbooks or discuss it in the simple algebra of balance-of-payments surpluses or deficits, which deal with net rather than gross flows. Again, trade is a two-way street, with benefits flowing in both directions. Since trade involves specialization that raises the productivity and welfare of the economy as a whole, its value is measured by gross rather than net flows. Auto trade between Canada and the United States reflects both "production sharing" and "market sharing." And unlike most maquiladoras or solely assembly operations, industries in both countries participate in the higher stages of value added and sell in each other's markets. The auto sector is an important component of Mexico's opening to two-way trade as well. The country's combined exports and imports of autos and auto parts already totals over 6 billion U.S. dollars annually, which represents over 10 percent of Mexico's total trade and a much larger share of its nontraditional exports.12 The growth of trade in this sector has

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been significant in both directions, primarily with the United States. This has raised concern: in the United States, that jobs are being lost directly to Mexican suppliers; and in Canada, that some of its auto parts trade is also moving south of the border, with components being passed back into Canada through vehicles exported by the United States. The situation signals both opportunity and risk. As Mexico's trade rises, representing a growing percentage of U.S. and Canadian imports, the northern countries will be able to increase their exports to Mexico as well, with the result being gains from trade that are across the board. The risk is whether it makes sense to put the three countries together in a larger economic grid (a free trade and investment area) with production sharing and market sharing extended to Mexico. All three countries should realize benefits in the form of the lower costs resulting from scale economies and induced competitiveness in previously sheltered oligopolies; a greater diffusion of technology; increased labor productivity (especially in Mexico); and improved quality, delivery times, and other advantages from a regionwide market. To encourage continentwide security, global competitiveness, scope for democratization, and social justice, a more formal approach to economic integration may well be in everyone's interest. Once more, the governance of such a relationship will demand regional leadership, institutional flexibility, adjustment compensation, and respect for the legitimate differences among the three countries—all at a scale unprecedented in North American history.

Implications of the New Paradigm for Mexico's Domestic and Foreign Relations Foreign policy operates within the limitations of domestic politics. Given the uncertainties and dislocations arising from Mexico's adjustment programs, austerity measures, and economic openings of the past eight years, social and political unrest remains a threat if the economy fails to experience recovery and growth sooner rather than later. Opposition is growing at the local and regional levels for the political commitments of President Salinas, the leaders of the ruling PRI, and their representatives to allow greater pluralism and democratization. Outbreaks of violence have occurred in some states, such as Guerrero, and in early 1990 groups opposed to the PRI were forceably removed from town halls throughout Michoacan, which they had occupied in protest of alleged election rigging. Unhappiness and unrest is rife among labor groups as well, exacerbated by the fact that real wages (in pesos) have fallen 40 percent since 1981, with declines hitting all sectors and skill levels. Yet Mexico's stability is still impressive, given the wringer that its society has been put through.

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Imagine what would happen if Canadian or U.S. real wages fell 40 percent in nine years! The Mexican people have shown remarkable patience with the present political regime, especially in light of their widespread belief that much of the debt for which austerity measures were justified was acquired to support the mismanagement of previous administrations and to finance corruption and capital flight. It is cold comfort to those who have suffered from these adjustments that Mexican leaders had no control over the rise in international interest rates or the fall in oil prices that brought the country's crisis to a head in 1982. As economic integration proceeds, any spillover of Mexican instability will have increasing ramifications for North American security, just as major economic cycles and political changes in the United States have had a profound impact on Mexico throughout its history. In other words, the sensitivity of the north to movements south of the border will grow with economic integration. Yet without integration Mexico is unlikely to achieve its essential goals of economic growth along with broader social participation and political democratization. This strategy implies a strong trade-off between the international economic linkages, which increase the vulnerabilities of each of the North American partners to the others' fluctuations, and the security problems that would arise for the United States if Mexico were hampered in its quest for development based on a strategy grounded in a North American paradigm. While one might breathe a little more easily in Canada, given the U.S. buffer, all three countries are part of a common security system, which is de jure in the case of Canada and the United States and de facto in the case of Mexico. Nonetheless, within Mexico the policy of increasing economic liberalization is also serving the interests of greater political and administrative decentralization throughout the country. Measures taken to encourage private investment in response to market forces weaken the ability of the central government to exercise hegemony over the pattern of regional development. In several of the northern states of Mexico, the P R I has selected representatives of prominent business groups to run for office, carrying the philosophy of the maquiladora and greater linkages with the United States directly into the political domain of what has been called, until recently, "the official party." In the state of Baja California, the opposition PAN party was permitted to win the governorship for the first time, putting in power a political movement that is even more pro-integration than the current national administration. The coalition party of the center-left opposition, the Party of the Democratic Revolution ( P R D ) (established in May 1989), is far more reluctant to embrace liberalization, and also more disposed to return to earlier policies of state-initiated industrialization and protectionism. Led by 1988 presidential candidate Cuauhtémoc Cárdenas, the P R D has yet to present a

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convincing program for recovery and growth, although it enjoys widespread popularity at the grass-roots level and among many who remain wary of U.S. hegemony. In the final analysis, Mexico's foreign relations and domestic political problems are directly linked through the performance of its economy under the new interdependence. At home and abroad there is a commitment to opening, in terms of both international trade and domestic democratization. Yet the pressures of adjustment to liberalization, exacerbated by the debt crisis of the last decade, have also engendered resistance to reform measures that take away jobs, profits, and privileges that depended on the earlier program of economic protectionism and political favoritism. It is at this juncture that the United States and Canada face the challenge of increased regionwide economic integration. The risks are great on both sides of the Mexican-U.S. border—just as they are for Western Europe as it embraces both the Southern European countries and those of the East (and particularly for Germany through unification). A similar challenge faces Japan as it expands its economic links with the newly industrialized countries of East Asia and the enormous low-wage and low-productivity labor force of China. In all cases it can be argued that regionalism in this new era could well be a practicable step in the direction of global gains from trade, permitting the process of international integration to be more responsive to domestic political concerns.

Notes 1. World Bank, World Development Report (New York: Oxford University Press, selected volumes, 1981-89). 2. Ibid. 3. Saul Trejo Reyes, "Mexican-American Employment Relations: The Mexican Context," in Labor Market Interdependence, ed. R. Hinojosa Ojeda and C.W. Reynolds (forthcoming). 4. World Bank, World Development Report, 1989. 5. C.W. Reynolds, "Shift-Share Analysis of Mexican Productivity, Employment, and Earnings," work in progress (Stanford: Americas Program, Stanford University, 1990). 6. See, for example, testimony given at the hearings of the U.S. House of Representatives, Committee on Ways and Means, Subcommittee on U.S.-Mexico Relations, "U.S.-Mexico Relations," June 14,1990; for Canadian concerns, see the relevant chapters in C.W. Reynolds, L. Waverman, and G.M. Bueno, The Dynamics of North American Trade and Investment (Stanford: Stanford University Press, forthcoming). 7. Paulo Cecchini, with Michael Catinat and Alexic Jacquemin, eds., The European Challenge 1992: The Benefits of a Single Market (Aldershot, Eng.: Wildwood House, 1988).

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8. See, the "Report of the Royal Commission on the Economic Union and Development Prospects for Canada" (Ottawa: Ministry of Supply and Services, 1985). 9. Reynolds, Waverman, and Bueno, The Dynamics of North American Trade. 10. See, for example, "The Border Boom: Hope and Heartbreak," The New York Times Magazine, July 1,1990. 11. R. Hinojosa Ojeda, M. Carnoy, and H. Daley, "An Even Greater 'U Turn': Latinos and the New Inequality," in Hispanics in the Labor Force, ed. E. Melendez, C. Rodriguez, and J. Barry-Figueroa (New York: Plenum Press, forthcoming). 12. R. Hinojosa Ojeda and R. Morales, "International Restructuring and Labor Market Interdependence: The Automobile Industry in Mexico and the United States," in Labor Market Interdependence, ed. R. Hinojosa Ojeda and C.W. Reynolds (forthcoming).

4 Mexico's Definition and Use of "National Security": Toward a New Concept for the 1990s Sergio Aguayo

Quezada

The recent revolution in the Mexican economy has captured the attention and imagination of observers throughout the world. Without underestimating its importance, I must point out one obvious fact: Change is occurring in all dimensions of Mexican life, not just the economy. In this chapter I will attempt to bring to light the uneven transformation of the concept of Mexican national security. Although the concept has been used more and more frequently in Mexico (and in the United States) in recent years, how it has been used and how it has evolved have generally been ignored. It only makes sense to explore this transformation, however, because the way the term national security is employed and the way it is practiced will be decisive for Mexico's future and the new relationship the country is building with the United States and the rest of the outside world. The first noteworthy point about Mexican security is the newness of the discussion. It was not until 1980 that efforts intensified to explain what the concept meant. Throughout this chapter I will focus on the Mexican government's use of both the conceptual and the operational aspects of the term. The former dimension is the one that has exhibited the most important changes in the past few years. When Mexicans spoke of security in the early 1980s, they were thinking, above all, of issues of sovereignty and development. There was a tendency to circumscribe the concept, limiting it to domestic concerns, and a noticeable resistance to draw up an agenda of explicit threats to security. A s we will see, this interpretation would change, with Carlos Salinas de Gortari's assumption of the presidency in 1988. What has not changed is the confusion in the operational dimensions of the concept, particularly with respect to the role of various government bureaucracies. National security continues to be equated with domestic security, and the latter with the use of coercion. All told, within the same regime coexist two counterposed interpretations of what security means. Nevertheless, the prevailing conditions in Mexico and its geopolitical surroundings will sustain and quite possibly increase the use of such a politically charged concept as national security. There is a risk that the narrower and more dangerous aspects of the concept will be imposed and

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that democracy and political pluralism will themselves be viewed as threats to security. It is therefore necessary to explain the scope, limitations, risks, and contradictions of the definitions of security that are employed. Based on this diagnosis, I will end this chapter by proposing a few elements for a third definition, which, by borrowing some elements from the current debate, can be adjusted to Mexico's present state of transition.

The Evolution and Practice of Mexican National Security Through 1988 Although widespread mention of Mexican national security began in 1980, at a conceptual level the key document for the period came a few years later, with the National Development Plan of 1983 (PND-83). 1 The plan defined security as "the integral development of the nation" and as "a tool for maintaining the state of freedom, peace, and social justice within the Constitutional framework." This definition had a corollary: The role of the armed forces was to "collaborate with," "help," or "contribute to" national security. The idea of "integral development" is broad enough in itself to suggest a wide range of issues involving security. Furthermore, the PND-83 asserted that there would be an attempt to formulate an "integral security policy" to link foreign and domestic policy. But despite that, the issues and policies that wound up being considered as relevant to national security were fundamentally domestic; and they ended up reasserting the traditional principles of Mexican foreign policy, which were characterized by a defensive and juridical approach. This first official effort to define national security would seem to have been the result of the circumstances in the country at the time. There was a tendency to make the definition as broad and general as the principles of the Mexican Constitution, assuming at the same time that a "state of freedom, peace, and social justice" worthy of maintaining already existed. We should note that underlying these rather doubtful generalizations was the care taken to avoid giving the definition a more specific content. This may be due in part to a limited reflection upon the concept and in part to the fact that, as several authors have pointed out, the civilian authorities were trying to avoid assigning greater importance to the internal security apparatus. 2 Whatever the reasons might have been, the reluctance to specify the term was also evident in the care the administration took not to put in writing, explicitly or publicly, a list of threats to security. In a 1984 article for Foreign Affairs, President Miguel de la Madrid made passing reference to events in Central America as a security issue, and it was not

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until 1988 that he explicitly designated drug trafficking as the principal threat to national security. 3 From another perspective, the fact that security was restricted to domestic issues demonstrates a still-defensive attitude vis-à-vis the external world, reflective of Mexico's closed and protectionist economic system of the time. During the early and mid-1980s one of the central hypotheses of Mexican revolutionary nationalism was still being maintained (albeit implicitly): that the outside world in general, and the United States in particular, posed a potential threat to Mexican sovereignty and security. But what has been said thus far still does not suffice to capture the Mexican regime's definition of security. At a conceptual level there is an important subtlety to explore. Shortly before the P N D was made public in 1983, the current secretary of foreign affairs, Bernardo Sepúlveda, clarified that the "real purpose" of security was found "above all in domestic political harmonization." 4 And Manuel Barttlet, de la Madrid's secretary of gobernación (the cabinet ministry responsible for maintaining law and order), would later refine the idea when he asserted that there is security "if there is national consensus and unity." 5 These statements can be interpreted in two ways that complement each other as well as what was said above. On the one hand, calls to unity make sense in the context of the traditional Mexican assumptions that the outside world is hostile and that national borders are barriers. On the other hand, unity has an internal meaning because, as government officials speak of it, they take for granted that it should revolve around the ruling Institutional Revolutionary Party (PRI) and the policies established by the executive branch. Thus, for the Mexican government, security was a key component of the authoritarian and corporatist political system. This interpretation is confirmed if we add another dimension to the analysis. Although it has done so without much theoretical or legal support, the Mexican government has used the concept of national security synonymously with internal security for decades, which has given it the connotation of controlling dissidence through the use of force. This was made clear during the 1968 student movement, which, although it made quite moderate demands, was repressed by a student massacre on the night of October 2 of that year. General Luís Gutiérrez Oropeza, then chief of staff of President Gustavo Diaz Ordaz, explained the decision to use violence in his memoirs: "Gustavo Diaz Ordaz," he wrote, "had no alternative but to use force to contain the violence [the students] wanted to involve us in. When it comes to order and national security, the government cannot—should not—run the risk of a failure, a shortcoming, a mistake, or lack of manliness, because what is at stake is the life of a nation." 6 This interpretation was one of the factors contributing to the emer-

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gence of guerrilla groups in some regions of the country. The Luis Echeverría regime (1970-1976) fought them with a multi-faceted policy: economic development programs, the co-opting of opposition leaders and intellectuals, greater political openness, and the selective use of force. It was precisely at the most heated moment of the virtually unknown Mexican "dirty war" that a government document mentioned publicly the concept of national security for the first time (as far as I have been able to determine). In 1973 the Internal Bylaws of the Secretaría de Gobernación gave the Federal Security Bureau (DFS) the role, among others, of "analyzing and reporting events related to the security of the nation." 7 The DFS was a political police force that had been created by presidential order in 1947. Formally under the Secretaría de Gobernación, it in fact took its orders directly from the president and partially for that reason acted with complete independence from the legislative branch or the judiciary. It was relatively effective (though disrespectful of human rights) in controlling the opposition movements that were sporadically emerging in Mexico during the postwar era. Indeed, the official interpretation of security published in 1973 was not to be an isolated phenomenon. The bylaws of the Secretaría de Gobernación published in 1980, 1984, and 1985 continued to assign the same role to the DFS.8 In sum, until 1988 the Mexican government simultaneously equated security with development, sovereignty, domestic issues, and internal control over the opposition through the use of force. This conception, as we will see, was to change in some respects and remain the same in others during the administration of Carlos Salinas de Gortari. Progress and Setbacks in the Use of Mexican National Security Under the Salinas Administration Under the dual impetus of Mexico's deepest economic crisis in modern history and a blind faith in the virtues of a market economy, a group of young economists headed up by Salinas launched a crusade to reform and correct the ills of the Mexican economy in 1988. Determined to recover Mexico's growth, they have revolutionized the economy with neoliberal formulas in an extraordinarily short span of time. They have streamlined the state, privatized the economy, and torn down the walls of protectionism. Confident of the virtues of an "outward looking" economic system, in May 1990 they obtained Senate approval to begin negotiations leading to a free trade agreement with the United States. It is beyond the purposes of this chapter to evaluate the advantages and disadvantages of these transformations. What is useful is to relate

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them to the discussion on security. For this we must return to my initial hypothesis: Changes in the economy have had and will continue to have repercussions in other dimensions of Mexican life. This rather obvious fact has translated itself into negative effects on national life because the desire for change that the Salinas regime has demonstrated in the economic realm has not been mirrored in the political realm. In other words, economic modernization is being established with old-style authoritarian methods. Later I will discuss the importance of this incongruence, and so I will start here by explaining the evolution of the concept of security in the short time Salinas has been in power. And to respect the order established in the previous section, I will discuss the dimensions of security—the conceptual, the agenda of threats, and the operational— before ending with a critical evaluation. The Conceptual Dimension Salinas's National Development Plan for 1989-1994 (PND-89) includes a fundamental conceptual change with regard to security. 9 It is not in the definition—that of 1983 remains—nor in the role of the armed forces, whose role continues to be to "contribute to" or "help" security. The change is in the greater number of references to the term; in Mexico's relationship with the world; and in the setting down of an explicit agenda of threats to security. The last two factors are of interest. Mexico's relationship with the world is explained by combining traditional elements of traditional policy with some innovations. Specifically, the plan makes a ritual demand for the traditional (defensive) principles of foreign policy only to later make a complete about-face and assert that one of the objectives of security is to "act firmly and in advance, so as to thwart all external actions that may become a threat to national security." 10 Taken literally, the idea suggests unlimited activism abroad to confront threats to a very broadly defined security. But the spirit of PND-89 is not so ambitious. In other places security is clarified as aimed at the economic sphere. Ambiguity is maintained even in this aspect, however, because there is no clarification of what the threats are or from where on the outside they may emanate. Regardless of these or any other criticisms that can be easily made, the tone of the phrase is typical of the aggressive style that has come to characterize Salinas's actions, and of the new situation in Mexico. That is, the economic crisis has demonstrated that external affairs directly influence Mexican life (the national debt is the clearest example) and that the new strategy of assuming a place in the international economy implies advantages and risks that, among other things, oblige closer monitoring of outside events. From this vantage point the conceptual change in

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PND-89 shows that the administration is acknowledging the apparent vulnerability of Mexico's national security. Thus, despite the generalizations, it is a realistic and positive adaptation of the concept. Threats to Security Another novel aspect of PND-89 is that it is the first time that such an important government document contains an agenda of threats to security, which includes but a single issue: drug trafficking. Nonetheless, neither this nor any other presidential document or statement that classifies drug trafficking as a threat to security offers any foundation for the assertion. D e la Madrid had also stated that drug trafficking posed a risk to national security. Salinas would say the same thing, but he added that it was also a threat to "the health of the Mexican people," and on another occasion he added that it was a "problem of international solidarity." 11 The one who has provided more basis for the assertion that drug trafficking threatens Mexican national security is the official in the attorney general's office who is in charge of combating it. Javier Coello Trejo has opined that drug trafficking threatens "political stability," "jeopardizes the soundness of the democratic institutions," "contaminates the economic, financial, and agricultural processes," and "damages Mexico's international prestige." 12 The official's reasons seem convincing, but they are nevertheless insufficient. One of the main weaknesses is that Coello Trejo never specifies who or what the main enemy is. This is important because the interpretation of a threat implies identifying the enemy in order to tailor a strategy to combat the threat. In the case of producing and trafficking in illegal narcotics, the obvious candidates are the drug traffickers, some corrupt Mexican government officials, and drug users in the United States (and the many possible combinations of the three). The government has never clearly established, however, what the main agent threatening security is. Another aspect of this evasiveness in drawing up the agenda is the fact that, because we do not know the criteria the regime used in deciding that drug trafficking is a threat to security, we cannot assess whether other problems (such as the debt or dependence on food imports) meet the criteria for classification as a threat and for inclusion on the list. The Operational Dimension Finally comes the concept in practice. Given the Salinas regime's expressed desire for reform and modernization, it was logical to expect improved bureaucratic efficiency and fundamental changes in the practice

Mexico's Definition and Use of "National

Security"

65

that equates national security with internal security, and the latter with the use of force against dissidence. This has not been the case. In de la Madrid's PND-83 the only official institution explicitly linked to security was the armed forces. But in the 1986 Organic Law on the Mexican Army and the Air Force there is no mention, among their functions, of guaranteeing national security; there is only mention of internal security. 13 Furthermore, in 1985 President de la Madrid issued the Internal Bylaws of the Secretaría de Gobernación, which (although this ministry was not included in the PND) gave it for the first time the authority to "coordinate national security activities." 14 This situation was maintained and then complicated during the first few weeks of the Salinas regime. On December 7, 1988, also through a presidential accord, the Office of Coordination of the President of the Republic was created. That same document announced the creation, for the first time in Mexican history, of a National Security Cabinet, which "functionally and operatively" is under the authority of the aforementioned Office. 15 This statement implied that the "coordination" functions of the Secretaría de Gobernación (which also belongs to the Security Cabinet) would be passed on to the Office of Coordination of the President. But this was not to be the case. On February 13,1989 the president issued new Internal Bylaws for the Secretaría de Gobernación that conferred upon it the functions of "coordinating National Security activities." 16 Finally, when the PND was published in May 1989, the national security section mentioned only the armed forces; there was no clarification of whether it was the Office of Coordination or the Secretaría de Gobernación that would be responsible for coordinating security actions. The foregoing confusion lends itself to many interpretations, which I cannot develop here. The truth is that there is confusion over the functions of a variety of cabinet ministries. Moreover, the Salinas administration continues to uphold the interpretation that equates national security with internal security. To support this contention, I will give some background. The assassination of U.S. Drug Enforcement Administration ( D E A ) agent Enrique S. Camarena in 1985 publicly revealed the complicity of some members of the Federal Security Bureau with drug traffickers (the DFS, as you may remember, was in charge of watching out for the "security of the nation"). It was partly for this reason that the political police force disappeared in 1985. In its place, by the decision of Miguel de la Madrid, appeared the General Bureau of Investigation and National Security which attempted to merge the operational functions of the DFS with the intelligence functions of the General Bureau of Political and Social Investigations (also created by a presidential decision, in 1947). Through the same system of decrees President Salinas transformed the bureau, in February 1989, into the Center for Investigation and National

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New Approaches to Foreign Relations

Security, whose functions included that of "establishing and operating an investigation and information system for the country's security." 17 A Critical

Evaluation

This brief outline of the dimensions of official use of the concept security under the Salinas regime allows us to conclude that shifts in the concept and the development of an agenda of threats have been carried out by presidential decree and without any explicit justification. Furthermore, the use of the concept poses some contradictions. Thus, whereas security was defined as the "integral development of the nation" in the PNDs of 1983 and 1989, the National Security Cabinet (created in December 1988) includes only the secretariats of gobernación, foreign affairs, national defense, and the Navy, and the Attorney General of the Republic. With the exception of the secretariat of foreign affairs, the role of these secretariats is to maintain domestic law and order. But for the broad definition of security to be valid, the National Security Cabinet should have to include some of the officials in charge of promoting development. The persistence of authoritarianism in the Salinas regime is reflected in other documents on security as well. PND-89 claims that the security of the nation is "procured by the people and government." 18 With these words the government seems to recognize the importance of including other sectors (Congress would be the logical candidate) in the mechanisms for deciding what security is. But in the decree that created the Office of Coordination and the National Security Cabinet, it is said that the "President of the Republic may determine" that "the representatives of other agencies of Federal Public Administration entities may attend" NSC meetings, "or whatever public servants he deems should participate according to the matters to be discussed at each meeting." 19 In other words, those meetings at which the security of the nation is in principle decided upon may be attended only by executive branch officials chosen by the president. Thus, even when the concept of security is gradually adapted to the new model of economic development, we perceive no intent to democratize it. Authoritarian practice is preserved. The executive branch, and ultimately the president, continues to be the one to decide when conceptual changes have to be made and what issues should be placed on the agenda; it also reserves the option of using coercion, legitimizing it by invoking the security of the nation. The doubt thus remains whether the security of the nation is being confused with the security of the government, and within it the security of one group. This fact is cause for concern if we look at the context of Mexico's situation today. The concept of security is in transition, and it can be used

Mexico's Definition and Use of "National Security"

67

either to democratize the country or to legitimize repression. In other words, if the political system is modernized along with the economy, the b r o a d e r c o n c e p t of s e c u r i t y will b e in use. If on t h e c o n t r a r y authoritarianism is maintained or increased, the practice that equates coercion with security may be imposed. However events unfold, Mexico's manner of relating to the world will be affected, because the economic opening is not yet a consummated fact; it may be reversed (or modified in its rhythm) depending on what happens in politics and society. Before suggesting a possible conceptual answer to the contradictory use of the term security, I will briefly sketch out this phenomenon.

Setting the Stage for a New Concept of National Security To make a reasonable prognosis of how the concept of security may evolve, we must consider other dimensions beyond those officially espoused. First, we must remember that there is a split in the Mexican people over the economic changes being promoted by President Salinas. Declining living conditions are partly responsible for the split, but so too is the confusion created by the opening to the outside, which touches sensitive chords of Mexican nationalism. To some the Mexican government is handing its sovereignty over to outsiders, while to others the opening is an intelligent and necessary adjustment that will allow the Mexican people to walk into the next century freer, more sovereign, and more prosperous. The 1988 presidential elections showed just how deep the rift is and how far-reaching the changes are that have occurred within society and the political system. If we take the questionable results provided by the authorities as an indicator, those changes are surprising indeed. The most prominent one was not the weak showing of the party in power (its decline had already been observed) but the quick emergence, despite the expectation of a strong showing by the National Action Party (PAN), of a center-left coalition held together by a charismatic leader and cloaked in nationalism, pluralism, and lawfulness. Since the only (ill-coordinated) alternative posed to Salinas's project for the nation has been center-left nationalism, two years after those elections we wonder whether it was only a transitory phenomenon or if it will become a more permanent fixture in national politics. Although it is impossible to give a definitive answer, I am inclined toward the second possibility, with the understanding that one of the great challenges of a modern Mexican political system is to give space to that nationalist left. Various analysts have pointed out that during his first year in office Salinas and his administration made a great comeback in popularity and

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New Approaches to Foreign Relations

legitimacy, and that the coalition that had supported Cuauhtémoc Cárdenas had become fragmented and lost some of its initial strength. Perhaps supported by that fact, and out of a need to resume economic growth as well as out of his own convictions, Salinas has taken his economic program further and launched a systematic offensive against the forces of the nationalist left. Because a good part of Mexico's future depends on the outcome of that confrontation, it is necessary to reexamine the assumptions on which this diagnosis is based. A common hypothesis in some circles in Mexico and the United States is that the 1988 campaign was the result, above all, of dissatisfaction with the economic crisis. It would then follow that resuming growth, putting an iron grip on the left, and encouraging the left to consume itself would result in its gradually disappearing or becoming neutralized. Then, without this obstacle—and with the support of the United States—those economic changes could more easily be carried out which are expected to lead Mexico down the shining path to neoliberal modernism. Once growth was resumed, one could expect a gradual loosening of the authoritarian chains. Viewed in this way, the diagnosis is impeccable. But it ignores some very important factors. The neoliberal reforms in the economic realm still have not resulted in a recovery of growth as quickly as the circumstances demanded. Inflation is relatively contained, but private investment is not flowing at the expected levels. On the other hand, even as growth is beginning to resume, it is not being mirrored by a recovery of real wage rates or a narrowing of the income distribution gap. Consequently, it can be stated that in the best of cases the economic causes that gave rise to the political dissatisfaction will remain for some years. Meanwhile, as the economic situation feeds social discontent, which with the passing of time is reflected in the heterogeneous organization of society, the nationalist left is maintaining its appeal in certain regions and sectors. In this we must remember that, regardless of the economic crisis, Mexican society has already changed. Behind the electoral gains of the nationalist left was the organized activity of social groups that had been operating in fragmented isolation over previous years. The unity of 1988 has been broken, but that does not mean that the diverse threads of the political fabric have disappeared, nor that the economic repercussions will not pull the unity back into place for the federal elections of 1991 or 1994. The hypothesis that the nationalist left may be a permanent fixture in Mexican politics is also supported by other effects of the new economic model. Under the rules of the Mexican authoritarian system, a streamlined state implies fewer resources and jobs to meet demand, foment cronyism, or control society (corruption and the co-opting of people come at a cost). Furthermore, the government's announcement that it is willing to begin negotiations with the United States aimed at a free trade agreement has

Mexico's Definition and Use of "National

Security"

69

reconfirmed to many Mexicans the nationalist left's argument that this is a "subservient" policy. Finally, the left's status will also be enhanced by the effects of the economic model on traditional foreign policy. Thus far it has generally been insisted that the government keep the fundamental principles of traditional Mexican diplomacy intact. The opening to the outside (and the possible signing of a free trade agreement with the United States) implies, however, a closer relationship with the industrialized countries, which in turn means a substantial change in one of the foundations of Mexico's foreign policy: Having the United States as a next-door neighbor has changed from having a potential threat to our sovereignty to having a chance for an economic recovery that has not arrived. This shift can gradually erode the traditional independence of Mexico's diplomacy. Moreover, when it is said that one of the objectives of security is "to prevent any external act that may become a threat to national security," the concept of nonintervention—another fundamental tenet of Mexican international policy—is called into question. It is logical, then, that this new activism will alter traditional foreign policy in an even more unpredictable way. Again we see that the economic revolution is causing far-reaching changes in a variety of aspects of Mexican life. No matter what one may think of Salinas's program, one cannot help but wonder how much social backing it has, organized or not. Support for the program is crucial because it will determine the longevity and consolidation of the economic model and Mexico's new insertion into the world. In the case of organized support we are witnessing a transition, because Sálinismo is destroying some of the old foundations of the corporatist system (the labor sector is the most obvious case), and new foundations are still being organized. As for the program's more general popularity, one indicator is public opinion of the Salinas administration. In September 1989 the Center of Public Opinion Studies conducted a national opinion poll, and one of its findings was that 61.9 percent of the respondents had a favorable opinion of President Salinas.20 Some months later, in early May 1990, he had dropped to a 43.6 percent approval rating. During that same period favorable opinions of Cuauhtémoc Cárdenas remained stable (at around 22 percent).21 Rather than speculate on the meaning of these figures, I am citing them simply to demonstrate how volatile popularity can be during unstable times. The above factors uphold the proposition that the nationalist left will maintain its presence in national politics and continue to confront the neoliberal program. This suggests a situation of potential instability, which in turn implies that official references to national security will continue. It is in this context that the disturbing possibility arises that force may be

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New Approaches to Foreign Relations

used as a mechanism to control the opposition, by invoking the security of the nation. As has been evident in other societies, force merely postpones work on the nation's fundamental problems; it does not resolve them. Thus, it is possible that a spiral of instability and violence may affect the security of Mexico (and the region).

Toward an Alternative Conception of Security In the light of such a possibility, I consider it necessary to establish a third conception of Mexican national security. To be viable, it must rest on what has already been done and on the new situation. Among the conceptual changes that should be effected is drawing a clearer distinction between national security and the security of the government. This distinction must be based on a more precise definition of security and of the criteria used to develop an agenda of threats to that security. This will be possible only if there is a democratic approach to examining what has thus far been determined to be security, and such an approach seems unlikely under the current authoritarian framework. To facilitate the process, it will also be necessary to change another dimension of the conceptual definition of security. Mexican rhetoric has constantly made calls to unity (a tradition kept alive by President Salinas), and unity has become synonymous with security. Unity made sense under the old political system and bureaucratic model that viewed sovereignty as continuously threatened by the outside, and at a time when the official party actually represented the majority. But given the fundamental changes that all aspects of national life are experiencing, this equation should be revised. Now there must be a new concept of security that includes a unity revolving around the basic rules of political coexistence but that accepts the inevitability of disunity around national programs and the means for carrying them out. It is therefore imperative that there be recognition of pluralism, which, after all, is one of the pillars of democracy. Our disunity is not bad. What is bad is that the current regime wants to impose on us a unity revolving around what the regime considers to be best for all Mexicans, even if it means forcing us by invoking the cause of national security.

Notes This chapter was translated from the Spanish by Rita A . Clark-Gollub. Part of the research for this chapter was conducted while the author was a fellow at the P e a c e

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Security"

71

and International Security Program of the Social Sciences Research Council of the John D. and Catherine T. MacArthur Foundation. 1. Secretaría de Programación y Presupuesto, Plan Nacional de Desarrollo, 1983-1988 (Mexico City: Secretaría de Programación y Presupuesto, México, 1983), p. 61. 2. See, for example, David F. Ronfeldt, "The Modern Mexican Military: An Overview," and Lt. Col. Alden M. Cunningham, "Mexico's National Security in the 1980s-1990s," both in The Modern Mexican Military: A Reassessment, ed. David F. Ronfeldt (La Jolla: Center for U.S.-Mexican Studies, University of California, San Diego, 1984); and Sergio Aguayo, "Los usos, abusos y retos de la seguridad nacional mexicana, 1946-1990," in En busca de la seguridad pérdida: Aproximaciones a la seguridad nacional mexicana, ed. Sergio Aguayo and Michael Bruce Bagley (Mexico City: Siglo XXI, 1990). 3. Miguel de la Madrid, "Mexico: The New Challenge," Foreign Affairs 66, no. 1 (Fall 1984): 62-76. 4. Bernardo Sepúlveda, "Discurso pronunciado al conmemorar el natalicio de Benito Juárez," photocopy (Guelatao de Juárez, Oaxaca: Secretaría de Relaciones Exteriores, March 21,1983). 5. Cited in Juan M. Sandoval, Francisco J. Guerrero and M. Eugenia del Valle, "La política de seguridad nacional y las fronteras de México," Nueva Antropología (Mexico City) 7, no. 26, (1985): 120. 6. Luís Gutiérrez Oropeza, Díaz Ordaz: El hombre, el Gobernante (Mexico City: Gustavo de Anda Ed., 1988), p. 49. 7. Luís Echeverría Alvarez, "Reglamento interior de la Secretaría de Gobernación," Diario Oficial (Mexico City), July 27,1973. 8. These regulations were approved by José López Portillo and Miguel de la Madrid and published in the Diario Oficial (Mexico City) on February 21,1980; June 14,1984; and August 21,1985, respectively. 9. Secretaría de Programación y Presupuesto, "Plan Nacional de Desarrollo, 1989-1994," La Jornada (Mexico City), June 1,1989. 10. Ibid., p. viii (emphasis added). 11. The quotations are of Miguel de la Madrid, Sexto informe de Gobierno, 1988 (sixth "state of the union" address) (Mexico City: Presidencia de la República, México, 1988), p. 17; Carlos Salinas de Gortari, "Discurso de Toma de Posesión" (inaugural address), La Jornada (Mexico City), December 2,1988, p. v; and Carlos Salinas de Gortari, Primer informe de Gobierno (first "state of the union" address) (Mexico City: Presidencia de la República, November 1,1989), p. 20. 12. Quoted in Jorge Reyes Estrada, "Narcotráfico, grave peligro para la seguridad nacional: SDN y PGR," UnomásUno (Mexico City), June 27,1989. 13. Secretaría de la Defensa Nacional, "Ley Orgánica del Ejército y Fuerza Aérea Mexicanos," Legislación Militar (Mexico City) 5, no. 12 (May 1986). 14. de la Madrid, Diario Oficial, August 21,1985, p. 3. 15. Carlos Salinas de Gortari, "Acuerdo por el que se crea la oficina de coordinación de la presidencia de la República," Diario Oficial (Mexico City), December 7,1988, p. 4. 16. Carlos Salinas de Gortari, "Reglamento Interior de la Secretaría de

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Relations

Gobernación," Diario Oficial (Mexico City), February 13,1989, p. 26. 17. Ibid., p. 40. 18. Secretaría de Programación y Presupuesto, "Plan Nacional de Desarrollo, 1989-1994," p. xi. 19. Salinas de Gortari, "Acuerdo," p. 4. 20. "Bien, CSG: 61.9%, DF: 29% Derecha y 12% De izquierda," Excelsior (Mexico City), September 25,1989. 21. The earlier results are from the poll cited in ibid.; those in the May 1990 poll are from an unreleased survey.

PART 3 REGIONAL ALTERNATIVES

5 Mexico's European Policy Agenda: Perspectives on the Past, Proposals for the Future Roberta Lajous If we had asked a European in 1989 what was going to happen in 1992, the answer would have been automatic: the integration of a single market of the twelve member countries of the European Community. 1 But the scope and speed of events in the continent since then has raised a series of complex questions about the fate of what Soviet President Mikhail Gorbachev has called the European Common House. It is hard indeed to predict what will happen to the current blueprints for European integration. As was true during the early 1960s and the recession of the 1970s, external events are impinging upon the process of solidifying the Community. Both then and now its members have evinced conflicting reactions to the pressures from outside. 2 In the light of the uncertain situation in Europe, we Mexicans have a very important task ahead of us. First, we must redefine our relationship with this effervescent Europe, which is reemerging as a salient pole of world power. To do so both skillfully and effectively, we must reassess our common cultural identity with the "Old Continent" and the history that connects us. Second, we must carefully analyze the process of European integration and the opportunities and dangers it poses. Finally, we must seek new markets and a rapprochement with Eastern Europe. So far there has been primarily the concern, voiced at the highest political level, that the resources Mexico could have expected from Western Europe are headed for its eastern neighbors. 3 The changes in Eastern Europe should also be viewed, however, as an opening of potential markets and as a counterpart to the similar economic and political changes taking place in Mexico over the past few years. For Mexico itself has been pursuing a steady course of economic opening since the middle of the 1980s. The administrations of both Miguel de la Madrid (1982-1988) and Carlos Salinas de Gortari (1988-) have focused their efforts on modernizing the Mexican economy and integrating it into the world economy. That process has required accelerated diplomatic activity, particularly in the case of the progress that is being made in plans for negotiations over a Mexican-U.S. free trade agreement. As others in this volume argue, if we are to integrate ourselves economi75

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Alternatives

cally with North America, it behooves us to have closer political and cultural ties with Europe—so as to strengthen our political sovereignty vis-à-vis our powerful northern neighbors. For us Europe represents a political and economic partner par excellence. Economic exchange with the region as a whole offers one of the most viable alternatives to the ever-growing influence of the United States in our country. Historically, Mexico has viewed Europe as a prime option for diversifying its international relations. In his ten-day visit to five European countries in late January and early February 1990,4 President Salinas continually emphasized the political and economic importance his administration attributes to relations with this part of the world.

Some History on Mexican-European Relations For over a century now, Mexico has attempted to diversify its external political and economic relations beyond the United States, in general, and has sought closer relations with the European countries, in particular. For Europe, in turn, Mexico has had a special draw. It was only less than a century and a half ago, for example, that France tried to establish an empire in Mexican territory. Soon after the invading forces withdrew (in 1867), peace and stability were to reign for thirty-four years during the presidency of Porfirio Diaz, from 1876-1911 (with one four-year exception). Although a strong (and often brutal) military dictator, Diaz was also a champion of Mexico's physical (but not social) modernization and development, and he succeeded in attracting large sums of foreign capital to finance those goals. During that same period, however, influence and investment by the United States grew by leaps and bounds. By the turn of the century, U.S. investment in Mexico had well surpassed the individual investment of Great Britain, France, and Spain, despite Diaz's foreign policy efforts to balance what was then called the "peaceful penetration" of the United States by stimulating European investment. 5 That stage of Mexico's modernization and growth, attained in large measure thanks to foreign capital, came to an end with the outbreak of the Revolution in 1910. By the time the domestic armed upheaval was over, the world's equilibrium had been broken. The two world wars had conspired against the development of ties between Mexico and Europe, primarily because of disruptions in transatlantic trade. But there were more difficult-to-measure, long-term repercussions as well. Mexico, for strategic reasons of its geography, had chosen to concentrate its trade relations on supporting the war efforts of its northern neighbor. Between 1940 and 1945 not only did it supply food, raw materials, and manufactured

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Mexico's European Policy Agenda

Table 5.1 Mexican Nonpetroleum Exports to the European Economic Community, by Country, 1986-1989 (in millions of ECUs)

Country

Average Annual J a n Growth, June 1988 1986-88 1988

1986

1987

(1)

(2)

(3)

(4)

Spain 97 France 90 Federal Republic of Germany 333 United Kingdom 87 99 Italy Belgium and Luxembourg 79 Netherlands 59 Portugal 8 Denmark 12 Ireland 1 Greece 3

124 115

147 236

23.1% 61.9

298 131 116 111 62 19 10 5 1

342 164 122 110 67 30 10 11

Total

868

—

992 1,239

1.3 37.3 11.0 18.0 6.6 93.6 -8.7 231.7 n.s. 19.5%

JanJune 1989

Annual Growth, First Half 1988First Half 1989

(5)

(6)

(7)

83 85

70 214

-15.7% 151.8

167 80 61 62 36 12 4 6 —

205 102 83 67 41 8 5 3 1

22.8 27.5 36.1 8.1 13.9 -33.3 25.0 -50.0 n.s.

596

798

33.9%

Source: Tamara Kitain Zimmerman, "El inercado de la Comunidad Europea," photocopy (Mcxico City: Banco Nacional de Comercio Exterior, S.N.C., April 1990), p. 14. Notes: The countries are listed in descending order by their size as a Mexican trading partner, as of June 1989 (see Table 5.2). Belgium and Luxembourg were listed together in the original source because of their economic union. Numbers in each column may not exactly total because of rounding. ECU - European Currency Unit; Less than one million ECUs; n.s. - not significant.

goods through bilateral agreements, but it also began to supply labor. The Recent Trade Picture

During the postwar decades recovery of trade flows was slow. By 1981 Mexican trade with Europe had reached 20 percent of its total exports, a percentage that was to remain roughly the same through 1985. In 1986, 1987, and 1988 it dropped to approximately 15 percent, in part because of the drop in world oil prices.6 Indeed, the increase in trade volume at the beginning of that decade was concentrated in one single product: petroleum and its by-products. In the 1960s and 1970s agricultural products had figured more significantly in the nation's exports to Europe, but in the 1980s Mexico returned to the colonial tradition of concentrating

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Regional Alternatives

Table 5.2 Total Mexican Exports to the European Economic Community, by Country, 1986-1989 (in millions of ECUs)

Country

1986 (1)

1987 (2)

Spain 761 1,055 France 361 567 Federal Republic of Germany 333 340 United Kingdom 188 376 Italy 209 116 Belgium and Luxembourg 94 173 Netherlands 211 209 71 Portugal 62 Denmark 12 11 Ireland 1 5 Greece 3 1 Total

Average Annual Growth, 1988 1986-88 (3) (4) 818 524 354 265 122 147 131 70 11 11 —

2,234 2,924 2,456

3.7% 20.5 3.1 18.7 -23.6 25.1 -21.2 6.3 -4.3 231.7 n.s.

Jan.June 1988 (5)

Jan.- Annual Growth, June First Half 198&1989 First Half 1989 (6) (7)

454 228

450 357

-0.9% 56.6

167 134 61 93 71 32 5 6

216 143 83 73 70 19 5 3 1

29.3 6.7 36.1 -21.5 -1.4 -40.6 0.0 -50.0 n.s.

—

4.9% 1,251 1,420

13.5%

Source: Tamara Kitain Zimmerman, "El mercado de la Comunidad Europea," photocopy (Mexico City: Banco Nacional de Comercio Exterior, S.N.C., April 1990), p. 13 Notes: The countries are listed in descending order by their size as a Mexican trading partner, as of June 1989 (column 6 above). Belgium and Luxembourg were listed together in the original source because of their economic union. Numbers in each column may not exactly total because of rounding. ECU - European Currency Unit; — - Less than one million ECUs; n.s. - not significant.

on mineral exports. Paradoxically, at the same time the composition of exports to the rest of the world—basically, the United States—was much more diverse. Between 1983 and 1988 petroleum's share of total exports dropped precipitously, from 76 percent to 33 percent. The most dynamic export sector was industry, and within it the production of automobile parts. In the case of Europe, however, oil continued to gain in importance until 1986. As shown in Table 5.1, nonpetroleum exports to the members of the European Economic Community (EEC) logged a significant increase between 1986 and 1988. The picture for Mexico's total exports, illustrated in Table 5.2, shows a clear concentration of trade to Spain, with France and the former Federal Republic of Germany a distant second and third. Nonetheless, recent growth in exports to the latter two and to other EEC members such as the

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79

United Kingdom is (as discussed further below) a cause for optimism, particularly since it is in nonpetroleum exports. Recent

Political

Exchanges

D u r i n g the 1980s Mexico also saw its political ties with E u r o p e strengthened. First, in 1983 the European Community summit in Stuttgart proposed a rapprochement with Latin America, to counter the marked deterioration in relations between the two regions that had resulted from the taking of sides during the Malvinas (Falkland) war of 1982. The growing integration of foreign policy among the E C members had led to their universal support for Great Britain in its confrontation with Argentina. And second, the Europeans were also increasingly interested in moderating the belligerence of the Reagan administration in Central America, specifically toward Nicaragua. For the first time since World War II, there were differences within the North Atlantic Treaty Organization (NATO) over a Western Hemisphere issue. More specifically, the Stuttgart summit was also to assert that the root of Central American problems was the region's economic and social backwardness. The final summit declaration said that those problems could "not be solved by military means, but through a solution emanating from the region itself and which respects the principles of non-intervention and the inviolability of borders." 7 In coordination with Mexico, Bonn proposed holding the first follow-up meeting on the subject in San José, Costa Rica. Held in September 1984, the meeting laid out a framework for how the Community would contribute to the economic and social development of Central America, in support of the Contadora Group's peace efforts. 8 Through a leak to the international press, it was learned that Washington was annoyed with this European interference. 9 In private some European foreign ministers confided to their friends in the Contadora Group that the U.S. State Department had asked them to exclude Nicaragua from their aid packages to the region. 10 F o r t h o s e in Washington convinced of the need to intimidate Nicaragua's Sandinista regime, the lack of European support was incomprehensible. Some conservative voices began to question whether the growing political divergences between the United States and Europe would result in a redefining of N A T O . Indeed, the European challenge over Central America was one argument, among many, for calling U.S. troops home from Europe. 11 Among the many voices in Europe, Hans-Dietrich Genscher, the foreign minister of the then Federal Republic of Germany, exercised particularly strong leadership in bringing Latin America closer to Europe, by clearly articulating the sentiments of those who wished to prevent

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Central America from becoming the site of an East-West conflict. This moderating voice succeeded in swaying international public opinion toward negotiations and away from the tendency to isolate Nicaragua, and in turn averted what otherwise would probably have been more decisive military action on the part of the United States. Spain also played a prominent role, even before becoming a full member of the Community and NATO in 1986. In the process of joining the Atlantic Alliance, Spain made it known that its voters might reject the referendum if Washington intervened militarily in Central American territory. 12 Finally, France maintained a presence in Latin America, albeit not as active as that of the former F R G or Spain. Although the socialist government of President François Mitterrand was later to wane in strength, the foreign minister from his first term of office (1981-1988) became E C commissioner for North-South Relations in 1984. From that office Claude Cheysson was able to convince the Community through the EC-Central American dialogue initiated in San José, to commit increasing levels of assistance to the region. 13 Indeed, dialogue among the Central American, European Community, and Contadora Group countries was institutionalized after the 1984 meeting in San José; later meetings were held in Luxembourg in 1985, in Guatemala in 1987, in Hamburg in 1988, in San Pedro Sula in 1989, and in Dublin in April 1990. 14 Over those years, however, economic aid under the original framework was reduced. By 1987 the E C had given an additional 50 million U.S. dollars to the existing bilateral programs of its members, but the significance of the aid was more political than monetary. When the United States seemed ready to step up its intervention in Central America, the Community made its desire to support the economic and social development of the region explicit, by promoting simultaneously its economic and political integration. In addition to the EC's endorsement of the Contadora effort, there later was another important development: meetings between the E C and the Rio Group (Group of Eight), which began in 1987. 15 With the reestablishment of democratic governments in South America, a Contadora Support Group had been formed by Argentina, Brazil, Peru, and Uruguay; and as political dialogue between the four Contadora countries and the Support Group took shape, the old, frustrated project of Latin American integration was revived, this time under the combined agenda of the Eight. 16 It was in September 1987 that the first political dialogue between the Rio Group and the Community took place, in New York. The meeting was held on a parallel with the regular meetings of the United Nations General Assembly. It was informal, with no set agenda. Since then, follow-up meetings have taken place alternately after the meetings of the

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ongoing Central American-EC dialogue or at the beginning of each General Assembly.17 Ironically, it was the conflict in Central America that brought together the major players in Latin America. It also gave a more influential voice to the regional groups coalescing in the contemporary international system. Previously, the E C had held periodic meetings with several of these groups: the European Free Trade Association, the Mutual Aid Council, the Persian Gulf Council, and others. But except for meetings with permanent representatives of Latin American nations in Brussels, the E C had not been able to meet more formally with leaders of the region for lack of a framework in which to do so.18

Mexico's Foreign Relations Today: The Primacy of North American Integration Mexico is entering the 1990s determined to integrate into the world economy. That will not be an easy task, but the path has already been marked. Decisions have been made since the de la Madrid administration to make integration possible, such as entry into the General Agreement on Tariffs and Trade (GATT). And since then, the Salinas administration has steadily pursued the effort to liberalize trade, which has brought improvements in the nation's productive apparatus and, in turn, a greater capacity to expand nontraditional exports. There has been much debate in Mexico about whether the recent foreign policy has been passive or active—whether it has been purely defensive, to protect the country from the threat of U.S. domination; or offensive, to further integration with the global economy." This discussion has been restricted to academic circles, though, because save for some exceptional periods, Mexico looks inward. Most of its inhabitants and even most of its political class are not concerned with nor do they understand the outside world. That is why the program of the Salinas administration represents a real change. It is not a merely rhetorical initiative, like most of those we have had in the past (the New International Economic Order, the Charter of Economic Rights and Duties of States, the World Energy Plan, the International Meeting for Cooperation and Development). Nor is it an attempt to exert regional or Third World leadership to denounce the economic policies of the industrialized countries or to reproach the ideology of imperialism. What President Salinas proposes is that we Mexicans lose our fear of the outside. Mexico as a strong and sovereign country should be confident of its capacity for self-determination and initiative and take advantage of the interactions possible in an increasingly interdependent world.

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Any real change in foreign policy begins domestically. The governments stemming from the Mexican Revolution had a closed model for economic development: "import substitution," or replacing the demand for imports with domestic production. In spite of the nostalgia we Mexicans may feel for the period of growth the country experienced under that policy for more than three decades, the "Mexican miracle" is over. The current political leadership is calling for an opening to the outside not only because there is no other choice in the modern world, but also because Mexico holds certain comparative advantages in so doing. Only one period in Mexico's history is comparable to this one—the Porfirio Díaz period in the final decades of the last century and the first one of this century. Then as now, the country experienced accelerated modernization. And then as now, it was believed that in order to achieve the modernization, foreign capital and technology must be brought in. In the Diaz period, however, policy put too much emphasis on growth, at the expense of the subjugation and extreme poverty of Mexico's laboring classes. Although a small segment of the population benefited from new wealth generated, the vast majority was displaced and impoverished. And as a result, the revolutionary movement of 1910 equated the most dynamic sectors of the economy not only with oppression but also with foreign investors, and Mexico gained a legacy of a certain xenophobia with respect to foreign capital. From then on, revolutionary nationalism was tied to state ownership of the means of production (which were originally developed by foreign capital). What is different today is that the government's modernization program proposes steps to reach groups that prosperity—as well as democracy—had previously bypassed. The first foreign policy step of the newly elected Salinas administration was to improve relations with the United States. It has rejected the extremes of confrontation or submission, striking a difficult, but so far possible, balance in an otherwise asymmetrical relationship. The moment of truth in maintaining that relationship was the U.S. invasion of Panama in December 1989. All of Mexico's political parties condemned the action, while the government abstained from strong criticism. Tellingly, there was moderation on both sides; U.S. President George Bush told the media he was concerned by Latin American reactions to the event, particularly that of his friend, President Salinas de Gortari. 20 Throughout the preceding year the Mexican government had indicated its satisfaction with having attained broader and more secure access to U.S. markets, with its iron and steel, textile, and other exports included in the Generalized System of Preferences. But starting in 1990, particularly since his tour of Europe, President Salinas has been taking the initiative in exploring an even broader trade agreement with the United States and

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Canada to guarantee access to North American markets for Mexican exports. The President explicitly stated that such an accord would be another incentive to attract foreign investment, not only from the north but from other nations as well.21 The big question mark remaining is what Mexico's medium- and longterm strategy will be regarding the option to join a North American common market. For now we know that progress is being made in sectoral negotiations, but we still do not know whether these will lead to a broader free trade treaty. There are those, such as Gabriel Szikely, who are urgently calling for one.22 Like-minded thinkers believe precious time is being lost, and that if the remaining time is not used wisely it may soon be too late to set the rules of the game. At the other extreme are those who recommend making every effort to swim against the tide, but they have reached no consensus on how to do so, at least not without drowning. A couple of attractive alternatives have been proposed, however, at least in theory: Latin American integration, and—the most recent call—integration with the Pacific Rim. The latter is a formula that disguises, or at least makes more palatable, our most important partners—the United States and Canada. Mexico's relationship with its North American neighbors is unparalleled in the world; it is an anomaly in international relations. The differences in GNP, per capita income, productivity, education, health, and other indicators, are abysmal. The relationship cannot be compared to that of Europe's relatively less-developed countries, such as Greece, Spain, Portugal, and Ireland, with the rest of the Community, especially since there is no country in that region with the decisive influence in the region and the world the United States has. If politics is the art of what is possible, what we can expect is progress, as long as there is a favorable climate for negotiations with the United States, and as long as the Mexican public accepts this as a desirable framework. For these conditions to hold, we will probably have to consider the inevitability of U.S. (and Canadian) access to Mexican labor. Then increasing numbers of Mexicans will understand the potential benefits of greater economic integration with the north. Moreover, President Salinas's European trip at the start of 1990 seems to have convinced him that a broader guarantee of access to U.S. and Canadian markets will be a necessary condition for attracting higher levels of European capital.

Prospects for More Diverse Political and Economic Relations in the 1990s While Mexico is leaning toward intensified integration with its North American neighbors, the European Community is doing the same with

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the rest of its continent and the Soviet Union. The 1990s therefore do not—at first blush—seem promising for a Mexican rapprochement with Europe. Before the dramatic events of the autumn of 1989, which seemed to culminate in the tearing down of the Berlin Wall but continued with the news from Romania and the Soviet republics, the challenge for Mexico and many other countries seemed to be how to penetrate the "European fortress" after 1992. The widespread view was that an integrated Europe implied a new rechanneling of European trade to within the Community, with dangerous consequences for the rest of international trade. And for those countries such as Mexico which compete with the preferential trade structure targeting the former colonies in Africa, the Caribbean, and the Pacific, the outlook was even more discouraging. But now, being added to the worries that Mexico and the rest of Latin America already had about 1992 is the dramatic transformation of the Eastern European countries. Speaking solely from a political standpoint, Latin Americans view the détente and democratization positively. Speaking economically, however, they see new and serious competition for foreign investment and financing. The winds of change in the East mean new and nearer markets for Western Europe, markets that are better known and believed to have large, underutilized pools of both skilled and unskilled labor. To the degree that the Eastern European economies can absorb more investment and credit, with their own economic resources being limited, they will be in direct competition with Latin America. For example, the Swiss-Swedish company Asea Brown Boveri is negotiating the purchase of part of the Polish electrical power industry, and Volkswagen of Germany is considering establishing auto assembly plants in Eastern Europe. 23 In many quarters a political decision has been made to channel more financial resources into the rebuilding of Eastern Europe. The European Bank for Reconstruction and Development was created for this purpose, with an initial capital investment of 12 billion U.S. dollars from the United States, Japan, and the EC. Sixty percent of the bank's loans will go to the incipient private sector in the countries of the region to help build a market economy, even in the Soviet Union.24 As the old People's Republics manage to increase their productivity, they may increasingly absorb foreign investment. This will not only diminish the overall pool of resources available; it will also make Western European leaders less interested in renegotiating Latin America's external debt. During the fall 1988 International Monetary Fund meeting in Berlin, the Federal Republic of Germany assumed leadership, at both the political and the commercial banking levels, by calling for alleviating the external debt service payments of those countries whose foreign trade had

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diminished. 25 Today, however, Berlin has a new meaning in international politics. One no longer thinks of Chancellor Helmut Kohl's call to the international banking world and the creditor countries to make some of the necessary adjustments. Since November 1989 Berlin has represented the hope that the Cold War has ended. But just because Mexico and Europe do not seem likely to devote much attention to each other in the 1990s does not mean this should be allowed io happen. Although the trend is undeniably to form regional trade blocs around the magnets of the U.S., EC, and Japanese economies, we Mexicans should not give up the opportunity to promote greater political communication particularly with the countries that share our historical and cultural background. Nor should we fail to promote economic relations that would allow Mexico, as the weaker partner in a North American free trade association, to enhance its negotiating position through a diversification of its trading partners. The emergence of a new world balance of power will not necessarily result in a more stable world. 26 Adjustment to a new multipolar structure may prove to be a longer, more painful, and riskier process than it now seems in the flush of excitement over the political and economic opening of the Soviet Union and Eastern Europe. It is in the interest of the full international community to get over any stumbling blocks as expeditiously as possible. We all should therefore temper our initial enthusiasm with a clear and realistic eye toward both national interests and the broad range of potential political and economic partners. Mexican leaders are opening a debate on the future of our trade relations with a very firm consensus to protect our political and cultural identity. One natural support for that identity is a closer relationship with Europe, which would likely foster the development and strengthening of a pluralistic political tradition at home. Mexico can hold out the promise of an important role in the formation of a new Europe, particularly to the countries with a Latin tradition. While Germany appears to be gearing itself toward the East, a German Confederation will need to be counterbalanced within the E C structure. This can be done with the Latin countries—France, Italy, Spain, and Portugal—which necessarily look more toward the Atlantic than to the Urals. More than one European intellectual considers Latin America to be one edge of the West. Whether its edge or its core, the other side of the Atlantic has contributed significantly to the thought and culture of the Iberian world in particular, and the Latin world in general. Therefore, on a parallel with these cultural trends, the Mexican government should take a leading role to consolidate political relations and foster economic ties with its sister countries across the waters. From another perspective Mexico is called upon to play a singular role

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through its strategic location in the Western Hemisphere. It is a bridge between the Americas—North and South—and it should also be one between the Atlantic and Pacific.

Proposals for a European Policy Agenda All told, a rapprochement between Mexico and Europe is certainly desirable. But it will require a careful, coordinated strategy subsuming four important objectives. Foreign Investment First is the promotion of foreign direct investment, for two reasons: to attract new resources, and to find new markets. It is obvious that once the first stage in the current effort to renegotiate Mexico's external debt is completed, fresh money is not going to automatically arrive in abundance. T o date it is commonly believed that only some 10 percent of the creditor banks have chosen to contribute new resources. Those in Mexico seeking to finance large investment projects with external savings should seek new alternatives. The most viable path is publicity to entice large and mediumsized European syndicates to set up operations in Mexico, with a view toward future exports to the large U.S. market, without forgetting about Latin America under the preferential structure of the Latin American Integration Association ( A L A D I ) . In his recent trip through Europe, President Salinas expressed his concern that "the sudden transformation of Eastern Europe is fascinating the world," and that "these splendid signs of change not cloud Europe's global vision or take its attention away from our continent—particularly Mexico—and other regions of the world." 27 In fact, Europe sees Mexico as part of a region that has been economically stagnant for more than a decade, with little prospect of recovery in the short term. On the other hand, two factors give Mexico an indisputable advantage over the economies undergoing liberalization in Eastern Europe. The first is its political stability. The countries of Eastern Europe were just starting to resume elections in the first half of 1990, and their efforts demonstrated how they sorely lack the political institutions to handle the public demands beginning to be expressed. Despite predictions to the contrary and doomsayer perspectives, the Mexican political system has demonstrated a capacity for self-reform since the surprising outcome of the 1988 elections. The new administration's handling of economic policy resulted in a 3 percent growth in the gross national product in 1989, and the ongoing pursuit of that policy promises continuity in growth in the future.

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Mexico's second distinction is its geography, and geography is destiny. Mexico shares a long border with the largest market in the world. Japanese companies have well understood this advantage, judging by the number of investments they have been making in Tijuana, within view of the U.S. border. European companies have been slow to follow their example, but with the proper advertising and incentives they may do so. There has been an interesting trend toward mergers and the integration of different European corporate structures to strengthen their international presence. It is also a fact that European conglomerates have bought up important U.S. companies in recent years. If one of their ultimate objectives is the U.S. market, one way to attain it is by taking advantage of the maquiladora concept in northern Mexico. Trends in the direct cost of labor in Mexico tell an interesting story: in 1989 the cost was only 10.4 percent higher than in 1985, whereas in Taiwan the increase was 118 percent and in Korea it was 130 percent over the same period. 28 Eastern European labor as well is likely to have a hard time competing with the cost of Mexican labor. The signing of the Cooperation and Friendship Agreement between Mexico and Spain in January 1990 established a model for promoting bilateral economic relations that could be followed by the other European countries. Obviously, Mexican relations with Spain could be called "special" because they encompass a panoply of shared historical experiences. Nonetheless, the agreement is also a model of what two countries can achieve when they have the necessary political will. According to the agreement, Mexico will receive a total of 4 billion U.S. dollars in investment between 1990 and 1994—of which 1.5 billion will be direct loans from Spain to finance its exports of goods and services to Mexico, and 2.5 billion will be for joint investments. 29 Less than fifteen years after diplomatic relations with Spain were reinstated, it has become Mexico's second ranking trading partner, and for almost a decade it has held the same rank among the customers of PEMEX, Mexico's state-owned oil company. The PEMEX association goes beyond the commercial relationship, which includes a contract for the sale of between 100 and 150 million barrels of oil a day over the first half of the 1990s. Throughout the past decade the countries built a much broader framework for cooperation: PEMEX owns 5 percent of the stock in the Spanish oil company Repsol, and it participates in that company's administrative bodies. Trade

If the first objective of Mexico's strategy toward Europe is foreign direct investment, the second should be trade, and diversified trade. Oil is and will continue to be a fundamental component of Mexico's exports to Europe. But there are other Mexican products that should maintain or

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recover their presence in European markets, including, of course, those recently opened in Eastern Europe. The boost given to the Mexican agroindustry when the government made it a short-term priority in February 1990 may mean an increase in the export capacity of hundreds of labor-intensive agricultural products. To promote trade, the Mexican banking sector has established a direct presence in Europe. International marketing strategists for the Banco Nacional de México (BANAMEX), the largest bank in Mexico, are exploring the possibility of doing business with the EC in petrochemicals, chemical products, nonferrous metals, and raw materials for its iron and steel industries.30 Mexico will continue to import from Europe a significant portion of the equipment it needs to develop its basic infrastructure for electricity, telecommunications, transport, and other high-technology industries. In the past the nation's planners have not been able to coordinate the purchasing power of the public sector with support for the opening of markets for nontraditional exports. Nonetheless, other developing countries, for example, Brazil, have shown that this can be done. Mexico should look to the successful examples now that it is diversifying its exports. Under the new rules of the game as of 1990, Mexico also has an opportunity to explore the markets of Eastern Europe and even those of the Soviet Union. Up until 1989 their share of Mexico's foreign trade was negligible. But given the new conditions, they may become more important trading partners. The first meeting between the Rio Group and the Eastern European countries, in Budapest in April 1990, may spur not only greater political dialogue between the two groups of countries but also closer economic ties. International

Image

A third objective that should be vigorously pursued is enhancing Mexico's national image in the outside world. The means to this objective are tourism and cultural exchange—two aspects of our relations with Europe that are just beginning to be developed and that should be further promoted. Today more than 90 percent of Mexico's visitors from abroad come from the United States. But recent British tourism investments, primarily through the opportunities made available by the debt swaps, have opened new channels, thanks to new hotel chains.31 Technological advances in commercial aviation have cut travel times across the Atlantic, and the new Western European affluence has made it feasible for more and more British, French, German, Spanish, and Italian vacationers to visit Mexico.

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A s the standard of living is raised in Hungary, Poland, and Czechoslovakia, their tourists can be expected to follow the same route. Tourism is an important source of foreign exchange, jobs, and infrastructure. But it has other implications as well. Those who come to know a country and its people develop intangible ties that have important implications for the country's international image—and for international interest in the country. Tourism directly and indirectly opens channels of communication with the outside world. It exposes guests and hosts to different customs and ways of life, which in turn fosters tolerance and peaceful coexistence among peoples with different characteristics. When its historical and cultural riches are exposed to foreigners, Mexico stirs admiration and rises in international prestige. One instance is illustrative. Before the celebration of the world soccer championship in Mexico City in 1986, the nation's image had deteriorated in the European press. On the heels of an intense campaign of "Mexico bashing" in the United States, a series of negative reports had been published in Europe on Mexico's political system, the encroaching drug traffickers, and the general decline in living conditions of most Mexicans due to the economic crisis. But after a large group of foreign correspondents and another one of fans, including such distinguished figures as the foreign minister of the former Federal Republic of Germany, stayed in Mexico for a few weeks, members of the press became less critical. They no longer believed the crisis was a time bomb about to explode, and they found they could survive the pollution of Mexico City. We must also recognize that Mexico's image abroad is founded not only in the attractions it has for visitors but also in its culture and cultural exchanges between the two sides of the Atlantic. Carlos Fuentes wrote: T h e true face of Europe is called Ibero-America, the unfinished project of a Renaissance Utopia, the Europe that also has Indian and African colors: the Indo-Afro-Ibero-American continent that is inexplicable without its European features, just as the E u r o p e of Moro, Erasmus, Diirer, Montaigne and Victoria, Lautréamont, Breton, Buñuel, Antaud and D . H. Lawrence is inexplicable without its Ibero-American dimension. 3 2

An important part of the contemporary literature read in Europe is from Latin America. There are Mexican authors who publish larger editions in the publishing houses of Madrid and Barcelona than in Mexico City, and some of our best novelists are translated into several languages. Mexican scientists and people of letters have received awards each year in Madrid and Alcalá de Henares. But few have run the circuit of the rest of the European universities or have an ongoing dialogue with their faculties and students. Mexico should make a greater effort to promote its

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cultural presence in Europe and to open permanent channels of communication in both directions. Political Dialogue

The final objective in Mexico's strategy must be its political relationship with Europe, which transcends the work of foreign ministries to include a broader dialogue with members of European parliaments, political parties, and public institutions. Mexico is in the process of developing a pluralistic political system inspired by the European intellectual tradition. For that system to be consolidated, it must be continuously nurtured and receive feedback from the thought and political activity of the European leaders steering this global trend. As reform is flowering in the state parties—and the state itself—in the countries that just a few months ago were dominated by a one-party ideology, Mexico has also begun a profound process of change with certain parallels, though it has its own dynamic. Although the first encounters between our respective political leaders have already occurred,33 broader communication should be sought in the future. Mexico's political structure follows a presidential model more similar to that of the United States than the parliamentary systems of Europe. Nonetheless, the evolution of its electoral system from one of direct representation to a mixed one, with a chamber of deputies reflecting direct and proportional representation, has promoted the development of a multiparty system. In the Mexican Congress, as in the European parliaments, different ideological points of view are represented that, although based in our unique historical experience, have important counterparts on the other side of the Atlantic. The incipient but continuously evolving Mexican democracy is sometimes little understood by its northern neighbor. In the United States democracy is believed to be an alternation in power between two political parties. To Mexicans, however, the ideological differences between the two are so small that they seem to be different factions of the same capitalist party. The Mexican tradition, like the European one, offers a much broader range of choices. In Mexico political parties identify ideologically with communism at the one extreme and Christian Democracy at the other, with a rich spectrum of alternatives in between. U.S. political analysts will accept the consolidation of a multiparty system in Mexico to the degree that it corresponds at least to its European counterparts. In turn, the respect that Mexico's sui generis political organization inspires in its neighbor will be a positive factor for harmonious coexistence during the coming period of increasing economic integration, with all its risks and uncertainties.

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On the European continent Mexico has periodic interparliamentary meetings only with Spain. There is an interest in formally establishing such encounters with other countries. The 1990s is a good time to begin them with members of the European Parliament, which represents most of the major political trends on the continent. As democracy comes into full flower in the East, contact must also be established with those parties that, like the Mexican ones, are undergoing complete transformation. European politicians generally share their Mexican counterparts' positions on international issues, such as respect for human rights, the codification of international law, and support for the UN system. Exchanges with them, and coordination through various international forums, will only serve to strengthen Mexico's foreign policy.

Concluding Thoughts I have proposed four objectives for strengthening Mexico's relations with Europe over the next decade: attracting greater foreign investment, expanding trade, improving Mexico's image through tourism and cultural exchange, and strengthening political dialogue. There is no question that steps in these four directions have already been taken. But the changes stemming from the "fall revolution" of 1989 demand that Mexico more deliberately establish a presence across the Atlantic as the two Europes, until recently divided, are finding each other again. Western Europe has become more indifferent toward Latin America because of both the stagnated economies there and the attention-grabbing events in Eastern Europe. Although Mexico has garnered much respect in Europe for the results of its recent economic policy, it is also viewed as increasingly close, in economic terms, to the United States. It is therefore all the more important now to assert Mexico's individuality and sovereignty to the rest of the world. The reemergence of Europe as a political and economic force heralds the consolidation of a multipolar framework for international relations. If Western Europe concentrates its political and economic activity on the East, it will effectively forgo its many other attractive global alternatives. To quote Fuentes again, it will run the risk of: leaving Ibero- America to the United States for the sake of an anachronistic belief in the sanctity of spheres of influence, at the moment in which the Soviet U n i o n is relinquishing its own sphere of influence in Eastern Europe. According to the natural law of symmetry, this would mean pushing the USSR into reinstating its own satellite zone between the Elbe and the Vistula. 34

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At the same time, however, the sudden transformations taking place in the East should not be viewed simply as competition in Mexico's attempt to attract resources. Indeed, they also pose an opportunity to form new political alliances and open new markets for Mexican exports. The opening of Eastern Europe offers great hope for consolidating a new system of world power that will allow Mexico to have a more independent international presence, in spite of its inevitable tendency to integrate with the North American markets. As we have seen, only a few short months ago Europe 1992 was considered to be a formidable challenge for Mexico and the rest of the developing world. But at the start of the 1990s its prospective nature has changed radically. The plans for European integration are necessarily changing. The Community's plans to consolidate a single market in 1992 will now have to accommodate a broader Europe, one that includes not only the members of the European Free Trade Association but also Hungary, Poland, Czechoslovakia, and the rest of the Eastern countries that wish to forge some kind of affiliation with Western Europe. The most immediate issue for the EC, however, is that of German unity, which upsets the balance among the Twelve. In the coming decade Mexico will have to be a very attentive observer of the international scene. The ability of Mexican leaders to make a correct analysis, and ongoing adjustments in that analysis as conditions change, will intimately affect their ability to design and implement policies to achieve a greater balance in Mexico's place in international relations. Just when Europe seems the most estranged is actually the time when we must expend the greatest effort to expand its role as one of our preferred political—and economic—partners.

Notes This chapter was translated from the Spanish by Rita A. Clark-Gollub. 1. Belgium, Denmark, the then Federal Republic of Germany, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom. 2. See, for example, Stanley Hoffman, "A Plan for the N e w Europe," The New York Review of Books 36, nos. 21 and 22, January 18,1990, p. 19. 3. Robert Graham, "Salinas H o p e s to Sell a Country C o m e of A g e , " Financial Times (London), January 30,1990. 4. The visit included Belgium, Portugal, Switzerland, the U n i t e d Kingdom, and the former Federal Republic of Germany. 5. Roberta Lajous, La politica exterior de Porfirio Diaz ( M e x i c o City: Ediciones del Senado de la Republica, in press), chapter 1.

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6. Roberta Lajous, "Las relaciones de México con Europa Occidental, 198288," Foro Internacional (Mexico City) 30, no. 3 (January-March 1990): 560. 7. Cited in Esperanza Durán, "Actitudes de Estados Unidos y Europa frente a las crisis latinoamericanas," in México-Estados Unidos 1984, ed. Manuel García y Griego and Gustavo Vega (Mexico City: El Colegio de México, 1985), p. 48. 8. The Contadora Group, comprising Colombia, Mexico, Panama, and Venezuela, had begun meeting in 1983 to seek means of ending the various conflicts in Central America. 9. México-Estados Unidos 1984, p. 49. 10. This perspective derives from my tenure as general director for North American affairs in Mexico's Secretariat of Foreign Relations, from February 1983 to September 1986. 11. See, for example, Irving Kristol, "Should Europe B e Concerned About Central America?" in Third World Instability: Central America as a EuropeanAmerican Issue, ed. Andrew Pierre (New York: Council on Foreign Relations, 1985), p. 69. 12. Fernando Moran, "Europe's Role in Central America: A Spanish Socialist View," in Third World Instability, p. 6. 13. Aid provided by the Community was in addition to the aid each member country provided individually. 14. For discussions of the substance of the meetings, see Víctor Flores Olea, ed., Relación de Contadora (Mexico City: SRE-Fondo de Cultura Económica, 1988); for the 1984 meeting, p. 101; for 1985, pp. 160-161; for 1987, pp. 231-232; and for 1988, pp. 334-335. For the 1990 meeting in Dublin, see Excelsior (Mexico City): April 10,1990. 15. At the 1990 North-South meeting in Dublin, the disappearance of the Contadora Group and its replacement by the Group of Three—Colombia, Mexico, and Venezuela—was made explicit. Panama had been temporarily suspended from the group in 1988 and was formally excluded from the March 1990 meeting in Mexico City of the Rio Group—Argentina, Brazil, Colombia, Mexico, Peru, Uruguay, and Venezuela—which in 1988 had taken over from where Contadora left off, once the latter was dismissed by the Central Americans. 16. Lajous, "Las relaciones de México," p. 571. 17. Much of the perspective in this section derives from my tenure as general director for Western Europe in Mexico's Secretariat of Foreign Relations, from September 1986 to December 1988. In that capacity I had access to the minutes of the initial E C - R i o Group meeting in New York and attended a later one held in Hamburg, in February 1988. 18. The full group of delegates from the Latin American missions to the European Community in Brussels, called G R U L A (Grupo Latinoamericano), was reluctant to accept the representatives of the Rio Group because it excluded some of G R U L A ' s members. 19. See, for example, Mario Ojeda, Alcances y límites de la política exterior de México (Mexico City: El Colegio de México), 1984. 20. Transcript of a presidential news conference on Panama published in the New York Times, January 6,1990.

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21. "President Salinas on Mexico's Economy," the Wall Street Journal, April 4,1990. 22. Gabriel Székely, "USAMEX: El avance de la integración," Nexos (Mexico City) 144 (December 1989): 4 1 ^ 8 . 23. "Two Germanies United Would Pose Challenge to Other Economies," the Wall Street Journal, November 13,1989. 24."Crearán EU, Japón y la CEE un banco," Excelsior (Mexico City), April 10,1990. 25. Lajous, "Las relaciones de México," p. 565. 26. See, for example, Sergei A. Karaganov, "The Year of Europe: A Soviet View," Survival (London) 32, no. 2 (March-April 1990): 123. Karaganov, assistant director of the Institute of Europe of the Soviet Academy of Sciences, clearly articulates a much less optimistic—and probably more realistic—point of view concerning the changes in Europe than his counterparts in the West. 27. Remarks given at the annual meeting of the World Economic Forum in Davos, February 1,1990, and published in Textos de Política Exterior 123 (Mexico City: Secretaría de Relaciones Exteriores, México, 1990), p. 58. 28. Leon Opalín, "Grandes ventajas de la maquila mexicana," Excelsior (Mexico City), April 9,1990. 29. "Inversión española en México por 4 mil milliones de dolares," La Jornada (Mexico City), January 12,1990. 30. José Manuel Rivero, "La banca mexicana ante la CE," Excelsior (Mexico City), March 19,1990. 31. Roberta Lajous, "México y Europa occidental," Proa (Mexico City) 13, no. 19 (Fall-Winter 1988): 14. 32. Carlos Fuentes, "El verdadero rostro de Europa," Excelsior (Mexico City), December 28,1989, p. 1. 33. In February 1990 the Institutional Revolutionary Party (PRI) hosted the visit of a distinguished group of ideologues and political activists from Eastern Europe for a dialogue on state reform. 34. Fuentes, "El verdadero rostro," p. 10.

J3_ Mexico and the European Community: Toward a New Relationship? Wolf

Grahendorff

Mexico today is a country that has entered into a process of profound political and economic reform. The project of domestic modernization begun in the second half of the 1980s has given rise to a reorientation of Mexico's external relations as well, designed in part to support the domestic reform process and in part to inject the country into the global system of the 1990s. Mexico's evaluation of foreign economic alternatives has been of special relevance to that reorientation. But any analysis of Mexico's choices in redefining its foreign policy goals must also take into account a broader set of the factors—historical, geographical, cultural, and political—that have determined Mexico's foreign policy in the past and that will continue to shape the framework for setting new priorities. Mexico's foreign policy has been, first and always, conditioned by its economic dependence on the United States. Because of its geographic proximity, the U.S. market has been and will continue to be the logical first choice in Mexico's external economic relations. In political and cultural terms, however, Mexico forms a part of Latin America. As a result of this position at the dividing line between North and South of the continent, which is also one of the borders between the First and the Third World, Mexico has always served in a certain bridging function, not only for the two American continents but also for North-South relations in general. An economically promising option in recent years, however, has been a new orientation toward the Pacific. Mexico's foreign policy plans today encompass the vast economic potential of Japan and the newly industrialized Asian countries to a much greater extent than those of any other Latin American country, with the possible exception of Chile. The European option within Mexico's foreign policy has traditionally been characterized by ambiguity. On the one hand, Mexico owes a considerable part of its national identity to European historical, political, and cultural influences. On the other hand, Mexicans have always pointed out that in spite of their historical links with the "Old Continent," they are nonetheless part of the "New World." And while Mexico's economic relations with Western Europe, particularly the European Community 95

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(EC), are important—the EC has traditionally been Mexico's second ranking trade partner—the European option has often been painted as a mere counterweight to the country's economic reliance on the United States. Whatever Mexico's traditional ambivalence toward Europe may have been, the nature of the changes now underway in the political and economic map of Europe is pointing to a shift away from viewing the European alternative merely as a means of diversifying Mexico's foreign relations and toward seeing it as an attractive option in its own right. In late January and early February 1990, Mexican President Carlos Salinas de Gortari made his first official visit to Europe. It was not solely the coincidence of recent events that led him to highlight in his statements there the new dynamism that is waking the "Old Continent." Further integration of the West European markets into the European Economic Space, and the prospects for economic changes in Eastern Europe, lends the European option a series of "assets" that will pave the way for Mexico to reconsider both the form and the quality of its relations with Europe. The following analysis of the manifold dimensions of Mexico's links with Europe is designed to help clarify this thus far fuzzy picture. It is also intended to allow for a prognosis of Mexico's interests in, and potential relations with, the "new" Europe over the coming decade.

The Historical Legacy of Relations with the "Old World" In the nineteenth century emancipation from colonial rule and the attempt to overcome the social order imposed by the Spaniards came to determine Mexico's relations with Spain and with Europe as a whole. With the French revolution, Mexican reformers echoed European ideas of freedom and social equality. But Napoleonic counterrevolution in Europe reached over into Mexico and restored a perception that gained particular strength after Mexico's social revolution at the beginning of the present century: Mexican-European relations perceived as the old world versus the new. In the mid-nineteenth century, Mexico had experienced a reform movement headed by the charismatic Benito Juárez. The government he installed in 1855 embarked on a process of social reforms and the preparation of a new, more liberal constitution, both largely inspired by the achievements of the French revolution. Nevertheless, the reforms, which were directed against feudalism and social privileges, were strongly resisted by those who saw themselves deprived of the old fueros. The deepening of the already persistent split within Mexican society between liberals and conservatives eventually resulted in civil strife, commonly known as the War of Reform (1858-1861). This confrontation on the

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domestic front also had its parallel in external realignments. While the liberals sought alliance with the United States, the conservatives asked the former colonial power to support their cause. Consequently, after the victory of the liberals relations with Europe, and Spain in particular, deteriorated. When the Juárez government declared a moratorium on foreign debt repayment in 1861, Spain, Britain, and France decided to send troops to Mexico. The joint European intervention paved the way for the French to act on their ambition to extend their empire to Mexico. In 1863 Napoleon III named Austrian Archduke Maximilian to the Mexican crown. French rule lasted only four years, however. After the withdrawal of Napoleon's troops a Mexican revolt overthrew the Franco-Austrian regime, and Republican rule was restored. But despite its short duration, the French occupation had a decisive impact, feeding the emerging principle of self-determination that would become one of the primary determinants of Mexico's foreign policy.1 It would also cloud Mexico's relations with Europe for an entire century. Whereas the ideals of the French liberal revolution resurfaced in Mexico after a delay of fifty years, the Mexican revolution preceded the Russian Revolution of 1917 by seven years. In fact, the Mexican constitution of 1917 has been called the first modern socialist constitution, promulgating a truly revolutionary doctrine.2 Notwithstanding fundamental differences in the origin, character, and outcomes of the two revolutionary processes, Mexico's perception of its own as the abolishment of the old political and social order prompted an affinity toward the Soviet Union— and after World War II, the European socialist regimes—that has been unique among the Latin American countries. Thus, Mexico was the first country in the Western Hemisphere to recognize the Soviet Union diplomatically (in 1924). It is within this background of solidarity with other revolutionary regimes that Mexico's early contacts with the Eastern European countries must be viewed. Interestingly, Mexico started to approach Eastern Europe at a time when the Cold War atmosphere on the one hand, and Mexico's special relationship with the United States on the other, left very little room for maneuvering between East and West. Thus, an initial, rapid rise in trade with the Soviet Union and the conclusion of the first commercial agreements with Czechoslovakia and Yugoslavia, in 1949 and 1950, respectively, must be viewed primarily for their political significance.3 Indeed, Mexican relations with Eastern Europe have always relied much more on common political grounds than on broad economic linkages. The recurrent harkening to the common revolutionary past has neither prompted a revision of Mexico's traditional foreign economic policy nor led Mexico to play a prominent role in Latin America's com-

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merce with the socialist countries. That Mexico was the third noncommunist country (after Finland and Iraq) to be granted observer status by the Council for Mutual Economic Co-operation (COMECON), which it received in 1975, was more the result of Mexico's good political relations with the region than the result of mutual economic interests. The same is true of the Soviet Union's traditional rhetorical support for Mexico's "revolutionary" foreign policy within the United Nations. All told, then, Mexico's policy toward Eastern Europe was based on the clear political message of manifest solidarity with revolutionary regimes.4 The traditionally tense relationship between postrevolutionary Mexico and madre patria Spain must be considered as another example of an ideologically motivated foreign policy posture. The relationship improved only briefly after the onset of the Spanish Second Republic. Its anticlerical regime, which intended to pave the way for political and social modernization, was well received in Mexico. In turn, Spanish Republicans responded by supporting Mexico internationally, for example, in its attempts to gain admission to the League of Nations. Relations also improved to the extent that Mexicans saw Spain as yet another ally to counterbalance U.S. influence in the hemisphere. 5 Franco's victory in the Spanish Civil War brought the incipient Mexican-Spanish friendship to a sudden end. Nonetheless, Mexican President Lázaro Cárdenas's diplomatic and military support to Spain's Popular Front and his refusal to recognize the Franco government were decisive in transforming Mexico into one of the most popular destinations for Republican émigrés. The 40,000 Spaniards who, during and after the Civil War, made their way to Mexico contributed a great deal to reducing anti-Spanish sentiments in Mexico and also stimulated an interest in the Hispanic elements of Mexico's heritage. By contrast, even after the Franco government had eventually gained some international prestige, Mexico continued the policy of nonrecognition and maintained its diplomatic relations with the Republican government-in-exile in Paris. The general tendency of Mexico's postrevolutionary governments to align with the forces of progress in their external relations had no correlation whatsoever on the domestic scene. On the contrary, the political culture and social order inherited from Spanish colonialism continued to dominate Mexican politics and society. Even with the background of democratic constitutions, caudillismo and the traditional patriarchal way of handling public affairs persisted. And those modern political institutions that did take hold remained exceptions to the colonial traditions in the economic order, social hierarchy, and public morality. The failure to reconcile formal democracy with true social reform prevented Mexico for many decades from transforming itself into a modern society. As Octavio Paz has put it, this paradox constitutes the

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core of Mexico's European legacy. 6

Interest Profiles vis-à-vis Europe Political

Adaptations

The perception of its revolution as a triumph over the old social order made Mexico determined to develop a foreign policy that would transfer internal social achievements to the international level, while at the same time preserving revolutionary postures by forging new alliances. Within the coordinates of the postwar international system, Mexico claimed to be a non-status quo power, whose foreign policy actions therefore had to be focused on defending the Third World in its struggle for justice versus the industrialized countries. The overall strategy aimed at profound structural changes in the international system.7 According to Mexicans' conception of the universality of international law, the UN was to become the ideal framework and the most important instrument to raise the concerns of the weak and underprivileged in the world. Mexico's unrestrained advocacy for such foreign policy principles as self-determination, national sovereignty, equality among nations, and nonintervention endowed the country with a moral integrity that made it a credible spokesman for the Third World. The prominent role Mexico would pursue in the UN was based on two pillars: promoting a new world economic order, and sponsoring initiatives to achieve nuclear arms control and disarmament. In 1972, on the occasion of the UN Conference on Trade and Development ( U N C T A D ) conference in Santiago de Chile, Mexican President Luis Echeverría presented the "Charter of Economic Rights and Duties of the States," which proposed a new structure for the international economic system. Approved as a UN resolution by an overwhelming majority in December 1974, the charter had a decisive influence in institutionalizing North-South dialogue between 1975 and 1977. And the 1967 Treaty of Tlatelolco, which provided for a nuclear free zone in Latin America, was also the result of a Mexican initiative. Concern over the nuclear threat led Mexico to cooperate as well in the founding of the "Initiative for Peace and Disarmament" (the Group of Six: Argentina, Greece, India, Mexico, Sweden, and Tanzania), which since its first convention in 1985 has sought to encourage multilateral dialogue on worldwide nuclear disarmament. Nevertheless, early Mexican efforts to change the rules of the international economic and security system were bound to fail where they ran counter to the interests of those countries that had established the postwar international order. The bipolar world system of the 1970s had little

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interest in imaginative initiatives designed to shift the general East-West inclination of international relations to pressing North-South problems. This was particularly true in the case of Western Europe. When Mexico unveiled a proposal for a Charter for a New International Economic Order (NIEO) in 1972, the countries in the region were fully absorbed with establishing a modus vivendi with the East within the framework of the Conference for Security and Co-operation in Europe (CSCE). Rhetorical support for Mexico's initiative never translated into action on issues not directly related to European concerns. France was even openly hostile to Mexico's involvement in international nuclear affairs. It turned a deaf ear to Mexican calls for its signature on a protocol for the Treaty of Tlatelolco. Indeed, although the French have extended their full-fledged support for other Mexican initiatives in the international sphere, Mexico's quarrels over France's nuclear policy and arms sales have been a recurrent feature of the two countries' bilateral relationship. Similar indifference or rejection has generally greeted the declarations on nuclear disarmament issued by the Group of Six. On the occasion of his visit to Europe in June 1985, Mexican President Miguel de la Madrid lobbied to promote large-scale reductions in the world's nuclear arsenal. Except for Spain, however, none of the other countries visited by de la Madrid (Great Britain, Belgium, the Federal Republic of Germany, and France) supported the initiative of the Group of Six. 8 Many West European members of the North Atlantic Treaty Organization (NATO) often accused the Group of unilaterally favoring Soviet positions by focusing exclusively on nuclear disarmament and disregarding the problem of the disequilibrium between East and West in conventional armaments. The pragmatic foreign policy approach of the Salinas administration, and the overriding importance it has given to foreign economic relations, is likely to cool the highly moralistic tone of Mexico's earlier relations with the outside world. Although the N I E O and nuclear disarmament are hardly likely to disappear from Mexico's agenda, both topics will necessarily rank lower among its foreign policy goals than they did in the past. Moreover, the profound changes in East-West relations over the last year mean that the nuclear issue will lose much of its urgency for those countries, like Mexico, that have debated it as part of their efforts to gain a stronger voice in international affairs. Mexico's role in North-South relations has been affected by similar changes. The country's vaunted position as a non-status quo power, particularly characteristic of its foreign policy during the 1970s, is no longer vocalized. Indeed, now it would only serve to hurt Mexico's chances of spurring international interest. The end of the 1980s in fact marked a clear turning point in Mexico's external relations. Mexico ceased to iden-

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tify itself with the cause of the economically weak and underprivileged and began to seek new alignments based on equal partnership, that is, with countries of similar size and economic development, such as Brazil and Venezuela.' Not only is this trend likely to continue, but we are also witnessing a further shift toward identification with and integration into the sphere of the politically and economically powerful blocs, such as North America and Europe. In this sense, Mexico is setting the stage for a notably different approach to its relations with Europe. Given the broad sweep of political and economic changes under way on the continent, Mexico has an unique card to play. Its familiarity with the Eastern European countries, in terms of both its diplomatic contacts and its economic understanding as an observer before COMECON, gives Mexico the chance to be in the forefront of defining Latin America's relations with the new Europe. It was no accident that in the course of his trip to Western Europe Salinas seized the opportunity to grow acquainted with government leaders and officials in Eastern Europe. Later in February 1990 Mexico's foreign minister Fernando Solana Morales visited the German Democratic Republic. And Mexico must be considered the driving force behind the first meeting between the foreign ministers of the Rio Group and their Eastern European counterparts. Held in April 1990 in Budapest, that meeting would lay the groundwork for Latin America's political consultations beyond the established framework of the EC.10 Moreover, Mexico's interest in and openness toward recent European developments undoubtedly favor expanded relations with the Community in general and with individual EC members in particular. In the course of the meetings with his European counterparts, Salinas did not hide Mexican concerns over the dangers of political and economic Eurocentrism. But he also confirmed his country's willingness to face the double challenge of the 1992 Single European Market (SEM) and the integration of Eastern economies into an even wider framework. There is a clear conviction on the Mexican side that the EC will be not only one of the world's principal economic powers but also an increasingly important political ally. The Salinas government has fully understood that ensuring Europe's interest in Mexico demands his country's active cooperation in both the political and the economic reshaping of Europe. Given this context, Mexico's own economic situation and its willingness to ensure political reforms are of critical importance. Economic

Upgrading

Again, the salient fact of Mexico's external economic relations is its asymmetrical interdependence with its northern neighbor. The United

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States is Mexico's largest source of foreign capital and its primary source of income from tourism. Most of the service payments on Mexico's external debt go to U.S. banks. In the commercial field, two-thirds of Mexican exports and imports go to and come from the United States. The importance of the North American market in its trade relations makes Mexico highly susceptible to U.S. pressure. Thus, Mexico's recent efforts to open its economic system have been largely a result of the U.S. government's carrot-and-stick policies, designed to encourage the removal of export subsidies and the reduction of tariffs in return for greater access to the U.S market. Recent developments in Mexican-U.S. trade relations leave no doubt about Mexico's firm will not only to deepen commercial ties with its northern neighbor but, more to the point, to integrate itself fully into the U.S. market. During his first visit to the United States, in October 1989, President Salinas signed an agreement with President George Bush that aimed at further liberalization of trade and investment flows. The two parties also agreed to embark on negotiations for a free trade area. T o date, officials from both countries are handling the possibility of Mexico's inclusion in the U.S.-Canadian free trade area with extreme delicacy. But nevertheless, any progressive trade liberalization with the United States will certainly result in Mexico's forming an integral part of the North American market. 11 Thus, although an important goal of Salinas's trip to Western Europe was to promote a trade regime that would reverse the trend of relative decline in Mexican exports to the EC, prospects for change look rather gloomy. The bilateral cooperation agreement on promoting commerce and investment signed in 1975 yielded only modest results, for it was much too general in scope and quality.12 It was not until the oil crisis of 1979 that bilateral trade soared.13 But it is precisely the high share of petroleum and related products in Mexico's export structure with the E C (almost 50 percent) that makes its trade relations extremely vulnerable. By contrast, Mexican exports to the United States have achieved a considerable degree of diversification: Between 1983 and 1988 the share of oil products dropped from 76 percent to 33 percent. Agricultural exports account for only 4 percent of Mexican exports to the EC, and the large share of semifinished products and minerals in Mexico's exports to the E C still fit the classical patterns that characterize trade between a developing country and the industrialized world.14 Hence, any growth in Mexico's exports to the Community as part of its trade diversification strategy will have to involve an increase in the export of manufactured products and other nontraditional exports. But Mexico is counting on enhanced European activity in other

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economic areas as well. The first is foreign direct investment. Although the United States has traditionally been by far the largest foreign investor in Mexico, in recent years accounting for 65 percent of Mexican receipts from abroad, E C investment has tended to rise to regain its position as Mexico's second most important investment source. In 1989 the EC's share was 18.7 percent of foreign investment in Mexico, while the U.S. share was 63.0 percent and Japan's was 5.1 percent. 15 The overall positive trend of European financial involvement in Mexico is likely to continue, as new regulations now allow for greater foreign participation in sectors that are of particular interest to some European investors. The Germans, for example, plan to invest in Mexico's petrochemical and steel industries, sectors that are included in the more liberal investment regime. 16 A second locus for expanded European activity is technology transfer, which also came under new rules in the late 1980s. More specifically, the rules give licensers the power to set royalty fees, enhance their confidentiality agreements, and speed up the approval time for contracts; they also restrict the Mexican government's ability to intervene in technology agreements. 17 Behind the simultaneous promotion of foreign direct investment and facilitation of technology transfer is Mexico's broader strategy to build up a genuine and sound technological base for its industry. And Mexican expectations in this regard are focused specifically on attracting European and Japanese support. European technology is considered the world leader in such sectors as chemical and pharmaceutical products and in some areas of communications, 18 while the Japanese have pulled ahead of the United States in electronics and automobiles and are in a tight race for the semiconductor industry. The famous maquiladora industries, which together pooled 70 percent of all foreign investment in Mexico in 1989,19 exemplify what Mexicans expect—or rather do not want—from European investment. The U.S.-dominated maquiladora sector is marked by the twofold problem of a generally low degree of technology transfer and the utilization of unskilled labor. According to a new concept developed by firms in the former Federal Republic of Germany that plan to enter the sector, maquiladoras will be run largely with Mexican inputs. 20 Indeed, the integration of the maquiladora sector into Mexico's industrial base would not only augment overall output; the quality requirements of foreign firms might encourage technology transfer and efforts to improve both productivity and labor conditions. Tourism is a third area of Mexico's economy in which Europeans are likely to be increasingly represented. By 1994, according to government planning, Mexico expects to host 10 million tourists annually—double the

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1988 figure—and generate 5 billion U.S. dollars in revenue. Already tourism ranks second (behind oil exports) as a source of foreign exchange. Although the formerly state-controlled tourism sector has not yet been completely opened to private initiative, and foreign investment in the sector is still subject to limitations, European investors—such as the Spanish hotelier group Melia Sol and the British companies Trust House Forte and Barclay's Bank—are beginning to enter the market.21 European investment and technology transfer were yet further subjects of President Salinas's talks with European leaders in early 1990. In each of the capitals he visited, Salinas lobbied hard for European investment in Mexico as the gateway to the North American market. At the EC institutions in Brussels he stressed Mexico's interest in the new cooperation agreement, slated for signing in 1990, which is to include the service sector and technology transfers.22 This improvement in economic relations is in line with the special status the EC recently granted to Mexico. In November 1989, on the occasion of the inauguration of the office of the EC delegation in Mexico, the country was connected to the BC-NET, the Community's computerized network for cooperation among businesses. The connection was a significant event, being the first time the BC-NET was opened to access by companies based outside EC countries; and it should greatly enhance the ability of Mexican firms to identify European partners. Despite all these positive signs, however, Mexico must still compete for attention with Europe 1992 and the imminent development of the Eastern European economies. The country's economic reform program, its new status as one of the most open markets in the General Agreement on Tariffs and Trade (GATT), and its attractive investment conditions do not alter that fact. Mexican concerns in this regard cover a range of fears, from the erection of new European trade barriers to the diversion of Europe's private investment and official economic assistance to Eastern Europe. These fears are given all the more weight because of Mexico's declared economic goal to secure the means to take advantage of the large post-1992 European market. In this sense, Mexico's interest in Europe in fact represents more than the traditional desire to diversify its external economic relations; it is an attractive and wise economic goal in it own right. The irony is that the very factors that are lending the "Old World" a very new economic appeal—the SEM and the changes in the East—are at the same time complicating economic relations between Mexico and Europe. Cultural

Strength

Almost every Mexican scientific essay, official speech, or literary award ceremony makes reference to the significance of the cultural ties between

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Mexico and Europe. There is no question that the historical ties, especially immigration from Spain, have had a decisive influence on the Mexican tradition in literature, philosophy, and the social sciences. In cultural terms many Mexicans like to define themselves as part of the "Old World"; by contrast, the U.S. way of life is often viewed as alien. (In fact, in the case of culture the influence is working in the opposite direction: The large and growing Hispanic community of the United States, largely composed of Mexicans, is progressively converting the nation into a quasi-Latin country, which already holds the world's second largest Spanish-speaking population.) Nonetheless, however impressive and often sentimental Mexicans' reference to their European roots may be, those roots do not provide an easy answer to questions concerning the future of Mexican-European relations. Mexico is changing rapidly, and cultural influences today are deriving from as far away as the Asian Pacific, following the paths of new economic ties. Although mutual affinity and familiarity in the field of literature are likely to remain unaffected by changing patterns in Mexico's external cultural relations, the next decade may give rise to frictions in the audiovisual sector. Among the Latin American countries Mexico has been a pioneer in this area. Its GALA-VISION is the only Latin American television network whose programs are broadcast in Europe. Any further insertion in the European market, however, will depend, among other things, on any new telecommunications regulations that evolve under the SEM project. According to the current E C directive on "television without frontiers," at least half of the programs broadcast by European television stations must be of European origin. Moreover, the EC Commission is determined to push an agreement to further force television producers, distributors, and investors to work within a purely E C framework. 23 Nonetheless, in television as in other cultural exchanges Mexico's emphasis on its special cultural relationship with Europe, and with Spain in particular, will continue to be an important pattern in its overall relations with the rest of the world. The European cultural heritage is undeniably an essential ingredient in Mexico's identity, one that is likely to be of increasing significance as that identity and Mexico's other interests are challenged by its powerful economic partners. Moreover, the country's economic apertura is likely to be paralleled by an unprecedented openness to cultural influences from other parts of the world. A recent remark by Foreign Minister Solana may illustrate the point. When asked whether Mexico feared the consequences of a free trade agreement with the United States, he responded that the basis of Mexico's national identity was sound enough not to be overwhelmed by foreign influences. 24

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Weakness

"Foreign policy in Mexico is the policy of the state."25 This formula summarizes President Salinas's thesis on the impact of Mexico's current economic modernization project on the country's foreign affairs. As he recently put it: Modernization of the state is an essential prerequisite to identifying and defending national interests vis-à-vis an interdependent international economic system.26 Both statements highlight the fact that in spite of—or perhaps precisely because of—the process of political reform on the domestic scene, the concept of the state as the exclusive actor in the nation's international relations has remained virtually untouched. Such a heretical notion of the state tends to grant small margin for the opening of society to transnational interactions. As a result, international relations at the substate level in Mexico have developed slowly. It has been mainly the ruling Institutional Revolutionary Party (PRI)—the state party—that has effected transnational interactions, for its own policy goals. Thus, the Conferencia Permanente de Partidos Políticos Latinoamericanos (COPPPAL) has served as a tool to extend and formalize the PRI's international connections. In the case of its policy toward Central America, the PRI looked to COPPPAL as a forum for integrating Nicaragua's Sandinistas into the "club" of other Latin American socialist, anti-imperialist, or revolutionary parties, and for creating a platform for opposition forces throughout Central America.27 Another case in point is the evolving relationship between the PRI and the Socialist International (SI). The PRI began to strengthen the relationship when the SI made promotion of a new international economic order one of its top priorities in the second half of the 1970s. The broadening of parliamentary powers accompanying the political reforms of the Salinas government28 also led to a meeting, on May 21-25,1990, between Mexican officials and the European Parliament's Delegation for Relations with Central America and Mexico. An evolving, more pluralistic party system in Mexico will certainly contribute to a gradual strengthening of the transnational dimension of Mexican-European relations. Bilateral Preferences

Throughout the past decade the former Federal Republic of Germany, France, and Spain have been Mexico's preferred economic and political partners within the EC. Mexico's relationship with each has its own, unique foundation, however. The former FRG has been and Germany will continue to be at the center of Mexico's economic relations with the members of the Community.29 It is Mexico's third most important export market within the EC

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(after Spain and France) and the leading supplier of European imports to Mexico. Notoriously imbalanced trade relations, to the detriment of Mexico, have been offset by the importance of the former FRG's investments in Mexico. Up until 1987 the FRG had been Mexico's second largest foreign investor, behind the United States. Only in 1988 and 1989 did it exchange positions with the United Kingdom, now ranking third among Mexico's foreign investors. But nevertheless, it has been precisely the combination of investment and technology transfer that has made German industry an especially attractive partner for Mexico. And so it was that the economic dimension of this bilateral relationship was at the top of Salinas's agenda during his January 1990 visit to the FRG. Indeed, Bonn was to be the litmus test for the President in convincing the other Western European leaders that economic involvement in Mexico need not be incompatible with their commitments to Eastern Europe. For the problem Mexico faces in its economic relations with the EC in general is particularly thorny in the case of Germany: The reallocation of economic resources necessary for the process of German unification could considerably reduce German investment in Mexico. And any negative trend in its economic partnership with the FRG would seriously harm Mexico's overall presence in Europe. It is within this context that the following statement by Foreign Minister Solana must be viewed: "Germany will be the key-country to Europe." 30 In Mexico's favor, despite the recent developments in Eastern Europe, is Germany's strong interest in the potential North American free trade zone, which will likely secure continuing German interest in Mexico as well. In the case of France, it is not economics but rather the political and cultural arenas that have dominated the bilateral relationship. In spite of France's increasing importance in Mexico's search for scientific cooperation with Europe and its outstanding position as a primary source of European development aid, commercial relations between the two countries declined during the second half of the 1980s. Nonetheless, in his visit to France in February 1990 Foreign Minister Solana made it clear that France will continue to be Mexico's preferred interlocutor on what has for some years been a crucial item on the Mexican-French agenda—Central America.31 The two countries' policy coordination on Central America dates back to a 1981 joint declaration in which the new French President François Mitterrand and Mexico's President José López Portillo recognized the Salvadoran Farabundo Marti National Liberation Front (FMLN)/Revolutionary Democratic Front (FDR) as a "representative political force." Mexico's pronounced anti-U.S. position on the conflicts in Central America at the time coincided with the beginning of the socialist president's term of office in France, a president whose foreign policy paid

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special attention to emancipatory movements in the Third World. But it was not by coincidence that France signed the declaration with Mexico. The new administration perceived Mexico—together with India and Algeria—as one of the principal spokesmen for the Third World.32 Although the French socialist government moved away from its radical position soon thereafter, Mexico could count on full-fledged French support for its later co-sponsorship of the Contadora initiative; and in Claude Cheysson, French foreign minister until 1984 and then EC commissioner for NorthSouth Relations in the decisive first phase of the Central American-EC dialogue, Mexico found a fervent critic of U.S. interference in the region. In comparison to its relations with Germany and France, Mexico's bilateral relations with Spain are much more balanced—in both their political and their economic dimensions. Spain has neither matched Germany's extensive economic involvements in Mexico nor articulated France's high degree of affinity with Mexico's ideological spokesmanship on behalf of the Third World. But it has for some time been the largest European outlet for Mexican exports, largely because of its petroleum imports (as shown in the chapter by Roberta Lajous in this volume). Indeed, Mexico's balance of trade with Spain in recent years has hovered at some 1 billion U.S. dollars. In terms of investment, though, Spain ranks low on the European scale. Skepticism has already been raised regarding the ambitious cooperation agreement signed between Spain and Mexico in January 1990, which provides for credits and direct private investment amounting to 4 billion U.S. dollars over the years 1990-1994. Full compliance with the accord—which would represent a 100 percent increase in investment from Spain—is hardly likely to be achieved.33 The significance of this bilateral agreement lies, instead, in the cancellation of half of Mexico's debt to the Spanish government. Diplomatic relations between the two countries were officially reestablished in March 1977, after an interruption of almost forty years. Mexican expectations of the benefits of a renewed Hispanic partnership were not fully met, however, as Spain decided to grant preference to relations with its fellow European countries. Relations even deteriorated when the conservative government of Leopoldo Calvo Sotelo was highly critical of Mexico for its enthusiastic support of the Sandinista regime in Nicaragua and the Castro regime in Cuba.34 It was not until the start of a socialist term of office in Spain and the more pragmatic foreign policy approach of the de la Madrid administration in Mexico, in the early 1980s, that we saw a considerable improvement of bilateral political relations. The position of the Spanish government on the Central American conflicts, and Nicaragua in particular, had drawn it very close to Mexican policy on the region; and Prime Minister Felipe

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González did not hesitate to throw his full support behind the Contadora initiative. Yet the Spanish never became as active in Central America as Mexico would have liked. As a newcomer to the E C in 1986, and while negotiating Spain's status in NATO, González chose not to become an official mediator in the region. But at the same time, Spain's growing weight within the Community and the prestige its socialist government enjoys as a competent voice on Latin American affairs are taken well into account in Mexico. Hence, given its role as the Community's advocate for Latin America's manifold economic problems and its increasing bilateral links with Mexico, Spain is likely to continue to be a strategic element in Mexico's European policy.

Mexico as a Regional Power By the mid-1970s, and coinciding with the change of the sexenio from Luis Echeverría to José López Portillo, Mexico had begun to identify itself with the Third World and to adhere to the "middle class" of nations within the international system. A series of internal and external changes at the time prepared the ground for Mexico's transition to a new role in world affairs. Two outstanding initiatives demonstrated its steady rise as a regional power: its leading role in the foundation of the Latin American Economic System (SELA) in 1975; and its involvement in Central America from the outset of the 1980s. In general terms, internal prerequisites for status as a regional power 35 are to be found in a relatively well-developed level of national integration, economic means, and the ability of the country's foreign policy elites to translate this economic potential into a coordinated use of foreign policy instruments. In the specific case of Mexico, the discovery of its vast oil reserves in 1974 had a decisive impact, accelerating its foreign policy initiatives considerably. Equally important, however, was the charismatic leadership of Luis Echeverría, who managed to renew domestic consensus through political and economic reform and to combine that reform with the display of a new image to the outside world. More specifically, Echeverría embarked on a foreign policy that seemed most promising in its emphasis on Mexico's claim to regional leadership. 36 Arguing that North-South integration was politically and economically incompatible with South-South cooperation, he launched the idea of a regional organization that would allow for flexible handling of intra-Latin American economic cooperation and the defense of regional interests vis-à-vis the exterior. SELA, founded in 1975 as a result of a joint effort by Mexico and Venezuela, was designed to fulfill these functions, and the small institution has since gained a wide reputation as

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a vital instrument for coordinating economic policy among the Latin American nations.37 Yet the single most important initiative that legitimated Mexico's status as a regional power—its political involvement in Central America through the Contadora process—was conditioned by a series of changes in international—rather than domestic—relations. First, the "rise of new influentials" in the international system cannot be understood without recognizing how the oil crises of 1973 and 1979 brought to light both the economic vulnerability of a large part of the First World and the weighty economic and political potential of some previously peripheral states (due to their energy potential or their strategic location in relation to the industrial powers, or both). Second, the effects of détente allowed many Third World states greater foreign policy autonomy and maneuverability. And third, the relative decline of the United States, in all aspects of the influence it previously held, was one of the most significant prerequisites for the development of regional centers of power. Thus, the inverse relationship between Mexico's rapid rise as an important oil supplier, on the one hand, and the gradual decline of the United States as a superpower, on the other, allowed Mexico to begin to fill some of the vacuum the United States seemed to have left in Central America. Mexico's engagement in the region was intended to accomplish three goals, which also happen to demonstrate three essential capacities of a regional power: 1. Mexico wanted to serve as a bridge builder among the Central American countries, whose domestic situations were marked by a process of revolutionary transition from traditional regimes to a new political and social order. The historical understanding of its own revolution and its consistent opposition to the United States on a wide range of issues—Fidel Castro's Cuba and U.S. intervention in the Dominican Republic, to mention but two—seemed to qualify Mexico to mediate on a national level. 2. Mexico also saw itself as a bridge builder between the United States and Latin America, and that perception had to be tested in the Central American case. Finding some middle ground in such a vital area would reflect upon the general foreign policy capacity of Mexico to mediate between the superpower and its Latin American partners. 3. Above all, Mexico hoped that mediating in the Central American conflict would lead to gains in international prestige and a widening of its own room to maneuver alongside the United States.38 In accordance with this approach, President Lopez Portillo embarked on a two-track diplomacy effort. On the one hand, he sought bilateral allies like France in August 1981 and multilateral resolutions in the U N in

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December 1981 that openly favored the revolutionary cause in El Salvador; meanwhile Mexico was actively supporting the Sandinista regime in Nicaragua with considerable economic assistance. On the other hand, Mexico was also attempting to facilitate a dialogue between the United States and Cuba, arranging a meeting between then U.S. Secretary of State Alexander Haig and Vice President of Cuba Rafael Rodriguez in November 1981. Together, these initiatives led, eventually, to Mexico's presentation of a comprehensive peace plan that was to become the point of reference for the "Document of Objectives" issued by the Contadora Group in September 1983. All these activities constituted a new design for international relations in the Caribbean Basin, where Mexico and Venezuela would play a credible role as regional powers. Given the widespread skepticism of the ultimate success of U.S. policy in the region, this concept found notable support in Western Europe. At the initiative of López Portillo's successor, Miguel de la Madrid, the Mexican peace proposal was placed into a multilateral framework, including the five Central American states and Venezuela, Colombia, and Panama—the three of which, along with Mexico, were to form the Contadora group of mediators. 39 Mexico nevertheless remained at the core— the driving force of the Contadora process. Its particular understanding of the conduct of interstate behavior, namely, the principles of nonintervention and self-determination, explains the utterly different angle from which the Contadora peace proposal attempted to tackle the Central American impasse. Specifically, in stark contrast to the U.S. approach, the Document of Objectives conferred the responsibility for negotiated solutions on the shoulders of the Central Americans themselves—explicitly decoupling the regional conflicts from the East-West entanglement. The document posited that efforts to reduce tensions and build up confidence should emerge primarily from within the region. Conflict settlement was to be achieved through reconciliatory measures on a national level and the control of arms trafficking and insurgency activities regionwide. Furthermore, the document made explicit reference to the economic and social roots of the regional crisis, encouraging joint action to revive the national economies. Obviously, intraregional dialogue had to be paralleled by negotiations with extraregional actors over the abolishment of foreign military presence in its various forms. Yet the merit of the Contadora group, and Mexico's leadership in particular, was to convene face-to-face talks among the actual parties to the conflicts. This method—seeking genuine regional solutions to the Central American conflict—was the decisive factor in the EC's support for the Contadora initiative. European interest in the region had been rising ever since the toppling of the Somoza regime in Nicaragua in 1979 and the beginning of the civil war in El Salvador in 1980. But the Community had

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lacked a proper instrument to take an active part in helping to resolve the conflicts. While the Central American-EC dialogue, initiated in San José, Costa Rica, in 1984, provided a forum for expressing Europe's interest in the region, it was the Contadora peace plan that became the vehicle for transmitting the message. EC member states were not willing to risk an open confrontation with the United States over a region that was considered to be of almost exclusive U.S. influence.40 On the other hand, given the tense East-West relations at the time, there was also a pronounced interest within the Community to develop a foreign policy profile throughout the world that would steer clear of superpower rivalry. In this context the Contadora plan offered a unique opportunity to situate EC interests within the wider framework of a regional proposal, without deliberately challenging U.S. policy in the area.41 The close tie between the Central American-EC dialogue and Contadora was evidenced when the Community invited the Contadora countries to participate in the biregional annual conferences. Mexico, as Contadora's single most important member, became an important link in the chain of EC contacts with Central America. The consistency and deep understanding that were evident in its diplomatic efforts transformed Mexico into a prominent interlocutor on behalf of Central America. And Mexico has always had a vested interest in ensuring Europe's support for its peace initiatives in Central America. It has consistently viewed the Community as a friendly, extraregional actor capable of counterbalancing U.S. influence in the region. Although some EC member states began to grow impatient with the record of the Sandinista regime in Nicaragua, which eventually led to a diminished consensus on the Contadora initiative, European consultations on Central America remained an important item on the Mexican-EC agenda. More recent developments in the Central American conflicts, however, as well as the Salinas administration's profound revision of Mexico's foreign policy priorities, indicate that Central America is likely to lose much of its importance in Mexico's relations with Western Europe. The potential for a lasting settlement in Nicaragua, traditionally one of the most sensitive spots in the Central American entanglements, has already reduced the importance of the broader issue on the agendas of both the Community and Mexico. Furthermore, domestic modernization and Mexican efforts to strengthen economic cooperation with the United States have become increasingly incompatible with a "revolutionary" Central American policy. It can be assumed that as long as the regional crisis persists, Mexico will be involved—and so will the EC. Yet the visit of President Salinas in Europe confirmed the new foreign policy agenda: putting in limbo the Central American crisis as a subject for bilateral consultations and focusing instead on problems, such as economic ques-

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tions, that are currently of much greater concern to Mexico. This pragmatic approach of the Salinas government could eventually endanger Mexico's privileged image as an important regional power in Latin America and its position as a favored partner for consultations in the context of Latin American-European relations.

Europe as a Global Power Ten years ago Mexicans would hardly consider Europe as an economically and politically powerful actor in world affairs—or as a prominent steward of international security. "Eurosclerosis" is a proper term to describe the general mood in Western Europe itself at the time, as well as the general international attitude toward the process of European integration. T h e search for individual solutions prevailed over a common approach to the—particularly economic—challenges the European Community had to tackle at the beginning of the decade. The end of the 1980s, however, brought about a radical change in this perspective. With the approval of the European Single Act in 1986, the heads of state of the E C member countries set in motion a new stage of economic integration that very soon gained a tremendous dynamism of its own. T h e creation of a S E M by the end of 1992—which will completely liberalize the circulation of goods, services, capital, and people—solidified the idea of a united Western Europe. If the construction of a huge economic bloc in Western Europe raised both expectations and concerns throughout the world, the new prospect of a subsequent enlargement by the addition of Eastern European countries has made the S E M project a cynosure of world attention. The E C is well aware of its privileged position in reshaping Europe politically, economically, and with regard to a new security agenda. Indeed, Eastern Europe's interest in adhering to the process of Western European integration in all its dimensions has transformed the Community into the epicenter of developments that will result in a complete reassessment of the balance of power in the international system as a whole. A recent statement by E C Commission President Jacques Delors echoes the new "Eurooptimism": The E C has become a partner to be respected, courted—and feared. 42 Renewed Economic Influence The European Community is the largest commercial power and the leading foreign investor in the world. The EC's share of total world exports

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amounted to 20.3 percent in 1987 (with the U.S. share at 12.6 percent and the Japanese share at 11.9 percent). In their foreign investments, the EC member countries represent about 49 percent of the total for the Organization for Economic Cooperation and Development (OECD) nations; their investment rates have thus developed as dynamically as those of Japan, whereas the U.S. share over the 1980s shrunk from 46 percent to 25 percent.43 Nevertheless, the powerful external performance of the EC over the 1980s took place alongside widespread economic stagnation on the domestic scene, characterized by low growth rates and high unemployment. It is the stated aim of the SEM to reverse this situation and to prevent it from spilling over into the EC's external performance. The abolition of nontariff barriers among the EC countries and the free circulation of capital and services are designed to achieve an efficient reallocation of productive and technological resources, thus generating higher growth rates in the individual countries and enhanced competitiveness for the EC as a whole on the international scale. Optimistic forecasts predict a collective rise in annual growth rates of between 4 percent and 7 percent.44 In addition, the EC summit in June 1988 called for relaunching the otherwise stalled process of Economic and Monetary Union (EMU), which is now scheduled to take over in the EC integration process where the 1992 program leaves off. The EMU is so far the single most ambitious item on the EC integration agenda—its aim is to delegate the authority for all monetary issues to a supranational institution, the European System of Central Banks (EUROFED). This initiative implies, by definition, that the EC will be empowered to influence national budgetary policies, ultimately giving it a decisive say in the design of member states' macroeconomic policies. With the SEM under way and the EMU on the agenda, the Community's partners in trade have been forced to revise their economic relations with the larger unit. This is particularly true for the countries of the European Free Trade Area (EFT A).45 Given the interdependence of EC and EFTA markets, it is in the interest of both sides to fashion a new cooperation framework. At present, the two have agreed in principle to the creation of a large European Economic Space in which the EFTA members would be allowed to participate fully in the Community provisions governing the free circulation of goods, services, capital, and people.46 It is, however, the opening to the East, and the envisaged integration of Eastern Europe into the SEM, that is creating new realities in the international economic system. Although speculations about the potential of the Eastern economies may seem premature, 47 the international competition to gain terrain in the formerly state-dominated economies

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demonstrates how high the expectations generally are. The E C reacted quickly to this change in perspective: In less than two years it has signed commercial and economic cooperation agreements with all but one of the Eastern European countries 48 and with the Soviet Union. In some cases these agreements will be transformed into a Treaty of Association, considered to be the last step leading to the countries' full membership in the Community. And the former German Democratic Republic, which has always held a special status given the inter-German legal situation, became a full member on October 3,1990—the very day German unification was formally completed. Although E C officials49 have repeatedly emphasized that enlargement of the E C is not on the agenda—not even in the case of Eastern Europe—an accelerated rapprochement between West and East in Europe is in the interest of all the parties there.

Political

Integration

Any further integration in the economic sphere will have an obvious corollary in the political realm. European Political Cooperation (EPC) as an instrument for coordinating foreign policy activities among member states has been an important pillar of European integration ever since it was established in 1969.50 What is more, by the end of the 1970s, when the region's economic crisis engendered paralysis in the integration process, foreign policy cooperation became the driving force of European integration and the flagship of joint action vis-à-vis the exterior. It was during that period that E P C had to pass the litmus test of a communauté d'action to preserve and promote Europe's interests in times of heightened world tensions and superpower rivalry. For the continent, close policy coordination managed to salvage détente in the aftermath of the Soviet invasion of Afghanistan in December 1979. Abroad, enhanced cooperation with the members of the Association of Southeast Asian Nations ( A S E A N ) and the institutionalization of the Central AmericanE C dialogue contributed decisively to the delineation of Europe's foreign policy profile in world affairs. With the E C members' adoption of the Single European Act in 1986, E P C was enshrined in an international treaty, binding each member state to consultations with its E C partners before formulating or implementing any foreign policy activity of its own. The provision fixed in legal terms what had long been a reality: a cooperative, informational network among E C capitals and embassies, within the framework of international organizations, to coordinate standpoints and—whenever possible—to proceed in joint action.

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A New International Security System Any community of nations that begins to act as a single political power in the international system will receive increasing numbers of requests to assist in the settlement of regional conflicts. While Europe's assistance has so far been limited to diplomatic instruments, occasionally accompanied by foreign economic policy, the inclusion of security aspects into EC foreign policy, a distinct possibility in the near future, would supply the Community with new instruments, such as peacekeeping missions. Europe as an established economic power and a rising political power might be increasingly tempted to reconfirm its global puissance by assuming as well a greater responsibility for international security issues. Thus, from whatever viewpoint Mexico looks at the new Europe, it will find reasons for a stronger and multilateral relationship.

Mexican-European Relations: An Outlook for the 1990s Mexico and Europe: one, a regional power on its way to economic and political modernization; and the other, a rising global power. Does this combination suggest favorable terms for sustaining the current level of relations, or may it give rise to even greater expectations for a new quality of bilateral bonds? On the one hand, President Salinas's recent visit pointed to the central role Europe is being assigned within Mexico's strategy of foreign policy diversification. But on the other, the future design of Mexico's European option will very much hinge upon the opportunities Europe can and is willing to offer in view of the present developments on its own continent. Despite the vagueness of these premises, some trends can be identified in the main areas of MexicanEuropean cooperation. It can be argued, with a good deal of evidence, that on the political level Europe will continue to be Mexico's single most important partner in counterbalancing U.S. influence in Latin America. Underscoring this point is the April 1990 meeting between the Community and the foreign ministers of the Rio Group within the framework of the ongoing Central American-EC dialogue. At that meeting it was significant that both Mexico and Venezuela expressed their concern over the possible consequences of the U.S. antidrug campaign for regional security. This obvious attempt to involve the EC in an ongoing Latin American-U.S. dispute at the same time challenged the Community on an issue that touches on one of the most delicate aspects of intra-EC relations: its members' loyalty to their North American partner.51 Up to the present the EC member states have successfully managed

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to harmonize European political cooperation with their relations with the individual countries across the Atlantic. In the future, however, the accelerated integration of the member states' foreign policies into a common EC frame will render compatibility between European and U.S. commitments increasingly difficult. Priority will have to be given to European cooperation. Hence, further political integration is likely to facilitate common European positions, even on issues that imply EC "meddling" in U.S. spheres of influence. In this sense, Europe's attractiveness as a political ally is likely to grow throughout Latin America, but especially in Mexico, given its special characteristics as a regional power. The social and cultural aspects of Mexican-EC relations will likely be of growing importance, as well, as a corollary of any such strengthened political links. And a deepening of the cultural affinity between the two regions will continue to contribute to mutual understanding on all levels. Moreover, if Mexico succeeds in opening its political system to allow for political and social pluralism, new forms of transnational exchanges are likely to result. Since Mexico's modernization process is very much modeled after Western European political and economic systems, the country's interactions with European political parties, trade unions, and other nongovernmental organizations are very much apt to be strengthened. The development of economic relations between Mexico and the EC is most difficult to predict. In commerce, Mexico looks north; and for investment and technology transfers, it has high expectations for the Asian Pacific. Between those poles the European Community is a courted, but potentially not forthcoming, partner. Thus, for the time being, any prediction regarding the impact of the SEM on Mexico's relations with Europe would be premature. Although an increase in European growth rates and measures such as the harmonization of technical norms suggest the possibility of greater access to the European Economic Space for outsiders, any benefits to extraregional states will depend on the competitiveness of their individual economies on the EC market. Without a doubt, a growing portion of foreign investment flows from the EC countries will be channeled to Eastern Europe. Nevertheless, it should not be overlooked that Mexico is more than halfway through the very process that Eastern Europe has just embarked on: Mexico's relatively stable political situation and its unflinching pursuit of economic reprivatization serve as a much more reliable basis for calculating the risks and benefits of investment than does the uncertain situation of many of the Eastern European countries—a situation that is unlikely to stabilize in the near term. Any forecast of future economic relations between Mexico and the EC must necessarily take into account Mexico's integration into the North

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American market. Mexico's potential alliance with the powerful northern bloc is significant for two reasons. First, it will place Mexico in an extremely privileged position vis-à-vis European investors. And second, and even more important, it will likely improve Mexico's economic position vis-àvis post-1992 Europe. Any reciprocal liberalization of Mexican-U.S. commerce will be an incentive for accelerating Mexico's process of economic modernization. In turn, this will in principle have a positive impact on Mexico's competitiveness in European markets. Interestingly, Mexicans often perceive their country's insertion into the international economic system as a zero-sum game between the world's economic blocs. Yet Mexico's success within a fully integrated European market will depend in part on the degree of its integration in the North American market. Thus, economic foreign policy in the Mexican case is not so much a matter of tough economic choices, but of skillfully playing out the choices so that the various aspects of the two options complement one another.52 The European Parliament, in its 1988 motion for a resolution on Mexico, deplored the poor performance of Mexican-European trade relations and expressed its concern that the United States and Japan would economically oust Europe from Mexico. The motion explicitly acknowledged that the potential loss of a European presence in Mexico was all the more worrisome because of the vital role Mexico plays in the interAmerican security system.53 This concern is shared, in one form or another, by the other EC institutions and some of its member states. Mexico's status as the second largest economy in Latin America (after Brazil) and as the most forceful political voice in the region thus confers upon it a key continental, and intercontinental, role. As much as Mexico needs Europe to counterbalance U.S. influence in the region, Europe needs Mexico to ensure an ongoing presence in the same region. Mexico assuredly faces a difficult phase in its economic relations with Europe. But it is in the European Community's own political interest to prevent any deterioration of economic ties. The interdependence of interests between Mexico's role as a regional power and Europe's as a global power thus holds out a stable basis for future relations. Inasmuch as the two parties acknowledge this interdependence, relations between Mexico and Europe can be of great mutual advantage in the 1990s.

Notes Kea Wollrad deserves special thanks for her research and editing assistance. 1. Luis Miguel Díaz, Historia de las relaciones internacionales de México (Mexico City: Porrúa, 1983), pp. 12-17. 2. Daniel Levy and Gabriel Székely, Mexico: Paradoxes of Stability and Change (Boulder, Colo.: Westview, 1987), pp. 28-29.

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3. A good overview of early relations between Mexico and Eastern Europe appears in Blanca Torres, "México en la estructura del comercio y la cooperación internacional de los países socialistas," in La política exterior de México: Realidad y perspectivas, ed. Centro de Estudios Internacionales (Mexico City: El Colegio de México, 1972). 4. Wolf Grabendorff, Bestimmungsfaktoren und Dimensionen der Aussenpolitik Mexikos (Ebenhausen: Stiftung Wissenschaft und Politik/Forschungsinstitut für Internationale Politik und Sicherheit, 1977), p. 92. 5. Thomas G. Powell, "Spain and Mexico," in The Iberian-Latin American Connection, ed. Howard J. Wiarda (Boulder, Colo.: Westview, 1986), pp. 253-283, esp. p. 259. 6. Octavio Paz, "Alba de la libertad," El País (Madrid), April 7,1990. 7. See Wolf Grabendorff, "Mexikos Aussenpolitik: Möglichkeiten und Grenzen einer mittleren Macht der Dritten Welt," in Polarità und Interdependenz, ed. Stiftung Wissenschaft und Politik, Beiträge zu Fragen der Internationalen Politik, Internationale Politik und Sicherheit 1 (Baden-Baden: Nomos, 1978), pp. 433-445, esp. pp. 433-438. 8. Alma Rosa Cruz Zamorano, "El viaje de Miguel de la Madrid a Europa: Diversificación de la dependencia?" Carta de Política Exterior Mexicana 5, nos. 2-3 (April-September 1985): 53-58, esp. pp. 57-58. 9. Guadalupe González, "Incertidumbres de una potencia media," in La política exterior de México: Desafíos en los ochenta, ed. Olga Pellicer (Mexico City: Centro de Investigación y Docencia Económicas—CIDE, 1983), pp. 15-81, esp. p. 70. 10. "Reunión en Budapest de países latinoamericanos y del Este," El País (Madrid), April 13-14,1990. 11. "Mexiko sucht vielfältige eigene Kontakte," Frankfurter Allgemeine Zeitung (Frankfurt am Main), April 9,1990. 12. Peter Coffey, "Co-operation between the European Economic Community (EEC) and Latin America—with special reference to Mexico," in The EEC and Mexico, ed. Peter Coffey and Miguel S. Wionzek (Boston: Martinus Nijhoff, 1987), pp. 29-36, esp. p. 33. 13. For an overview of Mexican-EC trade relations, see Victor L. Urquidi, "México y la Comunidad Económica Europea," Comercio Exterior (Mexico City), 38, no. 4 (April 1988): 299-303; and Luis Weckmann Muñoz, "Las relaciones entre México y la Comunidad Europea," Proa (Mexico City) 7, no. 15 (Winter 1988): 28-30. 14. Fernando de Mateo, "Mexico and the European Economic Community: Trade and Investment," in The EEC and Mexico, ed. Peter Coffey and Miguel S. Wionzek (Boston: Martinus Nijhoff, 1987), pp. 3-17, esp. p. 17. 15. Comisión Nacional de Inversiones Extranjeras, "Inversión extranjera directa en México según país de origen," reprinted in El Financiero (Mexico City), January 29,1990. 16. "Interesados en la petroquímica y la metalurgia: Empresarios alemanes planean elevar su inversión en México," El Financiero (Mexico City), October 31, 1989. 17. "Economy on the mend as new measures take effect," International Herald Tribune (The Hague), February 1,1990.

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18. de Mateo, "Mexico and the European Community," p. 23. 19. Instituto de Relaciones Europeo-Latinoamericanos (IRELA), Mexico under Salinas: The challenge of political and economic reform, dossier 23 (Madrid: IRELA, March 1990), p. 22. 20. "Interesados en la petroquímica," El Financiero. 21. "Nurturing the 'Mexican set,'" Financial Times (London), October 12, 1989. 22. "CSG: No dañara el avance de México el cambio en Europa," UnomásUno (Mexico City), February 10,1990. 23. Franfurter Allgemeine Zeitung (Frankfurt am Main), April 11,1990. 24. "Mexiko sucht," Frankfurter Allgemeine Zeitung. 25. Quoted from Manuel Rodriguez Arriaga, "Política exterior: Balance de un sexenio," Revista Mexicana de Política Exterior (Mexico City) 5, no. 21 (October-December 1988): 30-33, esp. p. 33. (Translation by the author). 26. Carlos Salinas de Gortari, "México, reformando el Estado/2: Las razones exteriores," El País (Madrid), April 11,1990. 27. González, "Incertidumbres," pp. 74-75. 28. See, for example, Instituto de Relaciones Europeo-Latinoamericanas (IRELA), Mexico under Salinas. 29. Mario Chacón assigned West Germany to the "bridge building" function between Mexico and the EC, in "México frente a la Europa de 1992," Comercio Exterior (Mexico City) 39, no. 7 (July 1989): 565-581. 30. "Mexiko sucht," Frankfurter Allgemeine Zeitung. 31. "Importancia de Europa en la política exterior de Mexico," El Día (Mexico City), February 14,1990. 32. Klaus Bodemer, Europa Occidental-América Latina: Experiencias y desafíos (Barcelona: Alfa, 1987), p. 77. 33. "El tratado con México marca el comienzo de una nueva era en las relaciones Iberamérica," ABC (Madrid), January 12,1990. 34. Powell, "Spain and Mexico," pp. 265-270. 35. For a typology of the regional powers in Latin America, see Wolf Grabendorff, "The Role of the Regional Powers in Central America: Mexico, Venezuela, Cuba and Colombia," in Latin American Nations in World Politics, ed. Heraldo Muñoz and Joseph S. Tulchin (Boulder, Colo.: Westview, 1984), pp. 83-100. 36. See Yoram Shapira, "Mexican Foreign Policy under Echeverría," The Washington Papers 6, no. 56, (Beverly Hills, Calif.: Sage, 1978). 37. It is notable that despite the Salinas administration's very different approach to external economic relations, recent Mexican initiatives demonstrate a persistent interest in intra-Latin American economic coordination. One example is Mexico's hosting, on April 30-May 1, 1990, of a meeting of foreign ministers within the Latin American Integration Association (ALADI). More significant, however, are recent efforts on a subregional level, such as the creation of the Group of Three (Colombia, Mexico, and Venezuela) aimed at coordinating the countries' industrial policies and promoting their cooperation on energy issues (Frankfurter Allgemeine Zeitung, Frankfurt am Main, April 9,1990). 38. See Grabendorff, "The Role of the Regional Powers," pp. 86-87; and Gonzlez, "Incertidumbres," pp. 72-75.

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39. For Mexico's role in Contadora, see the relevant chapters in Centro de Investigación y Docencia Económicas—CIDE, ed., Cuadernos de política exterior mexicana (Mexico City: CIDE, 1984). 40. Wolf Grabendorff, "Central America: A Dilemma for European-U.S. Relations?" Harvard International Review 9, no. 1 (November-December 1986): 37-39. 41. Bodemer, Europa Occidental-América Latina. 42. Quoted in "Ein Dämpfer für die Hoffnungen der EFTA," Neue Zürcher Zeitung (Zürich), January 19,1990. 43. Georg Koopmann and Hans-Eckart Scharrer, "Die Aussenwirtschaftspolitik der Germeinschaft nach 1992," Beihefte der Konjunkturpolitik (Berlin) no. 36 (1990): 115-140. 44. See, for example, Paolo Cecchini, Europa 1992: Una apuesta de futuro (Madrid: Alianza, 1988), p. 23. 45. Austria, Finland, Iceland, Norway, Sweden, and Switzerland. 46. "Bestätigter Verhandlungswille von EG und EFTA," Neue Zürcher Zeitung (Zürich), December 21,1989. 47. According to a recent EC Commission forecast, German unity is expected to increase overall economic growth in the Community by 0.5 percent (to 3.5 percent) in 1991 and by 1 percent in 1992. See "German unity 'will increase' EC growth," Financial Times (London), March 13,1990. 48. A similar agreement with Romania is in the making. 49. For example, Delors, at the European Parliament. See "Ein Dämpfer," Neue Zürcher Zeitung. 50. For an overview of activities related to European Political Cooperation, see Elfriede Regelsberger, "EPC in the 1980s: Reaching Another Plateau?" in European Political Cooperation in the 80s: A Common Foreign Policy for Europe? ed. Alfred Pijpers, Elfriede Regelsberger, and Wolfgang Wessels (Boston: Martinus Nijhoff, 1988), pp. 3-47. 51. "México y Venezuela denuncian ante la CE que EE UU viola el derecho internacional," El País (Madrid), April 11,1990. 52. Peter S. Rashish, "América Latina se queda sola mientras el mundo marcha al Este," El País (Madrid), April 20,1990. 53. European Parliament, "Propuesta de resolución sobre las relaciones económicas y comerciales entre la Comunidad Europea y los Estados Unidos de México," in Informe sobre las relaciones económicas y comerciales entre la Comunidad Europea y los Estados Unidos de México, Documentos de Sesión, serie A, documento A2-0328/88 (Brussels: European Parliament, December 19,1988), pp. 5-9.

7 Mexico and the Pacific Rim: Toward a Foreign and Domestic Policy Agenda Jorge Alberto Lozoya

The Pacific Basin is one of the main driving forces behind the global economy of the 1990s and beyond, and given its tremendous potential, it presages a fundamental change in the overall economic system. The signs of our times are movement, change, and flow. Today nations are going beyond their borders to face problems in international forums. Knowledge itself is power—as Bacon said four centuries ago—and seemingly rational models must be questioned every day. Isolation in its strictest sense has become virtually impossible. Events as important as the political reform in the Soviet Union, the processes of change in Eastern Europe, the surmounting of the bipolar system, and the end of the Cold War between the United States and the Soviet Union are the results of the unique economic, financial, and technological linkages among nations that have developed since the end of World War II. On the other hand, the inability of Marxism-Leninism to design and build a systematic structure that could uphold an integrated and highly competitive market has caused the almost instantaneous collapse of the European socialist system. An analysis of these transformations implies making a diagnosis of the world situation in which its governing forces are found to be the globalization of the market and the labor force, integration of the productive and technological systems, accelerated industrial growth (hyperindustrialization), and the consolidation of the democratic political and social formations. In turn, new demands for action by the nation states have been identified, including the internationalization of national interests, the transfer of duties and rights to international structures, and the impossibility of resolving the major issues—such as the economy, the environment, and national security—within the traditional sphere of the nation state. Contrary to what Fukuyama has stated, far from confirming the end of history—much less the total and absolute victory of a single ideology— the phenomena described above indicate the end of one cycle in history and the beginning of a new one in which nation states precisely should question the social and economic models predominant until now, as well 123

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as the traditional political and geographic spaces in which those states have conducted their business. Under these forces a new dimension of regional activity is being consolidated. If "development" has ceased to be a linear concept, if the monolithic ideological programs have given way to an acknowledgment of uncertainty and socioeconomic variables, then the emerging world poles— Europe, North America, and the Pacific Basin—are not vanguards, as centers of power were in the past, but rather centers of systematic economic formations. The great thinker Jacques Attali termed these new centers "hearts," thus illustrating their sense as a pulse andflow,similar to the nuclei of organic and also peripheral environments.

Setting an Agenda for Mexico in the Pacific What does all of this mean for Mexico? How can one define and explain its insertion in the Pacific Basin, in the light of the macro-level phenomena described above? Mexico's recent strengthening of its relations with the Pacific Basin represents but one of the strategies that have gone into the vast program to modernize Mexico and take a place for itself in latter twentieth century world trends. In this way it shares priorities with other significant and concurrent projects, such as the redefining of Mexico's economic relations with the United States and of its traditional ties with Latin America; the search for a greater Mexican presence in the markets of the European Economic Community; and, in time, broader and more active collaboration with the countries of Eastern Europe, whose presence will be decisive for the consolidation of Europe as a dominant economic bloc. Mexico's international activity in the coming decade must be focused on prioritizing strategic objectives, while striking a balance so as to devote attention simultaneously to different geopolitical theaters. This task is particularly crucial, indeed obvious, when it comes to redefining Mexican-U.S. relations and the parallel process of redefining efforts to integrate and collaborate with Latin America, particularly Central America and the Caribbean. Likewise, there is no question that initiatives aimed at greater Mexican participation in the Pacific Basin should be respectful of the times and conditions dictated by the resolution of new forms of coexistence and cooperation among Mexico, the United States, and Canada. Any Pacific initiatives must be grounded in the recognition that the three North American countries form an economic pole whose potential is directly related to the continuing exchange of goods and services with Western Europe and the Pacific Basin. As is well-documented elsewhere in this volume, the North American economic alliance is increasingly becoming the cornerstone of

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Mexico's response to the swiftness and meaning of the current world transformations. It is also a powerful factor that will in large measure condition Mexico's economic performance and its ability to sustain a stable opening to other regions of the world while enhancing its own competitiveness. The free trade agreement that the governments of Mexico and the United States are negotiating, expected to result in a commitment within a year, forms a substantial part of the actions aimed at generating commercial demand for Mexican products, which will not only promote a modernization of Mexico's productive plant but also enhance the volume and quality of its products. This will be possible with greater access to the U.S. market and greater inflows of direct foreign investment. The link between this project and the strengthening of relations with the Pacific Basin is clear. Increasing exports to the markets of the Pacific will depend on Mexico's productive capacity and competitive quality, neither of which can emerge from a small domestic market or an overprotected productive plant with serious structural and technical deficiencies. In other words, expanding Mexican access to the U.S. market, which is the largest national market in the world, will be the engine clearing a path to the Pacific. It is therefore necessary to examine the Pacific option within the framework of a primary commitment to the system of models and trends that are determining world economic, technological, and social development. At the same time, this implies expanded responsibilities toward a vast network of multilateral agencies aimed at channeling and ordering the activity of nations in that region. These forums include the Pacific Economic Cooperation Conference (PECC), the Pacific Basin Economic Council (PBEC), and the Organization of the Pacific for Trade and Development (OPTAD), to cite a few. The development of regional integration agencies can play an important role in coordinating efforts of both the public and private sector in each country and in determining the extent to which each member nation should participate. This work is not a substitute, however, for work in world forums, such as the UN, regardless of the fact that these forums may in turn need some updating in their conceptual and organizational aspects, so as to meet the new responsibilities of the changing world order. This is also true for the General Agreement on Tariffs and Trade (GATT) and other global institutions that emerged at the end of World War II. Although the Pacific Basin has developed its potential considerably in the last few years, it still is a region in which the process of defining the roles of agencies and institutions to coordinate and regulate participation of the states in the region is quite new. This fact offers Mexico and other nations on the periphery (in Latin America and Asia) an opportunity to push these forums toward actions that arc more responsive to the interests of the developing world than in the past. For not only development models based

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on economic globalization but also global peace depend on a narrowing of the gap between the North and the South. In this regard, it should be noted that Japan's economic success has raised high expectations among the developing nations, for several reasons. First, it has demonstrated that the strength of a modern nation is not determined by its military capacity but rather its economic and technological might. Second, it has proved that vast territory or extensive natural resources are not necessarily prerequisites for establishing a powerful modern industrial state. And finally, in numerous instances Japan's experience has confirmed that only a stable international order can guarantee access for all states to the natural resources and energy markets that will make their economic take-off possible. More specifically, the Japanese have witnessed exponential development of their productive capacity—something that could be attained only through the Third Industrial Revolution of the latter half of the twentieth century. A great percentage of the technological innovations of our times have come from the Asian side of the Pacific, which explains not only the case of Japan, but also its effect on the recently industrialized nations in the immediate region, such as Singapore, Taiwan, Hong Kong, and South Korea. The message for Mexico is clear: Given its vast expanse of land and abundant natural resources, external procurement or domestic development of technological processes must be a primary goal of its involvement with the Pacific Basin. Indeed, this goal can serve as the foundation for broader planning of Mexican activity vis-à-vis the Pacific. In an initial stage it will be necessary to generate productive growth, modernize facilities, and expand the market for Mexican exports to the North. Foreign investment and the acquisition of state-of-the-art technological systems should be promoted simultaneously. In a second phase the country will be in a position to promote the penetration of Mexican products in the Pacific Basin on a firm and competitive footing. Mexico should therefore carry out its entrance into the economic stream of the Pacific progressively and rationally, scaling its participation in such a way that it will not jeopardize the progress made at each stage. A premature attempt to open markets for manufactured products of poor quality may result in the loss of those markets and problems regaining them in the future after competitive capacity is increased.

Setting a Complementary Domestic Agenda In the domestic sphere the global transformations have obliged Mexico to rethink its traditional way of life and seek to modify its political, economic,

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and social structures under new conceptual premises and strategic criteria. Examples of this are the recent initiatives to open trade, change regulations on foreign investment, reduce governmental participation in the economy by selling quasi-public enterprises, and adopt a mixed system for banks and lending companies. In turn, to implement those steps it has been necessary to make several complex and difficult decisions, which represent a sharp break with deeply rooted programs and dogmas. Under these circumstances, the real exercise of democracy has become not merely a desideratum but a prerequisite for expanding social opportunities, redistributing wealth, and promoting productive development. Opening up trade and freeing up economic forces can hardly be understood within a market economy without a consequential democratization of political and social life. This is where democracy should play a very important role in Mexico, since it is a necessary condition if we are to reassess and counterbalance the social agenda vis-à-vis the rapid expansion of new forms of capital and financial speculation. In the same fashion, Mexico is obliged to carry out internal modernization, which is not limited to simple improvements in its infrastructure, sources of energy, or means of electronic communication. Special attention must be paid to fostering the new form of capital that postindustrial societies have placed at the center of their technological revolution: knowledgeable, qualified workers. It will be imperative to carry out a profound transformation of Mexican primary, secondary, and postsecondary schools, research centers, and knowledge-producing institutions in general, in order to consolidate the foundations of imparting specialized knowledge to a much larger segment of the Mexican population than in the past. The changes that occurred within Mexico in the 1980s, and those that are taking place today, have forced all sectors of Mexican society to face the difficult task of redefining their roles, their participation, and their national interests and goals. But this task will demand top-priority attention from Mexican society and its emerging forms of organization during the 1990s. The stakes involved are high, especially since times of change are always inherently unstable. The response of the rest of the world to Mexico's needs in such priority areas as the external debt, new access to financial resources, the opening of markets to its products, and the stability of international prices will play a decisive role in either consolidating this new program or dooming it to failure. The Mexican people, for their part, have demonstrated over the past few years their willingness to work toward a goal and make the necessary sacrifices. This was proven through the task of social coordination that gave rise to the Economic Stability and Growth Pact (PECE) established

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in November 1987, which made it possible to control the spiral of inflation and reduce the budget deficit. The will to go forward and build a modern nation, founded on its cultural heritage and its traditional values, is apparent. But establishing the international society of the new century, as world events are showing us, is not the task of a single country, or of a small group of superpowers. It is a constructive, peaceful, and coordinated task to be undertaken by all states and societies.

Note This chapter was translated from the Spanish by Rita A . Clark-Gollub.

8 The Dynamics of Pacific Rim Industrialization: How Mexico Can Join the Asian Flock of "Flying Geese" Terutomo Ozawa Now that Mexico has turned outward by boldly adopting a marketoriented, open-economy strategy for economic development, it is finding itself in ever-closer contact with the industrial dynamism of the Pacific Rim. In contrast to the politico-de jure forms of economic integration in North America (the Canadian-U.S. free trade agreement) and Europe (the European Community), economic integration along the Pacific Rim has so far been effectively organized primarily by market forces under the aegis of the private sector, with the governments in the region separately adopting measures to facilitate an outward-looking orientation. Observing the Asian Pacific, The Economist had this to say: When geese migrate, they fly in a V-formation. The pattern is a favourite analogy of Japanese civil servants for the economic development of East and South-East Asia. Japan leads. Behind it follow the NICs. In the third rank are the new NICs and coastal China. A s with flying geese, the arrangement is purposeful, well-ordered and coordinated. 1

This analogy to a flying-geese formation is a powerful one, capturing well the essence of the Asian formation in which a group of economies operating at different stages of development have organized for a mutually beneficial, purposeful, migration toward rapid industrialization. In fact, the emergence of the Asian Pacific region as a cynosure of economic growth is a boon for Mexico, as it provides a growth impulse that is alternative and supplementary to that offered by Mexico's predominant neighbor, the United States. Although Asian Pacific dynamism looks as if it were being generated within Asia itself, it is critically connected with the United States as the original provider of markets and technology for the Asian economies. Indeed, the United States has long been the vital export market for the Asian flock of geese, although Japan is now increasingly becoming another key market and a dominant supplier of technologies. One naturally wonders why Mexico has failed to seize upon the benefits of being a next-door neighbor to the United States; just as initially Japan, then more 129

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recently the newly industrialized countries (NICs) of East Asia, and now the newest NICs of Southeast Asia all have successfully been capitalizing on their economic relations with the United States. As Japan continues to organize its flock, transmitting growth stimuli to its followers, it is time to ask how Mexico can effectively link up with its "neighbors" across the Pacific. What are the necessary conditions for Mexico to do so? And what kinds of economic policies and strategies should it adopt? In reorienting its economic strategy from the inward-looking toward the outward-looking, Mexico is positioning itself for stepped-up interactions with the rest of the world. The new approach is a 180-degree turn from Mexico's former protectionism, a policy borne of the fear that the Anglo-Saxon doctrine of comparative advantage and free trade, if faithfully adopted, would inevitably lead to Mexico's domination by U.S. interests, that is, by the colossus to the north. The new posture is certainly more amenable than the old to an expansion of economic relations with the Asian flock. And there are growing signs that the Asian economies themselves are looking at Mexico as one of several promising markets for expanded trade and investment. Moreover, the Asian experience per se offers many pointers for Mexico, which is now at a stage in its economic development that Japan and its Asian followers have already passed through successfully. Indeed, the Asian Pacific experience holds out a new development paradigm, one that may serve as a beacon for Mexico in its present course of economic policymaking. T h e Asian experience clearly demonstrates that a latecomer economy can feed on, be nurtured by, and successfully thrive on—instead of being overwhelmed and dominated by—the strengths of the advanced economies, even that of the United States. It thus opens a new vista into Mexico's future. In particular, the Asian paradigm points out the importance of sequential restructuring of a latecomer economy from one phase to the next by means compatible with the economy's prevailing factor and technological endowments in each phase and by the government serving as a facilitator of the restructuring. Mexico's former inward-looking orientation led to a jumble of inefficient, and inefficiently connected, industries (that is, jumbled structuring) and an excessive dependence on external borrowing. Now, however, its new open-economy policy—and its increasing interactions with the outside world—gives Mexico an opportunity to streamline its process of economic development (that is, to unjumble its economic structure). The following discussion first analyzes the operative mechanism of the flying-geese formation of tandem development and then takes a closer look at the example of the Asian flock: its leader and its two ranks of followers. The discussion ultimately points to several lessons Mexico may

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wish to heed in groping for appropriate strategies for running an outwardoriented open economy.

The "Flying-Geese" Paradigm of Economic Development The flying-geese ( F G ) paradigm of economic development describes a phenomenon in which a group of economies, closely interacting with one another, advance together as a whole, led by a predominant economy as the growth center, followed by progressively less developed economies in a hierarchical pattern homologous to that formed by a flock of flying geese.2 The participating economies are necessarily pursuing an openeconomy path of development by feeding on the growth stimuli transmitted from the more advanced economies and, in turn, by generating their own—newly created—stimuli for the next rank of followers. Figure 8.1 sketches out the F G formation of the Pacific Rim, as well as the nascent one of the recently expanded European Community—and perhaps a forthcoming one of greater Europe, that is, Western Europe and Eastern Europe combined. The most clearly delineated V formation is in East Asia and Southeast Asia, where Japan is the predominant regional leader, while the Asian NICs, in their turn, are joining Japan in taking the lead to pull up the Southeast Asian economies. Mexico (and for that matter, other Latin American economies) appears ambivalent as to which growth pole—North America, Europe, or the Pacific Rim—it intends to connect itself with and capitalize on as a catapult for its own development. Despite frequent calls for cooperation within Latin America, the economies of the region have not succeeded in generating mutually supportive industrial dynamism among themselves. Mexico, in particular, is trying to diversify its external economic relations by reducing its traditional dependence on the United States and encouraging the growing ties with Europe and Japan; but in so doing, Mexico appears to be astray from any of the existing or potential F G formations, flitting this way then that in this increasingly interdependent world economy. Given the increasingly well-delineated F G formation in the Asian Pacific, it is important for Mexico to understand how the propelling forces of formation are generated if the nation is actively to partake of the industrial dynamism of the broader Pacific Rim. What are the essential mechanisms that might promote a hierarchical yet mutually stimulative— hence, mutually beneficial—process of economic growth for Mexico? Can we discern some basic economic principles at work in this phenomenon? The essence of an F G formation is the orderly, systemic sequencing of economic activities among its member countries. This sequencing

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allows the group, by way of technology transfers, investment, and trade, to utilize and maximize the benefits of externalities and linkages arising from economic exchanges among the participating countries. In fact, two types of sequencing are involved: one within each economy, that is, an internal sequencing of economic development; and the other among the constituent economies of the flock, that is, an intereconomy sequencing or aligning of economic development. Internal sequencing is a matter of the gradual development of industries in a manner compatible with a country's changing factor and technological endowments (from low value-added, labor-intensive industries to higher value-added, more capital-intensive industries), a structurally orderly process that can generate self-sustaining and self-propelling forces along the dynamic path of comparative advantage. In this evolutionary process, industrial upgrading in a leader economy is the wellspring of growth; it necessarily renders some of the economy's formerly competitive industries comparatively disadvantaged. But these newly disadvantaged industries can be transplanted to follower economies. Intereconomy sequencing then means that these industrial transplants will be made to those follower economies that possess the resources and technological capacities most suitable to the transplants. This type of systemic industrial transplantation accompanies, inter alia, foreign direct investment, licensing, subcontracting, technical assistance contracts, turnkey operations, marketing agreements (especially, easier access to the leader's markets), financial loans, and official economic assistance, both financial and technical, to build industrial infrastructure. Flows of both real and financial assets from the leader economy are thus combined in complementary fashion (as "joint inputs") and transferred to the follower economies as a "package of development ingredients." Indeed, this is how the benefits of intereconomy linkages, externalities, and opportunities are created, captured, and retained within the FG formation. In short, what drives the flock forward is the leader's internal restructuring or sequencing of industrialization from labor-intensive (low valueadded, low-technology) sectors to more capital-intensive (higher value-added, higher-technology) sectors. This sequencing is the main source of growth for second-rank followers.3 And in turn, the latter themselves will emulate the leader's restructuring efforts over time, eventually serving as a supplementary force to transmit their own growth stimuli, however small, to the next rank of followers. In the case of the Asian Pacific, Japan, as an initial emulator that effectively nourished itself on the postwar prosperity of the United States, became a major regional leader in its own right. Then the next rank of followers—Hong Kong, Singapore, Taiwan and South Korea—likewise

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emerged as auxiliary forces, pulling up the lower-rank economies, such as Malaysia, Thailand, and Indonesia. Thus tandem development continues. Several key aspects of this Asian F G formation are vital for Mexico to understand. What phase of industrial restructuring does each rank of the flock represent? In what ways is each developing new comparative advantages? What are the needs of each rank? And above all, what kinds of policies are being pursued to make the flock expand and prosper? To unravel these secrets of economic dynamism in Asia, we must take a closer look at the experience of the Asian F G formation.

A Closer Look at the Asian FG Formation Japan as the Leader

Japan owes its ascendancy in Asia to the powerful efforts it made to restructure and upgrade its economy by using trade and overseas investment, both inward and outward, as catalysts of rapid economic development. As illustrated in Figure 8.2, Japan's postwar period of transformation can be divided into four sequential, though overlapping, phases. The first was export-oriented, labor-intensive industrialization, which emphasized light industries such as textiles, household electric appliances, and sundries during the period from 1951 to the end of the 1960s. The second phase, extending from the mid-1960s to the early 1970s, saw the rise of export-oriented, heavy and chemical industries, namely, steel, shipbuilding, heavy machinery, petrochemicals, and synthetic fibers. The third phase witnessed export-oriented, assembly-based, R&D-intensive production of consumer durables and industrial machinery, notably automobiles and consumer electronics, from the late 1960s to the late 1980s. Fourth, from the early 1980s on, was home-market-oriented, flexible manufacturing, characterized by the application of computer science for design, engineering, and robotized manufacturing. Japan thus has succeeded in upgrading, phase by phase, its portfolio of industries toward a higher value-added, more knowledge-based one. These sequential phases were bridged by three metamorphic transformations, identified in the figure as Mark I, Mark II, and Mark III restructuring. What is most important to understand about these transformations is that as each targeted phase of industrial development was pushed to the hilt, the process of restructuring itself generated some irreversible changes both in factor and technological endowments and in trade environments that constrained the further growth in that particular phase but that also created the new factor supplies needed for the next phase of industrialization. In other words, new self-propelling forces were

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generated during one phase that served to upgrade the industrial structure during the next phase. Mark I restructuring, for example, was motivated by the rising wages and labor shortages that the very expansion of labor-intensive industrialization in the first phase had brought about, thereby undermining Japan's initial comparative advantage in labor-intensive industries. Yet the rising incomes also led to rapid increases in domestic savings, providing the funds needed to pursue capital intensification for heavy and chemical industrialization in the second phase. In the meantime, those firms in the contracting labor-intensive industries, notably textiles and sundries, began to seek lower-cost labor through overseas investment in Japan's neighboring countries, assisting the latter to reinforce their comparative advantages in these industries. This phase of overseas investment may be called the elementary stage of multinationalism. 4 T o facilitate resource-intensive heavy and chemical industrialization in its resource-scarce economy, Japan eagerly absorbed the latest technologies from the West to build large-scale, state-of-the-art factories. Thus, Japan was able to capture economies of scale as a new source of its competitiveness. A t the same time, moreover, Japan had to make all-out efforts to secure the necessary raw materials and fuels from overseas, through direct foreign investment and long-term purchase contracts (often combined with long-term development loans). This phase of industrialization thus resulted in the resource-seeking stage of overseas investment. In fact, Japan's first significant involvement as an investor in Mexico came during this Mark II stage, especially in the latter half of the 1970s and the early 1980s, as Mexico's rich endowment of mineral resources and oil was a big attraction for Japan. Japanese investments in Mexico were previously centered on trade infrastructure. The second phase of industrialization also sowed its own seeds of demise. As a small, land-poor, island economy, Japan simply could not keep expanding its large-scale, space-intensive heavy and chemical industries. In addition, the social costs of the pollution and congestion resulting from their expansion had further heightened Japanese awareness of the limits of their space. By the beginning of the 1970s, Japan had grown literally cluttered with heavy and chemical industries, and the costs of environmental decay had become unbearable. The first oil crisis of 1974 and the subsequent leaps in commodity prices, though short-lived, were decisive blows. Japan had to restructure itself away from resource-intensive industrialization both to reduce its vulnerable dependence on resources from abroad and to clean up its environment at home. The third phase of industrialization therefore was a shift toward less resource-based, less pollution-prone, higher value-added, assemblybased industries, notably automobiles and consumer electronics. Japan

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actually had begun to foster these cleaner, more knowledge-intensive pursuits as infant industries as early as the late 1950s. In this third phase of development, Japanese industry adroitly capitalized on its basic dualistic industrial structure, in which numerous small cottage enterprises coexisted alongside a limited number of large-scale firms. This dualism has characterized Japan's economic development as a latecomer ever since the beginning of industrial modernization in the late 1800s. The structure continues to exist today, with a uniquely symbiotic relationship between small and large firms. This dualistic structure has proved to be extremely useful in producing the networks of cooperative subcontracting arrangements necessary for the vertically multistaged assembly operations of modern machinery industries, which require numerous subassemblies, parts, components, and accessories. In fact, the dualistic (or multilayered) industrial structure— composed of manufacturers of different sizes and different levels of technological sophistication ranging from large, modern corporations down to very small, family-managed cottage shops—is an ideal structure for assembly-based industries. Yet this phase of industrialization, too, soon hit snags. The very success of building up efficient, large-scale (hence, exploitative of scale economies) hierarchies of assembly operations in automobiles and consumer electronics, along with stepped-up R&D activities and technological accumulation, resulted in Japan's export drive and its ever-expanding trade surpluses, that is, to its dominance in world markets. These developments in turn quickly led to trade conflicts and sharp appreciations of the yen. To skirt protectionism, Japanese producers of color television sets and microwave ovens were the first group of manufacturers to begin, in the mid-1970s, to replace their exports with local production in the Western markets, initially in North America and then in Europe. The next group to follow suit, in the 1980s, comprised manufacturers of photocopiers, electronic typewriters, printers, microchips, and automobiles. These waves of overseas investment constituted the assembly-transplanting stage of Japan's multinationalism, or Mark III restructuring. At the same time, these producers also started to outsource parts and components manufacturing to the developing countries, for final assembly operations in the North American and European markets. It was in connection with their export-replacing investments in U.S. operations that Mexico emerged as an important host country for Japanese parts makers and final assemblers in automobiles and consumer electronics. Mexico's maquiladora program, in particular, attracted a large number of Japanese investments in assembly-based operations aimed at the U.S. market. Japanese manufacturers also transferred more eagerly than ever

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before the production of low-tech consumer goods (such as calculators, digital watches, color televisions, and electronic toys) to the lower-rank Asian followers. Indeed, the Asian NICs and newest NICs in Southeast Asia quickly built export competitiveness in these industries. Here it is worth emphasizing that for some time now Japan has been playing an intermediary role in transferring the technology for these modern consumer goods from the advanced West (mostly the United States) to the developing Asian countries. Japan first had to modify and improve the technology to adapt it to the initially labor-abundant conditions at home. Later, when the rise in Japanese labor costs made homebased production no longer economical, these improved labor-intensive methods of manufacturing could then be transferred with relative ease to the developing countries in which low-cost labor was still available. This role of technological intermediation played by Japan has been critical in fostering sequential industrial development among its followers in the Asian FG formation. What is more, the latest stage of Japan's industrial transplantation abroad (involving massive transfers of production technology and managerial and organizational techniques, particularly to its Asian followers) has been accompanied by an equally massive outflow of financial capital, as Japan has striven to recycle its mammoth trade surplus and domestic savings. In fact, Japan has emerged as the world's largest donor of foreign economic aid over the past two years. One interesting feature of Japanese-style surplus recycling is that the Japanese government stresses what it calls "a comprehensive development strategy" as the major operational mode of its economic aid program. In its own words, In order to implement a comprehensive development strategy, it is critical to take advantage of the private sector's abilities to transfer funds, its managerial know-how and the technical expertise it offers to developing countries. Accordingly, Japanese private corporations are encouraged to actively support Japan's e c o n o m i c co-operation programme.5

In other words, the Japanese government takes the position that financial assistance (that is, financial recycling) alone will not work, as evidenced by the Third World's debt crisis, and that financial transfers must be combined with transfers of industrial skills and knowledge so that all borrowed capital can be used effectively for the actual development of productive facilities. As explained above, Japan has indeed been active in recycling not only its surplus capital but also its surplus industry. Japan's recycling of its surplus funds for the developing countries is thus closely linked with the overseas investment activities of its private sector.6 Thus,

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Japan is externally in what may be called the assembly-transplanting cum surplus-recycling stage of multinationalism, while internally it is pursuing a new phase of home-market-oriented manufacturing. Throughout the postwar period, especially in its early years, Japan's industrial policies were no doubt instrumental—and indeed to a large degree critical—in assisting the dynamic market forces, since large amounts of investment in knowledge absorption and creation (effective acquisition of advanced foreign technologies, R&D, education of scientists and engineers, and training and retraining of workers for higherskilled jobs) were continually required. These investments were inevitably accompanied by positive externalities (that is, social benefits beyond the private benefits); and so the private sector needed appropriate incentives and compensation for its effort to invest in various forms of human capital. Japanese industry also needed adequate supplies of investable funds, and the government made it a policy to keep the cost of capital (interest r a t e s ) attractively low for industrial use. The government also promoted education with a great emphasis on scientific, engineering, and technical training to provide an ample supply of skilled workers. Above all, through responsible monetary policy it successfully maintained price stability to encourage long-term, productive—instead of short-term, speculative—investments. Together these policies helped to induce high rates of savings (hence, less dependence on borrowing from overseas) and high rates of investment in both human and physical capital formations—the prerequisites for any economy if it is to pursue a course of continual industrial upgrading at home. 7

Second-Rank Followers: The Asian NICs Interestingly enough, the Asian NICs—Hong Kong, Singapore, Taiwan, and South Korea—have been reduplicating the Japanese experience of industrialization and policy formation. In the first place, all are pursuing an outward-looking strategy of importing the latest technology and making their manufacturing export-competitive by exploiting the factors they have in relative abundance: initially low-cost labor, and now increasingly highly educated, well-trained, skilled labor. These NICs are following a "natural order" of industrial sequencing in a manner consistent with their changing factor endowments and technological capacities. As illustrated in Figure 8.3, the Asian NICs have graduated from the initial phase of low-wage-based, light industrialization and are emerging as foreign investors of the elementary type, busily transplanting labor-intensive manufacturing to their third rank followers. The rising value of their currencies is also compelling them to upgrade their industrial structures, so as to produce less price-elastic and more income-elastic, higher

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value-added manufactures. Like Japan, the second-rank followers all have scarce natural resources and abundant labor. Each economy's physical space is quite limited, both in absolute terms and relative to its population and industrial activity. Yet all of them have managed to turn their apparent drawbacks into advantages. In fact, their special limitations and high population densities have turned out to be a large net benefit to them in this information age, since they can actually enjoy external economies of scale and scope as the result of close interactions within a particular industry and among related industries, as well as an efficient sharing of infrastructure among a large number of economic units. More specifically, a clustering of industrial activities can create positive externalities, a phenomenon that can be called a "neighborhood effect" or a "Silicon Valley effect." Hong Kong is the prime example. It enjoys a well laid-out, well-developed market infrastructure that can supply, through market transactions, all the necessary auxiliary services for entrepreneurial activities by small manufacturers (numbering as many as 50,000) and traders (about 28,000).8 Thus, the laissez-faire Hong Kong economy is equivalent, in its entirety, to a fully-equipped "free export-processing zone." On the other hand, the other second-rank economies have moved to a partial implementation of laissez-faire by setting up export-processing zones in certain designated areas, such as Singapore's pioneer industry park (Jurong Industrial Park, opened in 1960), Taiwan's Kaohsiung Export-Processing Zone (set up in 1965), and Korea's Massan Free ExportProcessing Zone (opened in 1970). All three economies have been successful in attracting foreign direct investment, especially from Japan, since the opening of those facilities coincided with Japan's Mark I restructuring. And all three have since established additional parks. One important aspect of the zones is that by creating industrial linkages, they have in turn served as an internal growth center for the rest of their economy. They did not remain as foreign industrial enclaves; in fact, local firms themselves became active investors in the zones. 9 The establishment of these zones and the policy emphasis on laborintensive manufacturing led to a rapid rise in wages—and hence, in the standard of living and the local savings rate. In all East Asian economies, small savers' contribution to local supplies of loanable funds is significant. In turn, the increased local funds were then invested in more capital-intensive, higher productivity modern manufacturing, that is, Mark I restructuring, as had previously been the case in Japan. Throughout the 1970s, for example, both Taiwan and South Korea moved away from textiles, wigs, beach sandals, and other low-priced sundries toward steel, shipbuilding, petrochemicals, and other heavy and chemical industries. Hong Kong too shifted, away from artificial flowers, textiles, and toys

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toward watches, clocks, simple electronics products, and peripheral equipment. Similarly, Singapore plunged into semiconductors and oil-industry engineering services. Mark I restructuring required an ample supply of skilled workers. Here, all the East Asian governments were—and still are—involved in assisting in human capital investment. Having exiguous natural resources, they realized the critical importance of human resource development and enhanced deployment of their only abundant resource. All four governments have promoted and subsidized education, especially in science and engineering, and vocational and technical training. Even laissez-faire Hong Kong strongly supports such labor training. Some observers have argued that "national policy throughout East Asia encourages technical competence and offers incentives for training engineers and scientists, while conspicuously ignoring the liberal arts and the training of lawyers."10 True, the tradition of Confucianism has long placed emphasis on learning, but heavy investment in human resource development by the Asian NICs is of a relatively recent origin, mostly since World War II. For example, the literacy rate in Korea was as low as 13.4 percent in 1945 and in Taiwan, 21.3 percent in 1940, but illiteracy has since been almost eradicated in both countries through their free and compulsory schooling (six years in South Korea and nine years in Taiwan). 11 Similarly, at the start of the 1960s, Singapore's level of education was low; "11.5 percent of the male and 40.1 percent of the female population aged ten and over had no education, and the proportion rose to 38.7 percent of males and 88.7 percent of females in the fifty-five and over population," but "in 1966 nearly all boys and girls aged seven to twelve were attending school." 12 In addition to their educational investments at home, all the secondrank followers have been sending a large number of students, especially in science and engineering, to more advanced countries. Upon completion of their academic programs there, many of them remain in their host countries—especially in North America and Europe, and now increasingly in Japan—and work for corporations as R & D scientists and factory engineers, gaining practical experience in the world's technology centers before returning home. They constitute a formidable supply of technical personnel their home countries will be able to tap in building technologybased industries, that is, in proceeding with Mark II and Mark III restructuring. In fact, some modern industries in East Asia, particularly in South Korea and Taiwan, are now being built by a large number of well-trained and highly skilled returnees from the United States—so much so that the United States is all of a sudden confronted with a shortage of engineers and technicians. In short, the governments of the second-rank followers are active in

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fostering both human and physical capital accumulations by sponsoring education, promoting savings, and providing a favorable business environment (including the provision of export-processing zones) conducive to industrialization. Third-Rank Followers: The Newest NICs

The third-rank followers in the Asian FG formation are the members of the Association of Southeast Asian Nations (ASEAN), except for Singapore, which is a second-rank economy, and oil-rich Brunei. Thailand, Malaysia, and Indonesia are all currently growing very rapidly and attracting huge amounts of direct investment mostly from Japan and the secondrank economies, while the Philippines is beginning to do the same. Interestingly, the second-rank countries are fast becoming the leading investors in the third-rank countries—often surpassing Japan and the United States. For example, the major investors in Malaysian manufacturing are currently Taiwan, Singapore, Japan, and the United States, in that order in terms of the number of investments. Taiwan and Hong Kong are now the two most active investors in the Philippines, while South Korea is the leading investor in Indonesia (except for its oil, gas, and financial-service industries).13 It is important to note that all these investments in the manufacturing sectors of the third-rank countries are basically aimed at the utilization of their low-cost local labor. Two recent events are forcing the second-rank countries, especially South Korea and Taiwan, to abandon their labor-intensive, standardized manufacturing: the sharp appreciation of their currencies against the U.S. dollar, and the increase in their local wage rates. To survive, therefore, their export-oriented enterprises are eagerly shifting their production base to lower-wage countries. In other words, they are in the same elementary stage of multinational operations (associated with Mark I restructuring) as Japan was in the late 1960s and the early 1970s. And some of them are indeed headed for Mexico's maquiladoras. On the other hand, Japanese investments in the third-rank countries, though similarly labor-intensive in nature, are nevertheless more closely related to Japan's Mark III restructuring; that is, they are centered on the standardized manufacturing of parts, components, and accessories for electronics, automobiles, and office machines, as well as price-competitive consumer goods for Japan's home markets. Thus, Japan's interest in low-cost labor stems from its vertical investment in the assembly-based industries. The Japanese are also actively investing in banking, finance, and trading, that is, in business infrastructure. The abundant labor supply in the third-rank host economies is no doubt the major attraction for

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foreign investors, and this, combined with the transferred technology, is helping these economies develop new comparative advantages. In addition to the market-mediated, inward-investment-based fostering of labor-intensive manufacturing, the third-rank economies have recently begun to receive an entirely new form of economic aid from Japan: what the Japanese government calls the New AID (Asian Industries Development) Plan. This scheme, introduced by Japan's Ministry of Trade and Industry (MITI) in 1987, combines official development assistance, private direct investment, private bank lending, and access to the Japanese market (often through the general system of preference) in a packaged form, to assist a host country in developing export-competitive industries. Participating in this program, at the moment, are Thailand, Malaysia, Indonesia, Singapore, China, Brunei, India, Pakistan, and the Philippines. All are being guided to set up a series of target ventures in comparatively advantaged industries. Japan, in turn, will certainly benefit from the New AID Plan, since the program generates opportunities for its comparatively disadvantaged industries to transplant production to the follower countries. Thus, the third-rank economies are encouraged to formulate a development strategy that will cultivate dynamic comparative advantages by drawing upon inward direct investments and economic assistance. In other words, they are being initiated into the FG formation. Until very recently, Thailand, Malaysia, Indonesia, and the Philippines had pursued inward-looking strategies of industrialization, with an emphasis on import substitution. This resulted in the predictable jumbled structuring. Now, however, they are being induced to streamline their development sequence, first, by developing and strengthening only those industrial sectors in which they currently have comparative advantages (that is, their labor-intensive, employment-creating sectors) and, then, by gradually preparing the foundations (especially in human resources, in both the private and government sectors) for the next phase of industrialization, Mark I restructuring. This FG-based development strategy may thus be called a "first-things-first" approach, or orderly, sequential restructuring.

Implications of the Asian FG Formation for Mexico's Development Through growing investments in Mexico, first by Japan and later by its followers, the Asian flock of geese has tilted its wings in Mexico's direction. Can Mexico join the flock? And how can it do so? Before answering these questions, let us examine the relevance of the Asian experience to

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Mexico's current economic situation. Mexico:

Poised for

Flight

In its economic conditions, Mexico is much more similar to Asia's thirdrank followers (Malaysia, Thailand, and Indonesia, in particular) than to the second-rank followers even though Mexico is usually identified as an NIC along with the four second-rank followers of East Asia. Mexico is rich in natural resources, notably oil and minerals, but it also has a vast and ever-increasing supply of labor, which is currently grossly underutilized—and for the most part sorely undertrained. Mexico's internal market is potentially huge and promising, once its economic development gets underway. This factor was probably one of the key reasons—together with its strong desire not to deepen its dependence on the United States—why Mexico formerly opted for import-substituting industrialization, just as Asia's third-rank countries had in the past. In pursuing that strategy, Mexico failed to exploit fully its salient advantage of being close to a wealthy neighbor or its latecomer advantage of technological borrowing. Its inward-looking, state-run economy was simply not geared to the task of capitalizing on the attractive opportunities that had long existed just over its borders. Mexico's strategy of import substitution did not create a sufficiently growth-supportive internal market by which it could sustain economic progress. In short, Mexico victimized itself by this ill-fated industrialization policy, just as its many other brethren in the Third World have done. Under the new leadership of President Carlos Salinas de Gortari, however, Mexico is determined to change its economic system to an open, more privatized, and more liberalized one. Mexico's new open-market policy for inward direct investment in turn enhances its "natural" endowment, that is, its strategic location in having close access to the U.S. market with minimal transportation and communication costs. Upon his return from a European tour at the start of 1990, which had made him realize that Eastern Europe would soon be a close rival to Mexico for foreign investment, President Salinas quickly proposed free-trade talks with the United States. In addition, over the past two years Mexico has succeeded in controlling inflation, the first task any economy must tackle, at all costs, if it is to develop its economy through an outward-looking strategy. At the same time, the Salinas administration has been cleaning up public-sector corruption and building a more reliable government. These are all encouraging developments, serving as vital preconditions for industrial revitalization. Significantly, Mexico is now in the very first phase of industrialization

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that Japan and its second-rank followers once successfully exploited—and that the third-rank followers are now presently going through—that is, an expansion of labor-intensive manufacturing pursued under the maquiladora program and along the doctrine of factor-proportions-based comparative advantage. As Business Week has commented: Indeed, there has been a virtual explosion of maquiladoras. Since 1982 the number of such plants in northern Mexico has doubled to 1,250, employing 300,000 workers. And their ownership is going international: . . . some [are] owned by Japanese, South Korean, and European companies, as well as American. Wages and other operating costs at maquiladoras pumped more than $2 billion into Mexico's economy [in 1987] Only the oil industry contributed more The bustle of the north is unmistakable. Tijuana, a leading border city just 15 miles south of San Diego, has [more than] 360 maquiladoras, most of them small sewing and sorting operations. It is also a magnet for the Japanese, with Hitachi, Sony, Matsushita, Sanyo, and a dozen other Japanese companies operating assembly plants there. 14

This increasing participation in the maquiladora industry by Asian multinationals is an unmistakable sign that Mexico has in fact begun to join the Asian flock of flying geese—connecting itself with the newest Asian NICs' Mark I restructuring, as well as Japan's Mark III restructuring. As wages and currency values continue to rise in these Asian economies, the maquiladoras will no doubt continue to attract more investments from them, just as the third-rank Asian followers are now hosting investments from Taiwan, South Korea, Singapore, and Hong Kong. In short, both pull and push effects are increasingly at work, with Mexico's opening up its market and industries and the Asian industrial dynamos accelerating their restructuring efforts by shedding their comparatively disadvantaged industries abroad by way of overseas investment and technology transfers. Asia's second-rank followers, in particular, are in need of transplanting their first-phase industries close to North America. Complementary forces are thus at work to induct Mexico into the Asian FG formation. Moreover, the liberalized use of maquiladoras is spreading farther and farther south from Mexico's 2,000-mile border with the United States. Even with the sociocultural friction that foreign direct investment often brings, the economic conditions in Mexico's six northern border states are improving, thanks to the Mexican equivalent of the free export-processing zones in the Asian Pacific. As the border grows ever more crowded, new maquiladoras spring up farther to the south, creating new ranks of growth pockets based on foreign i n v e s t m e n t — t h e internal sequencing

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phenomenon described earlier. Implications for Public and Private

Initiatives

The internal sequencing process now under way in Mexico may lead to a pattern of uneven development, since the market-oriented process of development tends to entail leads and lags. Yet given the scarcity of capital in the nation, it may be necessary—and should pay off in the long run—for the government to concentrate its infrastructural investments where the growth potential is the greatest, letting them serve as growth poles for the rest of the economy. At present, the way the maquiladoras are spreading, the leading industries, such as the steel and petrochemical operations located on the Pacific Coast and elsewhere, may be linked up with the maquiladoras in the North through the backward linkage effects generated by the latter. As stressed earlier, labor-intensive manufacturing is the first phase of outward-looking, FG-based industrialization that any labor-abundant, catching-up economy must go through. Fuller employment of abundant workers, even at low wages, must come first if Mexico is to modernize its economy. For jobs will enable Mexican families to invest in their children's education and to save what little they can save—thereby cementing the economy's transition to building more capital-intensive and skill-based industries, that is, Mark I restructuring. While promoting labor-intensive manufacturing, however, the Mexican government must now adopt two policies: encouraging the development of human resources through education and training; and the accumulation of savings through appropriate incentives. These are the necessary conditions for a Mark I transition to the next phase of development—the conditions clearly demonstrated by the successful experiences of Japan and its Asian followers. Excessive dependence on external funds is obviously like quicksand, a trap from which Mexico is now struggling to escape. Mexicans are favorably located to take advantage of the advanced educational and training opportunities available in North America. U.S. and Canadian institutions of higher learning, particularly their science and engineering schools, are more eagerly attended, however, by students from Asia and other regions than by students from Mexico. In fact, Mexican students are conspicuously absent from most North American universities. It is worth noting again that the backbone of most of Asia's leading industries was formed by U.S.-trained scientists and engineers, many of whom also had practical experience working for U.S. corporations. Those U.S.-educated and -trained people have been the most effective transplanters of technology and entrepreneurship to Asia. In turn

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Japan is now emerging as another attractive training ground for students from the developing countries. The Japanese government itself is now emphasizing—and, in fact, tailoring its economic cooperation program for—the development of human resources in the Third World. Mexico must aggressively capitalize on these educational opportunities in the advanced countries. Mexico, in sum, needs to articulate a new policy if it is to make use of Asian Pacific industrial dynamism as an alternative—or, more realistically, as a strong supplement—to U.S. industrial dynamism. In this connection, one observer has remarked on the particular orientation of President Salinas: Historically, Mexico has always looked for other countries to counterbalance the American presence in its economy. In the 19th and early 20th centuries it was Porfirio Diaz who encouraged and welcomed British and French investment to develop mines, oil fields, and railroads. Carlos Salinas has already made clear his belief that Japan will play that role in the coming century. Scores of Japanese bankers and businessmen were invited guests at his inauguration, far outnumbering representatives of any European country. Salinas's children attend the Japanese school in Mexico City. And the President frequently mentions his admiration for the Japanese work ethic. 15

Beyond Asia's leader, however, Salinas may be well advised to look to Japan's second-rank followers as well. As trade partners, direct investors, and technology suppliers, the "four dragons" can be instrumental in helping to map out Mexico's "Look to the East" strategy, analogous to the Malaysian approach. One natural outcome of such an involvement is likely to be a market-induced adoption of a sequential restructuring process, or a first-things-first approach—instead of the jumbled structuring approach fostered under Mexico's former inward-looking development policies. For the Asian FG formation, as described earlier, virtually compels its follower economies to pursue a path of dynamic comparative advantage, with a focused emphasis on sequential sector targeting consistent with the factor endowments existing in each stage of development. Again, in its efforts to push for Mark I restructuring, Mexico is favorably positioned: It already possesses a fairly well-developed heavy and chemical industry sector (which was fostered during the period of import substitution), although it entails some of the costs of jumbled structuring. Thus, Mark I restructuring may proceed relatively smoothly for Mexico if it is determined to stress those industries as the target sector. In fact, the transition may proceed more smoothly in Mexico than in the Asian third-rank followers such as Indonesia and the Philippines, which are in the inchoate stage of building the basis for these modern industries.

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Indeed, Mexico already has many world-class corporations. Cemex, which has acquired cement companies not only in Mexico but also in Texas and California, now "sits atop the North American cement market and ranks fourth in the world" according to Business Week}6 Vitro, Mexico's largest glass company, is likewise on a buying spree in North America, acquiring in the process the second-largest glassmaker in the United States, Anchor Glass. Fama, Vitro's glassmaking-equipment maker, is well-known for its advanced, in-house technology. Grupo Industrial Alfa (in steel), Grupo Visa (in breweries), and Cydsa (in plastics) are other well-known Mexican manufacturers.17 Now that Mexico's protected domestic markets have begun to be opened for international competition, these companies must become export-oriented. And to be competitive in the world market, they must absorb the latest technologies from advanced Western and Japanese corporations to strengthen their existing product lines and diversify their business operations. They should recognize that Japan and its second-rank followers (except for Hong Kong, which has skipped Mark I restructuring and moved directly to Mark II) are now in a stage of ridding themselves of those segments of their heavy and chemical industries that are intensive in the use of raw materials, energy, and industrial space. A s we have seen, Japan, in particular, is shedding standardized, mass-produced manufactures and concentrating on more knowledge-intensive manufactures in robotics, biotechnology, new materials, electronics, and telecommunications—making room for the less-developed economies to move into those industries in which Japan is losing its comparative advantages. Mexico can capitalize on this industrial shedding by these Asian economies by modernizing and consolidating its heavy and chemical industries (namely, by Mark I restructuring) through inward foreign direct investment (if not wholly-owned operations, then joint ventures) and nonequity forms of technology imports (licensing agreements and technical assistance contracts). These efforts will lead to Mexico's further involvement with the Asian flock of dynamic economies at a level more advanced than that of labor-intensive industrialization. What must be emphasized here is that although Mexico is leaving behind the era of import-substituting industrialization, a more open economy does not mean simply a laissez-faire regime. Mexico is switching to an export-oriented regime, which actually requires even more sophisticated policy activism on the part of the government than Mexico pursued for import substitution. A s Shahid Alam has warned, "It is incorrect to regard the E O [export-oriented] strategy as the antithesis of the IS [import substitution] strategy that it succeeded. More correctly, the former may be regarded as evolving naturally from a successful, and continuing, pursuit of the latter." 18 A s just mentioned, Mexico succeeded in fostering

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several world-class enterprises during its import substitution era. Now is the time to convert them into truly export-competitive enterprises by giving them a new set of appropriate incentives. In other words, opening and liberalizing the economy should not be equated with a hands-off policy. When squarely in the phase of labor-intensive industrialization, a laissez-faire approach may be appropriate. But when a developing economy strives to build modern heavy and chemical industries—not to speak of the knowledge-intensive, R&D-based industries that will develop in later phases—a hands-off governmental policy is contraindicated. These industries are accompanied by market imperfections, imperfections in the sense that (1) the industries are composed of monopolistic and oligopolistic suppliers of technology, raw materials, and inputs, as well as monopsonistic and oligopsonistic buyers in the world market and (2) the industries generate externalities, both positive and negative, thereby causing discrepancies between the social and private evaluations of the benefits and costs they engender. And these types of imperfections become more and more pronounced as a country shifts its locus of industrial activities toward higher value-added, knowledge-intensive sectors. Thus, the government has a critical role to play in leading and assisting the private sector through what the OECD identifies as "positive adjustment."19 The Asian FG formation is coordinated, though not openly most of the time, by the active involvement of its member governments as planner, facilitator, and promoter of industrialization. Again, even the Hong Kong government provides formal industrial and business infrastructure and support to the private sector. In the early 1980s the Mexican government itself served in this capacity by securing Japanese cooperation in formulating industrialization strategies. High-level Japanese delegations conducted studies and made policy recommendations to the Mexican government, focusing on potential linkages between the industrial port program and the interior industries and domestic markets. More specifically: The Japanese, building on Mexican development plans, sought to contribute to the objective of a single, integrated system of Mexican industrial production. The ideal system would be one in which vertically integrated industries included "heavy" industrial products flowing downstream, being converted into components, assembled, and then in varying proportions, marketed internally and later, abroad. 20

The Japanese recommendations clearly recognized Mexico's lack of strong vertical input-output relationships, the result of jumbled structuring; the role of the domestic market in providing the basis for export

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competitiveness, and Mexico's potential to build up competitive heavy and chemical industries—that is, the potential of Mark I restructuring. This development plan failed to be implemented, however, largely because of the economic crisis of 1982 and the collapse of the oil boom over the first half of the 1980s. In this respect, Mexico might consider linking up with Japan's new economic cooperation program, the New AID Program, described earlier. Although Japan has so far extended the program only to its Asian followers, it is likely to be willing to arrange a similar program for Mexico. Such a proposal should be geared mainly to facilitating Mark I restructuring in Mexico, namely, modernizing and upgrading Mexico's heavy and chemical industries through technological absorption; and early-stage promoting of Mark II restructuring, namely, fostering the development of higher value-added industries, such as automobiles and consumer electronics, by investments in human resource development. Mexico should bear in mind that Japan's mode of economic aid combines official financial and technical assistance with transfers of technology and capital from its private sector. Official aid serves as pump priming for private direct investment. Mere financial transfers, in whatever form, would not really assist the Third World. Japan thus stresses a semiprivatized way of offering economic cooperation. In this vein, Mexico should also consider proposing an economic cooperation program to be administered jointly by the United States and Japan. Japan might be much more apt to extend economic aid, especially if it is to be large-scale, comprehensive assistance, under such a plan, since the United States is after all Mexico's next-door neighbor. In the meantime, it is imperative for Mexico to keep pushing for labor-intensive industrialization until full employment is attained and wages start to rise. At the same time, however, Mexico's exports of labor-intensive manufactures to North America—if further expanded through a future Mexican-U.S. free trade agreement, perhaps combined with the present Canadian-U.S. free trade program—are likely to cause trade friction with its northern neighbors. It is in Mexico's interest, then, to diversify its export markets by redirecting its labor-intensive manufactured exports away from North America to the Asian Pacific, particularly to Japan and its second-rank followers. To this end, Mexico could initiate a proposal for a Mexico-Asian Pacific maquiladora program, by negotiating with Japan and the Asian NICs for privileged access to their markets— in exchange for their expanded use of the present Mexico-U.S. maquiladora arrangement. 21 This program could neutralize U.S. criticism of Mexico's maquiladoras as a Trojan horse to "hide" exports from the Asian Pacific, since the program would give North American multinationals a level playing field vis-à-vis Asian multinationals. Besides, if the

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maquiladoras continue to be used one-sidedly by the Asian economies, there is a danger that the United States might come to view the Asian flock as an "attack formation" cutting off the southern flank of its market. Finally, it is also interesting to speculate whether Mexico might be willing to offer the Japanese a site to establish what they call a "multifunction polis" (MFP), a "city of the future" to be founded on higher-tech industries, higher learning and research institutions, and leisure service facilities, with all the necessary modern communication and transportation infrastructures. Japan's planners have set the optimal population at 100,000 to 200,000 allowing for the residence of foreign scholars, scientists, engineers, and skilled workers and the establishment of joint research ventures. They estimate the total cost of the city to be equivalent to at least 50 billion U.S. dollars.22 The idea of the MFP is essentially a more advanced and multinationalized version of the already familiar scheme of an export-processing zone, except the city is intended to thrive on R&D and high-tech manufacturing instead of low-cost labor. This grandiose plan was originally laid out by Japan's MITI in 1987, and it is currently under deliberation between Australia and Japan. Two locations—one near Sydney and the other near Melbourne—are being studied. Australia is currently encouraging what may be called "high-tech immigrants" in order to restructure its economy toward high-tech industries. There would certainly be many obstacles to carrying out such a plan in Mexico. But if Mexicans were willing to coinvest in a similar high-tech "city of the future," say, near Acapulco, they would create a puissant magnet not only for direct investment (capital and technology inflows) but also for inflows of human capital (scholars, scientists, engineers, and skilled workers) from all over the world. Such a city in Mexico would certainly serve as a vital mechanism for later Mark II—and Mark III— restructuring, and it would link Mexico firmly with the Pacific circle of dynamic economies in the next century.

Notes 1. "Together under the sun: A survey of the yen block," The Economist, July 15,1989, p. 10. 2. The notion of a flying-geese formation of tandem development originated with Kaname Akamatsu in 1935. See Kaname Akamatsu, "A Theory of Unbalanced Growth in the World Economy," Weltwirtschaftliches Archive 86 (1961): 196-215. 3. These restructuring-related overseas investments are explored in Terutomo Ozawa, "Europe 1992 and Japanese Multinationals: Transplanting a Subcontracting System in the Expanded Market," in Multinational Firms and

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European Integration 1992, ed. B. Burgenmeier (London: Routledge & Kegan Paul, forthcoming). 4. See Kiyoshi Kojima and Terutomo Ozawa, "Micro and Macro Economic Models of Direct Foreign Investments: Toward a Synthesis," Hitotsubashi Journal of Economics 25 (June 1984): 1-20. 5. Overseas Economic Cooperation Fund (OECF), Japanese Government, The Overseas Economic Cooperation Fund: Its Role and Activities (Tokyo: OECF, 1984), p. 6. 6. For an explanation of Japan's recent recycling of surpluses, see Terutomo Ozawa, Recycling Japan's Surpluses for Developing Countries (Paris: Organization for Economic Cooperation and Development, 1989), or its Spanish translation, El reciclaje de los excedentes japoneses en los países en desarollo (Mexico City: Centro de Estudios Monetarios Latinoamericanos, 1989). 7. It is worth noting that the sequential pattern of Mark I, Mark II, and Mark III restructuring is not unique to Japan. All the advanced Western economies have gone through this developmental sequence, albeit over a much more extended span of time, say, 200 years for Great Britain and 150 years for the United States and Germany. Japan was able to replicate the pattern in much less time—about forty years since the end of World War II—because of the greater international mobility of technology over that period. The Asian NICs and the newest NICs are now witnessing a similar sequence, over an even smaller period of time. 8. Kung Wai-Ying Chan, "A Laissez-Faire Approach to Trade in Hong Kong," in Role of General Trading Firms in Trade and Development, ed. Terutomo Ozawa (Tokyo: Asian Productivity Organization, 1987), pp. 65-67. 9. For example, about one-quarter of the new ventures established in Taiwan's Kaohsiung zone are wholly owned by local businesses, and another quarter are joint ventures between local interests and foreign multinational firms. See Terutomo Ozawa, Multinationalism, Japanese Style: The Political Economy of Outward Dependency (Princeton, N.J.: Princeton University Press, 1979), p. 87. 10. Roy Hofheinz, Jr., and Kent E. Calder, The Eustasia Edge (New York: Basic Books, 1982), p. 114. 11. Tibor Scitovsky, "Economic Development in Taiwan and South Korea: 1965-80," Food Research Institute Studies 19 (1985): 216-17. 12. Helen Hughes and You Poh Seng, Foreign Investment and Industrialization in Singapore (Madison: University of Wisconsin Press, 1969), p. 39. 13. Asahi Shimbun, January 25,1990, p. 11. 14. "The Magnet of Growth in Mexico's North," Business Week, June 6, 1988, pp. 49-50. 15. Bruce Babbit, "Reviving Mexico," World Monitor 2 (March 1989): 40-41. 16. "Mexico's Giants March North," Business Week, Nov. 13, 1989, pp. 63-67. 17. Many of these Mexican enterprises are family- or group-owned and controlled. See Roderic A. Camp, Entrepreneurs and Politics in Twentieth-Century Mexico (New York: Oxford University Press, 1989). 18. Shahid M. Alam, Governments and Markets in Economic Development

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Strategies: Lessons from Korea, Taiwan, and Japan (New York: Praeger, 1989), p. 130. 19. Organization for Economic Cooperation and Development, Positive Adjustment Policies: Managing Structural Change (Paris: OECD, 1983). 20. Joseph Newman, Mexico on the Pacific Rim: Patterns of Trade and Investment, Occasional Paper no. 29, Central American and Caribbean Program, School of Advanced International Studies, Johns Hopkins University (Washington, D.C.: May 1988), p. 9. 21. Terutomo Ozawa and Clark W. Reynolds make this proposal in "The New 'U.S.-Mexico-Japan' Connection: Trilateral Economic Interaction and Regional Integration in the Pacific Rim" (Working paper, Americas Program, Stanford University, 1988), originally presented at a conference on "Mexico and the Pacific Basin," Universidad Nacional Autónoma de México, México D.F., Oct. 11-14,1988. 22. Asahi Shimbun, January 25,1990, p. 11.

9 Mexico and Latin America: Prospects for a New Relationship José Miguel

Insulza

To the rest of the Latin American countries, particularly the large ones in South America, present-day Mexico is an enigma. On the one hand, it participates enthusiastically in the regional initiatives for political coordination and cooperation that have emerged over the last decade. On the other, Mexico is undeniably integrating itself with the United States more and more. The recent announcement that the Mexican and U.S. governments have begun talks for a free trade agreement similar to that implemented between the United States and Canada in 1989 revived the debate in Mexico over the potential consequences of strengthening ties with the north. This is not merely a matter of economics; there are also growing demographic, political, and cultural ties that are weaving a North American fabric. "Mexamerica" and "USAMEX" are terms used regularly by scholars who analyze the issue,1 many of whom, by the way, seem to be convinced that the relationship with the United States is all that matters, judging by the fact that they pay little or no attention to the rest of Mexican foreign policy. It is thus logical that the recent polemic has gone beyond the limits of trade or economics, such that some maintain that what is at stake for Mexico in this integration is nothing more or less than "away of life."2 All of this would seem to make Mexico a very different nation from the one that in the late 1970s was an active member of the Group of 77, joined the nonaligned movement, took bold positions on Central America, promoted the Charter of the Economic Rights and Duties of States (to the apparent dismay of its northern neighbor), and hosted the North-South Dialogue. Mexico of the 1990s has a very different international image. Its role in Third World organizations has become markedly secondary, particularly when it comes to approving resolutions on controversial economic issues. Its relations beyond the Americas are for the most part limited to Europe and the Pacific Rim, with a special emphasis on strictly economic matters. Mexico's presence in Latin America has not diminished, but its positions have been significantly subdued. Since 1988 Mexico has been the 155

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driving force behind the Rio Group, the legitimate successor to Contadora and the Group of Eight. 3 This mechanism has at least served its stated purpose of coordinating diplomatic policy among the leading nations of Latin America; and it has also activated consultations on economic issues of common interest (the debt, trade, investment) and officially proposed a collective dialogue with the United States. Although these are outstanding initiatives, they are far from being the kinds of autonomous policies that irritated Washington in 1981, such as the Mexican-French declaration that proposed recognizing the Farabundo Marti Liberation Front (FMLN) as a belligerent in El Salvador and that later would create the Contadora Group. Which Mexico is it, then? One that is moving ever faster toward the creation of a North American macro zone, with its seemingly inevitable consequences for Mexico's economic, political, cultural, and social life? Or one that, although necessarily linked to the United States given the common border and a multitude of economic and social ties, continues to be an integral part of Latin America—the solid frontier separating the North from the South? For the rest of Latin America, it is essential to unravel this enigma through a search for common projects on coordination and integration. If the great North America already exists, it will necessarily wind up including Central America and the Caribbean (if it does not already), finally realizing the strategic entelechy of the Caribbean Basin with a border drawn at the Isthmus of Panama. South America on its own would thus become the only viable formula for regional coordination in the search for common policies—as some observers already purport.

The Neoliberal-Nationalist Debate and Mexico's Policy on Latin America Mexico's left opposition has a rational explanation for the recent course of the country's foreign policy. According to that explanation, this policy is not the result of government weakness or based on pragmatic reasons. Rather, it is in tune with a neoliberal national program that is presently being applied, which intends to link Mexico's destiny as a nation to its permanent integration in the geographic space of North America. This explanation is not new. In 1981 two Mexican intellectuals, one belonging to the Institutional Revolutionary Party (PRI) and the other to the nationalist left, published a book that would have a large impact on Mexican ideology.4 At that time the nation was experiencing an ambiguous period in its history. On the one hand, the benefits of the recent Mexican oil boom were giving the false impression of great prosperity

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(which did not, however, trickle down to the poorest segments of the population). On the other, some of the elements of the economic crisis that was to explode a year later were already visible. A discussion of alternatives arose around these two poles—prosperity and crisis. Rolando Cordera and Carlos Tello's book managed to pinpoint the debate in terms of two grand options—the "neo-liberal program" and the "nationalist program"—thus delineating what would be the political debate of the decade. That the authors were clearly inclined toward the nationalist program does not mean that their description of the two programs cannot be adjusted in terms of their larger premises and proposals. The neoliberal program would be a "metropolis" or center-based project that emphasized the issues of economic restructuring and the need to adapt to the global economic and political trends behind that restructuring. Domestically, that restructuring implied the progressive dismantling of the welfare state, which meant doing away with protectionism and the policy of government subsidies and establishing public participation in economic management on a permanent basis. This would harm both domestic labor and capitalists in favor of their international counterparts. Abroad, the neoliberal program would mean "expanding and facilitating the expansion potential of the external sector and controlling new markets and old and new sources of raw materials."5 More simply stated: In the case of Mexico, for well-known g e o e c o n o m i c and geopolitical reasons, the neoliberal view would culminate in an e c o n o m y increasingly integrated with North America, c o m p l e m e n t e d by a program in which Mexican state policy would be in close and harmonious solidarity with that of the United States.. . . According to that reasoning, the United States would provide Mexico with a secure and growing market for its exports; technical assistance, technology, and American know-how; abundant financial resources; capital goods, durable consumer i t e m s . . . and e v e n f o o d products at competitive prices; and finally the ability to [absorb]. . . Mexican labor. . . . In exchange for this, M e x i c o must be willing to provide . . . raw materials, finished products . . . and a growing market; to guarantee foreign investments made in Mexico; and to reach complementary industrial integration agreements. 6

Cordera and Tello's hypothesis on the neoliberal program thus also touched on foreign policy. In their view, the effective implementation of the neoliberal program presumed increased integration with the United States, with Mexican policies being in ever greater alignment with those of Washington. In that sense, the program would also presuppose "strengthening ties of friendship between the two countries through solidarity and international support for [Mexico] and its policy, particular-

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ly vis-à-vis the rest of Latin America." 7 The nationalist program, by contrast, emphasized the need to defend Mexico's national riches from foreign penetration, particularly at a time of restructuring. It assigned priority to the tasks of modernization and redistribution, with the state playing a predominant role. In fact, the nationalist program revisits the revolutionary tradition: Part of the general hypothesis [is] that at this stage of national development the needs of the country can be best met if the proposals and demands of the people which gave rise to the Mexican Revolution are taken and u p d a t e d . . . and if we exploit and develop the rich experience of the alliance between the mass organizations and the government, such as existed during the administration of President Cárdenas. 8

The temptation to examine the current status of Mexican policy in the light of Cordera and Tello's definitions is irresistible, especially if we look through the "neo-Cárdenas" eyes of an opponent to the administration of Carlos Salinas de Gortari. The almost immediate conclusion is that first the administration of Miguel de la Madrid, and then that of Salinas, completely implemented the domestic and international aspects of the neoliberal program, leading to the predicted consequences: an abandonment of Third World and Latin American policies, particularly on such controversial causes as Central America, and alignment with the United States in several arenas, ranging from international economic policy to the new "strategic" issue of drug trafficking. Although the changes in Mexican foreign policy are far from representing a picture of "solidarity with U.S. policy," it is nonetheless true that the general line of the new policy is today much less confrontational with that of the United States than in the previous decade, leading nationalist sectors to speak of a "progressive abandonment" of the South that will sooner or later become more pronounced. From this viewpoint "abandonment" of the South is completely logical, and the list of accusations the critics may produce to uphold that proposition is impressive: Mexico's gradual backing down from its Central American policy, its reluctance to coordinate positions with the other large debtors in Latin America, its almost neutral attitude toward the U.S. invasion of Panama in December 1989, its willingness to cooperate with the United States on drug trafficking within Mexico's own borders, its weak defense of its own emigrants and its willingness to collaborate with the United States to stem the flow of migrants from other southern countries, and its almost total loss of prominence in international organizations. The list could go on. But the criticisms of Mexico's current stance on the South in general

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and Latin America rarely put forth viable alternatives. This is not new to the supporters of the nationalist program. In Cordera and Tello's book itself, there was a noticeable failure to mention international policy as part of the nationalist program—a shortcoming that carried over into ensuing proposals throughout the 1980s. One very recent example is an article by Cuauhtémoc Cárdenas in Foreign Policy, in which he harshly criticizes the choices Mexico has made regarding events in Panama, Central America, and the general search for coordination with Latin America on economic issues.9 He also maintains that President Salinas "lost a unique opportunity to attain concerted activity with other Latin American debtors . . . by not temporarily suspending payment to commercial banks after his inauguration in December 1988." Cárdenas himself, however, acknowledges that would have been "no easy task."10 In fact, given the circumstances of the region, it is hard to believe it was even a possible task or that anyone would have joined Mexico in a suspension of payments, particularly since Brazil had recently renegotiated its debt and the other large debtors were unwilling to enter into conflict with the international banks at the time. The criticisms, therefore, lose some of their force without any alternative foreign policy proposals that assign priority to relations with Latin America beyond simple rhetoric. Throughout the past decade the criticisms have generally and increasingly focused on how to conduct relations with the United States, the importance of which no one can dispute. The result is that upon hearing the criticisms the outside observer becomes convinced that Mexico's incorporation into a new international space and the progressive abandonment of its more traditional sphere of foreign policy are inevitable. But the most serious flaw of the criticisms is that they do not take into account domestic conditions and the changes that have taken place over the last decade in the international context—both regional and global—in which Mexican foreign policy is conducted. It is true that in the policies introduced in recent years one can find elements of the so-called neoliberal program. It is also true that Mexican foreign policy has had to back down on many points of contention with the United States in order to reduce friction with that country. What is not easy to demonstrate is that these changes are the result of a design preconceived by Mexican leaders and not just of circumstances beyond their control, which rendered any other alternatives unfeasible. A coherent assessment of Mexican behavior toward the South and Latin America over the 1980s—which unquestionably changed for the worse—must be based first and foremost on an understanding of the evolving domestic situation as well as the international context and the reactions of the rest of the world's actors to those changes. Only thus can

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one determine the degree of consensus that might have been possible with alternative, more confrontational proposals. From this vantage point, as we will see, Mexican behavior was not at all isolated, but instead not only corresponded in many ways to external realities but also resembled that of other countries in the region. The Impact of the Economic Crisis on Mexico's Foreign Policy The economic crisis that broke out in 1982 had effects on Mexican foreign policy that must not be underestimated. What is most obvious is that once the problems of debt and the economic future of the country were discussed at an emergency meeting at the U.S. Treasury Department (which would be followed by similar meetings throughout the decade), it became difficult to maintain the degree of autonomy that existed when Mexico seemed to enjoy political stability and accelerated economic growth. Some Mexican officials may have exaggerated the crisis (particularly in international economic forums) in a desire to avoid positions that might seem to contradict the negotiations underway on the debt. But the new line was undeniably to avoid problems with the United States, whose participation in resolving the debt problem was assigned top priority. In more general terms it could be said that the 1982 crisis redefined the issues of the region and the resources available to promote foreign policy. It is important to remember that Mexico's full incorporation into Third World forums was relatively recent, and it was based most particularly on the economic strength Mexico had acquired during the 1970s. Although President Luis Echeverrfa's Third World-oriented policy was actually drawn up before the Mexican oil boom, the newly discovered resources served to enhance the country's international influence in promoting that policy. The boom thus was not purely a question of economics; Mexican diplomacy in the 1970s took on a new assertiveness, now sure that it had the means with which to support its own international proposals. During that period Mexico was an exemplary "emerging power," one of those which seemed called upon to alter profoundly the framework of international relations. In most cases, and Mexico was no exception, the illusion was short-lived. When the metropolitan centers of the world went into a full recession in the late 1970s, the boom continued in the intermediate powers, which only increased their optimism toward the future— and the irrationality of their economic policies. The grace period was not long. As world markets contracted in response to the decreased demand in the metropolitan centers, the producers of raw materials and energy products also had to face the effects of industrial contraction and of

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America

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resource conservation policies. At the same time, the shortage of credit and rising real interest rates made the heavy debt incurred in the previous period unbearable, just when there were few funds available to pay it back. At that point Third World solidarity did not, and could not, work. Although rhetoric about "breaking with dependency" had predominated during the 1970s, the fact remained that the economies of the emerging powers had become increasingly dependent on the performance of the metropolitan, industrialized economies, whose purchasing power and financial system was the basis for the new prosperity. As for the rest, by the end of the golden age of Third World organizations, it was already apparent that these were no longer representative of the interests of the South. The "North-South Dialogue," frustrated at Cancun in 1981, to cite just one example, became a dialogue between the emerging powers and the developed world in which there was neither direct nor indirect representation of the rest of the Third World. Under these conditions the response to the crisis was fragmented, with each country seeking to defend its own interests even if at the expense of the rest, in efforts to address both the debt problem and the drop in oil prices. In the former case each sought the best negotiations for itself seemingly without even considering the possibility of collective negotiations. In the latter increased oil production had seemed like a way to cope with limited credit. But no one inside or outside the Organization of Petroleum Exporting Countries (of which Mexico has never been a member) was able to stem the overproduction and ensuing glut of the market, with the well-known consequences.11 For Mexico the consequences for its foreign policy were necessarily great, particularly since the country's championing of Third World causes was a very recent phenomenon. The nation almost immediately assumed a less prominent profile in international forums, and although it promoted a few initiatives (such as those of the Group of Six on nuclear disarmament issues),12 it also adopted a much lower profile as a champion of the South. The same was not true of Mexico's Latin American policy, however. The extent of Mexico's involvement in the region could not permit a sudden withdrawal. Although there were several spokesmen who, invoking realism and the national interest, advocated less confrontation with the United States over the region, the attitude taken in defense of Nicaragua and the Mexican-French declaration was too recent and too important in the domestic political game for highly visible changes to be possible, even if the new de la Madrid administration had wanted them. In all it is clear that the economic crisis led to a severe reduction in the scope of Mexico's foreign policy activities. Mexico went from being a proponent of the Third World to simply one of Latin America. Some observers even maintain that the country took a lower profile in the region

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as well, especially on matters that might have been overly confrontational with the United States. It is also true that beyond the frustrated attempt at Cartagena in 1983 and the general discussions of the Rio Group, Mexico made no very serious effort to coordinate its policies on the debt or trade with its southern neighbors. Nevertheless, before concluding that all of this means that the neoliberal design was implemented, we must consider the circumstances under which these policies were chosen. Confrontation and Coordination on Central America Central America is the great argument put forth by those who assert that Mexico adjusted its policies to the need to avoid conflict with the United States. There are differences between the Mexico that openly backed the Sandinistas in 1979 and signed the joint declaration with France in 1981 and the one that fruitlessly worked for peace through Contadora. There are likewise differences between Contadora and the Rio Group, for which Central America became just another item on the agenda. The international context in which these changes occurred, however, can serve to explain them in large part. Starting in 1981, once the Reagan administration was installed in Washington, Mexico no longer had the same allies for its Central American policy. The Mexican-French declaration would not have been possible just a few months later, not because of changes in Mexican policy but simply because France would not have signed. From 1982 to 1984 the European Community preferred to avoid confrontation with the Reagan administration and took a low profile on Central America, trying instead to influence its main ally through diplomatic channels. This attitude would not change until the meeting in San José, Costa Rica, in September 1984, when it became apparent that Ronald Reagan not only refused to mollify his policy but was escalating it through support for the contras in Nicaragua. Mexico could not do the same without abruptly diminishing its presence in a region that was much closer and more important to it than to the United States; nor could it try simply to continue along the lines drawn by the administration of José López Portillo. The Contadora Group was a way out that combined the search for a negotiated solution with the opening of a chance for a Latin American answer to the Central American crisis. Its attitude was more moderate and conciliatory than Mexico had been in previous years, which made it precisely the meeting point among Venezuela (the country that thus far had most clearly supported U.S. policy), Panama, and Colombia. The creation of Contadora in 1983 and many of its actions over the following four years were criticized for being overly careful not to offend the United

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States—even when the Reagan administration launched offensives against it—and for the successive concessions that the group was willing to make to U.S. policy. But no one could say that Contadora itself was a concession to the United States. On the contrary, it was generally viewed as the institutionalization of Latin American dissent from Reagan's policy in Central America, and as such it became one of the main obstacles to that policy. The push that Mexico gave to Contadora when the economic crisis would have dictated more circumspect behavior, and when the overall international climate was unfavorable, seems proof more of independence than of an attempt to accommodate U.S. policy. Nevertheless, after the second Esquipulas meeting, at which the Contadora members signed an agreement based on the Arias Plan to launch a dialogue that eventually led to a political solution in Nicaragua, Mexico and the other members, along with the larger Rio Group, curtailed their activity by not pursuing any new initiatives. Rather than reflecting a loss of interest or an "abandonment" of Central America, as some have stated, this withdrawal seemed to reflect a desire to leave matters up to the Central Americans themselves. Finally, any assessment of Mexico's Central American policy of the 1980s must take into account that Mexico's involvement in Contadora and the Rio Group necessitated a broad disposition to seek harmony among their members, which did not necessarily share the same positions. As already noted, as of 1983 Venezuela was considered an important ally of the United States in the region, particularly in El Salvador. Although its behavior varied, Venezuela was always a moderating factor in the two groups. As for Colombia, let it suffice to remember that President Belisario Betancur supported several Reagan administration initiatives that represented significant departures from the declared purposes of Contadora. In such a context one could only aspire to a policy of general consensus.

Economic Trends in the Region In the economic sphere there have also been some well-defined regional trends, namely, reduced intraregional trade countered by increased trade with the United States. In the case of Mexico these are more noteworthy, but Mexico does not differ substantially from Latin America as a whole. The process of underground integration between Mexico and the United States over the past few years is demonstrable, almost without exception, by trade figures. In 1989 Mexico's import and export exchanges with the United States represented more than 70 percent of its total trade—or an average increase of around 10 percentage points over the

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Regional Alternatives Table 9.1 Exports from Latin America to Countries Within the Region, the United States, and the European Economic Community (EEC), as a Percentage of Total Exports, 1980 and 1988 Percentage of Total Exports Going to: Latin America 3 United States

EEC

Exporter

1980

1988

1980

1988

1980

1988

Mexico Argentina Brazil Chile Venezuela Latin America"

6.5% 23.0 17.0 22.6 37.4

4.5% 18.2 12.1 13.1 19.9

64.7% 8.9 17.4 12.6 27.7

72.9% 15.3 25.8 19.7 48.9

15.3% 31.5 30.5 37.1 17.4

9.1% 30.5 27.7 36.1 11.1

17.3

12.7

34.2

41.1

29.2

21.4

Source: León Bendesky and Fernando Sanchez, "Integración y comercio en América Latina," photocopy (Mexico City: CEMLA, 1990), tables 7,9,21,22,23, and 24. ""Latin America" includes Mexico and all the countries of Central and South America; it does not include any of the nations in the Caribbean.

figures for one decade earlier, when trade with the United States was just over 60 percent.13 Comparing these figures with those for intraregional trade makes the difference more noticeable. In 1989 Mexican exports to the United States reached almost 8 billion U.S. dollars, with imports at slightly more than 7.6 billion dollars. That same year Mexico exported 340 million U.S. dollars to the members of the Latin American Integration Association (ALADI) and imported 320 million U.S. dollars from them, which together represented just 4 percent of the country's total foreign trade.14 But the trend in Mexico's exports is not dissimilar from that of other Latin American or ALADI countries over the 1980s. As shown in Table 9.1, in 1980 Latin America sent 34.2 percent of its exports to the United States, whereas by 1988 that figure had risen to 41.4 percent. And among the larger economies of the region, Venezuela increased the percentage of its exports going to the United States from 27.7 percent to 48.9 percent; Brazil, from 17.4 percent to 25.8 percent; Chile, from 12.6 percent to 19.7 percent; and Argentina, from 8.9 percent to 15.3 percent. All of those countries—and Latin America as a whole—saw a reduction in the percentage of their intraregional exports, and all decreased the share of their

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Mexico and Latin America Table 9.2 Imports to Latin America from Countries Within the Region, the United States, and the European Economic Community (EEC), as a Percentage of Total Imports, 1980 and 1988 Percentage of Total Imports Coming from: Latin America' United States

EEC

Importer

1980

1988

1980

1988

1980

1988

Mexico Argentina Brazil Chile Venezuela Latin America"

4.1% 20.7 10.1 22.1 10.2

1.6% 33.4 13.1 27.2 11.9

61.6% 22.6 18.6 28.6 47.8

74.9% 18.8 20.9 19.7 44.0

13.6% 24.8 16.5 19.9 23.6

9.7% 29.2b 21.6 50.2 22.9

12.6

15.2

29.5

41.6

19.5

19.3

Source: León Bendesky and Fernando Sanchez, "Integración y comercio en América Latina, photocopy (Mexico City: CEMLA, 1990), table 1. ""Latin America" includes Mexico and all the countries of Central and South America; it does not include any of the nations in the Caribbean. b Data from 1987.

exports going to Europe over the same period. On the other hand, the picture for imports reflects a wide diversity of trends. As shown in Table 9.2, the share of Latin American imports coming from the United States rose from 29.5 percent to 41.6 percent between 1980 and 1988, despite the fact that Argentina, Chile, and Venezuela each posted a decrease in U.S. imports. With the exception of Mexico, all the leading Latin American economies—and the region as a whole—witnessed an increase in imports originating from within the region. The trends for imports from Europe were mixed; the share of imports from EEC countries remained about the same for Latin America overall, with Mexico and Venezuela posting decreases, and Argentina, Brazil, and Chile posting increases. All told, however, Mexico deviated from the general rule by increasing its imports from the United States while decreasing significantly its imports from Latin America and Europe. These figures lead to several conclusions. First, Mexico has always had a much higher level of trade with the United States than with the rest of Latin America, and its trade with that region has historically been low. Second, these two trends were accentuated over the past decade. But it is important to note that, at least with regard to exports, the largest

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economies of the region also traded less among themselves and more with the United States. And in some cases, such as that of Venezuela, the rate of increase in exports to the United States was much greater than it was in Mexico. The picture for trade balances becomes even clearer when other factors are considered. There continues to be much more U.S. investment in Mexico than in the rest of Latin America (although European investment, particularly from Germany, has increased faster than U.S. investment); the size of the Mexican debt with private U.S. banks is also greater; and added to these is the natural phenomenon of continuous cross-border trade. In sum, in a decade in which all of the Latin American economies have necessarily grown closer to the United States, particularly as they seek expanded markets for their products, Mexico's relationship seems to be quantitatively and qualitatively closer. This is not the place to discuss the causes leading to such a substantial Mexican-U.S. integration during the past decade. What should be emphasized is that there were not many alternatives. President Salinas himself, considered by his critics to be the mentor of the neoliberal program, began his presidency with tours of Europe and Japan. As Chabat recently pointed out, it was only after he proved how limited the options were to seeking more diversified trading partners that he sought negotiations with Washington.15 The situation is the same regarding Latin America as a whole. Tables 9.1 and 9.2 show that the plans for integrating the region, which already lacked substantial realism when they were launched a few decades ago, have not borne fruit. They collapsed under the weight of several key factors: lack of agreement on economic policies, intraregional protectionism, Latin American industry's loss of competitiveness, and of course the debt problem. All of these have sharply constrained collaborative relations among the countries of the region.

Prospects for a New Relationship The foregoing discussion does not negate the existence of changes in both the priorities and the substance of Mexican policy toward Latin America. It was simply aimed at demonstrating that those changes have derived not necessarily from some preconceived design but from the objective conditions under which the policy was developed, namely, conditions adverse to cooperation and regional integration. But whatever its cause, the fact remains that Mexico has been distanced from the rest of Latin America during the past decade, even though its political presence there is still quite important.

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The question that should be posed at this point is whether there can be a return to the situation that prevailed before 1982: in which relations with the United States were always the most important aspect of Mexico's foreign policy, while relations with Latin America also played a significant role. If we let ourselves be guided by official statements, then these are in fact Mexico's intentions. During his March 1990 visit to Chile to reinstate diplomatic relations between the two countries, President Salinas gave a speech at the headquarters of the Economic Commission for Latin America and the Caribbean ( C E P A L ) in which he repeatedly pledged a renewed Mexican commitment to Latin America and to an integrationist policy, which he asserted is Latin America's only possible answer to the unification and regionalization of world markets. 16 This willingness to integrate, however, has well-defined limits. A few weeks later, at an A L A D I meeting, Mexico obstructed a set of measures designed to encourage intraregional trade, based on the fear that they would create problems for its F T A negotiations with the United States. No matter how much Mexico—or any country—may want to promote Latin America, it seems unrealistic to risk reducing activity with the partner that represents more than 70 percent of its total trade just to achieve marginal gains that are unlikely to exceed 5 percent of its trade. Nevertheless, within these limits a strengthening of ties between Mexico and the rest of Latin America is possible. Latin America has undertaken a series of political initiatives in the last few years aimed at greater coordination. It is true that some of them have not been crowned with success, as in the case of Cartagena, and the worsening economic situation yielded anti-integrationist tendencies. But these trends have been countered by the Latin American Economic System (SELA); the Contadora Group and the later Rio Group; the Andean Pact, which still exists; and integration agreements among Argentina, Brazil, and Uruguay. All of these and other institutional arrangements point to the existence of a common desire within the region. Furthermore, it can be asserted that in both the economic and the political sphere the objective conditions for accomplishing this strengthening of ties have recently improved over previous years. Several economies of the region have finally begun adjustment processes aimed at doing away with the macroeconomic imbalances that have afflicted them for many years, and they are substantially opening their markets to international trade. Those imbalances and protectionism have been the two greatest obstacles to integration in recent decades. The fact that the adjustment programs are being implemented around similar economic policies should also favor coordination among the countries of the region. In this sense Salinas's trip to Chile had a clear purpose beyond

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reinstating diplomatic relations after their lapse of more than fifteen years. Salinas's model of privatization and opening to the outside is quite similar to that applied by Chile in the past few years. The new democratic government there has also expressed its intent to maintain these policies. The search for affinities between Chile and Mexico is aimed at the regional objective of promoting the opening of markets in the other countries, which will become more possible as the structural crisis is overcome. It is in Mexico's interest, even within the framework of its current policy, to diversify its import and export markets. In light of the figures, the Latin American market holds out a significant untapped potential. The prospects for economic integration are complemented by greater coordination in the political realm, which is fundamental during times of change such as the international system is now experiencing. The privileged relationship that Mexico has maintained in this sense with the South Americans, particularly through the Rio Group, can be viewed either as an attempt to obscure the fact of its greater accommodation to the United States or as an authentic effort to counterbalance the magnetism of its northern neighbor. Furthermore, Mexico needs this counterbalance, at least as long as the Central American crisis persists and until that subregion becomes more stable politically and more viable economically. Among the reasons considered for carrying on an autonomous policy in Central America was the fear that U.S. intervention there would leave Mexico "surrounded by the United States" without any connection to the rest of Latin America. Given the current trends in Central America and the Caribbean, Mexico is likely to have to coexist with a Basin completely dominated by the United States (while Cuba is totally isolated). This makes it more imperative, also from a strategic point of view, to pursue mutual interests with South America. With these elements it may become possible to speak of a "new relationship" between Mexico and Latin America, one that, conscious of the economic limitations, promotes secondary forms of integration but fundamentally centers on political cooperation. As the economies of the region stabilize and open up, we will surely see increased economic exchanges and even stronger flows of investment between Mexico and the South, better operation of the cooperation agencies, and possibly even coordination for dialogue with other regions. What we surely will not see, however, is Mexico returning to the Third World arena with the high profile it had in the 1970s. Policy will continue to be dictated by geography, as in the past few years, without prejudice to the ongoing initiatives on disarmament, as through the Group of Six, which are part of Mexico's traditional foreign policy.

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Notes This chapter was translated from the Spanish by Rita A. Clark-Gollub. 1. See, for example, Lester Langley, "Mexamerica," Nexos (Mexico City) 140 (August 1989); Peter H. Smith, "Mexamerica: El comienzo del futuro," Nexos 146 (February 1990); and Gabriel Székely, "USAMEX: El avance de la integración," Nexos 144 (December 1989). 2. Larry Rohter, "Free Trade Talks with U.S. Set Off Debate in Mexico," the New York Times, March 29,1990. 3. The Rio Group (formerly the Group of Eight) originally included Argentina, Brazil, Colombia, Mexico, Panama, Peru, Uruguay, and Venezuela, but Panama (which had been excluded from the Contadora Group in 1988 by its three other members—Colombia, Mexico, and Venezuela) was formally excluded from the Rio Group in 1990. 4. Rolando Cordera and Carlos Tello, México: La disputa por la nación; perspectivas y opciones de desarollo (Mexico City: Siglo XXI, 1981). 5. Ibid., p. 80. 6. Ibid. 7. Ibid., p. 81. 8. Ibid., p. 107. 9. Cuauhtémoc Cárdenas, "Misunderstanding Mexico," Foreign Policy 78 (Spring 1990). 10. Ibid. 11. José Miguel Insulza, "El dilema de una potencia intermedia," Nexos (Mexico City) 102 (June 1986). 12. The Group of Six includes Argentina, Greece, India, Mexico, Sweden, and Yugoslavia. 13. Comercio Exterior (Mexico City) 39, no. 11 (November 1989), p. 1011. 14. Ibid., p. 1019. Data are from the Banco Nacional de Comercio Exterior de México (B ANCOMEXT). ALADI data on the percentages of Mexican trade within the region are generally even lower than the BANCOMEXT data. 15. Jorge Chabat, "La política exterior de México en 1989: Entre el nacionalismo y la interdependencia," photocopy (Mexico City: CIDE, 1990). 16. Carlos Salinas de Gortari, "Discurso pronunciado en la sede de la Comisión Económica Para América Latina (CEPAL)," Santiago, Chile, March 24, 1990, photocopy. See also Carlos Salinas de Gortari, "Primer informe de Gobierno" (first "state of the union" address) (Mexico City, CIDE, November 1, 1989), pp. x and xi.

10 Mexico's Relations with Central America: Changing Priorities, Persisting Interest Cheryl L. Eschbach The leitmotif of the Carlos Salinas de Gortari administration is rapid economic modernization. The urgent pursuit of this goal during the first two years of his sexenio has left few of the sacred institutions produced by the Mexican Revolution untouched; even PEMEX, the national oil company forged in the 1930s from Mexico's confrontation with U.S. and British investors, is now soliciting foreign investment. Nor has any exception been made in the realm of foreign policy, where Mexico's traditional emphasis on revolutionary nationalism and solidarity with the Third World has been replaced by the effort to insert Mexico more competitively into the world in general, and into the North American economies in particular. For Mexican policy toward Central America, these developments seem to imply an unambiguous retrenchment from the active role Mexico played in the 1980s. Except for his summit meetings with several of the Central American leaders,1 President Salinas has appeared to go out of his way to downplay the region.2 Specifically, Mexico under the Salinas administration has accepted two limits on its Central America policy, at least for the time being: first, that it not jeopardize Mexican relations with the United States; and second, that it let the Central Americans set the agenda shaping Mexico's diplomatic role in the region. Yet Mexico's fundamental political, security, and economic interests in Central America have not changed significantly from those of the 1980s. If the Mexican regime signs a free trade agreement with the United States, it will be under strong domestic pressures to counterbalance Washington's increased weight in Mexican affairs, pressures that could lead it to pay greater attention to its political ties with Central and South America. Mexico's national security continues to be affected by the large number of Central American exiles seeking haven in or passing through the country on their way to the United States. These security concerns would be aggravated by a continuation or intensification of civil war in Guatemala and El Salvador. Finally, Mexico has an important stake in the region's economic development, both because it holds nearly 6 percent of Central America's foreign debt of 20 billion U.S. dollars and because the 171

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latter's profound economic problems continue to color external perceptions of Mexico's own—in reality far more promising—economic situation. Mexico may well be able to defend its strong interests in Central America through the circumscribed and cautious policy adopted by the Salinas administration. Its prospects for doing so, however, will depend upon economic and political developments at home and in Central America. This chapter will examine both continuity and change in Mexican relations with the region, analyzing in turn the political, security, and economic dimensions of Mexico's interests and policy.

The Push and Pull of Mexico's Political Interests in the Region Mexican political interests in Central America have typically been shaped largely by U.S. relations with the region. Mexico's decision not to support the March 1954 Organization of American States (OAS) resolution legitimizing action against the reformist regime of Jacobo Arbenz in Guatemala, its refusal to break relations with Cuba in the early 1960s, its condemnation of the U.S. invasions of the Dominican Republic in 1965 and Grenada in 1983, and its strong political and economic support of the Nicaraguan revolution in the early 1980s are all illustrative of a long-standing pattern in Mexican foreign policy. By defending the autonomy of its smaller southern and eastern neighbors, Mexico has been able to enhance its own margin to maneuver within the U.S. sphere of influence. This strategy has also helped the nation to maintain its equilibrium domestically, given its sizable nationalist left, whose political strength derives from institutions and traditions forged in good measure by Mexico's history of conflict with the United States. Although the Cold War has ended, the features of U.S. policy toward Central America that Mexico has traditionally opposed do not appear to have changed significantly. Hardly had the Eastern bloc crumbled and the Berlin Wall been dismantled when the United States, in December 1989, invaded Panama and captured its leader, General Manuel Noriega, in a move that Latin American critics likened to the "big stick" policies of Theodore Roosevelt and Woodrow Wilson.3 Although the war waged by the U.S.-backed contra armies against the Nicaraguan government has also ended, the United States still maintains a large military presence in Honduras.4 Moreover, President George Bush remains strongly committed to supporting the Salvadoran government. What has changed is the way in which Mexico is responding to the United States and its actions in Central America. This change was most strikingly reflected in Mexico's position on the evolving U.S.-Panamanian

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conflict.5 In May 1989, after Noriega had annulled elections presumed to have been won by Guillermo Endara, the Secretariat of Foreign Relations (SRE) issued a communiqué strongly criticizing Noriega's conduct. It then voted in favor of a U.S.-promoted OAS resolution blaming Noriega for "serious abuses" in the electoral process and authorizing a three-country commission (comprising Guatemala, Ecuador, and Trinidad and Tobago) to find a solution leading to "the democratic transition of power." 6 Although subsequent developments showed Mexico hewing to a somewhat more traditional position—acting in October 1989 to prevent other Rio Group members 7 from expelling the Noriega-dominated regime from their ranks and immediately condemning the U.S. invasion of the following December—the Panama case suggests that Mexico's invoking of the nonintervention principle in defending its neighbors from an antagonistic U.S. policy has become less automatic and absolute than in the past. President Salinas affirmed the more nuanced approach to intervention issues in his first state-of-the-nation address. He explained that although Mexico still upheld the principles of self-determination and nonintervention, it had "made a distinction between defending such principles and protecting those who have hindered the progress" of Panama. 8 More generally, the Salinas administration has reached the conclusion that principles alone should not determine Mexico's foreign policy objectives. On the contrary, Mexico's objectives—above all the fundamental goal of modernization—should structure the way in which the country defends its principles and pursues its interests.9 Observers of Mexico seem to agree that these developments, and the intensifying economic ties with the United States that accompany them, represent a watershed in Mexican foreign policy. But is this change a sign of Mexican vulnerability to the United States and a failure to defend the country's sovereignty, as some critics charge, or is it instead a manifestation of strength, maturity, and vision, as the Salinista camp contends? To be sure, Mexico's overall weakness matters: The economic crisis and the consequent stress on Mexico's political system have both limited Mexico's foreign policy options and sharpened the trade-offs associated with any particular choice that Mexico makes. This difficult situation has inevitably shaped the nature of the lessons the country's leaders have learned from their difficult foreign policy experience of the 1980s as well as the vision that Salinas has for the 1990s. Together, Mexico's weakness and political learning from the recent past explain the new parameters of its regional policy: its twin commitments (1) not to permit Central America to create conflict in its bilateral relationship with the United States and (2) to follow the political lead of the Central American countries themselves. Mexico's persisting economic dependence on capital repatriation and financial and investment flows from the United States and other Organiza-

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tion for Economic Cooperation and Development (OECD) countries goes far toward explaining its unwillingness to come in conflict with U.S. interests in Central America. Bilateral relations with the United States are already complicated by tensions over border and narcotics issues. And the Salinas administration likely assumes that openly differing with Washington over Central America could send the wrong signal not only to potential investors in the United States, but also to those in Europe, Japan, and Mexico's own private sector. Contributing to this concern is Mexico's experience of conflict with the United States over Central America during the 1980s. Although Mexican-U.S. relations were strained by a variety of issues in the mid1980s, none tore so much at the fabric of the relationship as did Central America. Although Mexico repeatedly emphasized the socioeconomic sources of the crisis in the region, the Reagan administration regarded Soviet-Cuban intervention as the chief problem and therefore harbored suspicions of the Mexican-promoted Contadora peace process.10 Those differences with the United States proved to be costly for Mexico. They undermined the diplomatic resources—the goodwill, political imagination, and sustained top-level attention—that U.S. policymakers might otherwise have devoted to pressing bilateral issues, such as management of the Mexican debt. The second limitation on Mexican policy—the commitment to follow Central America's lead in regional diplomacy—also derives from a combination of Mexico's external vulnerability and the lessons learned over the past decade. In this case, the vulnerability is political. Mexico cannot play much of a role in regional negotiations that have begun to tackle such sensitive internal issues as the structure of the Central American security forces when its own domestic record in the areas of human rights and public elections are coming under increasing international scrutiny.11 The lessons driving Mexico's lower profile in the region stem from the mixed legacy of Contadora. Strong Mexican and Contadora Group leadership was necessary to launch negotiations in the deeply polarized context of the early 1980s. But as the negotiations process matured, the Central Americans grew to resent what they perceived as Mexican dominance. (Those feelings were not, of course, shared by Nicaragua.) A chronic source of tension was the Contadora Group's practice of unilaterally determining the negotiating agenda and writing up the final documents. Ultimately, the Central Americans rejected this practice, "indigenizing" the negotiations process after 1986 through the Arias Plan and the Esquipulas II peace agreement. 12 It was very likely in response to these developments that SRE, under Foreign Minister Fernando Solana, signaled Mexico's intention to follow the diplomatic agenda set by the Central Americans, provided the agenda

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is determined by them multilaterally or is consistent with the goals of the Esquipulas process. Mexico's National Development Plan (1989-1994) is most emphatic on this point. Our country will continue to be attentive to the developments in that region and disposed to support, when the Central American countries so

solicit, dialogue and reconciliation in the Isthmian zone. The Mexican endeavor will continue to support all attempts to achieve a solution to the" area's problems that are based on respect of its right to self-determination; we will insist that such a solution be one produced negotiations of the Central American countries themselves,13

by the

This change in attitude was evident in the way Mexico handled its role in the Salvadoran peace talks between the government of Alfredo Cristiani and the Farabundo Marti National Liberation Front (FMLN), which Mexico hosted in Oaxtepec in June 1990. SRE officials seemed to go out of their way to emphasize their purely supportive, background role. The foreign ministry arranged for the private sector to provide the facilities and the technical equipment used during the discussions, and it sent as its representative to the premises a low-level computer specialist. 14 Mexico's aspirations to foster improved economic relations with the region while simultaneously building stronger bilateral ties with the United States appear to have received a boost from several propitious external conditions. First is the impact of the recent U.S.-Soviet rapprochement on the ongoing Central America negotiations process. The more polarized international environment of the 1980s had frustrated the efforts of Mexico and the other Contadora (and later Rio) Group countries to promote multilateral diplomacy. But the Soviet Union's continuing pursuit of perestroika, the disintegration of the Eastern bloc, and the corresponding warming of U.S.-Soviet ties at the end of the decade gave the Central Americans' Esquipulas process a new momentum. Nicaraguan President Daniel Ortega Saavedra agreed in early 1989 to hold free, internationally supervised elections in exchange for the disbanding of the U.S.-backed contra forces in Honduran territory. In mid-March 1990 Guatemalan President Vinicio Cerezo unexpectedly announced his government's willingness to resume talks with the rebel forces led by the Guatemalan National Revolutionary Unity (URNG); and in early April the Cristiani government in El Salvador signed a seven-point peace accord with the FMLN, outlining measures aimed at "reintegrating the members of the FMLN" into the country's political and civic life.15 A second source of momentum for the Esquipulas process—and Mexico's own aspirations—is the accelerated integration of Central America's principal trading partners. Acting individually, the Central

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American states have little to offer economically to a future North American common market or to the post-1992 European market. The Esquipulas summitry, on the other hand, provides a political mechanism for revitalizing the Central American Common Market (CACM), which had been undermined by the collapse in the 1980s of intraregional trade.16 Indeed, the principal outcome of the Esquipulas meeting in June 1990, in Antigua, Guatemala, was a decision to restructure and strengthen the economic integration machinery of the CACM.17 Thus, the end of the Cold War and the changing world economy have reinforced and helped to institutionalize the multilateral negotiations regime that Mexico was instrumental in launching early in the decade. That regime continues to serve Mexico's interests. The Esquipulas summit meetings are each preceded by five rounds of talks by lower-level officials that foster flexibility in and convergence among the Central Americans' political positions: The first round is a technical meeting to define the agenda, followed by sequential meetings of the vice ministers of the economy, the vice ministers of foreign relations, the ministers of the economy, and the ministers of the economy jointly with the ministers of foreign relations. This iterative negotiating process tends to dilute the ideological extremism of the positions that some of the Central American leaders might otherwise adopt. Historically, such extremism has been a major obstacle to Mexican diplomacy in the region. A third development that could enhance Mexico's political relations with the region is a change in what the country has to offer. At the outset of the 1980s Mexico emphasized its ability to mediate Central American interests vis-à-vis the United States based on its own history of conflict with Washington. That approach fostered close ties with the Sandinista regime, but it eventually politicized Mexican relations with Nicaragua's neighbors. At the start of the 1990s it is the country's economic model— the set of sweeping economic policy reforms such as privatization, structural adjustment, and export promotion—that Mexico is holding out to Central America. These reforms are likely to be standard fare for the region's economies. In other words, no matter what their political ideology, Central American leaders will look to Mexico as an economic model and a source of technical assistance. Already, Mexico is providing technical assistance to individual Central American countries on the restructuring of their external debt. Mexico has also agreed to provide the secretariat of the CACM with technical expertise to facilitate its reactivation.18 Against these favorable circumstances, however, two potential obstacles to the success of Mexico's low-key diplomacy stand out. First, as the process of forging a free trade agreement with the United States moves forward, Mexican sensitivity to U.S. policy toward Central and South America will undoubtedly increase. There will be strong domestic près-

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sure on the Mexican government to demonstrate that closer economic ties with the United States are not compromising the country's political sovereignty. Such pressure would be intensified by a failure of the new economic model to generate sustained recovery and increased employment. In turn, the government will find it difficult to ignore nationalistic sentiment on this issue because of efforts on the part of the ruling Institutional Revolutionary Party (PRI) to win political support back from the center-left, much of which deserted the party in 1988-1989 and reconstituted itself as the Party of the Democratic Revolution (PRD). The desire to recapture the nationalistic banner now being carried by the PRD has already spurred the PRI to reassert the leadership role it once played, but abandoned after 1982, in the Permanent Conference of Latin American Political Parties (COPPPAL). Concerned about the PRD's growing visibility in COPPPAL activities, the PRI in December 1989 reassumed the presidency of the organization, which it had founded in 1979. It is conceivable—though not inevitable—that a higher Mexican profile in Central America resulting from domestic political competition with the PRD could dampen Mexico's warming relations with the United States. The potential for political and economic conditions in Central America to deteriorate is a second possible obstacle to Mexican policy in the 1990s. The advances achieved in recent rounds of the Esquipulas process, while important, are still very fragile. Guatemala and El Salvador remain heavily militarized even though they are nominally governed by civilian regimes. The popular appeal in Guatemala's 1990 presidential campaign of General Efrain Rios Montt, notorious for the "scorched earth" counterinsurgency policy he directed as president in 1982-1983, is an especially ominous sign. Should Guatemala's political future hold an important role for him, the rapprochement that Mexico has carefully cultivated with the country since early 1984 could be seriously strained. And, again, an intensification of civil war in either Guatemala or El Salvador would aggravate Mexico's national security concerns, forcing the administration to adopt a more active policy that could once again bring Mexico into conflict with U.S. interests in the region.

Security Interests: An Open Tradition, a Closing Border As Mexico's National Development Plan (1989-1994) notes, Central America's "grave conflicts have important repercussions for Mexico."19 The most immediate of these is the large number of Central Americans uprooted from their homes by war, political uncertainty, and economic

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crisis. At least half of those exiles leave the region, heading north to Mexico or the United States. According to conservative estimates, the Central American population illegally residing in Mexico has come to exceed 400, OOO.20 The exodus northward is unlikely to diminish significantly in the near future. Central America is suffering demographic pressures that its wardevastated economies will have severe difficulty accommodating. The region's estimated 1990 population of 27 million is expected to increase to 37 million by the end of the decade. To employ the young adults who will be entering the labor force over this period, the region's economies would have to double the existing number of full-time jobs.21 And to these demographic and economic pressures must be added the costs of the probable persistence of armed conflict in Guatemala and El Salvador. Although immigration is undeniably a problem affecting Mexico's national security, defining the precise security issues at stake is a politically complex task. Despite Mexico's long history of conflict with the United States, there is no precedent in Mexican foreign policy for defining national security in terms of specific threats emanating from the external environment.22 On the contrary, national security has traditionally been conceived in general terms as the promotion of Mexico's socioeconomic and political development in accordance with the objectives established in the Constitution of 1917.23 Complementing this conception is the principle of openness embodied in Mexico's foreign policy tradition. From the time of its establishment as an independent nation, Mexico has seen itself as a haven for those suffering political persecution. Thus, Mexico has vigorously defended the right of political asylum, embracing large numbers of Spaniards fleeing the Spanish Civil War, Jews emigrating from Europe during World War II, and Latin Americans escaping repressive regimes of both right and left.24 Even though many of the Central Americans coming to Mexico are victims of generalized violence rather than selective political persecution, Mexico's tradition clearly suggests a moral obligation to extend refuge to them as well. Mexico's foreign policy principles also suggest an openness to those Central Americans who have been forced to leave the region for economic reasons. For Mexico has unconditionally supported the right of its own citizens to migrate to and work in the United States. This policy was recently reaffirmed by the Salinas administration in a published official statement declaring that "it does not constitute a crime of any sort" for Mexican citizens to "try to enter another country without immigration documents or to leave national territory without going through inspection and other established formalities."25 On the other hand, Mexico has obvious reasons to want to exercise sovereignty over its southern border. Most of the Central American

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refugees and migrants bring with them pressing needs for employment, education, medical care, and housing—the same multiple social needs that the Mexican government finds itself unable to meet with respect to a large segment of its own population. Whether they settle in the rural southeast or in Mexico's urban areas, the immigrants inevitably compete with Mexicans for these scarce resources.26 Moreover, the objective problem of strained national resources can be compounded by public perceptions that the displaced Central American population is an explicit danger to national security. In the early 1980s, for example, conservative business and political leaders often asserted that the Mexican south was vulnerable to Central American-inspired Communist subversion. Although this view did not command much support in government circles, the Central American crisis no doubt intensified government concern at the time about conditions in Chiapas and the southeast more generally. Living conditions for a large majority of Mexicans there were poor, and a highly skewed distribution of land had resulted in the rapid growth of a number of independent campesino organizations.27 By 1990 the agrarian movement in Chiapas and elsewhere had subsided. 28 But the persistence of precarious economic and political conditions in Central America and in much of Mexico's rural areas remains a potentially volatile combination of political problems. How can Mexico resolve the conflict between the principles of openness embodied in its foreign policy tradition, on the one hand, and the economic and political pressures to control its southern border, on the other? The 1980s serve as a rough guide to what we can expect to see in the 1990s: public promotion of foreign and domestic policies consistent with Mexico's traditional principles, combined with quiet but vigorous efforts to control the porous 600-mile southern border. During the 1980s the popularity of the Contadora policy among the Mexican populace helped to distract domestic attention from the simultaneous implementation of more controversial policies, such as highly restrictive visa requirements for Central American tourists in Mexico, an increase in the number of immigration agents along the southern border, the creation of a second military command in Chiapas, and the expansion in Chiapas of the activities of several federal police organizations.29 Similarly, the federal government's Plan Chiapas, designed to rapidly raise the overall living standards in the state, was consistent—at least on paper—with Mexico's practice of equating national security with domestic development. 30 The plan's ambitious welfare objectives would prove elusive, however, because its funds were inefficiently and even corruptly put to use by local bureaucracies closely tied to the existing power structure.31 Nonetheless, Plan Chiapas did finance the construction of the

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Southern Frontier Highway along the border with Guatemala, a security project that received priority attention. At the outset of the 1990s the public face of Mexico's policy on national security includes a set of new initiatives to improve the conditions of the Central American refugees in Mexico. Most important in this regard is a 1990 amendment to Mexico's Law of Population that incorporates the term "refugee" into the Mexican legal code. 32 Following the terms of the 1984 Declaration of Cartagena on Refugees, the legislation considers as refugees those persons who have had to flee their countries "because their life, security, or liberty has been threatened by generalized violence, foreign aggression, internal conflicts, massive violation of human rights, or other circumstances" that have seriously disturbed the public order. 33 Mexican government officials assert that this legislative change could result in the recognition and legalization of 10 percent to 15 percent of the Central American population in Mexico. 34 A second important initiative is the recent upgrading of the immigration status of the 23,000 Guatemalan refugees in Chiapas, granting them the right to work and to move freely throughout five of Mexico's southern states. 35 At the same time, the Salinas administration is not neglecting border control. Granted, the immigration checkpoints across the Isthmus of Tehuantepec remain as primitive as before, in many cases lacking electricity and formal roadblocks. But efforts to apprehend and return Central Americans passing through those checkpoints have increased sharply. Whereas during the de la Madrid sexenio the average number of Central Americans apprehended and returned was estimated to be, at most, 14,000 per year, in 1989 Mexican agents were said to have apprehended an estimated 85,000. During the first five months of 1990 alone, they apprehended and returned another estimated 80,000 Central Americans. 36 This stepped-up enforcement is in good measure a response to increased U.S. efforts to seal its own southern border to Central Americans. In 1989 the U.S. Immigration and Naturalization Service (INS) began to implement a plan to "stem the flow of frivolous asylum claims." 37 Asylum petitions are now processed in one-day hearings, which have speeded up the process considerably, although Central Americans are still held in detention camps just north of the border until their hearing. If their requests are denied, as most are, the refugees are summarily deported. 38 The pressure this policy is exerting on Mexico to prevent Central Americans from seeking passage across its southern border in the first place has led Mexican immigration agents to begin exchanging information with INS officials working in Guatemala, El Salvador, Honduras, and Nicaragua. 39

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Economic Interests: New Incentives and Old Impediments Mexico's postrevolutionary regimes have had a variety of economic interests in Central America,40 but their efforts to advance those interests did not bear much fruit until the early 1980s, when Mexico began offering Central America and several other Caribbean Basin countries preferential terms for financing the purchase of Mexican petroleum. This initiative, undertaken jointly with Venezuela through the 1980 San José Accord, intensified Mexico's economic relationship with the region and served as the basis for several other programs of economic "assistance" or cooperation. (Mexicans are careful not to consider such preferential financing schemes as "aid" or "assistance.")41 Mexico committed, on better-thanmarket terms, resources worth more than 1.2 billion U.S. dollars to the five Central American countries over the course of the 1980s. When Mexico launched the San José program, it would have been difficult to foresee the dire economic crisis toward which Central America was headed. Between 1960 and 1975, the economies of Central America had grown at an average rate of 6 percent annually. But between 1980 and 1989 the region's cumulative economic growth was only 6.5 percent.42 After 1982 the average per capita income in the five countries declined almost continuously, dropping a total of nearly 17 percent from its 1980 level by the end of the decade.43 In this context it is not surprising that Central America proved unable to make use of the development assistance as Mexico had intended. Instead, the programs of economic cooperation have turned Mexico, involuntarily, into a major creditor of the region. Compounding the debt problem is an even greater obstacle to Mexican-Central American economic relations—the fact that Central America produces very little that Mexico wants or needs to import. Let us examine each of these problems in turn before assessing Mexico's vision for their solution in the 1990s. Economic Relations Under the San José Accord

Mexico and Venezuela have renewed the "Energy Cooperation Program for Central American and Caribbean Countries" every year since its establishment in 1980, albeit with modifications jointly agreed to by the two oil suppliers. The benefits accruing to the recipients over those years—the five Central American countries as well as Panama, Jamaica, and the Dominican Republic44—have been significant. The two primary benefits have been the secure source of petroleum and the financing on preferential terms of a portion of that petroleum. But in addition to the

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balance-of-payments support, the San José Accord (known for the Costa Rican city where it was first signed) provides long-term development loans. In turn, for the supplier countries the accord is an instrument for fostering regional development and, through it, increased levels of economic exchange with the recipients. The terms of the financing have been generous in the light of world economic conditions over the past decade. From 1980 to 1983 the accord stipulated that up to 30 percent of the total value of the oil purchased could be financed for periods of five years at 4 percent interest.45 The terms of the agreement for 1990 provide for financing of up to 20 percent of the value of the oil purchased at 8 percent over five years or, under special circumstances, at 6 percent over twelve years.46 In practice, the portion of Central America's oil that has been financed by Mexico on preferential terms has been even greater than the 30 percent and then 20 percent allowed under the San José Accord. From August 1980 through March 1990 the total value of the Mexican oil purchased by Central American countries except for Nicaragua (which for political reasons was a special case) was 1,174 million U.S. dollars; and of this total, 391 million dollars, or over 33 percent, was financed under the accord. If we include Nicaragua, which received preferential financing on all of the 387 million U.S. dollars of oil it purchased from Mexico between 1980 and 1985, the portion of the total petroleum purchases financed on preferential terms was nearly 50 percent for the 1980-1990 period.47 Mexico's principal mechanism for long-term development loans to the region has been a November 1984 agreement with the Central American Bank for Economic Integration (BCIE), through which Mexico has so far channeled 122 million U.S. dollars in resources recycled from the San José Accord's medium-term financing.48 To be eligible for the Mexican-BCIE funding, a proposed project must be designed to promote regional integration, economic and social development, or complementarity with Mexico's economy.49 In addition, at least 50 percent of the goods and services used in the project must be Mexican.50 Because of the developmental nature of the projects involved, 80 percent of the total BCIE endowment from Mexico is designated for public sector use, while the remaining 20 percent is for private sector projects. The results of both aspects of the San José program—the mediumterm balance-of-payments support and the long-term development loans through the BCIE—have fallen short of Mexico's expectations in several ways. Unable to pay for even the required 70 percent and then 80 percent of the petroleum invoice (despite a decrease of roughly 50 percent in the price of oil since its record high at the beginning of the 1980s), the Central American countries began to use the financing mechanism to roll over their growing debt to Mexico. In response, in 1984 Mexico began to

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Table 10.1 Central America's Oil-Related Debt to Mexico, by Country, May 31,1990 (in millions of U.S. Dollars) Country Costa Rica El Salvador Guatemala Honduras Nicaragua Total:

Debt $ 117.2 33.9 43.2 13.6 932.7 $1,140.6

Source: Personal communication with an official of the Secretaría de Hacienda y Crédito Público, Mexico, June 1990.

require payment of 100 percent of the value of the petroleum upon delivery, offering the 20 percent financing upon receipt of the payment or a letter of credit. But Central America continued to fall further into arrears; as shown in Table 10.1, by May 1990 its collective oil-related debt to Mexico was nearly 1.1 billion U.S. dollars, which represents nearly 6 percent of the Central American countries' total external debt.51 Moreover, political and economic conditions in the region have undermined the long-term development planning necessary to take full advantage of the loans Mexico has offered through the B C I E . As a result, although 48 million U.S. dollars of the 122 million-dollar Mexican endowment has been committed to finance eight development projects, so far only 14 million dollars has actually been disbursed, and only two of the eight projects have been completed.52 Another obstacle for the program is the condition that the projects utilize Mexican goods and services, about which there is still little knowledge in Central America. The Mixed Picture for Trade Relations Central America's proximity to Mexico and its common cultural heritage make the region a natural arena for Mexican trade and investment. Furthermore, in theory at least, Mexico's exports of petroleum and manufactured and consumer goods complement the largely agricultural economies of Central America. Unfortunately, this complementarity is largely one-way, as most of the region's principal exports—wood, coffee, cotton, and bananas—are also produced in Mexico. As a result, trade flows since World War II have consistently been biased in Mexico's favor.53 Mexico's efforts to overcome this asymmetry date back to the 1960s,

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when the government began officially to espouse the objective of granting Central America preferential access to its market. At issue, however, was Mexico's membership in the Latin American Free Trade Association ( A L A L C ) , which refused to grant Mexico an exception to its requirement that any preferences offered to third parties automatically be extended to A L A L C . It was not until 1980 that Mexico finally succeeded in negotiating the necessary exemption. 54 On this basis, by the mid-1980s Mexico had signed bilateral agreements with each country of the isthmus (including Panama but excluding Belize) that granted nonreciprocal trade preferences on most of the goods Mexico imported. 55 Those accords also set the stage for subsequent bilateral talks, held with each country biannually, in which further tariff reductions were negotiated. In the early 1960s Mexico did succeed in negotiating a series of reciprocal payments agreements between the Bank of Mexico and the central banks of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, which have since facilitated trade in the region. 56 Signed in August 1963, those agreements enabled exporters in each country to be paid in their own currencies by their respective central banks at the prevailing exchange rate. In turn, the exports could be financed by the central banks through short-term credit lines with interest set at 80 percent of the prime rate. 57 Every four months, the six central banks clear their accounts with one another. The value of the payments agreements is obvious: They eliminate third parties in the region's trade and thereby allow all the signatories to save scarce foreign exchange; and for Mexico, they allow the Bank of Mexico to assume the political risks associated with the country's trade with the region. But as with the San José Accord, the potential benefits of the trade agreements and the complementary payment mechanism have been undermined by the deterioration of the Central American economies over the 1980s. During the years 1980-1986, for example, intraregional trade among CACM members dropped 58 percent; and over the course of the full decade the exports of three of the members dropped significantly below their 1980 levels: Guatemala, by 23 percent; Nicaragua, by 42 percent; El Salvador, by 54 percent. 58 And as the Central American countries grew increasingly delinquent on the obligations they incurred through the short-term credit lines extended under the payment agreements, the Bank of Mexico suspended those agreements, with Nicaragua in 1983 and Costa Rica in 1985, and then with Guatemala and Honduras in 1988 and El Salvador in 1989. Furthermore, not long after the trade agreements were negotiated, Mexico began to institute dramatic changes in its international trade policy. By eliminating import licenses and establishing common tariff rates, and then gradually reducing those rates, Mexico in effect cancelled

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Mexico's Relations with Central America Table 10.2 Mexican Trade with Central America (excluding Panama), 1979-1989 (in thousands of U.S. dollars) Year

Exports

Imports

Balance

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

136,724 228,665 437,138 398,306 401,884 354,965 269,150 205,019 315,752 334,076 439,369

13,017 32,047 102,473 64,275 25,967 30,873 30,486 18,478 21,503 40,691 62,322

123,707 196,618 334,665 334,031 375,917 324,092 238,664 186,541 294,249 293,385 377,047

Sources: Comercio Exterior (Mexico City), various issues, 1979—1989; and Secretaría de Comercio y Fomento Industrial, "Balanza Comercial de México con los países centroamericanos," photocopy (Mexico City: Secretaría de Comercio, June 1990)

out many of the preferences previously granted to its neighbors to the south. Central American products now had to compete in the Mexican market with products from a variety of other nations. In 1988 and 1989 Costa Rica, El Salvador, and Guatemala were nevertheless able to boost their exports to Mexico, which accounts for the modest reduction in Central America's trade deficit shown in Table 10.2. Over the decade the value of Mexican exports to the region rose from just over seven times the value of Central American exports to Mexico in 1980 to a high of over fifteen times their value in 1983, before returning again to seven times their value in 1989. Prospects for Cooperation

in the 1990s

Central America's profound debt and trade problems are a source of deep concern to Mexican officials. They view the vast trade gap as a potential taproot for regional hostility toward Mexico—and Central America's general economic miasma as reflecting on the larger world's perception of Mexico's own economy, despite its reforms and recent improvements. As a result, Mexico is planning a series of initiatives aimed at fostering economic cooperation in the coming decade, by alleviating Central American debt in the near term, boosting the region's exports to Mexico in the short and medium terms, and increasing the complementarity

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between the two economies in the long term. Among the options Mexico plans or has already begun to pursue in order to meet the most immediate objective—debt restructuring—are (1) arrangements for each debtor country to make payments in its own currency; (2) the exchange of a portion of the debt for Mexican investment; (3) the exchange of a portion of the debt for expenditures in Central America that promote Mexican culture; and (4) the purchase of Mexican commercial bank debt paper on the secondary market. The last option is modeled after an agreement Mexico signed in June 1987 with Costa Rica, in which the latter consented to buy Mexican commercial bank paper on the secondary market (where it is discounted by roughly 50 percent) in return for having its own debt discounted for nearly the full face value of the Mexican paper.59 Though not defined as a debt-reduction package, the agreement did significantly decrease Costa Rica's debt to Mexico. To promote imports from Central America—the second main objective—Mexico created, in February 1989, the Central American Import Financing Program (FICE). This program makes use of resources generated through the San José Accord to grant special financing (from a revolving fund of up to 65 million U.S. dollars) to Mexican importers of Central American goods and services. Although nineteen import operations have been financed through the FICE program to date, the value of the operations is only about 1 million dollars.60 In early 1990 Mexico also opened a second free trade zone along its southern border. The first, created in 1975 along a twenty-kilometer ring around the Chiapan border city of Tapachula, allows tariff-free imports of up to 100 million U.S. dollars worth of Central American products. The new zone, in Quintana Roo, allows an additional 25 million U.S. dollars worth of products from the region, again, completely free of tariffs.61 To date, however, on average only half of the authorized quotas are being used.62 Another effort to promote regional trade is a study now in progress to identify potential sources of Mexican demand for Central American products. Sponsored by the ministries of the Treasury (SHCP) and of Commerce and Industrial Development (SECOFT), in collaboration with the foreign trade bank Banco Nacional de Comercial Exterior (B ANCOMEXT) and several private sector organizations, the research is intended to lay the foundation for a subsequent government-backed consortium of Mexican industrial and commercial enterprises and Central American trade and investment operations, with a particular focus on Mexico's southern states. In pursuit of the longer term objective—greater overall cooperation and economic complementarity—Mexico established, in 1988, the Mexico-Central America Professional Development Program (PDPMC), which offers opportunities for Central American professionals to take

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four- to eight-week courses in public administration, development planning, economics, international politics, diplomatic studies, and engineering at Mexican universities. As of mid-1990 nearly 200 students had taken advantage of the PDPMC. 63 Finally, important programs of economic cooperation have also been carried out within the context of bilateral relations. At the outset of the 1980s Mexico's most salient political ties were with Sandinista Nicaragua, to which Mexico extended credit and other resources on very generous terms (in addition to the preferential financing under the San José Accord). Although strict records of this assistance were not kept, a retrospective study by SRE estimated that over a three-year period beginning in July 1979, Mexico committed to Nicaragua 229 million U.S. dollars in credit lines on soft terms.64 In addition, Mexico donated an estimated 43 million U.S. dollars in cash and in kind to Nicaragua over the same period.65 In the case of Guatemala, Mexico has sought to provide financing on preferential terms since the Cerezo government took office in 1985. In addition to the petroleum financing and the development loans extended by the Mexico-BCIE funding, Mexico has rescheduled 42.4 million U.S. dollars of Guatemala's petroleum debt and arranged for the payments on it to be recycled to Guatemala on preferential terms for use in bilateral development projects. The government also extended a credit of $10 million (provided by BANCOMEXT) to support Guatemalan development projects that use Mexican goods and services.66 Table 10.3 summarizes the estimated value of the various economic cooperation programs Mexico extended to Central America over the 1980s. The total—1.29 billion U.S. dollars—represents a generous commitment given the size of the Mexican economy. But to sustain that commitment in the future, Mexican policy will need to have considerably more success in promoting balanced trade and economic complementarity with the region than it has had to date. Conclusions Mexico's policy toward Central America in the first half of the 1990s will necessarily mirror the changes in its more general foreign policy that have stemmed from its aggressive modernization program. Mexico, at least for the time being, has decided to quietly foster the political and economic integration of its southern neighbors that was set in motion by the Esquipulas process. Despite its lower profile, however, Mexico continues to have strong political, security, and economic interests in Central America. If the Esquipulas process runs into new obstacles or becomes

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Regional Alternatives Table 10.3 Estimated Value of the Economic Cooperation Programs that Mexico Presented to Central America, July 1979-June 1990 (in millions of U.S. dollars) Program or Agreement

Estimated Value

San José Accord (preferential terms for financing Central American oil purchases) Central American Bank for Economic Integration (BCIE) (funding development projects through resources recycled from San José Accord financing) Central American Import Program (FICE) (preferential terms for financing Mexican imports from Central America) Professional Development Program (PDPMC) (subsidizing Central Americans' education and training in Mexico) Subtotal Preferential Credit and Financing for: Guatemala Nicaragua (early 1980s only) Subtotal Total

$778.8 122.0 65.0 0.5 $966.3 $52.4 229.0 $281.4 $1,247.7

Sources: Secretaría de Hacienda y Crédito Público, "Mecanismos Financieros de México para el apoyo de empresas Mexicanas en Centroamérica y el Caribe," photocopy (Mexico City: Secretaría de Hacienda, April 3, 1989); Secretaría de Hacienda y Crédito Público, "Apoyos financieros de México a los paises centroamericanos," photocopy (Mexico City: Secretaría de Hacienda, June 8,1990); and Secretaría de Relaciones Exteriores, "Nicaragua: Asistencia económica de México," photocopy (Mexico City: Secretaría de Relaciones Exteriores, 1982).

m e r e l y a f a c a d e f o r c o n t i n u e d m i l i t a r i z a t i o n of C e n t r a l A m e r i c a n p o l i t i c a l l i f e , M e x i c o c o u l d o n c e a g a i n f i n d itself in a n o - w i n s i t u a t i o n w i t h r e s p e c t t o its n e i g h b o r s t o t h e n o r t h a n d t o t h e s o u t h .

Notes T h e a u t h o r is grateful f o r c o m m e n t s on an earlier version of this c h a p t e r by o t h e r contributors to this volume, particularly Sergio A g u a y o , Wolf G r a b e n d o r f f , and Jesus Silva-Herzog, and by L e o n a r d o Ffrench. 1. Since taking office, Salinas has met with Vinicio Cerezo of Guatemala, Alfredo Cristiani of El Salvador, and Violeta Chamorro of Nicaragua. In addition, Salinas has received visits from Rafael Calderön-Fournier of Costa Rica and Rafael

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Callejas of Honduras, at the time each was president-elect of his respective country. 2. During a visit to Washington in 1989, for example, Salinas responded to a question on Mexican interests in Central America with an emphatic demurral: "We aren't talking about that." See "La gira de Salinas, torneo de halagos en el que no participo la prensa estadunidense," Proceso (Mexico City), no. 675 (October 9,1989), p. 10. 3. See the sampling of the Latin American press in "Bush's Big Stick," World Press Review, February 1990, pp. 15-23. 4. Although the United States has no bases that are officially its own in Honduras, at any given time there are from 2,000 to 5,000 U.S. troops stationed in the country. Presently, the Honduran government is debating a U.S.-proposed amendment to the terms of a 1954 bilateral military assistance treaty, which would permit the United States to construct permanent military bases for the use of its forces. 5. Even before Salinas took office, Mexico had inched away from its traditional defense of the principle of nonintervention, voting in February 1988 to suspend—though not to expelí—Panama from the Rio Group, in a censure of Noriega's dismissal that month of the Panamanian president, Eric Delvalle. 6. Mexico Journal (Mexico City) 2, no. 33 (May 29,1989): 6-7. 7. The other members of the Rio Group, or Group of Eight, are Argentina, Brazil, Colombia, Panama, Peru, Uruguay, and Venezuela. 8. Reported in Mexico Journal 3, no. 7 (November 13,1989): 24. 9. Ranking high among Mexico's interests are, of course, good relations with the United States. Thus Secretary of Foreign Relations Fernando Solana has argued that "our current challenge is to transform this need for 'inevitable' cooperation into a phase of 'active' cooperation" with the United States. See "Remarks by Fernando Solana, Mexican Secretary of Foreign Relations, at the Dinner Sponsored by the CSIS Mexico Project," photocopy (Washington, D.C.: Center for Strategic and International Studies, November 14,1989), p. 3. 10. The other members of the Contadora Group were Colombia, Panama, and Venezuela. 11. See especially the recent Americas Watch report, Human Rights in Mexico: A Policy of Impunity (New York: Americas Watch Committee, June 1990). 12. First proposed by Costa Rican President Oscar Arias Sánchez in February 1987, the Arias Plan formed the basis for the peace agreement, which was signed by the presidents of the five Central American nations (that is, excluding Belize and Panama) on August 7, 1987. The principal terms of Esquipulas II call for national reconciliation, democratization, cessation of external assistance to guerrilla forces, an end to the use of national territory to harbor those forces, and continued negotiations on arms control. For the text of the agreement, see the New York Times, August 12,1987, p. A8. 13. Secretaría de Programación y Presupuesto, Plan nacional de desarrollo 1989-1994 (Mexico City: Secretaría de Programación y Presupuesto, México), pp. 30-31 (emphasis added). 14. Confidential interview with an SRE official, June 1990.

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15. Mexico and Central America Report, RM-90-04 (May 19,1990). 16. Between 1980 and 1986 intraregional trade among the CACM countries dropped 58 percent; over the same period, Central American imports dropped from 1.1 billion to 0.5 billion U.S. dollars. United Nations, Comisión Económica Para América Latina (CEPAL), "Centroamerica: Situación actual y perspectivas de la economía y la integración," LC/MEX/L.101/Rev.2 (September 7,1989), pp. 32-33. 17. The Washington Post, June 18,1990, p. A15. 18. See Secretaría de Hacienda y Crédito Publico, "Programa de cooperación económica y financiera de Mexico en favor de Centroamérica," photocopy (Mexico City: Secretaría de Hacienda, México, February 13,1990), pp. 10-11.

19. Secretaría de Programación, Plan nacional de desarrollo 1989-1994, p. 30. 20. "Informe de México a la Conferencia Internacional sobre Refugiados Centroamericanos," photocopy (Mexico City, Comisión Mexicana de Ayuda a los Refugiados, March, 1989), pp. 6-7. 21. Pedro Vuskovic-Céspedes, "Central America: Regional Crisis and Alternatives for Peace and Development," in Mexico-Central America-U.S. Relations: Implications for Peace and Development in the Region, ed. Rodrigo Juaberth et al. (Boulder, Colo.: Westview, forthcoming). 22. For a fuller discussion of Mexico's definition of security vis-à-vis its external environment, see Sergio Aguayo's chapter in this volume. 23. See also Olga Pellicer de Brody, "National Security in Mexico: Traditional Notions and New Preoccupations," in U.S.-Mexico Relations: Economic and Social Aspects, ed. Clark W. Reynolds and Carlos Tello (Stanford: Stanford University Press, 1983), pp. 181-192. 24. Sergio Aguayo Quezada, El éxodo centroaméricano (Mexico City: Foro 2000,1985), pp. 84-85. 25. Published on March 16,1989, and cited in the New York Times, March 17,1989, p. A l . Olga Pellicer makes this point as well in her chapter in this volume. 26. Daniel C. Levy, "The Implications of Central American Conflicts for Mexican Politics," in Mexico's Political Stability: The Next Five Years ed. Roderic A. Camp (Boulder, Colo.: Westview Press, 1986), pp. 244-245. 27. See Sergio Aguayo Quezada, Chiapas: Las amenazas a la seguridad nacional, Estudios del CLEE EST-006-86 (Mexico City: Centro Latinoamericano de Estudios Estratégicos, June 1987), pp. 9-12; and Thomas Benjamin, A Rich Land, A Poor People: Politics and Society in Modern Chiapas (Albuquerque: University of New Mexico Press, 1989), pp. 235-236. 28. See Antonio García de León, "Encrucijada rural: El movimiento campesino ante las modernidades," Cuadernos Políticos, no. 58 (October-December 1989): 29-40; and Adriana López Monjardin, "1982-88: Un proyecto anticampesino y antinacional," Cuadernos Políticos, no. 53 (January-April 1988): 19-33. 29. Cesaer D. Sereseres, "The Mexican Military Looks South," in The Modern Mexican Military: A Reassessment, ed. David Ronfeldt, Monograph series no. 15 (La Jolla, Calif.: Center for U.S.-Mexican Studies, University of California, San Diego, 1984), p. 210; Aguayo, Exodo centroaméricano, p. 96.

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30. Financed by the World Bank, Plan Chiapas called for the investment over six years of the equivalent of $300 million U.S. dollars. Specifically, the stated objectives of the plan were to increase agricultural production by small farmers, strengthen the communications and transportation infrastructure of the state, correct irregularities in landholding, improve the administration of municipalities, and assure the legality and impartiality of electoral processes. Secretaría de Programación y Presupuesto, "Plan Chiapas," in Antología de la planeación en México, 1917-1985:16. Planeación regional, estatal y municipal (1982-195\85), (Mexico City: Secretaría de Programación, 1986), pp. 541-607. See also Aguayo, Chiapas, pp. 16-17. 31. Aguayo, Chiapas, p. 15. 32. "Integrar a la región sureña del país a refugiados guatemaltecos," La Jornada (Mexico City), June 14,1990. 33. See Declaración de Cartagena sobre los refugiados, conference document produced by the "Coloquio sobre la protección internacional de los refugiados en América Central, México y Panamá: Problemas jurídicos y humanitarios," cosponsored by the Universidad de Cartagena de Indias Facultad de Derecho, Centro Regional de Estudios del Tercer Mundo, and the United Nations High Commissioner for Refugees, Cartagena, Colombia, November 1922,1984, p. 14. 34. "Integrar a la región sureña, La Jornada, June 14, 1990. In fact, the number of Central Americans who will actually qualify for refugee status will depend upon the way in which the legislation is implemented. 35. This status had already been granted to the 20,000 Guatemalan refugees who in 1984 chose to move from Chiapas to the UN-sponsored settlements in Campeche and Quintana Roo. The recent modification is due in part to the availability of new external funding from the European Community, Sweden, and Japan for public works projects that will employ the refugees. 36. Estimates from a confidential interview with a U.S. Embassy official, Mexico City, June 1990. 37. The Nation 249, no. 6 (August 21-28,1989), p. 193. 38. Ibid. See also the New York Times, March 5, 1989, p. A l ; and The Economist, April 29,1989, p. 224. 39. Latin American Monitor, April 1989, p. 640. 40. Of particular concern over the years has been the threat of being excluded from Central American markets by the CACM's external tariff barrier. This concern led the Mexican government to launch a series of initiatives designed to increase trade on a preferential basis for Central America; to provide credits to Central America for the purchase of Mexican products; and to foster joint Mexican investment (on a minority basis) with Central America. See Ramón Medina Luna, "Proyección de México sobre Centroamérica," in México y América Latina: La nueva política exterior (Mexico City: El Colegio de México, 1974), pp. 11-46. 41. This distinction, though perhaps merely semantic in economic terms, is philosophically important because, as a developing country itself, Mexico does not consider itself to be in a position to "grant aid" for the development of other countries. 42. By contrast, cumulative growth in South America over the same period

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was 11.7 percent. Comisión Económica Para América Latina (CEPAL), "Centroamérica: Evolución económica en 1989; apreciación preliminar," LC/MEX/L.129 (Mexico City: CEPAL, United Nations, February 27,1990), p. 15. 43. This contrasts with the less severe drop in South America's average per capita income, which was 8 percent over the same period (ibid., p. 1). 44. In 1989 Belize was formally included in the San José Accord, although that country has not yet received any shipments of oil under its terms. Barbados also receives oil through the accord, but it is supplied exclusively by Venezuela. 45. By contrast, interest rates on commercial bank loans in 1983 were over 11 percent, while World Bank loans carried an interest rate of 8.25 percent. George W. Grayson, Oil and Mexican Foreign Policy (Pittsburgh: University of Pittsburgh Press, 1988), p. 126. 46. To qualify for the longer term, the importing country must (1) allow Mexican enterprises to execute the project and (2) be current on its payments to Mexico for debt incurred on oil sales already financed through the accord. Secretaría de Hacienda y Crédito Publico, "Mecanismos financieros de México para el apoyo de empresas mexicanas en Centroamérica y el Caribe," photocopy (Mexico City: Secretaría de Hacienda, April 3,1989). 47. Secretaria de Hacienda y Crédito Público, "Apoyos financieros de México a los paises centroamericanos," photocopy (Mexico City: Secretaría de Hacienda, June 8,1990), p. 2. 48. Between 1980 and 1983 the initial financing in theory could have been converted into long-term financing over twenty years at 2 percent interest, but the restrictive condition that the resources derived from this financing be devoted to energy-related development projects eliminated all potential candidates. 49. Projects meeting these guidelines include the cultivation of food products that can be exported to the Mexican market; the development of energy resources and national infrastructure; and the rational utilization of natural resources. Secretaría de Hacienda, "Apoyos financieros," p. 4. 50. To this end, 10 million of the 122 million U.S. dollars Mexico endowed to the BCIE is earmarked for technical assistance and preinvestment studies. The latter are to help the recipient country target the Mexican and other enterprises necessary for the execution of the project. 51. By the end of 1989, Central America's total public external debt, including debt to Mexico, was estimated to be almost 20 billion U.S. dollars. Comisión Económica para América Latina (CEPAL), "Centroamérica: Evolución Económica en 1989" (New York: CEPAL, United Nations, 1990), p. 21. 52. Secretaría de Hacienda, "Programa de cooperación," p. 1. 53. Medina Luna, "Proyección de México," p. 11. 54. Mexico took advantage of the renegotiation of the Treaty of Montevideo in 1980 (which changed the name of the trade group to the Latin American Integration Association, or ALADI) to secure new provisions allowing for preferential trade relations with nonmembers of the treaty. See in particular articles 24-27 of the treaty. Secretaría General de la Asociación Latinoamericana de Integración (ALADI), "Tratado de Montevideo, 1980," photocopy (Montevideo: ALADI, August 1980), pp. 6-7. 55. "Acuerdo de alcance parcial entre los Estados Unidos Mexicanos y la

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República de Guatemala," Guatemala City, September 4, 1984; "Acuerdo de alcance entre los Estados Unidos Mexicanos y la República de Honduras," Tegucigalpa, December 3,1984; "Acuerdo de alcance parcial entre los Estados Unidos Mexicanos y la República de Nicaragua," Mexico City, April 1985; "Acuerdo de alcance parcial entre los Estados Unidos Mexicanos y la República de El Salvador," Mexico City, February 6,1986; "Acuerdo comercial entre los Estados Unidos Mexicanos y la República de Costa Rica," Mexico City, February 27,1986; and "Acuerdo de alcance parcial entre los Estados Unidos Mexicanos y la República de Panamá," Mexico City, May 22,1985—all photocopies (Mexico City: Secretaría de Comercio y Fomento Industrial, Mexico). 56. These are known as the Payment and Reciprocal Credit Agreements (Convenios de Compensación y Crédito Reciproco). For more analysis, see Gabriel Rosensweig, "La cooperación económica de México con Centroamérica a partir de 1979: Perspectivas para los proximos años," in La política exterior de Mexico: Desafíos en los ochenta, ed. Olga Pellicer (Mexico City: CIDE, 1983), pp. 235-272. 57. This arrangement compares favorably to the similar credit lines of ALADI, which charges interest at 90 percent of prime. 58. United Nations, CEPAL, "Centroamérica: Evolución Económica en 1989," p. 17. 59. The terms of Costa Rica's debt restructuring are fourteen years with four years' grace, at the London interbank offer rate (LIBOR). This model was the basis for subsequent arrangements that Brazil granted to Uruguay and that Argentina granted to Bolivia. 60. Secretaría de Hacienda, "Apoyos financieros," pp. 6-7. 61. Certain products deemed sensitive to Mexico's trade balance are prohibited, however. 62. Secretaría de Hacienda, "Mecanismos financieros," p. 21. 63. Secretaría de Hacienda y Crédito Público, "Programa de cooperación energética para paises de Centroamérica y el Caribe," photocopy (Mexico City: Secretaría de Hacienda, May 1990), p. 8. 64. Secretaría de Relaciones Exteriores, "Nicaragua: Asistencia económica de México," photocopy (Mexico City: Secretaría de Relaciones Exteriores, Mexico, 1982). See Maria Guijarro Arrillaga, "Una experiencia en la cooperación México-Nicaragua," master's thesis (Iztapalapa, Méx.: Universidad Autónoma Metropolitana, May 1984). 65. Unpublished International Monetary Fund statistics, cited in Arturo Cruz Sequiera, "Nicaragua: Crisis económica, radicalización o moderación?" in Centroamérica: Más allá de la crisis, ed. Donald Castillo Rivas (Mexico City: Ediciones SIAP, 1983), pp. 14&-149. 66. Secretaría de Hacienda, "Apoyos financieros," p. 7.

11 Mexico in the New Era of the United Nations: Continuity and Change Olga Pellicer

Since its inception the United Nations has always held a position of importance in Mexican foreign policy. The opportunity afforded by the global forum to counteract the excessive bilateralization of the country's foreign relations, the presence in its agenda of sensitive topics for Mexico's internal politics, and the experience of some of the most renowned members of the Mexican foreign service in multilateral affairs allow us to predict that this will continue to be the case. Mexico's decision to formally present its candidacy for a seat on the Security Council for the 1992-1993 term also confirms this impression. The question for the future is not how much attention Mexican diplomacy will grant to the UN but rather what objectives it will pursue in the light of the changing circumstances both in the UN and in Mexico's domestic scene itself. Along with other spheres of international relations, the United Nations is going through a period of unprecedented change. Opportunities for the UN to participate in the settlement of regional conflicts have been greatly amplified; new agenda priorities have emerged; groups of negotiating partners are changing shape. As a result, unexpected challenges have arisen for the member states. Mexico's response to these challenges will be conditioned by domestic factors, which include, among others, its receptivity and reactions to the new agenda priorities, such as international policy on the environment; the inertia of its traditional mechanisms for conducting UN diplomacy; the search for new modes of insertion into the international economy; and the rate at which the country's economic and political modernization is achieved. The purpose of this chapter is thus twofold: first, to describe the recent transformations in the United Nations; and second, to chart the route Mexico is likely to take in response, with some attention to the domestic factors that will affect Mexico's decisions.

A Landscape in Flux: Signposts to a New Era for the UN The UN entered a new era starting in 1987, when the Soviet Union and the United States, the two most powerful of the five permanent members

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of the Security Council, began to exhibit a marked improvement in their bilateral relationship. In the ensuing climate of conciliation, we have witnessed far-reaching changes in the UN's ability to pursue peacekeeping missions, in the nature of its policy agenda, and in the very means by which its members carry out their own agendas. All of these have implications for Mexico's UN diplomacy. Resolving Regional

Conflicts

The new climate of rapprochement in the Security Council has enhanced the ability of Secretary-General Javier Pérez de Cuéllar to actively search for, and execute, agreements concerning regional conflicts. This first sign of a new era was manifested in the Geneva accords for the withdrawal of Soviet troops from Afghanistan, which took place under the auspices, and with the active participation, of the UN. Also in the years since 1987, advances in negotiations over other regional conflicts have allowed the Security Council to implement five formal peacekeeping operations. Two of these would prove to be decisive moments in the annals of the UN's actions for peace. First was the UN Transition Assistance Group for Namibia (UNTAG), which, despite initial skepticism, managed to organize Namibia's elections of November 1989 and install its first independent government. And second were the diverse operations for peace in Central America, including the Observer Mission for the Verification of Elections in Nicaragua (ONUVEN); the International Support and Verification Commission, responsible for dismantling irregular forces in Honduras and Costa Rica, as well as for their repatriation to Nicaragua and attention to their immediate needs; and the UN Observer Group in Central America (ONUCA), whose mandate has evolved to the point that it has become a central player in the demobilization of irregular forces within Nicaragua. To these activities we might add other recent peacemaking efforts by the secretary-general, such as his mediation to encourage negotiations between the government of El Salvador and the Farabundo Marti Liberation Front (FMLN) and his plans for the holding of a referendum in Western Sahara. At the same time, the Security Council has adopted a plan for a comprehensive political settlement of the Cambodia conflict based on an enhanced United Nations role. This plan, which includes the organization of elections by the UN, will be one of the most ambitious actions ever undertaken by the organization toward the settlement of a regional conflict. It is well beyond the scope of this chapter to analyze peacekeeping operations further. But given the salience of peacekeeping operations as a major UN activity, it is important to recognize some of the questions

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19 7

they are raising for the member states—in particular those which, like Mexico, are seeking membership in the Security Council. The most obvious question, seemingly of only a procedural nature, concerns financing. The budget for peacekeeping operations has already matched the size of the regular budget for the UN, at a time when the majority of the developing countries are in a difficult position to increase their contributions. As a result, for all practical purposes the principal responsibility for the operations has fallen on the five permanent members of the Security Council and leading donor countries, among which Japan, the Scandinavian countries, Canada, and Germany stand out. This situation has in turn led to a tacit differentiation among UN members, one that emphasizes the superiority of the donor countries, whose influence upon the Secretariat, and therefore upon all the activities carried out by the organization, is ever increasing. Another controversial issue surrounding the peacekeeping operations is the extent to which they should be broadened. Sending two missions of observers to the February 1990 Nicaraguan elections and the possibility of carrying out government functions in Cambodia are fairly novel roles for the UN. Even more novel would be direct participation to protect the environment or to stem drug trafficking, both of which have been proposed in one forum or another. Thus far, no UN operation has challenged the principles of the sovereignty and internal jurisdiction of the member states. Before any UN operation can be initiated, it must have the consent of the targeted state or states and of all other interested parties. But in the new atmosphere of conciliation among the permanent members of the Security Council, some voices, known for their ascendancy in UN thinking, are raising the possibility of rescinding this requirement. 1 Although at this point the voices are simply speculating, they are nonetheless disquieting, for two reasons. First, international relations are now in a period of such rapid transition that there are doubts as to how the UN, or any institution or government, can best identify the most serious new threats to peace and international security. As the putative danger of Soviet expansionism recedes, and as the very real fear of nuclear annihilation is ebbing, other problems (again, the prime examples being the environment and drug trafficking) are coming to the fore in many nations' estimations of the most serious threats to the health and survival of the human race. Without denying the importance of these problems, we cannot help but conclude that their urgency has at times been used to legitimate unfortunate acts of intervention. 2 These cases invite the exercise of greater caution. Second, and at a different level, talks regarding the possible participation of the UN in the Cambodian conflict, have been carried out among the five permanent members of the Security Council, without the formal participation of other

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states that are also UN members. That procedure raises the worrisome possibility that a new, hegemonic "directorate" might be engendered, with a clear influence on the Security Council. Such a prospect is of even more concern if we take into account the fact that internal problems in the Soviet Union are precluding its traditional role as a counterbalancing force in the Council. The New Primacy of Transnational Problems The second sign of a new era for the UN is the gravity of problems that transcend national boundaries. Again, the global environment and international trafficking in illegal drugs are the most prominent of these. The publication in 1987 of the UN report Our Common Future3 can be seen as a watershed in the growth of an international consciousness of the dangers posed by the rampant contamination, misuse, and destruction of our natural resources. Environmental organizations, diverse research findings, and the pronouncements issued by political leaders from around the globe have all contributed to the now widely accepted notion of a "world in danger." And the topic has acquired even greater weight since, as noted earlier, it has for many leaders come to replace nuclear destruction as the leading threat to our continued existence.4 In response to these and other concerns, the efforts of the UN are increasingly pivoting around environmental initiatives. In 1989, for example, one out of every five resolutions approved by the Committee of the General Assembly for Economic Issues referred to the environment; and in 1990 the greater UN system convened over a hundred international conferences on diverse aspects of the environment, in many instances prefatory to the topics slated for the 1992 International Conference on the Environment. The scope for multilateral actions to improve the environment is vast. It includes the so-called global changes—in particular, the depletion of the ozone layer and the "greenhouse effect"—as well as regional and local manifestations of environmental decay, such as air and water pollution, acid rain, desertification, and the depletion of forested areas of all kinds. Moreover, a panoply of theoretical and methodological issues need to be resolved, such as providing an exact definition of the term "sustainable development," establishing the linkages between environmental and development concerns, creating mechanisms for the elaboration of norms and conventions, determining the responsibility of specific states, and reaching compromises on the means for international cooperation. It is not surprising that the projected budget for the committee planning the 1992 event is the largest yet foreseen for a UN conference. Growth in international concern over illegal drug trafficking has been in evidence since the Vienna Conference of 1987. The multidisciplinary

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nature of the problem—including consumption, production, distribution, education, and rehabilitation—was established at that time, as well as the need to approach the crisis in an integrated manner through international cooperation.5 The conference also approved a plan of global action, although the plan sorely lacked the financial support and political will necessary to put it into effect. Regarding the development of international norms, the UN sponsored the elaboration and signing of the 1988 Vienna convention on illicit drug trafficking.6 Throughout the last few years the expanding dimensions of the drug problem—the rising consumption in the industrialized nations and the growing realization of the links between drug trafficking and terrorism in the producing nations—led the General Assembly to summon a special session on drug-related issues in early 1990. That session adopted a political declaration and new action plans pertaining to both the global level and the level of the UN system.7 This time, the political will necessary to advance financial support for the plans seems to be more forthcoming. Indeed, the drug issue is likely to remain near the top of the UN's agenda throughout the coming decade. Waning Interest in

Development

A third signpost to the new era is a marked decline in the UN's traditional emphasis on development initiatives. Unlike the peacekeeping operations, which in 1988 were recognized for their influence over world affairs with a Nobel Peace Prize, the UN's efforts to avert increasing North-South polarization and to counteract the consequences of the so-called "lost decade for development" have met with widespread pessimism.8 Over more than two decades, from the mid-1960s to the mid-1980s, most UN activities were dominated by efforts on the part of the developing nations to institutionalize principles that would legitimate their demands for a New International Economic Order. Global negotiations to improve North-South relations were also central to UN affairs at the time. But little was actually accomplished: The industrialized nations accepted neither the terms for the global negotiations nor the principles of the New International Economic Order. Nonetheless, throughout those years the UN became a significant force in consolidating the theses put forward by the developing nations, a sounding board for their demands, and a forum in which, largely due to their coordinated action through the Group of 77, they enjoyed an undeniable power. Today, in curious disharmony with the gravity of development problems in the southern continents, or perhaps precisely because of the serious limitations imposed by their economic crisis, the subject of international cooperation for development has receded from the UN's agenda.

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The developing countries have abandoned their demands for global negotiations and a new economic order. In a pragmatic fashion, the Group of 77 now searches for resolutions by consensus, with proposals that often refer to only partial aspects of development, and that may not call for substantive commitments by the industrialized nations to broaden the mechanisms of macroeconomic coordination to encompass the views and interests of the developing nations. A good example of this toned-down approach was the final Declaration of the XVIII Special Session of the General Assembly on international economic cooperation, in particular, the revitalization of economic growth and development of the developing countriesIts approval by consensus brought to an end ten years of stagnation in the North-South dialogue; and as such, it is welcome and no doubt represents a step forward. But the concessions made by the developing nations regarding their individual responsibility for adjustment programs, and the evasive pledges made by the industrialized nations concerning their future policies for international economic cooperation, evinced a new timidity on the part of the UN as a whole in its efforts to afford the developing countries a stronger foothold on the world economic stage. Much of the waning interest in development is directly attributable to the G-77's recent loss of relative power and coordinating capacity within the UN. In fact, the ingrained map of intraorganizational negotiations— which has long been based on three groups, the industrialized countries, the socialist republics, and the G-77 (whose numerical superiority allowed it to impose decisions through its sheer voting power)—is being whittled into new, ephemeral patterns during this uncertain transition to a new era. It is highly probable that the "old" schema will be replaced in the coming decade by pragmatic, transitory alliances among groups or subgroups, decided on the basis of regional or thematic interests, which brings us to a necessary reflection on these changes in decision making within the UN. Bloc Politics in the UN Today

Politics in the UN today are in a constant state of flux, with old blocs disintegrating and new groups coalescing and recoalescing (or failing to coalesce). The most dramatic change in the three large negotiating groups has been the crumbling of the socialist bloc. The transformation in the internal politics of the Eastern European countries in late 1989 had immediate repercussions for traditional voting patterns in the UN. Emblematic was Poland's abstention from the resolution condemning the U.S. invasion of Panama; another example, which confirmed their break with long-standing commitments, was the cosponsorship by the formerly socialist countries of Poland and Czechoslovakia of a resolution regarding

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Cuba approved by the Commission on Human Rights in March 1990. The coalescing of the positions of the Eastern European countries with positions characteristic of the primarily Western industrialized countries, together with their not incidental interest in becoming new beneficiaries of programs sponsored by UN agencies, is adding a new dimension to the dialogue between them and the developing countries. Far from having the automatic support previously extended by the Eastern European countries, G-77 members now find themselves competing with them for scant resources. It should come as no surprise, therefore, that they have begun to question how the formerly socialist countries have managed to obtain a relatively large number of seats in several important organs of the UN. Moreover, while the socialist bloc has been crumbling, the members of the Western bloc have succeeded in consolidating their activities. One of the most notable examples is the practice followed by members of the European Community over the past five years of acting as a unit on almost every issue discussed at the General Assembly. This in turn has given them heightened influence, transforming the EC into a new power center that is perceived as such not only by members of the G-77 but also by the United States and Japan. Although such fully coordinated action can engender problems of rigidity, as well as blurring the stances of the individual participants, the new, unified Europe has gained a noticeably broader range of influence in the international arena. Another interesting development within the Western bloc is the insistence that some of its members, traditionally supporters of multilateralism, have displayed in their search for a more dynamic role in the organization's work, taking advantage of the window opened by the rapprochement between the Soviet Union and the United States. Thus, the Scandinavian countries have seized a pivotal role in the handling of environmental issues; Australia has become prominent through its efforts to advance its proposal for UN action in Cambodia; and Sweden has been persistent in its efforts to moderate the positions of the Palestinian Liberation Organization and foster a better climate for negotiations in the Middle East—among several other examples. But contrasting sharply with this individual influence being exerted by the medium powers in the Western bloc and with the bloc's growing consolidation is the striking loss of influence of the developing countries, whose traditional mechanisms of coordination are failing. The end of the Cold War has produced a serious identity crisis for the nonaligned movement. Since its inception at the end of World War II, the rivalry between the two superpowers had much to do with shaping the movement's identity; and so now it finds itself with its very foundations shaken. A great effort of imagination is now necessary to fix credible new

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objectives. The difficulty posed by this challenge was recently exemplified on the occasion of the ministerial reunion during the special session of the General Assembly for International Economic Cooperation, where it proved impossible to adopt a communiqué that had the approval of all the member countries. In fact, the difficulties inherent in establishing a new raison d'être and modus operandi are several. In the first place, several of the movement's leading members are suffering severe domestic problems, such as economic crisis, disputes among ethnic minorities, and the renovation or change in their political elites. These conditions have necessarily paralyzed their creativity in searching for new goals, strategies, and proposals for their U N diplomacy. Similar problems, although with different roots, are faced by the G-77. The group's force resided, for several years, in its numerical weight; in its internal discipline; and, it bears mentioning, in the validity of its theoretical formulations regarding the problems of development. The participation of the G-77 in consolidating the U N Conference on Trade and Development (UNCTAD) and the principles on which the latter was founded was an accomplishment of great significance. Nonetheless, with time the force of these factors has been diminished. Today, for good or for bad, a tendency has been imposed by which U N resolutions of importance are adopted without voting, that is, by consensus. Without belaboring the positive or negative character of this tendency (it could well be considered a retreat to the era of the League of Nations), the fact is that without a vote the numerical weight of the G-77 is invalidated—because it makes no difference. In the second place, the developing nations' habit of seeking consensus within the G-77 before presenting resolutions on economic subjects unnecessarily complicates work on these issues and frequently leads to dubious results. Thus, agreement within the G-77 has become increasingly illusory, as measured by the fact that, throughout the critical transformations of the international economy that took place over the past decade, the positions common to all its members have remained at the level of generalities. The formulation of positions on how to participate most effectively in the international economy receives little impetus when, for a large number of developing nations, the very viability of their participation is in doubt. By 1990 the differences among the members—both regional differences and disparities in the level of economic development—had intensified. Conditions in Africa's poorest countries are very different from those in the recently industrialized nations of Southeast Asia. Foreign debt is a priority for Latin America, but not for the countries in the Asian group, who are more concerned with protectionism. Many African nations require emergency programs of food supply, which are not so urgent in other regions. And the rifts have only been widened by the differences in the

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remedies the nations propose: For some countries it is important to emphasize the critical situation facing the least-developed areas, while for others it is important to stress strategies to accelerate competitiveness and industrial development. This is not to say that there is no longer a common denominator to the stances of the developing nations; the simple fact of nonparticipation (whatever the cause) in the formal mechanisms of economic coordination among the industrialized nations is in itself a reason to close ranks. But it is nevertheless obvious that this will not be enough to counteract the heterogeneity of interests and recover the group's power. A clear and profound reorganization of its goals is needed, which may mean an acceptance of subregionalization and differentiation in specific cases. The route toward new goals and negotiating methods has been difficult for the G-77, however, especially given the inertia inherent in the mechanisms of the Economic Committee of the General Assembly, which is dominated by a small group of middle-level diplomats. In these circumstances, what role can be played by a country like Mexico, which has acquired a certain prestige and a tradition within the UN? Mexico's UN Diplomacy: Guideposts to Continuity and Change Given the unprecedented changes that are altering the form and substance of the UN, one of the most urgent tasks facing Mexican diplomacy is a revision of its goals and strategies vis-à-vis the UN. This does not mean that it is either viable or desirable to abandon the traditional goals or mechanisms of coordination with other developing nations. Many if not most of those goals are still valid, even if they have paled somewhat in the light of new priorities.10 Moreover, no viable alternative to the existing mechanisms of coordination has yet presented itself. Despite the weakening it has suffered, the G-77 is still an unavoidable presence in the UN. New coalitions, such as possible subregional groups, are still incipient and offer no guarantee of success. Thus, Mexican policy in the UN must maintain a balance among continuing to promote traditional goals, incorporating new priorities, and searching for more efficient forms of coordination without, however, denying the importance and durability of those which still exist. Maintaining

Mexico's Traditional

Convictions

Among the issues still having ongoing relevance in Mexico's policy toward the UN are those related to disarmament. UN diplomats will not easily forget that the final document adopted by consensus in the first Special

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Session for Disarmament of the General Assembly in 1978 was, in large measure, articulated and promoted by Mexican diplomats. Denizens of the organization have great respect for the tenacity with which Mexico, in the risk-ridden years of East-West confrontation, persistently focused international attention on the dangers posed by the nuclear arms race." In recent years Mexico's interest in the issue has centered on the General Assembly's resolutions regarding the summoning of a Conference for the Amendment of the Moscow Partial Test Ban Treaty, which points toward the total prohibition of nuclear testing. Many nations committed to the cause of nuclear disarmament believe that technological change and the modernization of nuclear weapons have served simply to counteract the advances gained in the agreements now being promoted by the Soviet Union and the United States. In their view, only a total ban on nuclear weapons testing can halt the qualitative advance of nuclear arsenals and provide a more solid ground for effective disarmament. It is unlikely, however, that the scope for the Partial Test Ban Treaty will be broadened. All amendments to the treaty require the approval of the depository governments (the Soviet Union, the United Kingdom, and the United States), which have made their opposition to such projects well-known. Nonetheless, as in so many activities promoting the cause of disarmament, a primary goal is celebration of the conference itself, which will offer the opportunity to attract the public's attention and interest, to mobilize nongovernmental organizations, and to promote a greater awareness of the limitations of the disarmament process now going on. In large part through the active diplomacy of Mexico, the conference is now being planned for January 1991. A second issue that has been prominent on Mexico's agenda is international migration. In collaboration with other "countries of origin," Mexico has for several years now been promoting a Convention on the Rights of Migratory Workers and Their Families and has presided over the UN working group on the topic. Following a series of complex negotiations aimed at reconciling the points of view of receiving countries and the countries of origin, the convention was finally completed May 1990. From here it goes on to a vote by the General Assembly before it is sent to the member states for ratification. The convention is the first instrument of international law to establish a broad set of rights for all migratory workers, regardless of the conditions under which they entered the receiving country. As such, it will therefore apply to workers who have crossed borders without documents (a very sensitive issue in Mexico's foreign policy)—workers whose number has risen dramatically in recent years as a result of growing international disparities in income and the high demand for labor in the industrialized nations. The convention applies to the workers' families as well, which again constitutes a great step forward

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in international law on this issue. And indeed Mexico has historically had a strong interest in contributing to the development and codification of international law. In the Forty-fourth General Assembly (1989) Mexico, together with other nonaligned countries, proposed the establishment of the UN Decade of International Law. The program of the Decade, to be elaborated in the 1990 Assembly, will include a number of Mexican proposals, such as strengthening the obligatory jurisdiction of the International Court of Justice, a campaign to encourage the signing and ratifying of the treaties sponsored by the UN, wider dissemination of information on advances made in the international community's adoption of legal instruments, and a general improvement in the teaching of international law throughout the world. Last, but certainly not the least among Mexico's traditional goals within the UN, is the concern to keep alive the organization's commitment to the process of economic development and social advancement. Many arguments can be used to support this priority, the first of which is its congruence with the basic principles underlying the establishment of the UN. The UN Charter signaled a significant advance beyond the concepts of peace and security that were prevalent at the end of World War II, namely, by recognizing their linkage with social and economic development. It is not in vain that the Social and Economic Council is categorized, along with the General Assembly and the Security Council, among others, as one of the principal organs of the UN. A second, unavoidable argument for development goes beyond theory to the economic reality facing much of the world today: the legacy of the alarming deterioration of social and economic conditions in the majority of the developing nations during the 1980s; the widespread uncertainty over ways to reverse that trend; and the additional demand for development funds and technological resources generated by the opening of the Eastern European economies. On the other hand, it has also been argued that the UN is not the ideal forum in which to discuss development, and that other agencies, such as the International Monetary Fund and the World Bank, are there to fulfill this need. But the actions taken by those agencies address only some of the many aspects of development. Only in the UN can development be dealt with in an integrated, global manner and dealt with simultaneously with issues of international peace and security. The UN is also one of the few arenas in which it is possible to counteract a distorted perception of reality. For instance, influential segments of the media in many parts of the world have stated that the end of the Cold War, the dismantlement of the Eastern European regimes, and the interdependence of the world economy all augur a better era. Yet nothing up to this point would allow the developing nations to make such a prediction. The fact is, no clear signs

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have appeared that might lead us to assume that we can achieve a recuperation of growth and long-term development on a global level. It is one of the tasks pending for the UN to be alert to the obstacles, mainly at the international level, to attaining this goal. To emphasize the legitimacy of the UN as a vehicle for promoting economic and social development is not enough to remedy its loss of resolve when it comes to this agenda item. A new strategy is needed, and a necessary prerequisite is stronger leadership by the developing nations. This is a topic addressed later in this chapter, but it is worth mentioning two important venues in the UN here. The first is the UN Development Program and other organs with responsibilities for development, such as the World Food Program. There is much to be done in these organs to increase, or simply to prevent diminishing, their financial resources. They must also guard against being converted—as has already happened in some cases—into agencies devoted mainly to the administration of aid or emergency assistance programs for the least-developed countries. The second venue is the General Assembly, which still plays a significant role (through its resolutions, declarations, and strategy formulations) in seeking to identify the most urgent social and economic problems, to recommend measures to counteract them, and to provide a normative framework for international cooperation for development. But the prevailing climate for carrying out these functions is not encouraging. As already noted, the Final Declaration of the Special Session of the General Assembly is a timid document, one in which the industrialized nations made a minimal commitment to helping solve the grave development crisis of the 1980s. But it would be even more discouraging to accept that there is nothing left to do. Despite its timidity, the declaration holds out some elements from which to elaborate and continue negotiations over the coming years. For example, the document recognizes the mutual responsibility of all the member states to achieve the reactivation of development and economic growth; and it represents the first time the United States formally endorsed with its vote the view that measures taken to reduce the developing nations' external debt must have as a goal their renewed growth and development. Incorporating

New

Priorities

The second group of priority issues for Mexican policy in the UN includes those which have come to the center of attention in recent years, such as peacekeeping operations and protection of the environment. On peacekeeping, it is probably time for Mexico to change its traditional standpoint and begin to participate more actively. Until now Mexico has been reticent to participate in the UN's peacekeeping forces. The

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experience of the Interamerican Peace Forces, in their interactions with the Organization of American States (OAS), fully justified this reticence. But the enormous legitimacy the peacekeeping operations have since gained, the fact that they now employ civilian contingents, and their current role in regions that are of strategic interest to Mexico (such as Central America) should soon lead to a change in attitude. Mexico's eventual participation in the operations would offer the nation greater exposure to and dialogue with the UN agencies responsible for them. In my opinion, this is an opportunity that should not be missed. A second issue of the peacekeeping operations concerns the principles upon which they function. As it has already stated before the General Assembly, Mexico stands firmly by the principle according to which the consent of the parties involved in a conflict is required in order to initiate an operation. Mexico also maintains that, when designing the mandate for an operation, the principles of the sovereignty and internal jurisdiction of the states concerned must be taken into account. Finally, Mexico is interested in counteracting, as much as possible, the tendency to reach decisions concerning peacekeeping within the circle of a limited number of states. Thus, it has been in favor of revitalizing the functions of the Special Committee of the General Assembly for Peacekeeping Operations in all their aspects. The establishment of channels of communication among that committee, the Security Council, and the pertinent agencies from the secretariat, would allow an organ of a global character, such as the General Assembly, to be better informed regarding the diverse aspects of the operations. The environment is an issue that poses the greatest challenges, in part because of its dual nature: It is as much an issue of science and technology as it is a problem of international politics. Given the vast scope of the issues involved and the paucity of human and financial resources that have been committed to their resolution, it would seem advisable for Mexico to concentrate on some subset of the issues. This is not to say, however, that Mexico should focus its attention exclusively on the most immediate problems of ecological deterioration within its own country. By now it is well recognized that any meaningful reversal of environmental deterioration will require international cooperation, which in turn must be set in motion by the establishment of wide-ranging principles on a global level. Mexican diplomacy has been clearly in favor of formulating such principles and of international environmental agreements in general. Mexico has signed the Montreal Protocol on the Protection of the Ozone Layer and the Basel Convention on the Transboundary Movements of Hazardous Waste; it also has a vice-presidency on the Preparatory Committee for the World Conference on the Environment in 1992, and it will host the Latin American Regional Conference of 1991. These actions are

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not enough, however, to assure the country a prominent role in future negotiations. In their pronouncements concerning the tasks to be carried out by the conference of 1992, Mexican representatives have pointed out the importance of identifying and differentiating the causes of environmental problems, taking into account different levels of development, the origin and dissemination of contaminating technologies, and the deliberate prao tice of transferring environmental problems to the developing nations.12 Such differentiation will allow the establishment of responsibilities that correspond to the diverse kinds of countries involved, and to adapt the responses to specific conditions in each region. In the case of the developing nations, additional financial resources are obviously needed, as well as the transfer of technological and scientific knowledge, on a preferential basis, to develop noncontaminating industries. International agreements that incorporate these theses will be difficult to negotiate. Some of the industrialized countries have already displayed a reluctance to take on a real commitment; an eloquent example was the U.S. government's decision not to authorize financial aid to help developing nations cut down on their production of contaminating chemical substances. Powerful economic interests attend the environmental issue in many quarters, and this resistance is therefore very likely to continue. The suddenness with which serious concern about the environment has burst forth upon the world scene has not allowed the majority of countries, including Mexico, to prepare the human resources necessary to master technical knowledge and international negotiations on the subject. What is needed is firm coordination among the diverse internal government agencies that take part in environmental matters—always a difficult task, in Mexico as in any other country, given the usual profusion of contradictory bureaucratic interests. Scientific knowledge and diplomatic skill are also requisite. Thus, the greatest challenges for Mexican multilateral policy in the next years will be to achieve that coordination and know-how and to select an effective strategy for coordinating its policies with other countries having similar interests and standpoints. This brings us to the final topic we must examine in forecasting the future of Mexico's UN diplomacy. The Search for Efficacious

Partners

Mexico cannot pursue its goals in the United Nations on its own. The UN is by definition a political body, and its politics revolve around coordinated positions, intense negotiations, and, increasingly, the search for avenues of consensus. The recent deterioration of the traditional means of coor-

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dinating among the developing countries, namely, the G-77 and the nonaligned movement, has forced Mexico and the others to lose no time in attempts both to arrest the deterioration and to seek new alternatives for concerted action. Each of these tasks has its own immediate and formidable obstacle. In the case of the first there is the inertia of the G-77's procedures, which, as is true of any mature organization, makes it difficult to instigate modes of adapting to new circumstances. And in the second case—the search for alternatives—the unexpected, rapid change in the international scene has triggered a heated debate in Mexican foreign policy circles as to the most efficacious way for the country to enhance its profile in international affairs. As is normal in times of rapid and unpredictable transitions, this debate is raising valid questions, but can also prolong efforts to come to terms with the new situation and move on to the pressing need to make headway in promoting the nation's foreign policy objectives. In his introduction to this volume, Riordan Roett points out that in this final decade of the twentieth century, Mexico must "discard old shibboleths and slogans. Pragmatism and common sense dictate that the new global system will require new—and nuanced—responses." His opinion reflects a common skepticism raised in the general debate among politicians and scholars interested in Mexican foreign relations. Many have questioned the usefulness of channeling the nation's interests through the traditional forums, which, according to some critics, have ultimately produced nothing but rhetorical positions. Many of the same people ask if it would not be preferable to look for mechanisms that are less ambitious, ones defined more by regions or levels of development than by such vague notions as the "Third World" or the "developing nations." In some cases, these queries have gone even further. Specifically, if Mexico's most important economic links are with its northern neighbor, would it not be better to consolidate a North American alliance, which could, in due time, serve as a counterpoint to the powerful alliances represented in the EC and Pacific Rim? Before we reflect on the range of Mexico's potential partners, it is important to offer several counterpoints to the preceding position. Much of that standpoint is based on a preoccupation with issues of trade, investment, and technology transfers. But Mexico's involvement in the UN subsumes a much broader gamut of issues: including regional conflicts of particular strategic interest to Mexico, as in the case of Central America; the development of international norms applicable to issues that are very sensitive for Mexican policy, such as migratory workers and drug trafficking; and the continuing desire to achieve nuclear disarmament. Mexico's strategies for addressing those issues obviously need to be coordinated with the strategies of other countries that hold similar interests and positions.

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Let us then review the implications of Mexico's foreign policy priorities for its choice of negotiating partners. In the case of the UN's peacekeeping operations, I emphasized earlier that Mexico defends a strict adherence to the principles of respect for the sovereignty and internal jurisdiction of the member states. Mexico would therefore oppose any operation undertaken without the explicit consent of all interested parties or undertaken to influence affairs that bear strictly on matters of internal jurisdiction. This position implies the awareness of a dichotomy between the politics of power and the politics of principles; the latter are of particular interest to those who fear meddling in their internal affairs. Recent changes in the international situation have not modified, but may have deepened in some areas, the chasm between nations that intervene and those that are the object of intervention. In other words, a politics of power prevails, and it will continue to be part of the North-South dichotomy. Other issues on the UN agenda also carry with them an unavoidable separation of interests along North-South lines. In the case of migratory workers, we have countries of origin and receiving countries; in the case of the drug problem, we have producing countries and consumer countries; in the case of the environment, we have countries with the resources to develop environmentally sound technologies and countries that require assistance to develop or implement them; in the case of the debt crisis, we have debtor countries and creditor countries. The list could go on, but it would only lead to the same conclusion: There is no denying the mutuality of interests among the southern countries, or among the northern countries either. At the same time, however, not all the issues brought to the forum of the UN are confrontational along North-South boundaries. There is another list—shorter perhaps but no less significant—that transcends the dividing line and proves that common interests and greater collaboration between North and South are possible. Here we have the multiplicity of environmental issues; the campaign to raise standards of living, health, and education for children; and projects to improve the efficiency of the UN's administrative and intergovernmental bodies—to name just a few. Nevertheless, the majority of Mexico's top priorities call for partnerships among developing countries. Thus, it is all the more urgent to revise and improve the working mechanisms of the Group of 77; to strengthen more informal groups already in existence, such as the Rio Group; and finally, to explore new alliances with countries at a level of development and with a regional weight similar to Mexico's. And in the last two cases, it would be convenient to be able to coordinate positions without necessarily going through the larger-scale mechanisms of the G-77.

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Conclusions and Caveats The new era of the United Nations is requiring of each member nation a reassessment of its own diplomacy in regard to both ends and means. The larger organization is now characterized by a greater involvement of the secretary-general and the Security Council in the settlement of regional conflicts, the emergence of new transnational problems as priority issues on the UN's agenda; and changes in the traditional framework for negotiation. Under these circumstances, the developing nations' capacity to influence the life of the organization has diminished. While the UN's peacekeeping activities are undoubtedly extremely constructive, there is also a growing tendency to concentrate power among the five permanent members of the Security Council and the leading donor countries when questions of the peacekeeping operations are being decided. And there is a small but growing chorus of voices calling for a broader scope for the UN's direct interventions, which could lead the organization away from its strict adherence to principles of national sovereignty and internal jurisdiction. On the other hand, the emergence of the new global issues, such as the environment, has opened the gates to an abundance of new possibilities for action by the UN over this decade. Their scope and complexity stand as serious challenges for the diplomacy of the member states, however, especially for that of the developing countries. Finally, regarding the internal politics within the UN, the crumbling of the socialist bloc, the consolidation of power by the industrialized countries, and the deterioration of the G-77's traditional mechanisms of coordination have all contributed to the currently precarious position of the developing nations. The UN is admittedly in flux. But if the preceding trends should continue and become the norm, the developing nations will have little part in determining the new shape of the world organization. Indeed, it could well be that, instead of carrying through on their recent role as protagonists of change, they might become mere passive elements—and, in the final analysis, losers in this new era of international relations. Even under this pessimistic scenario, however, Mexico still retains a certain latitude to preserve its influence in the UN and combat the dangerous marginalization of the developing nations from the process of change. The prestige Mexico has acquired in defending its traditional goals is valuable capital to draw upon in preserving and exercising this influence. There is all the more reason, then, to maintain a vigorous role in disarmament efforts and in international cooperation for development. It will not be easy to gain similar prestige in addressing the emerging

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priorities, such as the environment. Mexico does not have enough international negotiators with the experience and expertise necessary to assert leadership, although it does have both the will and the desire to participate more actively, which often works to overcome obstacles such as these. But the greatest challenge is to find the right partners and develop mechanisms for coordinated action in the multilateral arena. Only through concerted action can the developing nations offset the consequences of the growing solidification of the Western bloc and the loss of equilibrium within the UN that has attended the disintegration of the socialist bloc. The extent of Mexico's capacity to retain or enlarge its range of action, in particular its role in the creating and reformulation of mechanisms of coordination, will be affected by two factors that have now become decisive for legitimacy and ascendancy in international politics: the success of domestic economic policies for a new and more vigorous insertion into the world economy, along with improved and more equitably distributed economic growth; and internal political modernization, in an atmosphere of social peace and respect for human rights. The lessons of the last years of the 1980s were very clear on this point: Democracy and the success of a country's economic model will determine the possibility of becoming a relevant actor in world politics during the 1990s.

Notes 1. See, for example, Brian Urquhart, "Peacekeeping: Where do we go from here?" Survival (London: International Institute for Strategic Studies), forthcoming. 2. General Manuel Noriega's links with drug cartels were presented on numerous occasions as a justification for the U.S. armed intervention in Panama in December 1989. 3. U N World Commission on Environment and Development, Our Common Future (New York: United Nations, 1987). 4. In her speech before the General Assembly in November 1988, British Prime Minister Margaret Thatcher said, "Whilst conventional problems, such as the threat of global destruction or regional conflicts, appear to have been overcome, . . . we have now gained consciousness of other dangers, yet more insidious . . . the possibility of irreparable damage to the atmosphere, the ocean, and the earth itself." In "Provisional Verbatim Record of the forty-eighth meeting," General Assembly, Forty-fourth Session, A/44/P.V. 48 (New York: United Nations, 1988), pp. 4-5. 5. United Nations, Report of the Vienna Conference on Drug Abuse and Illicit Drug Trafficking, A/Conf. 133/12 (New York: United Nations, 1987). 6. United Nations, Convention against Illicit Trafficking in Narcotic Drugs and Psychotropic Substances, E/Conf. 82/15 (New York: United Nations, 1988). 7. United Nations, Final Report of the XVII Special Session of the General Assembly devoted against the production, demand, consumption, traffic and illicit

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distribution of drugs and psychotropic substances, A/RES/S-17/2 (New York: United Nations, 1990). 8. See Donald Puchala and Roger Coate, The Challenge of Relevance: The United Nations in a Changing World Environment (New York: Academic Council on the United Nations System, 1989), pp. 45-63. 9. United Nations, Declaration of the XVIII Special Session of the General Assembly on international economic cooperation, in particular the revitalization of economic growth and development of the developing countries, A/RES/S-18/3 (New York: United Nations, 1990). 10. For a good account of the objectives Mexico has pursued in the United Nations, see Secretaría de Relaciones Exteriores, México en las Naciones Unidas (Mexico City: Secretaría de Relaciones Exteriores, México, 1986). 11. See Alfonso Garcia Robles, "México y el desarme," in ibid. 12. See "Preparations for the UN Conference on Environment and Development," photocopy (New York: United Nations, 1989), which describes the Mexican delegation's speeches on the topic at the forty-fourth period of sessions of the General Assembly.

PART 4 THE PRIMACY OF RELATIONS WITH THE UNITED STATES

12 Forging a North American Economy: Issues for Mexico in the 1990s Gabriel Szekely

Although the literature on U.S. foreign policy toward Latin America, especially Mexico, is quite extensive, international relations theory as a whole has rarely paid close attention to analyzing bilateral relations between a superpower and a developing country.1 In the near future, however, the prospect of Mexico's signing a free trade agreement ( F T A ) with the United States is likely to generate a flurry of intellectual curiosity, not only among internationalists but also among economists. For the reaching of such an agreement between two countries with such diverse socioeconomic characteristics has no precedent. Even Canada, with a population of 26 million, or less than one-third the size of Mexico's, produces goods and services worth two-and-a-half times as much as Mexico's production (equivalent to 464 billion U.S. dollars in 1989). Mexico's gross domestic product is only 4 percent of that of the United States (5.2 trillion U.S. dollars in 1989). Although Mexico has evolved into an urban society over the past four decades, only 3 million Mexicans, or one of every thirty, are employed in manufacturing. The proportion is about one in twelve in the United States. 2 Paradoxically, the integration of the two economies grew significantly during the 1980s, a decade of austerity for Mexico. According to the International Monetary Fund, bilateral trade reached a record high of 52 billion U.S. dollars in 1989, and it has kept growing. Most significantly, whereas Mexico was in the early 1980s the leading exporter of crude oil to the U.S. market, by the end of the decade it was first among exporters of color televisions, computer keyboards, refrigerators, and other manufactures to the United States. Exports of automobiles, auto parts, and engines reached close to 4 billion U.S. dollars in 1989. 3 Mexican-U.S. trade compares well with Canadian-U.S. trade (170 billion U.S. dollars), and Mexico shares with Canada the same degree of concentration of its exports to and imports from the United States (an annual average of around 65 percent). If one looks at the share of total foreign direct investment that U.S. funds represent in both the Mexican and the Canadian markets, one finds similar data once again (two-thirds of the total). As of 1989 U.S. businesses owned some 1,200 of the 1,800 217

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maquiladora plants operating (mostly) along the Mexican-U.S. border, which in that year generated close to half a million jobs and a value added of over 3 billion U.S. dollars.4 How is this deepening economic relationship likely to affect the two countries? As Sally Shelton-Colby explains in her chapter, the United States is busily redefining several of its strategic relationships in the aftermath of the Cold War. No one can claim to know in detail the kind of world order that will emerge in this most exciting period of human history. The critical issue for Mexico is whether the United States will view its southern neighbor as a costly burden to bear or as a vital resource in an international environment of ever-expanding competition. From an economic standpoint alone, both countries face a challenge of major proportions: investing billions for education and labor-force training and retraining programs to enhance their productivity in the context of increasingly integrating economies. Capital is necessary as well for enhancing the existing infrastructure. These investments are needed at a time when both countries have become debtor nations, a situation that does not augur well, especially for Mexico. The argument that follows is based on the assumption that the United States will find the political will and the resources to put its economic house in order. If such a scenario proves close to reality during the 1990s, Mexico will, for the first time in half a century, be able to renegotiate its place in the world system from a position of strength. Its natural resources, huge potential market, and ambitious and energetic labor pool, now combined with significant structural changes in its economy, are a force to reckon with as the United States positions itself for a new drive to enhance the productivity and performance of its own economy. Whether Mexico seizes this opportunity to thrust itself into the twenty-first century as a fully established modern nation—and as a full-fledged member of a North American economy—is open to question. The outcome will depend on the ability of its leadership, as well as the vision of its society, to resolve four critical issues, which are the subject of the remainder of this chapter: the decision to join the industrial world; allocating resources more efficiently as national income rises; strengthening social consensus in support of economic integration; and devising an international strategy toward third parties outside North America that best serves Mexico's national interests. In terms of that international strategy, Mexico will have to perform a difficult balancing act: While sustaining the accelerated expansion of close economic ties with Japan (which in five years has become Mexico's second largest trading partner and investor and its leading source of new loans),5 strengthening its overall relationship with Canada (which could be an

219 effective ally in counterbalancing U.S. predominance in North American affairs), and maintaining good relations with Latin America and Europe (which traditionally have been close political allies and now represent attractive targets for diversifying Mexican trade), Mexico will at the same time be focusing the bulk of its attention and resources on redefining its relationship with the United States. Finding new ways to deal with trafficking in illegal narcotics, migration, and other old irritants, while also negotiating an FTA, will be crucial. But most significant for the long term will be whether Mexico can convince the United States to consult on and occasionally coordinate decisions regarding foreign policy issues of mutual concern, conceivably within the institutional framework of a continental North American economy (which would include Canada). This does not mean that traditional bilateral disagreements in the foreign policy arena are about to disappear. In fact, as recent developments in Panama suggest, a more likely scenario for the 1990s is one in which Mexico and the United States develop unprecedented economic ties, while maintaining quite diverse views and even tensions on foreign policy issues. This is precisely the pattern that has characterized U.S. relations with Israel and sometimes even with Canada, which also happen to be the only nations with which the United States has signed an F T A . At the same time, however, the experience of the European Community suggests that the effort to develop a common view of world affairs on at least some issues constitutes the ultimate test of how committed neighbors are to establishing a relationship based on equality and mutual trust. For example, Mexico now has no institutional forum within which to express its views and concerns on U.S. economic policy changes, which often affect not only its ability to plan ahead but also its overall economic performance. Canada, through its membership in the Group of Seven 6 and now through its F T A with the United States, does not have this problem. Moreover, Canada and Mexico could play a moderating role within any new North American institutions or arrangements each time the United States might be tempted to resort to the excessive use of force in Latin America and beyond. If the Cold War is indeed over, as there is good reason to believe, not only the Soviet Union but also the United States will eventually have to change its traditional behavior. In particular, if waging all-out war was dangerous and anachronistic during the Cold War years, using force to solve diplomatic disputes with weak states will be not only outmoded but hard to justify in the emerging world system. In other words, the outcome of strengthened economic integration between a superpower and a developing country need not be greater economic exploitation and political domination. In today's changing world system, experimentation with truly new forms of organization is tempting and

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likely to be well worth the effort.

Joining the Industrialized World If economic integration between Mexico and the United States has proceeded largely on its own, what are the advantages to formalizing Mexico's membership in the North American economy? Obviously, economic integration is not good or bad in itself; how Mexico will fare will depend on specific negotiations with its northern neighbor, as well as on how effectively Mexico deals with several critical domestic issues. In theory, the advantages of integration include an increase in national income as a result of greater investment and trade; expanded opportunities for society as a whole to shape the agenda and outcomes of the integration; and the opportunity for the government to develop a more effective negotiating strategy with Mexico's international partners. But each of these issues also poses a series of economic and political risks that will challenge the ingenuity and imagination of the weaker partner in this bilateral relationship. What distinguishes Mexico's foreign policy at the outset of the 1990s is that its central goal is to help restore self-sustaining growth and development at home. In the hands of the state, other aspects of this policy are subordinated to such objectives as reducing the transfer of resources to service the foreign debt, opening the borders, and deregulating the economy to generate new investment and trade opportunities. Mexico wants to attract foreign resources from fully committed business partners. For this purpose, it has been clear since Carlos Salinas de Gortari took office in late 1988 that his administration is willing to pay the high political costs associated with Mexico's rapid insertion into the world economy. It is not written in stone that the success of wide-ranging economic reforms has to be at the sacrifice of political change, but, as Laurence Whitehead well explains later in this volume, this view is what has characterized the Salinas administration's behavior so far, and it may become a source of great friction with the United States over the course of this decade. The implementation of the Canadian-U.S. F T A , political and economic transformations in Europe and Latin America, and rising U.S. tensions with Japan are but a few of the international factors forcing Mexico and the United States to adjust their bilateral relationship. Another critical source of change is that, for almost a decade now, both countries have been dominated by administrations that hold quite similar views on economic policy in general and on the process of integration in particular. President George Bush (and especially his close cabinet associates from Texas, who know Mexico well) and President Salinas (along

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with his economic advisors who were educated in the United States) have come to realize that a political opportunity exists for bringing their economies closer together, an opportunity that may not present itself again in many years. The first daring step of Mexico's new foreign policy at the start of the 1990s was the decision to pursue the negotiations for an FTA with the United States and assume the political risks involved in publicly acknowledging this new policy. Formal integration with the North American economy could serve as a catalyst to bring about the economic and political changes that are needed for a modern Mexican nation to flourish. If the government resists change, however, it risks alienating powerful political forces not only within Mexico but also within its northern neighbors.7 The United States and Mexico have complementary production factors in various economic sectors that could be used more efficiently, with benefits for both parties, but restrictions in the past and present have prevented this. These complementaries have been described extensively elsewhere, and I need not define them here. 8 Briefly, they include industries such as energy, telecommunications, and agriculture. What has been lacking is the political will to formalize the economic integration that has been brought about otherwise by social and market forces acting from both sides of the border. Coming to terms with this decision is much more a matter of expediency than one of choice, since practically every sector of the Mexican economy is already highly integrated with the U.S. economy. In addition, it is in the national interest that the government begin to exert some influence over a process that has, so far, gone largely unchecked. The center-left coalition of Cuauhtémoc Cárdenas, which has a political responsibility to fulfill with society, has so far failed to appreciate these two issues and therefore to do its job. Thus, Cárdenas and his sympathizers have almost without exception limited themselves to accusing the government of selling out to foreign, especially U.S., interests.9 Nonetheless, any casual observer of this process easily realizes that the government has little influence over the decision of many millions of Mexicans, of all social classes, who on a daily basis closely associate themselves with the United States. These include not only migrants but also all kinds of professionals, businesspeople, tourists, and more. Since in all likelihood the center-left would agree with the rest of the nation that the government should play a regulatory role, at least over certain aspects of an integration process that has developed independently over the past few decades, its rhetoric should give way to the more concrete contributions that its political weight could usefully provide. Specific and innovative ideas for the protection and enhancement of

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Mexican workers' rights, in both Mexico and the United States, represent but one example of what the public expects to hear from this group. The Cardenistas must be reminded that the left in Europe opposed integration for years—until it recognized that there was a high price to pay for alienation and great benefits to reap from contributing to the process of shaping social policies. 10

Preventing a Boom-Bust Cycle If the oil boom experience is still fresh in the minds of Mexicans, one can assume that as greater integration produces an increase in national income, poor planning and waste will not characterize the allocation of resources by the government this time. I have argued elsewhere that these two ills, together with the decision in the 1970s to postpone tough economic reforms by relying on huge oil revenues and foreign loans, inevitably led to the economic debacle and social setbacks of the 1980s, which had not been seen in Mexico since the Great Depression. 11 The resulting economic problems that plagued Mexico during much of the decade included government deficits, limited credit available for business, low levels of investment, unprecedented inflation, a net transfer abroad of income and foreign exchange resources, unemployment, a drastic drop in real wages, and deteriorating health, nutritional, and educational services for the vast majority of Mexicans. Preventing a repetition of this boom-bust cycle will require more than applying "correct policies." In fact, governmental decisions that may have appeared sound under previous conditions can be assessed quite differently once those conditions have changed. What is now needed is a series of institutional changes that will facilitate adjusting policies in response to concerns expressed by a variety of economic and political actors, in addition to the president and his closer associates. In turn, what this means is that the twin issues of placing limits on presidential power and of expanding the prerogatives of Congress, especially in approving the budget, must be forced to the top of the political agenda if Mexico pursues economic integration with the United States and Canada. During the oil boom years governmental expenditures got seriously out of hand, eventually wreaking havoc with the rest of the economy. Congress limited its role to approving a budget that had to be adjusted at the end of each year to bridge the huge gap resulting from unplanned and unapproved expenditures. Deficits were met through new loans, eventually driving Mexico's financial position out of control. That pattern could have been averted, at least in part, had Congress enjoyed true supervisory and regulatory powers. Society as a whole would then have been responsible for specific

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policies and their outcomes. A change of this nature, long demanded by Mexican society, is at the core of the needed political reforms in M e x i c o — outside the electoral arena.

Strengthening Social Consensus on Integration If we recognize that greater economic integration has an impact on political, social, and cultural matters, again, several sectors of society, and not just the government, must contribute to shaping Mexico's strategy of negotiating an F T A with the United States. T h e opportunity here lies in the fact that those w h o are interested in or affected by what the government, business, and other actors decide and do are now more attentive and likely to participate in discussions and negotiations regarding economic integration than in the past. Because each of these actors will have high stakes and therefore concrete incentives to become involved, there will be pressures to generate consensus, which in turn may help to strengthen democracy in Mexico. A brief examination of the changing role of the border-region maquiladoras will serve to illustrate this argument. 12 T h e maquiladora program allows manufacturers—domestic and foreign-owned—to assemble products with duty-free foreign components and raw materials and to export those products to the United States with duty charged only on the value added in Mexico. Should an F T A be signed, these preferential rules would be phased out over a number of years, until the tariff rate regulating overall Mexican-U.S. economic exchanges approached zero. It is not only the managers and owners of the more than 1,800 existing maquiladoras w h o will have to adjust to this new situation. Fully open borders will mean that medium-sized and large cities farther into the interior of both countries will become formidable competitors of the border regions. T h e reason is that the border cities—which suffer from high labor turnover rates, a lack of managerial and engineering cadres, and poor infrastructure and public services—will have lost one of their key comparative advantages, namely, the preferential tariff rates. T o remain competitive, businesses and local governments along the border will have to invest sizable resources to bring their cities up to standards, during a transitional period agreed upon in the negotiations for establishing the F T A . Raising the necessary funds and allocating the resources involved would be best managed through strengthened democratic rules and institutions, especially in the northern urban centers of Mexico. A n d because some of those investments and decisions will require joint projects with the United States, there will be added pressure to operate with a new approach that emphasizes participation and an effective decentralization of decision-making authority for issues important to local jurisdictions.

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Involving business owners and managers in negotiations over broader international economic issues is another measure that could help to build up support for integration. Mexican government delegations usually do not include private sector representatives, or if they do, the business representatives are not invited to participate directly in diplomatic bargaining sessions as observers and advisers—as their counterparts in certain other countries often do. Their exclusion can result in lost opportunities or, worse, unnecessary harm to domestic interests. Nevertheless, improved government-business relations over the last few years—in both Mexico and the United States—suggest that change in this critical area is feasible. Over the longer term, popular support for economic integration will also hinge on the extent to which Mexicans witness a concurrent redistribution of income. And that goal will depend in turn on heavy investments in education and labor-force training and retraining programs. Offering these programs and opportunities also has the advantage that individuals are rewarded according to their own efforts, rather than as a result of paternalistic measures designed by state bureaucrats. For the investments to be effective, however, Mexico's overall education system will have to undergo a true revolution: It should be based on merit and equal opportunity, as well as on high standards of quality. Finally, intellectuals and artists, and not the government, should play a constructive and leading role in developing and promoting Mexico's stand on cultural issues. In the Canadian-U.S. FTA, for example, the decision was to exempt cultural industries altogether in order to best protect Canada's cultural identity and allay fears of alleged threats to Canadian sovereignty.13 Strengthening social consensus is critical to a nation's ability to adapt effectively to the consequences of economic integration. In particular, resources must be raised and allocated to keep a fair balance between winners and losers in various economic sectors and regions—especially if the transition toward a free trade economy is to proceed smoothly. Institutions can be strengthened and participatory democracy can be enhanced. Social consensus is important as well to present a unified position in negotiations with international actors.

Developing a Broader International Strategy In March 1990 Canadian Prime Minister Brian Mulroney signed ten ambitious agreements with Mexico, encompassing issues from trade and investment to environmental and legal cooperation. In June of the same

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year President Salinas met for the third time in eighteen months with Japan's prime minister—as many times as Salinas's predecessors had met with the head of the Japanese government over the previous ten years. This unusual attention by the leaders of key industrial nations is not the result of a sudden rise in Mexico's international status but of both significantly improved bilateral relations and Mexico's prospects for closer ties with the United States in the near future. It is not an exaggeration to argue that for Canada and Japan, as well as for Latin America and, to a lesser degree, Europe, a close Mexican-U.S. economic relationship of the sort Clark Reynolds discusses in his chapter will have a profound impact on the relations each has with both the United States and Mexico. For example, a fear of losing some ground in its negotiations with the United States explains the recent strategic change in Canada's diplomatic approach to Mexico, a country that Mulroney had kept way down in his list of priorities before he learned of Mexican and U.S. intentions to pursue free trade negotiations. In Japan a concern to prevent any loss of leverage and direct communications with Mexico probably explains the decision of Prime Minister Toshiki Kaifu to include a stopover in Mexico City during his electoral campaign tour of North America in 1989. And in Latin America a growing number of government leaders and intellectuals have come to realize that a revolution in the region's political and economic thinking would follow on the heels of Mexico's formal membership in the North American economy. Finally, should the world system evolve into trading blocs, it is noteworthy that Mexico's population represents for North America what that of the five most advanced economies of Eastern Europe represents for the European Community.14 Although the latter enjoy a much higher average level of education, Mexico's natural resources, industrial and overall infrastructure, and political stability make it a much more attractive trading partner. But is the Mexican-U.S. relationship about to experience a qualitative leap forward? Let us assume for a moment that the answer is yes. Canada would have to be considered as well. Although Mexico's economic relations with the United States have certainly grown significantly since the mid-1980s, parallel negotiations with Canada have helped to maintain the momentum, with one reinforcing the other. As Jesus Silva-Herzog notes in his chapter here, by acting in concert on certain issues, Mexico and Canada have the opportunity to exert more influence in their respective negotiations with the United States than each can on its own. Thus, in 1985, for example, Mexico signed its first comprehensive Framework Agreement on Trade and Investment with the United States and decided to join the General Agreement on Tariffs and Trade (GATT), just as the United States was opening negotiations with Canada for an FTA that was eventually signed in 1988 and put in effect one year later. Moreover, the

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agreements signed in 1990 by the Mexican and Canadian governments were inspired by what Mexico and the United States had previously negotiated—with the exception of migration and the environmental issues, on which Mexico and Canada have accomplished more between themselves than with the United States. Eventually, the three countries will see it to their advantage to sit together at the bargaining table and create trilateral institutions to deal with some issues of common concern to continental North America. It is puzzling indeed that to date only one single treaty has been signed by these three neighbors, one designed to protect migratory birds within the region! It is a symbolically important treaty, but hardly one to capture the imagination of the 350 million inhabitants of continental North America. Nonetheless, beyond economic issues, growing concern over the environment, the sharing of tax information, and legal matters may foster a new era of trilateral cooperation. Alternatively, forceful opposition in the U.S. Congress and society to signing an FTA with Mexico would render all this discussion irrelevant. It would not be the first time that the thinking of the U.S. president and of certain leaders in the society was far ahead of that of their constituency. There were many calls in the midst of the oil boom for establishing a North American common market that included Mexico. There are many groups in the United States that would like to keep the economic relationship with Mexico at the current level of intensity, at least until what they perceive as negligence on the part of Mexico is replaced by satisfactory responses on the issues of drugs and migration. Others are reluctant to pay the price of helping Mexico to incorporate itself as a full partner of a North American economy. This is probably one of the worst times for the U.S. Congress to consider massive assistance to a foreign country, when opposition to the idea of raising taxes to solve the nation's own fiscal problems continues to be strong. Still others will continue to look at Mexico with disdain and plain mistrust. This is precisely why, as Riordan Roett argues in the introduction to this volume, Mexico cannot pursue only the goal of a negotiated integration with the United States, but should also strengthen its relations with other international actors as well. The paradox is that Mexico's negotiating leverage with Japan and other industrial nations will be significantly enhanced only if and when it formally joins the North American economy.15 For the time being, Mexico must welcome all the foreign investment and trade that can help restore self-sustaining growth and development. It cannot afford, in its negotiations with other nations, to press for special concessions or for provisions allowing it to reap a larger share of the benefits resulting from the investments. Nor can Mexico respond to U.S. pressures regarding, especially, the operation on Mexican soil of Japanese firms bent on exporting to the U.S. market alone. But if Mexico does formally join with its

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neighbors to the north, its relations with each of the world's main regions and leading countries, which have been carefully analyzed elsewhere in this book, would have to be approached differently. In particular, there would now be an institutional framework—and the incentive—for coordinating the views and policies of continental North America with respect to the rest of the world. Even if an FTA is signed within the next year, full implementation could take many years; and there is no guarantee that, in assessing its outcomes, the participating countries will be interested in pushing integration in new directions. The current concerns over opening the border being expressed in both the United States and Canada could well turn into forceful opposition if new pressures for immigration from Mexico result, especially if Mexico does not implement more effective measures for redistributing income and if its society, as a result, becomes further polarized. In these instances the mere idea of an increasingly open border with Mexico will not be well-received in many U.S. communities in particular. Indeed, the United States does not stand alone in terms of the dramatic changes needed in government and society to establish a truly new relationship. For Mexico the central challenge is to take a fresh look at relations with the United States based on a vision of the future, and of what is possible to accomplish in a changing global order near the onset of the twenty-first century. Should Mexico or the United States decide to focus its attention on the grievances and frustrations of the past, the 1990s will be largely uneventful; that is, we might witness another decade of missed opportunities in which our respective governments and societies continue to lack imagination.

Notes 1. Although theoretical approaches are few and far between, one of the volumes in this series illustrates how sophisticated scholars have become in actually carrying out such bilateral analyses. See Riordan Roett, ed. Mexico and the United States: Managing the Relationship (Boulder, Colo.: Westview Press, 1988). 2. World Bank, World Development Report (Washington, D.C.: World Bank, 1989). 3. International Monetary Fund, Direction of Trade Statistics (Washington, D.C.: International Monetary Fund, 1990). 4. Secretaría de Comercio y Fomento Industrial, La industria maquiladora de exportación (Mexico City: Secretaría de Comercio y Fomento Industrial, México, 1989). 5. Barbara Stallings, Gabriel Székely, and Kotaro Horizaka, eds., Living

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Together with Latin America: Perspectives from Japan, the United States, and the Region (in Japanese) (Tokyo: Doubunkan Shuppan, forthcoming); English manuscript in preparation. 6. The Group of Seven includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. 7. Representing this position in general, and calling in particular for international observers to monitor the Mexican midterm elections in 1991, former Arizona Governor Bruce Babbitt presented a critique of Mexico's lack of political reform during the Tenth Annual Press Briefing of the Center for U.S.-Mexican Studies at the University of California, San Diego, in June 1990. 8. The most recent and comprehensive study is by Sidney Weintraub, A Marriage of Convenience: Relations Between Mexico and the United States (New York: Oxford University Press, 1990). 9. See, for example, Cuauhtémoc Cárdenas, "Misunderstanding Mexico," Foreign Policy, no. 78 (Spring 1990): 113-130; and Jorge G. Castañeda, "A 'Deal' to Give Away the Store," The Los Angeles Times, April 2,1990. 10. See Primo Vaniccelli, Italy, NATO, and the European Community: The Interplay of Foreign Policy and Domestic Politics, Harvard Studies in International Affairs, no. 31 (Cambridge, Mass.: Center for International Affairs, Harvard University, 1974); and Spokesman Books, Speeches by Tony Benn (Nottingham, Eng.: Rossell Press, 1974). 11. Gabriel Székely, "Recent Findings and Research Suggestions on Oil and Mexico's Development Process," Latin American Research Review 20, no. 3 (1985): 235-246. 12. Gabriel Székely and Oscar Vera, "Integración: La hora de los sectores," Nexos (Mexico City), no. 152 (August 1990): 49-60. 13. See U.S. Department of State, U.S.-Canada Free Trade Agreement (Washington, D.C.: U.S. Department of State, June 1988), p. 7. 14. The five are Czechoslovakia, the former German Democratic Republic, Hungary, Poland, and Yugoslavia. 15. See Gabriel Székely, "When Two Paths Are Better Than One," The Los Angeles Times, April 6,1990.

13 Mexico and the United States: A New Convergence of Interests Sally Shelton-Colby

Historically, the United States has tended to define its national interests in a security context and in the context of competition with, during the nineteenth century, the major powers of Western Europe and, during the twentieth, the Soviet Union, the People's Republic of China, and their allies. The radical and rapid changes now occurring in the global polity— specifically, the fading of traditional threats to U.S. security—offer a historic opportunity to move beyond the strategic doctrine that has guided U.S. foreign policy for half a century and to shape a vision of a new world, and a new U.S. role in that world, for the 1990s and beyond. Few Americans would disagree that the 1990s will be an era in which the principal issue will no longer be security but rather "securitization," that is, how to manage the increasingly dominant economic and financial issues that have leaped to the top of the world's policy agenda at the end of the 1980s. This shift in emphasis has important implications for Mexican-U.S. relations. Before examining those implications, let us briefly review the dominant influences of the changing global scene on U.S. interests as they apply to Mexico.

U.S. Interests in the Changing World For much of the 1990s U.S. interests and policy priorities will continue to be dominated by Europe (including the Soviet Union) and Asia. The breakdown of authoritarian, centrally managed systems in Eastern Europe and the structuring of pluralistic political models and more market-oriented economies will inevitably be accompanied by, at least initially, sharp economic decline and a degree of social and political turmoil unwitnessed by the West for half a century. In addition, the Soviet Union will face mounting challenges to its very survival as the nation we know today. The Baltic states will move toward Finlandized status, separatist and ethnic tensions elsewhere in the Soviet Union will produce a clash between regional and central authority, and the growing debate

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over political and economic reform in the country as a whole will preoccupy Moscow, as well as Washington, for years to come. The European Community will expand to include the European Free Trade Association ( E F T A ) , a unified Germany, a reformed Eastern Europe, possibly the Maghreb countries of North Africa, and eventually perhaps even a reformed Soviet Union. Meanwhile, the process of adjusting to the formation of a new economic and political union among our Atlantic allies will create new stresses and strains in the United States. In the Pacific Basin the passing of the current generation of Chinese leaders will result in a search, most likely a struggle, for new political and economic arrangements. That transition will not be a smooth one, and U.S. diplomacy will be focused on the inevitable turmoil within China and U.S. policy options for affecting that change. In addition, the U.S.-Japan relationship is experiencing unprecedented and escalating tension as Japan's postwar dependence on the United States—psychologically, strategically, politically, and economically—diminishes and as the former moves to shape a new, more assertive political and economic role on the world stage. Some of the newly industrializing economies of East and Southeast Asia, flush with capital, strong currencies, and self-confidence from their double-digit growth rates during the 1980s, will become increasingly influential international economic actors in efforts to address such key issues as exchange rates and trade and monetary policy. And they are likely to be increasingly at odds with the United States over these and other issues. The United States, which will continue to struggle with its budget and trade deficits, will find its influence in the economic arena waning, even while its influence over international security and politics remains considerable. Without any doubt, the present and emerging economic powerhouses of the Asian Pacific will pose formidable new challenges to the United States in the coming years. All told, then, the growing turmoil within Eastern Europe and the Soviet Union, the shifting economic and territorial realignments in Western as well as Eastern Europe, and the political and economic transitions in the Asian Pacific mean that for years to come U.S. interests will continue to be defined largely in an East-West context. Yet a subtle shift seems to be occurring: Latin America has begun, almost imperceptibly, to loom larger on the U.S. agenda. U.S. policymakers, starting in the White House, are gradually beginning to think differently—and more creatively—about relations within this hemisphere, and especially about relations with Mexico. They have come to a fuller realization that internal developments in Latin America and the Caribbean can and do impinge on the United States, both negatively and positively. Although not all Americans accepted President Ronald Reagan's definition of Sandinista Nicaragua as a threat, a broad consensus does exist that Latin American

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drug producers threaten the fabric of U.S. society; that Latin America's debt affects the health of the international banking system, not to mention the survival of democratic systems in the region; that low-growth, overpopulated Latin American and Caribbean countries will increasingly view migration to the north as an important, if partial, solution to their domestic socioeconomic problems; that a reformed and healthier Latin American economy will mean greater demand for U.S. products and therefore a much-needed stimulus to the sluggish U.S. economy; and that U.S. (and global) environmental concerns are directly linked to development pressures in the southern hemisphere. As this realization and consensus are crystallizing, fundamental shifts in U.S. thinking about more specific issues in the Latin America-U.S. relationship are also taking place. After years of rejecting the idea of debt reduction schemes, the White House has reversed itself and developed a debt and interest rate reduction strategy (the Brady initiative), which has been forced down the throats of unwilling bankers by, surprisingly, a Republican administration. In addition, the Republican administration has proposed reductions in the debt Latin American countries owe the U.S. government. It has responded to Latin American demands for open markets with the Generalized System of Preferences (GSP), the Caribbean Basin Initiative (CBI), and the goal of a free trade agreement, at least with Mexico, which is now broadly supported in Washington. In fact, in June 1990 President George Bush launched his Enterprise for the Americas initiative, which signaled his interest in a broader, hemispherewide trade arrangement. Washington has begun to accept the idea that political, not just military, solutions can be effective tools for achieving change and that a successful antidrug policy must seek to eradicate the demand, not just the supply. This is not to say that the United States has developed a perfect or comprehensive strategy for dealing with the problems of debt, trade, and drugs. Savings to the debtor countries under the Bush and Brady initiative are so far modest. Furthermore, little or no attention is being paid to the growing net transfer of resources to the international financial institutions. The GSP and CBI are of limited scope, and nontariff barriers still severely restrict Latin American exports from the U.S. market. Some U.S. policymakers insist that the contras were essential to bring about a political opening in Nicaragua. And the December 1989 invasion of Panama demonstrated that the United States has not totally discarded the tool of military force in its efforts to effect political change in the hemisphere. Finally, it is still easier to criticize the drug-producing countries than it is to find the resources and the will to tackle seriously the demand side of the problem. Nevertheless, there are many signs that the United States is beginning to rethink its interests in and strategy toward Latin America,

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particularly in the case of Mexico.

Changing Perspectives in the United States and Mexico Indeed, Mexico is at the forefront of the U.S. agenda in Latin America. Although this has been true for decades, we are now witnessing a profound transformation of both the atmosphere and the dynamics of Mexican-U.S. relations, which augurs a substantially improved relationship in the 1990s. An inchoate consensus has emerged in the United States that the nature of politics, society, and ideas in Mexico is changing, at both the elite and popular levels; that Mexico sees its future economic links as lying increasingly with North America and Asia and less with Latin America and the Third World; that Mexico is prepared to play a more constructive and cooperative (read: less contentious and anti-American) role in resolving bilateral and regional problems than in the past; and in particular that Mexico expects to become a major competitor in the global economy in the twenty-first century and therefore needs closer economic ties with larger markets and sources of capital (the United States, Europe, and Japan). In the past Mexico generally (albeit with some exceptions) perceived its national interests and policy objectives not only as not complementary but also at times as directly in conflict with those of the United States. That perception was rooted in a century and a half of military, economic, and political conflict with its northern neighbor, as well as in the obvious uneven distribution of power that continues to characterize the MexicanU.S. relationship today. For its part, the United States generally perceived its national interests and policy objectives—enhanced cooperation for regional security, market-oriented economic reforms as a precondition for U.S. support, and cooperative efforts to solve specific bilateral problems of migration, drugs, and the environment—as ones with which Mexico should concur, if only it would act less like a Third World country and more like a mature, responsible regional leader. U.S. policymakers were apt to lament the fact that, as Susan Kaufman Purcell writes, "the opportunities inherent in a closer relationship between the two countries were often overlooked, while the potential costs were exaggerated [by Mexico]." 1 The suspicion and distrust that were part and parcel of these historical attitudes are beginning, ever so gradually, to abate, as both countries' perceptions of their own national interests as well as of the other's policy goals are changing. The impulse for this is a combination of shifting public attitudes, new policy initiatives, changing global political and economic conditions, and, perhaps in largest part, the increasing integration of the

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two economies. Growing economic links and the additional macroeconomic growth they will presumably produce will, over time, accelerate the reshaping of attitudes on both sides of the border, among elites and nonelites alike. Friction and dispute will continue to mar the Mexican-U.S. relationship to some degree, however, as they do in U.S. relations with Canada and other allies. The asymmetry of power and resource endowments between the two neighbors, along with their fundamentally different histories and cultures, will pose inherent limits on their ability to share an identity of interests and to cooperate fully on the management of the bilateral agenda. Mexican nationalism will continue to foster the search for opportunities to assert its independence from its neighbor, just as the United States will continue to look for ways to reassert its longtime hegemonic role in the hemisphere. Nevertheless, Mexican-U.S. relations in the 1990s are likely to evolve in ways that will mark a major historical shift away from the mutual suspicion and recrimination that have characterized the relationship for almost 150 years. The overall net effect will be gradually but significantly more cooperative and less fractious interactions. A prime determinant of the revised attitudes in Washington is the broad sweep of recent policy changes in Mexico. First and foremost among these has been the commitment to economic reform of the administration of Miguel de la Madrid and especially that of Carlos Salinas de Gortari. Fiscal and monetary restraint, liberalization of trade and foreign investment rules, privatization, tax reform, and a sterling record of timely interest payments on the external debt—objectives long sought by successive U.S. administrations—have combined to alter dramatically the image of Mexico among U.S. policymakers, from one of a country looking backwards to one of a country moving to engage constructively in the new global economy. A second policy change is Salinas's anticorruption drive, even against members of his own Institutional Revolutionary Party (PRI), which has indicated to Washington that he, like de la Madrid, represents a different, more modern, and more technically efficient Mexico. And third, Mexico's commitment to drug interdiction policies, though less complete than Washington might like, is nevertheless perceived as much more serious than in the past. Even the always-skeptical and sometimes antagonistic U.S. Drug Enforcement Administration believes that Mexico's resolve to enforce antidrug measures has been fundamentally strengthened. Fourth, despite the fact that he took office under a cloud of alleged electoral fraud and suspicion that the opposition may have won, Salinas quickly moved to legitimize himself by some early, popular moves to stem corruption in the PRI; by his demonstration of technical and managerial

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competence, which led to the beginnings of economic recovery in 1989; and by his efforts to improve relations with the United States. The result has been that his personal popularity remains unusually strong. In addition, the first-ever victory by an opposition governor2 and Salinas's efforts to redefine the PRI (though not yet the larger political system) hint at prospects for political pluralism, which, though still modest, are better now than at any time in recent memory. Last but by no means least, Mexico's shift away from a Central American policy that the United States regarded as both provocative and soft on the region's left has removed a major irritant from the bilateral relationship. Washington now views Mexico City as purposely seeking to avoid confrontation over the region, a sharp departure from earlier administrations. Even the Mexican government's criticism of the U.S. use of force in Panama has been interpreted in Washington as more moderate than it might have been in the past. The judgment of one senior U.S. official that "Salinas is redefining the [Mexican] revolution" is broadly shared within both the executive and the legislative branches of the government.3 In general terms Washington sees Mexico's foreign and domestic policy shifts as a reflection in part of Mexico's growing economic reliance on the United States, especially its need for favorable treatment of its external debt and for access to U.S. markets. But it also views these shifts as part of a broader process of incipient intellectual and attitudinal change on the part of both Mexican elites and ordinary citizens, which could, if sustained, lead to a redefinition of the Mexican national interests with regard to the United States. In fact, several recent polls suggest that the Mexican populace as a whole may identify Mexico's interests more closely with the United States than do Mexican officials and intellectuals themselves. One poll, for example, found that less than 1 percent of those surveyed blamed the United States for Mexico's economic problems, while a large majority blamed corruption and previous economic policies in Mexico. 4 Even on the controversial external debt issue, a two-thirds majority of respondents in another poll said that Mexico's debt is Mexico's own fault.5 And twice as many favored encouraging foreign investment as favored restricting it.6 In yet another survey 80 percent of the respondents cited domestic economic, social, and political problems as the most important ones facing their country, whereas only 1 percent cited "foreign intervention." Similarly, slightly more Mexicans said the drug-producing governments should be the ones responsible for solving the drug problem than said the drug-consuming countries should. And 86 percent of the respondents approved of closer cooperation with foreign countries to combat illegal drugs, while 80 percent favored extraditing drug traffickers. Among

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those who favored extradition, 95 percent favored it even if the accused were Mexicans. Overall more than three times as many respondents said that Mexico's problems were caused by Mexico than said they were caused by other countries.7 One particularly revealing indicator of shifting attitudes toward the United States is reflected in a poll of Mexicans taken in December 1989 shortly after the U.S. invasion of Panama.8 While 55 percent opposed the invasion, a surprising 43 percent of the respondents thought the United States "did the right thing." That same survey also indicated that Mexicans believed, by a margin of 60 percent to 18 percent, that General Manuel Noriega should have been removed rather than being allowed to remain in power, and a poll taken one month later showed an even larger margin on this question (84 percent to 15 percent). 9 Together these findings suggest that, at least at the popular level, Mexico's historical antipathy to U.S. economic influence and its unilateral use of military power may be lessening, at least under certain limited circumstances.

Strengthening Economic Ties In addition to the changing perceptions on both sides of the border, a combination of Mexican and U.S. economic policy initiatives, together with Mexican and foreign capital that is seeking new markets, is drawing the two countries' economies closer together. Bilateral trade between the two countries rose by a rate of 25 percent annually over the years 19871989, despite Mexico's declining oil exports, a stagnant Mexican economy, and a sluggish U.S. economy. For all practical purposes, large areas of the border region are integrated to an extent unimaginable a decade ago. About 80 percent of Mexico's exports enter the U.S. market at a rate of duty between zero and 5 percent. Half of Mexico's imports (which come overwhelmingly from the United States) enter duty-free, and the average tariff level on the remaining half is 9 percent;10 nontariff barriers in Mexico have been all but eliminated. Almost one-third of total bilateral trade is now estimated to be duty-free,11 and capital also moves freely back and forth across the border. The maquiladora program is a several-billion-dollar industry, contributing significantly to strong growth rates on each side of the border. (The economy of Laredo, Texas, alone, where 1,300 eighteen-wheel tractor-trailers cross on an average working day, grew at the staggering rate of 28 percent per year in 1988 and 1989.) 12 The U.S. Customs Service is projecting the volume of trade across the border to double and the volume of border crossings to triple by the year 2000. 13 In both countries, an attitude is clearly emerging that some sort of integrated economic arrangement is inevitable and even inexorable: that it will

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happen through market forces even if not through the negotiations over a free trade agreement. But Mexico is also making a major effort to promote Japanese investment and trade. Other Asian investors, especially from Taiwan, South Korea, and Hong Kong, are interested in Mexico as well. But Mexico is fully aware that foreign investors, especially Asian ones, are much more interested in access to the U.S. market through an integrated MexicanU.S. trade regime than they are in the Mexico market alone. Moreover, if Eastern Europe, with its low-wage but relatively skilled labor, continues the process of economic reform launched at the turn of the decade, especially as it seeks to enter the dynamic European Community, capital could be lured away from Mexico. Mexico's initiatives to move toward closer trade arrangements with the United States and to foster the Pacific Rim connection reflect its intention to compete for that capital. In the United States a similar process of redefining national interests in the bilateral relationship is starting to take root. As in Mexico, this reassessment is a result partly of global political and economic changes, partly of a changed policy environment, and partly of the increasing flow of commerce between the two countries and its impact on growth. The European Community's projected expansion to a market of 320 million people, with an additional 130 million once the countries of the E F T A and Eastern Europe are included (as is expected), and 250 million more if an economically reformed Soviet Union seeks to associate, has created new worries among Americans about their potential marginalization from the world trading system. In addition, the growth of an Asian trading region (intra-Asian trade will soon outstrip transpacific trade, and transpacific trade surpassed transatlantic trade a decade ago) along with the gradual adjustment to life in a free trade arrangement with Canada are nudging public and private sector elites in the United States to think in terms of new economic arrangements with Mexico and even with South America, as was clearly evident in the launching of the Enterprise for the Americas initiative. Although multilateral trade talks under the General Agreement on Tariffs and Trade ( G A T T ) will remain a higher U.S. priority than talks with Mexico and the rest of the Western Hemisphere, there is nevertheless a growing belief among U.S. elites that closer trade linkages with Latin America are in the interests of both parties. The executive branch, under a president, secretary of state, and secretary of commerce who are all Texans, believes that both countries will benefit substantially from expanded trade. The Congressional leadership seems to share this view, although the struggle to obtain legislative approval is likely to be greater in Washington than in Mexico City. Another complicating factor will be Asian, especially Japanese, interest in Mexico's low wages and proximity to the U.S. market. This could attract

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substantial new Japanese capital flows for production aimed at accessing the U.S. market. Finally, in the case of every existing major FTA in the world—the Canadian-U.S., the Israeli-U.S., the European Community, and the EFTA—the agreement came after an established strategic or political arrangement, sometimes formalized by treaty or convention, sometimes informal, reflecting shared values, shared threats, and shared principles of international conduct. Clearly, no such antecedent exists between Mexico and the United States (except for the general principles of the UN and the Organization of American States, to which both countries belong). Indeed, even in view of the changes in both countries referred to earlier, any such political or security arrangement is almost inconceivable, given the historically divergent principles that have informed the bilateral relationship. The two countries' definitions of their respective strategic interests, while closer now than in years past, are still far apart. These elements, in addition to the hesitancy of many Americans about a closer relationship with a country that is ethnically, culturally, and linguistically different from the majority of North Americans (and that pays much lower wages), will complicate, but not reverse, the growing economic integration already under way between the two countries.

Redefining Other Bilateral Issues Greater economic integration will inevitably influence how the two countries perceive and address the broader range of issues that have traditionally been the source of major bilateral contention, such as drugs, debt, and migration. U.S. policymakers expect the economic integration will gradually lead Mexico to redefine its national interests in such a way that they will more closely coincide with those of the United States and that, as a result, Mexico will adopt an increasingly more cooperative approach to the resolution of most bilateral issues. Those same policymakers are also beginning to redefine U.S. national interests in light of the expanding economic links with Mexico and internal changes in U.S. society. What were points of contention between the two countries in the 1980s are likely to diminish in importance in the 1990s or be replaced by other, new issues. Migration

Migration is a case in point. The 1980s were marked by serious political pressures in the United States to restrict illegal immigration. Although the resulting legislation, the Immigration Reform and Control Act of 1986, initially succeeded in reducing the inflow, recent estimates show a resump-

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tion of high levels of illegal migrants and immigrants.14 Toward the end of the 1980s, however, U.S. perceptions of migration issues began to shift, not only because of the growing integration of the U.S. and Mexican economies, but more especially because of the growing concern over labor shortages north of the border. Both the research community and the popular press began to report on the effects of the aging labor force, declines in the numbers of young workers entering the labor market, and the problems of the educational system—all of which forebode serious shortfalls in both the workers and the skills needed to meet the U.S. demand for labor by the year 2000.15 Although some Americans will inevitably decry the presence of large numbers of illegal aliens, the gap between the requirements of the U.S. economy and the shrinking and inadequately prepared labor force suggests that there will be a need to expand the migrant labor force in the future. For example, although more than 1 million foreign-born persons settled in the Los Angeles area in the 1970s, job growth there was well above the national average, and unemployment fell below national averages, over the same period.16 Immigration continues to be a sensitive issue, however, one often approached emotionally rather than rationally. It is not likely to disappear altogether in the 1990s, but it will be less of a bilateral issue, mainly because of the changing demographic and economic conditions in the United States. Debt If the Mexican economy continues to recover and the international economic environment remains relatively benign (that is, if the industrialized countries continue to enjoy strong growth and remain relatively open to trade with the developing nations, and if interest rates stabilize), Mexico should have less difficulty servicing its external debt. In that case, debt should therefore be less of an issue on the bilateral agenda than it has been in the past. But if the international and especially the U.S. economy deteriorates, and if interest rates rise, Mexico could renew its efforts to obtain debt relief. The U.S. government will support Mexico and will relieve its official debt as long as Mexico remains committed to economic modernization, but Washington's limited influence over commercial banks means that significant new relief from that source is unlikely. And since the international financial institutions, especially the International Monetary Fund and the World Bank, will no doubt become increasingly important lenders to Mexico (in the absence of commercial bank financing), Mexico's debt to those institutions will in this case grow. Already those institutions are close to collecting more from Mexico in repayments on old debt than they are transferring to Mexico in new lending. Mexico

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may well seek relief from the IFIs, either through debt rescheduling or debt reduction, but Washington's influence will be relatively less than that of Japan and Germany, both of which will be strongly resistant to such relief. In any event, the issue is more likely to be addressed multilaterally than bilaterally. Narcotics

Interdiction

The major exception to the expectation of better bilateral relations is the narcotics interdiction effort. In spite of significantly improved cooperation between the two nations' drug enforcement agencies in recent years, Mexicans remain dubious that the United States is doing as much as it could to discourage drug abuse at home. Moreover, a new ingredient has been injected into the equation that could cause renewed friction. Over the 1980s the U.S. Department of Defense was highly reluctant to get involved in the antinarcotics effort, despite strong pressures from the U.S. Congress to do so. But with the collapse of the Communist-ruled, proMoscow regimes in Eastern Europe, political reforms in the Soviet Union, and major shifts in Soviet foreign policy, the U.S. military has lost its traditional enemy. A search is underway for a new raison d'être for the post-Cold War era. The military is now finding a new enemy in the drug cartels, and it has entered that struggle with considerable enthusiasm. The Defense Department has established a Joint Task Force (JTF), under the command of the U.S. Army but with a sizable Marine component, near the Mexican-U.S. border in a move that will undoubtedly give it a much more visible and active role in the antinarcotics arena in the future. The mandate of the JTF is largely surveillance of the border and intelligence gathering; it is specifically prohibited from any active, hands-on role in interdiction that could bring it into conflict with Mexican authorities. Nevertheless, the line between intelligence and active involvement is a thin one, and given the energy the U.S. military is bringing to its new role, the prospect of its moving into a more direct role in the 1990s can by no means be discounted. Historical Mexican sensitivities to U.S. military activity at or even near the border suggest a strong potential for drug interdiction to be even more conflictive than it has been in the past. Moreover, the growing integration of the two economies, specifically, the probable sharp growth in bilateral trade, will require major improvements in Mexico's inadequate transportation infrastructure along the border and most likely an expansion of border crossing points as well. Certainly, the existing arrangements are severely inadequate to handle the current volume of trade, not to mention the expected increase. There will be difficult trade-offs to resolve, therefore, between the need for more open borders for trade, on

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the one hand, and pressures for a more tightly controlled, if not closed, border for the antidrug effort, on the other. Thus, the potential for heightened tension between the two countries, as a result of a growing U.S. military presence and involvement along the border, is substantial.

Conclusions In the coming decade we are likely to witness less tension and contention in the Mexican-U.S. relationship overall because of changing policies, changing attitudes, and the growing integration of the two economies. The United States perceives Mexico as undergoing important economic, social, intellectual, and attitudinal changes as it pursues its goal of transforming itself from a country with outmoded, stereotypical attitudes and structures into a modern, globally competitive economy. This perception has in turn resulted in a change in the attitudes of U.S. elites toward Mexico. A bipartisan consensus has emerged in the U.S. public and private sector that Mexico's leadership has secured a commitment to economic reform, drug interdiction, and cooperation with the United States generally among the Mexican populace. No such consensus exists, however, with regard to political reform in Mexico, and some U.S. observers, especially those on the poles of the right and the left, would like to see Mexico move toward a more pluralistic system. Others prefer the "predictability" of a one-party-dominant system, at least as long as the dominant party promotes market economics, tolerates some degree of pluralism in its politics, and cooperates broadly with the United States on bilateral issues. Still, the movements toward democracy in the Soviet Union, Eastern Europe, and Central America will inevitably put more pressure on Mexico to move much more expeditiously toward a more pluralistic system itself. A resistance to do so could, for the first time, put the Mexican political system squarely on the bilateral agenda.17 Meanwhile, various issues such as the environment, cross-border crime, human rights abuses, and the not altogether unlikely U.S. resort to force to solve a problem somewhere in the hemisphere will continue to cause some degree of friction between the two countries. But as in the case of Canada, issue-specific disagreements are unlikely to be allowed to spill over into and affect the general management of the broader bilateral relationship. Policy changes in the United States have contributed to the likelihood of an improved overall relationship in the 1990s, led by the growing integration of the two nations' economies. The ending of the U.S.-backed contra war in Nicaragua (and thus the ending of Mexico's major objections

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to the U.S. role in Central America), the (modest) debt relief Mexico achieved under the Brady initiative, and the relatively more sensitive and less ideological philosophy and personnel of the Bush administration have removed major irritants from the bilateral relationship. (Mexico's voting record in the UN continues to be as independent of the United States as ever: During the first year of the Salinas administration, there was no significant shift from the pattern of weak Mexican support for U.S. positions that had been obtained previously, despite a substantial improvement in bilateral relations.) In addition, Washington is finally recognizing, to Mexico's relief, that U.S. demand for illegal drugs is an important ingredient in the drug problem. This is not to suggest that either side will ever be fully satisfied with the other's efforts, but new policies on both sides are producing important improvements in the atmosphere of the relationship. In sum, both global changes and domestic changes in the two countries will inevitably lead, over time, to a redefinition of the two countries' interest in each other in such a way that their national interests will more closely coincide. National strategies for protecting those interests may differ, but the trend will be toward convergence rather than divergence. As Riordan Roett has put it, "It may well be that they will begin to reduce the space and lack of understanding between what have been very 'distant neighbors.'"18

Notes 1. Susan Kaufman Purcell, "U.S.-Mexico Relations: An Optimistic View," Columbia Journal of International Affairs 43, no. 2 (Winter 1990): 423. 2. Ernesto Ruffo Appel in the state of Baja California Norte. 3. Confidential conversation with the author, April 1990. 4. Poll conducted by The Los Angeles Times, August 5-13,1989. 5. U.S. Information Agency poll conducted October 23 through November 18,1989. 6. The Los Angeles Times poll, August 5-13,1989. 7. U.S. Information Agency poll conducted October 3-November 18,1989. 8. U.S. Information Agency poll conducted December 1989. 9. U.S. Information Agency poll conducted January 12-15,1990. 10. B. Timothy Bennett, "Are there possibilities for creating a North American Common Market?" Comercio Internacional Banamex (Mexico City) 1, no. 2 (June 1989): 29. 11. Personal communication, Office of the U.S. Special Trade Representative, Washington, D.C., April 1990. 12. Personal communication, Peter Vargas, city manager of Laredo, Texas, February 23,1990. 13. Speech given by Larry Coke, U.S. Customs Service representative, to

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the Laredo (Texas) Chamber of Commerce, February 23,1990. 14. "Illegal U.S. Border Crossing from Mexico On Rise Again," The Washington Post, October 6,1990, p. 2. 15. See, for example, William B. Johnston and Arnold H. Packer, Workforce 2000: Work and Workers for the Twenty-First Century (Indianapolis: Hudson Institute, June 1987); Business Week, "Human Capital: The Decline of America's Work Force," special issue, September 19,1988; E.B. Fiske, "Impending U.S. Jobs 'Disaster': Work Force Unqualified to Work," the New York Times, September 25,1989. 16. Johnston and Packer, Workforce 2000, p. 94. 17. Wayne A. Cornelius, "Mexico: Salinas and the PRI at the Crossroads," Journal of Democracy, forthcoming. 18. Riordan Roett, "Mexico and the United States: Managing the Relationship," in Mexico and the United States: Managing the Relationship, ed. Riordan Roett (Boulder, Colo.: Westview Press, 1988), p. 19, referring to the rubric assigned to the two countries by Alan Riding in Distant Neighbors: A Portrait of the Mexicans (New York: Vintage Books, 1986).

14 Mexico and the "Hegemony" of the United States: Past, Present, and Future Laurence

Whitehead

During the forty years following Pearl Harbor the United States was at the apex of its career of global leadership. Its regional ascendancy in the Western Hemisphere was correspondingly complete. In fact, that regional "hegemony" 1 was a substantial contributor to the U.S. position of global strength. The contribution can be evaluated from two angles. First, one could list the various resources made available to the United States by its allies in Latin America. These would include not only raw materials and token military support but also a secure regional setting and more generalized political and ideological reinforcement—expressed, for example, in voting patterns in the United Nations in the 1950s and even after that reflected in acquiescence by the Organization of American States (OAS) to almost all the policy choices Washington made (until 1979). The second angle is more difficult to observe or measure, but viewed in a historical perspective it may be considered the more remarkable regional contribution to U.S. supremacy. It concerns what did not happen, the difficulties for Washington that the region might have created but did not. Of all the southern neighbors that might have caused headaches for Washington policymakers, Mexico is easily the most important. It is also Mexico that could be considered to have the strongest historical reasons for resentment and obstruction of Washington's policies. Yet between 1941 and 1979 Mexico was a virtually invisible presence within the global and even regional system of U.S. alliances. This chapter argues, as Sherlock Holmes observed about the dog that didn't bark, that the neighbor that didn't create any trouble was in fact a highly significant presence. From the 1940s through to the 1970s Mexico was an invisible foreign policy asset of considerable benefit to Washington. And although eventually, starting in 1979, Mexico's policies and positions began to diverge, considerably and publicly, from those of Washington, by the late 1980s they had reconverged. The chapter will trace the course of this critical Mexican component in U.S. hegemony in the Western Hemisphere, and compare the recent Mexican-U.S. experience with that of other great powers and their neighbors, after first briefly reviewing several different perspectives on the meaning of that hegemony today. 243

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Three Perspectives on U.S. "Hegemony" in the Region During the 1970s and 1980s U.S. regional hegemony appeared to weaken somewhat, and the position of global leadership the United States had enjoyed for decades also came under new pressure, notably from Japan. But as the December 1989 invasion of Panama illustrated, there is scope for debate over just how drastic and far-reaching those changes have been and just where they are leading.2 One conclusion to be extracted from the general debate is that "leadership" and "hegemony" are multidimensional, relational properties that cannot adequately be captured on a single, linear scale. U.S. leadership may be strengthened in certain dimensions or in particular arenas even while it is being eroded elsewhere. The overall balance sheet will then be subject to conflicting assessments according to different theories of what constitutes the most important facets of leadership and different perceptions of alternatives. Within this general framework it is fairly clear that over the past decade some key indicators have pointed to a significant erosion of U.S. regional hegemony, such as the Central American impasse, the debt crisis, and the emergence of various Latin American groupings that exclude the United States and bypass the OAS. Other indicators can be read differently, such as the decline of statism and the protracted economic crisis that has weakened Latin America far more than the U.S. economy has faltered. Whether the overall outcome should be classed as a lasting reduction in regional hegemony may be doubted. Many observers in Washington believe that the current shift toward civilian constitutional governments and free market economies throughout the region offer the prospect of a restoration of U.S. authority on a sounder basis in the 1990s. Others of a more cynical disposition argue from a second perspective: that after successive displays of raw U.S. power during the 1980s (including funding the contras and sending troops to Grenada and Panama), Latin American assertiveness would in any case be cowed during the 1990s. Once used, the "big stick" might be put aside for a while without risking much relaxation of discipline. From a third view the disintegration of the Soviet bloc, and the shift of economic power across the Pacific, leaves the North Americans virtually in sole possession of the field as regards international interest in Western Hemisphere issues. What these three contrasting viewpoints all suggest is that for some time to come challenges from Latin America are unlikely to detract much from Washington's global position. And even if it turns out that overall U.S. hegemony is now in decline, Latin America's contribution to the fall should hardly prove pivotal.

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The Mexican Dimension in U.S. "Hegemony" It would be overly simplistic to survey the course of Mexican-U.S. relations over the past fifty years as one moving from harmony to discord to renewed harmony. A notable feature of the harmony that grew out of shared wartime interests was that any tensions that arose over a particular issue would be isolated by the two central governments, which were resolved to prevent the outbreak of any open disputes that might contaminate the overall relationship. It took commitment and careful organization to ensure the cordial relations that prevailed during the 1950s and beyond—that is, the quietude was actively and purposefully managed. Similarly the marked deterioration in the relationship that took hold in the 1980s reflected mòre than the fact that Mexicans had become more assertive in the international arena or that Americans had become more worried about their southern border. The shift reflected both long-term, structural changes (for instance, Mexico's population grew from one-sixth of the U.S. population in 1950 to one-third of it in 1990, and Mexico became a major oil exporter, while the United States became the largest oil importer) and shorter-term, contingent factors (such as the ideology and influence of Jesse Helms as chairman of the U.S. Senate Foreign Relations Committee). By the mid-1980s sources of friction had become cumulative. And in the absence of active efforts to suppress conflict, the reassuring sounds of silence were disturbed, with unease and even alarm spreading on both sides of the border. No doubt part of this shift was inevitable, given the multiplying sources of tension in the relationship and the growing urgency of a number of specific, more traditional issues—debt, drugs, immigration, trade policy, and Central America. But there were other foundations for an escalation of these disagreements: a change in leadership style at the top (first in Mexico under the administration of Luis Echeverría in the 1970s, then during the oil boom, and later in the United States under the Reagan administration) and also a certain dispersion of policymaking authority within both countries. At root the clash expressed deeper concerns—the rise during the 1970s of Mexican hopes (in some circles) and U.S. fears (in others) that the basic structural inequality of the traditional relationship might be more equitably reshaped. As we have seen, what had really changed was the exceptionally privileged position the United States had held as a great power that need not worry about problems with its neighbors. In this, as in other respects, U.S. "exceptionalism" has been on a long decline, but U.S. policymakers have found it difficult to come to terms with the kinds of constraints that

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have been the everyday fare of nearly all other dominant powers in world history. Following the Mexican electoral crisis of 1988 and the contested assumption of the presidency by Carlos Salinas de Gortari, the overt indicators of Mexican-U.S. friction abruptly disappeared from view. Not only was the silence of the 1950s resumed, it became deafening. The breadth of the apparent U.S. consensus in favor of Salinas was startling to those who had grown accustomed to the polarized rhetoric of the Reagan years; it was even more striking in the light of Washington's strictures on the purity of suffrage in Chile and Nicaragua. But the record is clear. The U.S. foreign policy establishment, as well as the U.S. media from left to right, closed ranks as one to assist in the consolidation of the Salinas administration. Naturally enough, the new government in Mexico also deployed all its formidable powers of organization, policy promotion, and media influence to confirm the U.S. response. At the time of writing the efforts seem to have paid off most handsomely. The surface quiescence of the 1950s has been energetically recreated and perhaps even surpassed. (It is remarkable, for example, how little friction has arisen over the U.S. invasion of Panama or the recent kidnapping on Mexican soil of Dr. Humberto Alvarez Machain, a Mexican citizen, by the U.S. Drug Enforcement Administration.) Before examining the bases and durability of this new phase of orchestrated harmony, it is instructive to review the earlier period. How did the good neighborliness of the 1950s come about? How was it maintained and reinforced? And how did the relationship compare with the experiences of other great powers at the peak of their preeminence? The Emergence of Harmony Around World War II

It is not as if harmony prevailed spontaneously from the beginning of the relationship. On the contrary, as is well-known, in the first century of the Mexican republic the clashes of interest with an expanding United States were just as serious as an observer schooled in European or Asian power politics would be led to expect. For example, Mexico's abolition of slavery in 1829 (before its neighbor was ready to do the same), added to all the other frictions with Texans, who broke away to create the "Lone Star State" in 1836. When Mexico resisted Washington's decision to annex Texas in 1845,3 it lost California and New Mexico as well and suffered the humiliation of a U.S. military occupation of the capital city. In this century Vera Cruz was occupied by the U.S. Marines in 1914, and Pershing conducted his fruitless "punitive expedition" through the deserts of northern Mexico in 1916. There was another moment of near war in 1926, when President Coolidge accused President Calles of "exporting bolshevism"

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to Nicaragua by supporting Sandino. And as late as 1938 Mexico's nationalization of oil production brought the two neighbors to the brink of confrontation, with U.S. oil companies imposing an effective boycott on imports of Mexican oil because of a dispute over compensation. (The result of this was that the leftist President Lázaro Cárdenas had no choice but to barter his country's oil with Italy, Japan, and Hitler's Germany.) This admittedly very sketchy history is sufficient to demonstrate that the seemingly easy coexistence between Mexico and the United States after 1940 could not have been the spontaneous product of a naturally harmonious relationship. How, then, did it come about? Alan Knight, with his characteristically revisionist approach to Mexican history, has recently argued that before 1940 the frictions were already less severe than my thumbnail account would indicate.4 But since the revisionist case has yet to win universal assent, those still unconvinced will continue to emphasize the importance of World War II as a major impetus for the ensuing reconciliation. That is the explanation stressed here. At the time of Pearl Harbor U.S. policymakers had good reason to worry that as their country embarked on a war on two fronts, its enemies might seek to use Mexico as an instrument of counterpressure. During the U.S. Civil War, for example, the French had sought to take advantage of America's internal travails by enthroning Maximilian as a Hapsburg emperor south of the Rio Grande. And during World War I the Zimmerman telegram would reveal in melodramatic details the Kaiser's fanciful plans for turning Mexico against its northern neighbor. The reconquest of California and Texas had even been dangled as bait. It was a strategic necessity for the United States to guard against any recurrence of such adventurism in World War II. On a narrower military front, moreover, the defense of the United States would have to extend south to the equator. In July 1940 the U.S. War Department rated Mexico as second only to Brazil among Latin American countries requiring what was to become lend-lease. As the Japanese naval threat grew in the Pacific, the protection of the coastline, especially in Baja California, became a top priority for Washington. Meanwhile, in Mexico City former President Cárdenas was charged with responsibility for overseeing Mexico's Pacific defenses, a task that involved collaborating with the Pentagon while ensuring U.S. respect for Mexican sovereignty. Thus, from the Mexican perspective as well, World War II created enormous incentives to seek an approximation to the United States. It is important to recall that Mexico continued to recognize not only the defeated Republican government of Spain but also the Polish government in exile after the German invasion. Likewise in 1938 Cárdenas had refused to recognize the Anschluss of Austria. From this political perspective Mexico was bound to welcome a subsequent U.S.

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decision to lead the struggle against Axis expansionism. From an economic viewpoint, also, the war in Europe eliminated most of Mexico's trading prospects beyond the United States. After 1941 the U.S. government would have to buy up in bulk all the strategic minerals Mexico could produce along with much of its agricultural surplus and even its industrial production. (One spectacular example of this convergence was the steel industry: The United States supplied Monterrey with a complete steel mill, on the condition that for the duration of the war all the output would be sent back to Texas for the construction of Liberty ships.) Mexico could either accept this quite attractive trading prospect or cease exporting virtually anything to virtually anyone.5 The choice was preordained. But the reconciliation was certainly sweetened and facilitated by President Roosevelt's willingness to use U.S. taxpayers' funds to lubricate a settlement of the bitter dispute between Mexico and U.S. oil companies. Once the war was underway, he could use national security arguments to override the commercial principles invoked by the oil magnates. As for the military dimension of the relationship, Mexico did accept lend-lease and did send token forces to the Phillipines and to Italy. This was not a major involvement on the scale of Brazil's, but it was sufficient to put Mexico in good standing in the diplomacy of the postwar world, (for example, as a respected founding member of the UN and as a frequent defender of the principles of self-determination and nonintervention). To understand the extent to which Mexican attitudes toward the United States had been reoriented by 1945, it is important to stress not just the enormous increase in U.S. power that came with the war effort and the Allied victory nor merely the material advantages that Mexico could gain from close association with the winning side. Compelling though those considerations may have been on their own, they would not explain the desirability and in due course even the relative popularity of the new accommodation. Those attitudes derived just as much from relief that the United States was not using its overwhelming power—as the Germans had or as the Russians were then doing, or as European imperial states were inclined to do—to trample on the rights of weaker neighbors. Orchestrated Harmony in the Postwar Years The new Mexican stance toward the United States reflected a relative judgment, of course. The triumphant United States was in some ways overbearing, but not nearly so intolerable as many Mexicans would have feared. It was possible to restrain the worst excesses of U.S. expansionism by invoking the common ideals for which the war had been fought, and the ideals of the UN system to which the war had given rise. As Mexicans verified through experience that those restraints were indeed more than

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mere rhetoric, their most extreme fears about the space available to them in a U.S.-dominated world order began to fade. In other words, at least in the Mexican case, U.S. regional hegemony rested not simply on the nation's overwhelming strength and bargaining supremacy but also on a measure of common interests and even some convergence of values. The Mexican regime sought an international system in which nonintervention could be stressed as a norm. (Ironically in view of later developments, the regime initially viewed the creation of a regional body within the UN system as a further support for this norm; that is, the OAS might restrain the United States from the interventionism that might arise from its domination of the UN as a whole.) Such a norm would serve as the present defense against external involvement in Mexico's domestic affairs and would leave the revolutionary family free to concentrate on its internal program of development, undisturbed, for example, by international criticism of its less than fully democratic political practices. For its part Washington sought stability in Mexico, on the rationale that any change might well be for the worse and that whatever its eccentricities the Mexican regime could be trusted not to obstruct any vital U.S. interests. That was the implicit bargain explaining the orchestrated harmony of the 1950s. In fact, in the immediate postwar period the U.S. diplomats most directly concerned with Mexico went to considerable lengths to head off potential sources of renewed friction between the two countries. For example, Merwin Lee Bohan, President Truman's economic affairs counselor on Mexico, condoned increased levels of protection for Mexican industry, even though this ran counter to the general U.S. stance on free trade. 6 Similarly, Mexico was not pressured to join G A T T , the General Agreement on Tariffs and Trade, at a time when many countries were coming under intense pressure to open their markets to U.S. goods. Likewise the U.S. ambassador to Mexico, Walter Thurston, resisted instructions to press for the denationalization of the Mexican oil industry (contenting himself with President Miguel Aleman's assurance that "in an emergency affecting the United States or this hemisphere, Mexico's oil resources would be instantly at our disposal"). 7 Perhaps the most striking episode was the same ambassador's decision not to communicate a U.S. State Department warning to Mexico to suppress the illegal cultivation of opium poppies or see the matter raised at the UN Economic and Social Council. Thurston's explanation to his superiors is of contemporary relevance: If the United States government officially endorses... a critical attitude of the Mexican government for permitting the production of poppies and opium, it is quite apparent that this attitude will provoke resentment and

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very likely hostile remarks with respect to conditions in the United States and the connivance of American capital and gangster organizations, which we seem no more able to control than do the Mexicans seem able Q to control the production and shipment of narcotics. Within such a setting it was only to be expected that the U.S. government would refrain from any criticisms of Mexico's internal political arrangements that might sour the relationship on other fronts, or that might weaken the stability of a friendly regime. If Mexico was not "democratic," as the United States understood the term, at least it was no longer radical and turbulent, as it had seemed before 1940. It offered no advantages to Washington's enemies, it restrained from intervening in the internal affairs of other allied countries, and it demurred in only the mildest terms when the United States adopted assertive policies in other parts of the world. In return for all these advantages, treating the facade of Mexican constitutional government almost as if it were a genuine instance of a pluralist democracy was a minor price for U.S. policymakers to pay. T o argue that the Mexican one-party regime was actually tailored to satisfy U.S. requirements for the observance of democratic forms might be too reductionist. But at any rate the outcome was remarkably felicitous for Mexican leaders who had no intention of sharing power with the opposition, let alone of relinquishing it in the event of an electoral rebuff, but who urgently needed the assurance that Washington would refrain from either stirring up internal dissension or indeed from becoming sucked in when internal tensions arose. 9 By holding regular elections at all levels of government, and by enforcing the no reelection rule, the Mexicans were able to deflect the United States from making frequent judgments about internal political processes south of the Rio Grande. "We have our constitution," they would say, "which we demonstrably observe (at least in these formal respects) and which gives rise to a rotation in office of civilian politicians." That argument served well to demonstrate the boundary between acceptable and unacceptable areas of U.S. involvement in Mexico's internal affairs. It reserved a significant sphere of activity to the governing party, one that all factions jealously defended under the guise of Mexican "nationalism." And so the U.S. government (and most U.S. media and academics) accepted this demarcation for a good thirty years, 10 in part because Mexico seemed to threaten no broader interest, in part because the United States was free to exert quite extensive influence over Mexican internal affairs beyond the banned realm of party politics, and in part because even if Mexico's internal affairs were less democratic than they appeared, they were considerably more democratic than they had formerly been, and the trend was in the right direction.

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T h e published r e c o r d provides clear evidence that Washington policymakers w e r e actively committed to sustaining the harmony of the relationship and thought it worthwhile to quell potential sources o f friction that might otherwise get out of control. F o r example, in August 1953 the U . S . ambassador to Mexico, Francis White, wrote to Secretary of State J o h n F o s t e r Dulles: I have been working closely w i t h . . . the Minister of Foreign Affairs He and other Mexican officers are fully cognizant of the special role that Mexico plays in our relations with Latin America and have told me so. Other countries in Latin America look to our relations with Mexico as a barometer with which to judge our whole Latin American policy. A number of Latin American ambassadors have told me the same and some even implied that watching that situation was their most important duty here. 1 1 Then, in O c t o b e r 1953 Dulles briefed President E i s e n h o w e r on his upcoming meeting with newly elected President A d o l f o Ruiz Cortines, as follows: Mexican-United States relations are stable and friendly. We know what to expect from Mexico and understand her limitations. The same is true of Mexico's attitude toward the United States, although it is traditionally colored by vague suspicion of our motives. This arises from past incidents, the peculiar course of Mexican history, the fear of the weak of the strong, and the activities of groups interested in fomenting d i s c o r d . . . . Many problems exist between the two countries mostly stemming from our geographic juxtaposition. All are probably susceptible of settlement without undue concessions by either side None of the problems is of sufficient dimension that the national security of either country is menaced now, but prompt solution of some is clearly in our national interest. The Communist danger is not fully appreciated in Mexico because of her tradition of extreme liberalism. . . . In spite of an apparent lack of concern with Communism within the country (where it has not won a significant number of followers) and of a non-committal attitude toward the efforts of the United States in the East-West struggle, there is little doubt that in time of crisis Mexico would be on our side. In J u n e 1954, when White presented President Ruiz Cortines with the names of over twenty Mexicans who had recently traveled behind the Iron Curtain, " t h e President said at o n c e that these people are not important, and he said that should it be necessary or shall we so desire, he could have t h e m all arrested in five minutes and would do so, but he thought they w e r e not important enough to warrant doing so." 1 3

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Nonetheless, to sustain such a harmonious relationship, the United States had to accept certain minor irritations of its own. In March 1954 Mexico joined with Per6n's Argentina in abstaining when the O A S voted 17 to 1 to condemn Guatemala, paving the way for the U.S. Central Intelligence Agency ( C I A ) operation to oust the leftist constitutional government of Jacobo Arbenz, 14 and the following autumn it resisted U.S. pressure to deport Guatemalan political refugees either to the Iron Curtain or back to the tender mercies of the new pro-U.S. military dictatorship that had by then been installed in their homeland. More serious perhaps, was Mexico's decision not to join the rest of Latin America in receiving military grant aid under the 1951 Mutual Security Act. The ostensible reason for this was that Mexico would not accept the act's requirement of willingness "to participate in missions important to the defense of the Western Hemisphere" outside Mexican national boundaries. Another possible reason may have been that the governing party in Mexico preferred to keep military training, equipment, indoctrination, and intelligence under its own control. (As it turned out, the long-term cost of sharing these prerogatives with the Pentagon subsequently proved quite damaging to the political authority and stability of other Latin American governments.) Although a thorough history remains to be written, it is safe to assert that this snapshot of the relationship between Mexico and the United States at the height of the Cold War provides a reasonable approximation to the underlying patterns prevailing from the early 1940s to the late 1970s. Rather than deriving automatically from a spontaneous harmony of interests, and in addition to any genuine convergence of outlooks between the two governments, this nonconflictual relationship contained a structural tension that was masked on both sides, for fear of what might happen otherwise. 15 Instead of examining further detail, let us consider how much more damaging to U.S. hegemony the relationship might have been. This counterfactual can be illuminated by the experiences of other great powers. What the Relationship Might Have Been At the height of British power Ireland was a much more serious source of vulnerability and distraction than Mexico has been to the United States. It could well be argued that the British had brought this misfortune upon themselves by the way they had treated the Catholic majority in Ireland over preceding centuries, but from the mid-nineteenth century onward governments in London had tried (in their way) to make amends for earlier wrongs and to reestablish Anglo-Irish relations on a more compatible basis. In the Edwardian period, however, Ireland continued to be

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such a source of trouble that it even occasioned a serious possibility of mutiny within the British armed forces, and of course the Irish Republicans took the opportunity of World War I to launch the 1916 Easter Rising. Traditionally Britain's continental enemies had looked to Ireland as the platform from which to attack the United Kingdom "from behind," a tradition Libya's Colonel Qaddafi keeps alive to this day. Britain's problems with Ireland were no worse than the norm for other European power struggles. Poland can be viewed as an analogue of Ireland through which the security of governments in Berlin, Vienna, or Moscow might be threatened;16 and the Balkans occupied a similar position in relation to the Ottoman Empire. Beyond Europe Japan's relationship with Korea is also analogous. To take a more contemporary example: Regardless of ideology, Communist Peking views Communist Hanoi as a similar enemy neighbor. This is undoubtedly a miscellaneous range of examples, but it should serve to demonstrate the exceptional good fortune of the United States in managing to establish such a relatively favorable relationship with Mexico, and also to show that Mexico's problems with its northern neighbor could easily have been far worse. (In this sense U.S.-Cuban relations follow a pattern that is in some ways more typical for a great power and a vulnerable neighbor.)

The 1980s: Reversal and Reprise Again, the orchestrated harmony between Mexico and the United States would not be visibly disrupted until the 1980s. Tensions grew particularly acute in the first half of 1986, when President Miguel de la Madrid threatened unilateral action on the debt issue, and when public testimonies in the U.S. Senate gave voice to harsh criticism of the Mexican regime from various normally muted sources within the U.S. administration.17 With the encouragement of CIA Director William Casey, the U.S. security establishment had begun to air serious forebodings about the potential threat to U.S. national interests emanating from Mexico, and some apocalyptic opinions began to circulate in segments of the U.S. media. This change of tone was reflected in establishment opinion.18 It had its roots in a series of events that began in 1979 and even earlier—and it proved to be short-lived. There were in fact multiple causes for the alarms raised in the mid1980s. One significant factor was Mexico's qualified support for the Sandinista regime in Nicaragua, which contrasted sharply with Washington's unbridled hostility and covert warfare. The disagreement was already in view in May 1979, when President José Lopez Portillo met with President

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Fidel Castro and reached an understanding that greatly enhanced the international respectability of the Sandinista revolution. The outcome of that meeting (and of the associated change of the guard in the Mexican foreign ministry) was that the United States was abruptly confronted with an effective Latin American resistance to its attempts to prevent a Sandinista military victory in the Nicaraguan civil war. The hypothesis that had brought Mexico and the United States to the brink of war in 1926-1927 (Mexico's alleged support for the "export of bolshevism" to Nicaragua) reappeared in an only partially altered guise a half-century later, and Mexican-U.S. government-to-government relations have been affected ever since. This is not the place to enter into the details of the 1979 events.19 It could well be argued that in both 1927 and 1979 the underlying Mexican intention was to export the ruling Institutional Revolutionary Party (PRI) rather than bolshevism. (This is a distinction that usually seems far clearer to policymakers in Mexico City than to those in Washington.) If a Sandinista victory was in any case inevitable, then it could be argued that it would be very much in the interest of both Mexico and the United States if a noncommunist government—one basically friendly to the United States and sensitive to its security concerns—should seek to take the lead in assisting the inevitable, especially if Cuba were willing to stand back. Perhaps subsequent developments make this argument more impressive than it seemed to many in the United States at the time, but of course Mexico and the United States hold differing perspectives on where responsibility should fall for such developments. At the time U.S. policy on Nicaragua seemed bankrupt (even to many in Washington), and the Mexican alternative could be viewed as a constructive step taken at a difficult moment. Although 1979 can be singled out for attention in this way, it was just the most dramatic episode in a longer process. The conflict became more acute after November 1981, when the Reagan administration began funding the contras. Starting in 1982 Mexico began playing a prominent role in the Contadora Group, which sought a peaceful solution that would, among other things, have required the dismantling of the contra forces. After 1987 the focus of attention shifted away from Mexico as the Central American Esquipulas initiative displaced Contadora, and as the Reagan administration was forced to retreat in the wake of the Iran-Contra scandal. Central America was, however, by no means the only example of Mexican assertiveness at the time. Already in the early 1970s President Echeverría had taken a number of international initiatives (including support for the New International Economic Order and for the famous UN pronouncement equating Zionism with racism) that signaled growing Mexican assertiveness and independence from Washington on key inter-

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national issues. Those gestures could initially be dismissed as the eccentricities of a single, somewhat erratic leader; and indeed after the economic crisis of 1976 it appeared at first that President López Portillo would go to considerable lengths to distance himself from the oddities of his predecessor. But by the late 1970s Mexico was feeling the upsurge in national self-confidence associated with the oil boom. U.S. prestige had fallen considerably as a result of the government's policies in Chile, followed by the Watergate scandal, Richard Nixon's resignation, and the defeat in Vietnam. López Portillo was also irked by certain bilateral problems with the United States (such as the "gasoducto" dispute in 1977) and held a low opinion of the Carter administration. All those factors contributed to the shift in Mexican policy in 1979, and they also help to account for the subsequent change of mood in the United States, where a much more critical attitude toward Mexico's failings began to emerge in the early 1980s. (Both Mexico and Central America suffered from a nationalist backlash in the United States, which was, in my opinion, attributable much more to U.S. frustration with events in Southeast Asia and Iran in the 1970s than to a measured assessment of the real challenges arising in the adjoining subregion.) Obviously the 1982 debt crisis was another major turning point in Mexican-U.S. relations, quite as significant as that of 1979, and opposite in sign. Mexican assertiveness crumbled, and with it the country's capacity for autonomous action in distant arenas. Instead Mexico became a priority problem for Washington to deal with—a needy mendicant resorting alternatively to bluster and pleading to secure debt relief from a U.S. administration that was ideologically opposed to state-led patterns of economic management and that believed in rewarding its security friends and sanctioning its supposedly disloyal allies.20 The fact that Mexico's failure to pay its interest bill was precipitated by massive capital flight, and was followed by the controversial decision to nationalize the banking system, contributed to a loss of U.S. confidence in the stability and coherence of Mexican policymaking. This loss of confidence reinforced the Reagan administration's inclinations to play hardball with a recalcitrant neighbor. Given this multiple list of causes, it could be said that the public clashes of the mid-1980s were overdetermined. But if so, the reestablishment of apparent harmony later in the decade requires all the more explanation. Once again a multiplicity of factors may be cited for the reversal in tone, but identifying the underlying dynamic is trickier. Insofar as the Central American issue had poisoned the relationship, by the time of the August 1987 Esquipulas summit that source of difficulty had begun to fade. Other issues that came to a head in 1986 (reform of U.S. immigration

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law, for example) were also at least temporarily defused by new initiatives. The various trade conflicts subsided as Mexico applied for admission to G A T T and embarked on a broad program of economic liberalization. But almost certainly the critical turning point was in June 1986, when the de la Madrid administration dropped its threat of unilateral action on the debt issue and accepted the limited concessions on offer from the creditor banks. For a brief moment in early 1986 it had seemed possible that Mexico might join with Argentina and Brazil (both then engaged in eventually unsuccessful "heterodox" stabilization policies) in a common "debtors' front." But since mid-1986 Mexican economic policy has moved progressively further from this Latin American posture, with an increasingly clear emphasis on economic orthodoxy, liberalization, and the search for a separate, North American solution to the country's development problems. In response to this cumulative change in direction, Mexico's economic policy has received increasingly enthusiastic support from the international financial community and from Washington policymakers. Mexico was singled out in 1989 as the first beneficiary of the Brady initiative, and plans for privatization and economic integration with the United States and Canada are emerging thick and fast from the Salinas administration. (In September 1990 Mexico formally asked the United States to open negotiations on a "free trade" treaty, with a hoped-for completion date in 1992.) The underlying dynamic of this improving relationship is thus evidently economic, and it rests on an explicit decision made in Mexico City to meet the conditions of domestic economic policy reform desired by Washington. Although the United States has also shifted ground a little (easing back from the dogmatism of the Reagan administration's approach to Latin America), in essence the Mexican authorities have largely gone over to the U.S. point of view. In gratitude for this essentially unilateral shift, opinion makers north of the border have worked hard to dampen the controversies that inflamed feeling in the mid-1980s.

Prospects for the 1990s Inevitably not all is harmony, even now. The U.S. invasion of Panama was a direct violation of Mexico's most cherished foreign policy principles. Moreover, the arguments used to justify it (extraterritorial enforcement of U.S. antinarcotics laws and the illegitimacy of a government which had come to power through electoral fraud) set precedents for intervention that were clearly threatening from the Mexican regime's point of view. But the potential for long-term damage to Mexican-U.S. relations has been minimized by the implicit promise that Manuel Noriega was an

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extreme case. If Panama were to prove to be the first of a series of dominoes (falling not to the left but to U.S. intervention), Mexicans would be severely provoked, but the real danger for Salinas would be if the United States started viewing his administration through a Panamanian lens. The Panama precedent could become truly threatening to the Mexican authorities if Washington were to decide to treat narcotics in the 1990s as it treated Sandinismo in the 1980s. For now, however, a strategy of containment is being applied (by agreement between the two governments) to limit friction over narcotics-related incidents. In practice this means that Mexicans are required to mute their uneasiness over displays of U.S. assertiveness for fear that otherwise they might jeopardize their still-fragile new economic strategy. This is an unequal basis on which the appearance of continuing harmony might well be sustained for Some years to come, in which case, it would be right to say that U.S. "regional hegemony" had been successfully reestablished. There is, however, one remaining source of conflict that may not be so easy to keep off the public agenda. Does U.S. hegemony derive essentially from the nation's material power and advantages, or is it equally a product of the persuasive force of the arguments and example of the United States? This chapter has tended to give weight to the second component as much as to the first, and to argue that at least since World War II apparent harmony in Mexican-U.S. relations can be attributed to an actual convergence of assumptions and outlook between the two governments. Since the U.S. government has been decidedly unresponsive to most of the arguments and distinctive viewpoints of the Mexican authorities, this "convergence" has depended largely on tacit or explicit Mexican acceptance of a range of official U.S. positions, initially on the Cold War and more recently on questions of economic policy. But if U.S. hegemony rests at least in part on the principles and example of the United States, there is one major topic of discourse that may become a serious point of contention with Mexico. This is the question of democracy, political pluralism, and the importance of impartial electoral procedures. As noted earlier, Washington traditionally extended its tacit approval of Mexican internal politics that were—and still are—substantially at variance with stated U.S. values. It was not until around 1984 and 1985 that the deficiencies of electoral democracy in Mexico suddenly began securing an unusual degree of exposure in the U.S. media. Criticisms along these lines persisted until mid-1988 but then abruptly subsided. The disputed results of the 1988 election could easily have led to a severe confrontation between the two countries, but the potential danger was immediately defused when Washington chose to take the official party's version of events at face value and lent its support to the inauguration of the Salinas administration. Nevertheless, this has created a potential

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contradiction between the heightened rhetoric of the United States in favor of democracy around the world and what the nation may be required to condone in order to protect the status quo (or at least to preserve stability) south of the Rio Grande. In Washington's official discourse in 1990 the confirmation of the U.S. role as a global and regional leader is intimately associated with the almost worldwide adoption of political pluralism and economic liberalism as the guiding principles of good government. This global acceptance can be viewed as the most decisive evidence that U.S. ascendancy derives from the power of its arguments and its example, and not just from the nation's capacity for coercion. But this official discourse sits uneasily with a long history of U.S. inaction and disinterest in the face of traditional Mexican electoral practices, and it will become increasingly difficult to sustain that passivity in the 1990s if Mexico remains too flagrantly out of line with the political standards now being demanded—and achieved—elsewhere. Two main factors are likely to determine the evolution of the "democracy issue" as a possible source of renewed contention between the two countries. One is the success, or otherwise, of the Salinas administration in presenting its political strategy to the outside world as an example of realistic democratic reform. The second concerns the efforts of the center-left opposition coalition, the Party of the Democratic Revolution (PRD), to reawaken international concern over the inadequacies of the Mexican electoral system. Both of these factors are imponderables. The democracy issue may somehow be defused or even resolved in the next few years, in which case only the drug issue would retain the potential to poison the relationship. But it is equally plausible to anticipate a renewed burst of crisis over the former issue, with unpredictable consequences both for the Mexican-U.S. relationship and for U.S. claims to moral leadership. The Salinas administration could face the choice between practicing electoral plurality (and jeopardizing its economic strategy) and pursuing economic continuity (even at the cost of further and more flagrant electoral misconduct). Obviously efforts are being made to head off such a disjuncture, and the center-right opposition party, the National Action Party (PAN), has been partially enlisted in this enterprise. PAN has few disagreements with the basics of Salinas's economic strategy, and it has no wish to see Mexico governed from the left. As long as it tacitly endorses Salinas's credentials as a political reformer, U.S. criticisms will probably remain muted. (It was only when PAN appeared to be the potential beneficiary of greater electoral freedom that Washington took up the cause of Mexican democracy between 1985 and 1988. Once the left emerged as the leading power contender, U.S. enthusiasm for political

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reform was quick to fade.) P A N would be unwise, however, to risk co-optation by an essentially unreformed PRI. It must therefore hold out for a degree of democratization that may exceed Salinas's capacity to deliver. The greater imponderable concerns the challenge from the left. The unquestionable figurehead of this movement, Cuauhtémoc Cárdenas, faces an awkward dilemma. On the one hand, his chances of success will be maximized if he stresses the issues of political freedom and justice on which Salinas is most vulnerable and if he appeals to international opinion to stand up for these values in Mexico, as elsewhere. On the other, the natural base of his support comes above all from Mexicans opposed to the economic and social priorities of the Salinas administration rather than to its electoral practices. Moreover, his economic policies inspire less confidence than those of the incumbent technocrats, and his credentials as a nationalist conflict with his interest in mobilizing international opinion to meddle in Mexico's internal political arrangements. Nevertheless, his case against the status quo could still elicit decisive support from within Mexico, in which case his critique of the current state of Mexican-U.S. relations would suddenly acquire greater currency: T h e n e w relationship b e t w e e n M e x i c o and the U n i t e d States . . . c o m e s at the expense of M e x i c o ' s pride and dignity. It is based on self-inflicted vulnerability . . . [and] runs c o u n t e r to M e x i c o ' s national interest, its historical convictions, and its political beliefs. A lasting friendship cannot b e built on a one-sided relationship. T h e path chosen is w r o n g for M e x i c o and dangerous for the U n i t e d States. A l t h o u g h it s e e m s pragmatic, this n e w a p p r o a c h is necessarily u n s t a b l e . . . . It reflects the antidemocratic bent of the Salinas g o v e r n m e n t , which refuses t o d e b a t e m a j o r national issues and to accept public accountability for its acts. . . . R a t h e r than m a k i n g concessions in o n e field in e x c h a n g e f o r A m e r i c a n concessions in others, M e x i c o presented its w h o l e p r o g r a m m e of restructuring as entirely unlinked to the bilateral negotiation. W h e t h e r in e c o n o m i c s , drug e n f o r c e m e n t , or immigration, this state o f affairs should c h a n g e . A m e r i c a n d e m a n d s should b e s t a t e d — a n d t a k e n — f o r w h a t they are, and M e x i c a n concessions should also b e seen correctly as part of the give and t a k e of a healthy bilateral relationship. N e e d l e s s to say, only a M e x i c a n government with legitimacy, popular support, and impeccable nationalist credentials could m a k e such a c h a n g e . 2 1

The search for a more equitably based relationship between Mexico and the United States thus has not been abandoned. The greatest test of the relationship will come if Mexico does indeed become more democratic. Such a development would also test the role of consent as a constitutive element in U.S. regional hegemony.

260

The Primacy of Relations with the U.S.

Notes 1. Whereas an imperial power assumes direct control over subordinate territories, a hegemonic power sets the rules and regulates the system within which lesser states coexist and exercise a degree of autonomy. But given the absence of formal control, the boundary between hegemony and mere leadership becomes elusive and open to debate. 2. The most drastic extrapolations of decline are associated with Paul Kennedy, The Rise and Fall of the Great Powers (New York: Random House, 1987). The most comprehensive rebuttal of Kennedy's views comes from Joseph S. Nye, Jr., Bound to Lead: The Changing Nature of American Power (New York: Basic Books, 1990). Nye notes that if Mexico "became too weak to deal with internal poverty or domestic problems, transborder flows of migrants, drugs, or contraband might create a new foreign policy agenda for the United States. Ironically, the current neglect of weak Third World nations may reduce America's future power to influence them on the new transactional issues" (p. 198). 3. When President Polk accepted the annexation of Texas, he emphasized that the United States was thereby rejecting attempts to introduce the European doctrine of the balance of power into the Americas. The superior principle, he claimed, was "the expansion of free principles" (including slavery). 4. Alan Knight, "U.S.-Mexican Relations, 1910-1940: An Interpretation," monograph no. 28 (San Diego: Center for U.S.-Mexican Studies, University of California, San Diego); and Laurence Whitehead, Journal of Latin American Studies 21, pt. I (February 1989): 164-165. 5. Blanca Torres Ramirez, México en la segunda guerra mundial (Mexico City: El Colegio de Mexico, 1979), gives a clear description of the trade prospects as viewed from Mexico. 6. Foreign Relations of the United States (FRUSA), 1947 Vol. Ill: The American Republics (Washington, D.C.: U.S. Government Printing Office, June 1947), p. 778 (Counselor Bohan, June 1947). 7. Ibid., p. 791 (Ambassador Thurston, January 1947). 8. Ibid., p. 840 (Ambassador Thurston, December 1947). 9. For a representative example of the U.S. response to such contingencies, see FRUSA, 1952-54, Vol IV (1983), pp. 1360-1361, in which Ambassador White reported on a rumored revolutionary plot by the Henriquistas (who claimed to have been defrauded in the 1952 election) and his reaction to requests for sympathy and possible assistance. 10. For example, Karl M. Schmitt, Mexico and the United States, 1821-1973 (New York: Wiley, 1974), says nothing about elections or democracy. See also Lorenzo Meyer's chapter on U.S. disinterest in the democratization of Mexico, in Abraham Lowenthal, ed., The United States and Latin American Democracy (Baltimore, Md.: Johns Hopkins University Press, forthcoming). 11. FRUSA, 1952-54, vol. IV, p. 1341. 12. Ibid., pp. 1350-1351. (For Francis White's earlier career as a vice president of ITT who sought U.S. government support for buying out the rival Ericsson enterprise in Mexico, and who was accused of pro-Nazi or pro-Soviet behavior, or both, see FRUSA 1947, Vol. VIII, p. 767).

Mexico and the "Hegemony" of the U.S.

261

13. Ibid., p. 1366. Ambassador White replied that he was not making any such request. 14. According to Stephen G. Rabe, "Dulles was particularly troubled by Mexico's abstention on the final resolution. Foreign Minister Luis Padilla Nervo defended Guatemala, telling Dulles, 'I remember the time when Mexico stood alone and we were going through an economic and social reform, a revolution, and if at that moment you had called a meeting of the American states to judge us, probably we would have been found guilty of some subjection to foreign influences.'" Dulles wildly concluded that Mexico's position was due to "a real infiltration of Communist, or fellow traveller influence into the Mexican government itself." In Eisenhower and Latin America (Chapel Hill: University of North Carolina Press, 1988), p. 52. 15. For example, Rabe's book (ibid.), which covers the years 1953-1961, refers to four substantive episodes in Mexican-U.S. relations, all arguing for tact in the handling of Mexican sensitivities for fear that otherwise the country might succumb to Communist influence. Thus, on October 15,1960, Eisenhower urged U.S. congressmen to show patience in response to Castro. He argued among other things that if Mexico became "disgruntled" with U.S. tactics, "and if we were to see the Communists come to power there, in all likelihood we would have to go to war about this." Ibid., p. 165. See also pp. 70 and 114. 16. Paul Kennedy explicitly invokes the comparison between Mexico and Poland. Although his study of the Great Powers contains only one sketchy and alarmist paragraph about Mexico, that suffices for him to judge Moscow's Polish crisis "small by comparison" with the Mexican-U.S. relationship. (See Kennedy, The Rise and Fall, p. 517.) A much more thorough comparison by Jeffrey L. Hughes, written at about the same time, stresses the similarities and understates the contrasts: "The Politics of Dependence in Poland and Mexico," in Dominant Powers and Subordinate States: The United States in Latin America and the Soviet Union in Eastern Europe, ed. Jan F. Triska (Durham, N.C.: Duke University Press, 1986). 17. I analyzed these 1986 tensions in Laurence Whitehead, "U.S. Relations with Mexico: Un deterioro sin fin?" in The Latin American and Caribbean Contemporary Record Volume V: 1985-86, ed. Abraham Lowenthal (New York: Holmes & Meir, 1988). 18. The January 1988 report of the Commission on Integrated Long-Term Strategy (a memorandum to the U.S. Secretary of Defense signed by such national security authorities as Zbigniew Brzezinski and Henry Kissinger) probably represents the last, and most authoritative, example of this genre. "The absence of significant security threats close to home has helped free the United States to play a global military role in the years since 1945. This situation might change if more pro-Communist regimes come to power in the hemisphere. If the Sandinista regime consolidates . . . hostile Communist regimes might gradually become established elsewhere in Central America Any such trend could be expected to endanger control of the Panama Canal and the political stability of Mexico. These developments would force the United States to divert far more of its foreign policy resources and defense assets to the Caribbean region, leading to a reduced American role in NATO." "Discriminate Deterrence," U.S. Commission on

262

The Priman/ of Relations with the U.S.

Integrated Long-Term Strategy, monograph (Washington, D.C.: U.S. Department of Defense, 1988), p. 11. 19. See, for example, Robert A. Pastor, Condemned to Repetition: The United States and Nicaragua (Princeton, N.J.: Princeton University Press, 1987); and from the Mexican side, Edward Best, "Mexican Foreign Policy and Central America Since the Mexican Revolution," D. Phil, dissertation (Oxford, Eng.: Oxford University, 1988). 20. See Joseph Kraft, The Mexican Rescue (New York: Group of Thirty, 1984); and for the broader picture, Laurence Whitehead, "Latin American Debt: An International Bargaining Perspective," Review of International Studies 15, no. 3. 21. Cuauhtémoc Cárdenas, "Misunderstanding Mexico," Foreign Policy, no. 78 (Spring 1990), pp. 128-130.

About the Contributors

Riordan Roett is the Sarita and Don Johnston Professor and director of the Latin American Studies Program at the Nitze School of Advanced International Studies (SAIS) of Johns Hopkins University. Jesús Silva-Herzog F. is a Mexican economist and director of the Center for Latin American Monetary Studies. He was Mexican minister of finance from 1982 to 1986. Clark W. Reynolds is professor of economics at the Food Research Institute at Stanford University. Sergio Aguayo Quezada is researcher at the Center for International Studies at El Colegio de México. Roberta Lajous is a career member of the Mexican foreign service. Currently she is director of the magazine EXAMEN and a member of the National Executive Committee of the PRI. Wolf Grabendorff is director of the Institute for European-Latin American Relations (IRELA) in Madrid. Jorge Alberto Loyoza is technical secretary for the Foreign Policy Cabinet of the Office of the Presidency of Mexico. Terutomo Ozawa is professor of economics at Colorado State University. José Miguel Insulza is researcher at the Instituto Latinoamericano para Estudios Transnacionales (ILET) in Santiago, Chile. Cheryl L. Eschbach is assistant professor of government and foreign affairs at the University of Virginia. Olga Pellicer is deputy Mexican permanent representative to the United Nations. Gabriel Székely is associate director of the Center for U.S.-Mexican Studies.

263

264

About the Contributors

Sally Shelton-Colby is adjunct professor at the Center for Latin American Studies, Georgetown University and former deputy secretary for interAmerican affairs. Laurence Whitehead is a professor at Nuffield College, Oxford.

Index

A L A D I . See Latin American Integration Association A L A L C . See Latin American Free Trade Association Alam, Shahid: quote of, 149 Aleman, Miguel, 249 Alvarez Machain, Humberto: kidnapping of, 246 Andean Pact, 167 Arbenz, Jacobo, 172,252 Argentina, 167,193(n59); exports from, 164; imports to, 165; relations with, 15, 16, 33, 79; stabilization policy and, 256 Arias Plan, 163,174,189(nl2) Asian Pacific Economic Cooperation (APEC), 10 Asea Brown Boveri, negotiations by, 84 Association of Southeast Asian Nations (ASEAN), 115; members of, 143 Attali, Jacques, 124 Austerity, 55; maintaining, 25 Australia, relations with, 10 Austral Plan, 6 Authoritarianism, 66-67 Auto Pact. See United States-Canada Automotive Products Agreement B A N A M E X . See Banco Nacional de México B A N C O M E X T , See Banco Nacional de Comercial Exterior Banco Nacional de Comercial Exterior, 186,187 Banco Nacional de México ( B A N A M E X ) : reciprocal payment agreements with, 184; work of, 88

B a n k i n g : n a t i o n a l i z a t i o n of, 255; reprivatization of, 31,51 Barclay's Bank, 104 Barttlet, Manuel: on security, 61 Basel Convention on the Transboundary Movements of Hazardous Waste, 207 BC-NET, 104 BCIE. See Central American Bank for Economic Integration Belize, 184; San Jose Accord and, 192(n44) Betancur, Belisario, 163 Bilateral relations, 28,77,174,184,187, 195, 196, 217, 220, 225, 234-236, 259; defining, 237-240; economic integration and, 240-241; growth of, 23 Blocs: disintegration of, 28-29,123,200, 212; regional, 23,24,27-28,85,101, 113,118; U N and, 200-201 Bohan, Merwin Lee, 249 Boom-bust cycle, preventing, 222-223 Border industries. See Maquiladoras Border issue, 180, 204, 235; U.S. and, 174. See also Immigration; Migration Brady initiative, 14-15,27,31,231,241,256 Brazil, 167, 193(n59); exports from, 164; imports to, 165; relations with, 15, 16, 33, 101, 159; stabilization policy and, 256 Brunei: growth of, 143; New A I D Plan and, 144 Bush, George, 4,5,7,32,172,220,231; Salinas and, 82,102 Business Week, 149; on maquiladoras, 146 CACM. See Central American C o m -

265

266 mon Market Calles, President Plutarco Elias, 246 Calvo Sotelo, Leopoldo, 108 Camarena, Enrique S., 19(nl), 65 Cambodia, 201; conflict in, 197 Campesino organizations, 179 Canada, 197, 217; agreements with, 5, 53, 83, 224, 236; economic diversification of, 53; interdependence and, 41; leadership of, 34; per capita GNP of, 42; relations with, 17, 18, 33, 39, 218, 225, 226, 240; trade surplus of, 44; U.S. relations with, 53, 219. See also Free trade agreement Capital, 17,218; access to, 4,16; flight, 55, 255; foreign, 25; surplus, 138139,153(n6) Cárdenas, Cuauhtémoc, 55, 68, 221, 259; article by, 159; popularity of, 69 Cárdenas, Lázaro, 98,158,247 Cardenistas, economic integration and, 221-222 Caribbean Basin, relations with, 5, 111, 124,156,181-187 Caribbean Basin Initiative (CBI), 231 Casey, William, 253 Castro, Fidel, 108,110,254,261(nl5) CCEP. See Conference for Economic Cooperation in the Pacific Cecchini Commission, 46,49 Cemex, 149 Center for Investigation and National Security, 65-66 Center-left coalition: economic integration and, 221-222; nationalism of, 67. See also Left Center of Public Opinion Studies, 69 Central America: abandonment of, 158-160,163; changes in, 240; debt of, 185; dialogue with, 124, 175; European Community and, 108, 115, 116; exports of, 181, 183; hegemony over, 244; immigration from, 255-256; militarization of, 188; oil purchases by, 182; refugees from, 191(n34); relations with, 18, 110, 158, 162-163, 168, 171-178, 181-188, 209, 234, 254-255; U.S. relations with, 172-173, 176. See also Latin America Central American Bank for Economic

Index

Integration (BCIE), 188, 192(n50); loans from, 182,187 Central American Common Market (CACM), 176, 184; tariffs of, 191(n40); trade in, 190(nl6) Central American Import Financing Program (FICE), 186,188 Central Intelligence Agency (CIA), 252 CEPAL. See Economic Commission for Latin America and the Caribbean Cerezo, Vinicio, 175,188(nl) Charter of the Economic Rights and Duties of the States (Echeverría), 81,99,155 Cheysson, Claude, 80,108 Chile: exports from, 164; imports to, 165; relations with, 15, 16, 33, 95, 167-168; U.S. relations with, 246, 255 China: changes in, 230; leadership of, 34; New AID Plan and, 144 CIA. See Central Intelligence Agency Civil War, U.S.: Mexico and, 247 Coello Trejo, Javier: on drug trafficking^ Cold War: end of, 175-176, 201-202, 219; Mexico and, 252,257 Colombia, 162,163 COMECON. See Council for Mutual Economic Co-operation Commerce and Industrial Development Ministry (SECOFI), 186 Commission on Human Rights, 201 Committee of the General Assembly for Economic Issues (UN), 198 Common market: North American, 176,226 Communism, 251, 254, 2 6 1 ( n l 4 ) , 261(nl5); reduced threat from, 16; vulnerability to, 179 Conference for Security and Co-operation in Europe (CSCE), 100 Conference for the Amendment of the Moscow Partial Test Ban Treaty (UN), 204 Conferencia Permanente de Partidos Políticos Latinoamericanos (COPPPAL), 106,177 Constitution of 1917,178 Contadora Group, 79,80,108,109,110,

Index 174, 179, 254; disappearance of, 9 3 ( n l 5 ) ; document of, 111; European Community and, 111112; members of, 93(n8), 169(n3), 189(nl0); Mexico and, 111, 156, 162,167,175; Reagan and, 162-163 Contadora Support Group, formation of, 80 Convention on the Rights of Migratory Workers and Their Families (UN), 204 Convergence: migration and, 51; potential for, 44-46,49-50 Coolidge, Calvin, 246 Cooperation, 47,128,148,155,168,188, 212, 227, 232; economic, 151; fostering, 185; international, 198, 199; problems with, 203; trilateral, 46 Cooperation and Friendship Agreement, 87 C O P P P A L . See Conferencia Permanente de Partidos Políticos Latinoamericanos Cordera, Rolando: hypothesis of, 157158 Corruption, 18,55; stemming, 145,233234 Costa Rica, 196; debt restructuring for, 186, 193(n59); exports from, 185; oil-related debt of, 183; reciprocal payment agreement with, 184 "Cost of Non Europe, The" (Cecchini Commission), 46 Council for Mutual Economic Cooperation (COMECON), 98,101 Cristiani, Alfredo, 175,188(nl) Cruzado Plan, 6 CSCE. See Conference for Security and Co-operation in Europe Cuba, 172,201; relations with, 108,254; U.S. relations with, 253 Cultural identity, protecting, 224 Cultural relations, 104-105 Customs Service, U.S., 235 Cydsa, 149 Czechoslovakia, relations with, 97 Debt: 30,50,97,102,127,166,192(n46), 192(n51), 206, 220, 233, 234, 245; economic integration and, 237; national, 63; oil-related, 182-183;

267 reduction of, 14-15, 27, 231; rescheduling of, 84,86,160,176,186, 238-239; threat of, 64 Debt crisis, 19,31,34,40,166,244,255; Third World, 138; unilateral action on, 253,256 Debt relief, 51,239,241,255,256 Decade of International Law, UN, 205 Decentralization, 55,223 Declaration of Cartagena on Refugees (1984), 180 Deficits, 222; Mexican, 30; reducing, 128; trade, 185; U.S., 7, 24, 26, 44, 48,230 de la Madrid Hurtado, Miguel, 3, 50, 100,108, 111, 158,161,233; border control and, 180; debt issue and, 253, 256; on drug trafficking, 64, 65; GATT and, 81; modernization and, 75; on national security, 60 Delegation for Relations with Central America and Mexico (European Parliament), 106 Delors, Jacques, 113 Democratic Revolutionary Front (FDR), 107 Democratization, 6,7,14,40,54,55,56, 67, 84, 90, 91, 127, 240, 250, 257, 258,260(nll); hegemony and, 259; national security and, 60 Department of Defense, U.S., interdiction by, 239 Dependence, 33, 145, 147; reducing, 136,139 D e r e g u l a t i o n , 45, 220. See also Privatization Developing countries: Mexico and, 2829, 34; problems for, 26-27, 202203; UN and, 211-212. See also Third World Development, 26,30,35,124,144,151, 211; financing, 31, 183; industrial, 134; intereconomy sequencing of, 133; internal sequencing of, 133, 147; Mexico and, 205; national security and, 59, 179; paradigm, 130; regional differences in, 202203; sustainable, 198; UN and, 206; waning interest in, 199-200 Development Program, UN, 206 DFS. See Federal Security Bureau Diaz, Porfirio, 82,148; foreign policy of, 76

268 Díaz Ordaz, Gustavo, 61 Diplomacy, regional, 174-175 Diversification, 32,34-35,46,51,53,76, 83-86,102 Document of Objectives (Contadora Group), 111 Dominican Republic: invasion of, 172; relations with, 110,181 Drug E n f o r c e m e n t Administration, U.S., 246 Drug issue, 19(nl), 89, 158, 174, 197, 198, 199, 209, 210, 231, 232-235, 239-241, 245, 249-250, 256, 257, 260(n2); complicity with, 65; dealing with, 219; economic integration and, 237; extradition for, 234; threat of, 61,64 Dulles, John Foster, 251,261(nl4) East-West relations, 204; Mexico and, 100 Eastern Europe, 205, 225; changes in, 28, 84, 123, 230, 240; competition from, 145,201,236; disintegration of, 175, 200-201; European Community and, 115; relations with, 34, 88, 101, 107,117,124; Rio Group and, 88; SEM and, 114 EC. See European Community E c h e v e r r í a , Luís, 62, 99, 245, 254; foreign policy of, 109,160 E c o n o m i c and Monetary Union (EMU), 114 Economic and Social Council, UN, 249 Economic Commission for Latin America and the Caribbean (CEPAL), 167 Economic Committee of the General Assembly (UN), 203 Economic crisis, 14, 62, 89, 156-157, 222, 244; consequences of, 29, 68; f o r e i g n p o l i c y a n d , 160-162; Salinas and, 63 Economic integration. See Integration Economic liberalization. See Liberalization Economic policy, 101; changes for, 2425; d i v e r s i f i c a t i o n o f , 83-86; f o r e i g n r e l a t i o n s a n d , 3; irrationality of, 160-161; strengthening, 235-237 Economic Stability and Growth Pact

Index (PECE), 45,127-128 Economist, 8; quote from, 129 Ecuador, 173 Education, 17, 179, 186-187, 218, 224; differences in, 83; investment in, 142, 143, 151; opportunities for, 147-148 E E C . See European Economic Community EFTA. See European Free Trade Association Eisenhower, Dwight, 251,261(nl5) Electoral fraud, 246,256-258 El Salvador, 111, 162-163,196; civil war in, 171,177,178; exports from, 185; INS in, 180; oil-related debt of, 183; reciprocal payment agreement with, 184; relations with, 175 Emigrants. See Migration Employment, growth of, 40,177 E M U . See Economic and Monetary Union Endara, Guillermo, 173 Energy Cooperation Program for Central American and Caribbean Countries. See San José Accord Enterprise for the Americas initiative, 5,231,236 Environmental issues, 207-208, 210, 212(n4), 224,226,231,232; Mexico and, 208, 212; UN and, 198. See also Pollution EPC. See European Political Cooperation E s q u i p u l a s p r o c e s s , 174-177, 187, 189(nl2), 254,255 E U R O F E D . See European System of Central Banks Europe: exports to, 87,92; influence of, 104-105,113-116, 201; integration of, 27,28,49,75,92,104,113,115, 118; i n v e s t m e n t by, 86; Latin America and, 79-81,85,89,117; oil for, 87; relations with, 3,12-13,18, 33-34, 75-81, 84-92, 96-109, 116118,131,219; technology from, 88, 103 E u r o p e a n Bank for Reconstruction and Development, 84 European Community (EC), 129,131, 162, 209, 219, 225, 237; aid from, 9 3 ( n l 3 ) , 191(n35); Central

índex America and, 80-81,93(nl7); Contadora Group and, 111-112; Eastern Europe and, 115; expansion of, 201, 230; exports to, 102; foreign policy of, 115-116; influence of, 113; investment by, 103, 117; Mexico and, 75, 96,101,104,118, 236; performance of, 114; population of, 41; relations with, 83-84, 92,95 -96,106-107,117; Rio Group and, 80; Soviet Union and, 115 E u r o p e a n Economic Community (EEC): exports to, 77,78,164; imports from, 165; Mexico and, 12, 124 European Economic Space, 96,117 European Free Trade Association (EFTA), 81, 114, 230, 236, 237; Mexico and, 92 European Parliament, 106; Mexico and, 91,118 E u r o p e a n Political C o o p e r a t i o n (EPC), 115 European Single Act (1986), 113 European System of Central Banks (EUROFED), 114 Exports, 32,134,164; diversification of, 102; subsidies for, 102 External debt. See Debt External relations. See Foreign policy "Factor price equalization" theory, 51 Fama, 149 Farabundo Marti National Liberation Front (FMLN), 107, 196; Mexico and, 156,175 FDR. See Democratic Revolutionary Front Federal Security Bureau (DFS): role of, 62; complicity of, 65 Fertility rates, fall in, 43 FG formation. See Flying geese (FG) formation FICE. See Central American Import Financing Program Financial Times, quote from, 7 Flying geese (FG) formation, 143-152; description of, 131-134; Japan and, 138 FMLN. See Farabundo Marti National Liberation Front Foreign Affairs, de la Madrid in, 60

269 Foreign debt. See Debt Foreign investment. See Investment Foreign Policy, Cárdenas in, 159 Foreign policy, 155,156,173,191(n41), 221; bilateralization of, 195; conditioning, 23-24; criticism of, 159; debate about, 209; development of, 3,16-18,23-25,95,99,106,219; diversification of, 76; domestic influence on, 82,160-162; economics and, 3,25; nationalist left and, 69; openness in, 178; priorities of, 124, 167, 210; reform and, 25, 95; selfdetermination in, 97; strengthening, 91 Fortress effect, domination of, 28 Framework Agreement on Trade and Investment, signing of, 225 France: relations with, 80,85,100,106108,110,156,161,162; trade with, 78 Free export-processing zones, 143,146; establishing, 141-142,186 Free trade agreement (FTA), 13, 42, 231; Canadian-U.S., 47-49,53,102, 129, 151, 220, 224, 225; negotiations for, 5, 32-33, 39, 45, 51, 62, 68-69, 75, 125, 145, 155, 167, 176 -177, 217, 219, 221, 223, 225, 226, 227,236,256 Free trade association, North American, 85,102,107 Free trade economy, transition to, 224 FTA. See Free trade agreement Fuentes, Carlos: quote of, 89,91 G-77. See Group of 77 GALA-VISION, 105 "Gasoducto" dispute, 255 General Agreement on Tariffs and Trade (GATT), Mexico and, 1213, 17, 50, 81, 104, 125, 225, 236, 249,256 General Assembly (UN), 199; Mexico and, 204-207 General Bureau of Investigation and National Security, 65 General Bureau of Political and Social Investigations, 65 General System of Preferences (GSP), 82,231 Genscher, Hans-Dietrich, 79

270 GDP. See Gross domestic product Germany, 197, 239; aid from, 28; growth of, 121(n47); investment by, 8, 13, 103, 107; leadership of, 24,34; oil for, 15; relations with, 19, 106-108, 120(n29); trade surplus of, 13,26; trade with, 78 Globalization, 27-28,34-35,90,123,126 GNP. See Gross national product González, Felipe, 108-109 Gorbachev, Mikhail, 75 Great Britain. See United Kingdom Grenada, invasion of, 172,244 Gross domestic product (GDP): deficit and, 30; estimate of, 217; gains in, 46; U.S., 8 Gross national product (GNP): differences in, 83; growth of, 49, 86; North American, 42; per capita, 42-43 Group of Eight. See Rio Group Group of Seven, 219; members of, 228(n6) Group of 77,199,200; Mexico and, 155, 203, 209, 210, 211; problems for, 201,202 Group of Six, 100; members of, 99, 169(nl2); Mexico and, 161, 168 Group of Three: members of, 93(nl5); work of, 120(n37) Growth: improvement in, 24-25; potential for, 48 Grupo Industrial Alfa, 149 Grupo Visa, 149 GSP. See General System of Preferences Guatemala, 172, 173, 261(nl4); civil war in, 171,177,178; exports from, 185; INS in, 180; oil-related debt of, 183; preferential credit for, 187, 188; reciprocal payment agreement with, 184; refugees from, 180, 191(n35); relations with, 180,252 Guatemalan National Revolutionary Unity (URNG), 175 Gutiérrez Oropeza, Luis, 61 Haig, Alexander, 111 Harris, Richard, 47 Hegemony: decline of, 243-244, 252; definition of, 260(nl); democratization and, 259; leadership and, 244; Mexico and, 245-

Index 253, 257; regional, 244, 249, 257; threat of, 56,81 Helms, Jesse, 245 Hemispheric trading zone, 32 H o n d u r a s , 172, 196; INS in, 180; military aid for, 189(n4); oil-related debt of, 183; reciprocal payment agreement with, 184 Hong Kong, 141, 146, 149, 150; industrialization of, 139; investment by, 236; success of, 126,133 House Ways and Means Committee (U.S.), 5 IMF. See International Monetary Fund Immigrants, 260(n2); high-tech, 152; status for, 180 Immigration, 52, 245, 255-256; accommodating, 178; restrictions on, 237238; sensitivity to, 238. See also Border issue; Migration Immigration and Naturalization Service, U.S. (INS), 180; crackdown by, 51 Immigration Reform and Control Act of 1986 (U.S.), 52,237 Imports, 165,185; food, 64; growth in, 25 Income: disparities in 44; per capita, 83; redistribution of, 224 India, New AID Plan and, 144 Indonesia, 134, 148; economic condition of, 145 Industrialization, 129, 133, 134, 144146; assembly-based, 136-137; clustering, 141; FG-based, 147; heavy, 136; import-substituting, 50,53,82,145,150; knowledge-intensive, 150; labor-intensive, 136, 149,150,151; light, 139; transplant a t i o n of, 137-138. See also Manufacturing Inflation, 18,50,68,128; rolling, 145 Initiative for Peace and Disarmament, 99 INS. See Immigration and Naturalization Service, U.S. Instability, 44, 70; ramifications of, 55. See also Stabilization Institutional Revolutionary Party (PRI), 50, 61, 94(n33), 106, 156, 177,254,259; anticorruption drive

Index

271

in, 233-234; opposition to, 54; role of, 7 Insulza, José Miguel, 33 Integration, 48, 56, 129,166, 217, 220, 232, 256; consequences of, 27-28, 46; European, 115, 118; global, 123; issues related to, 237-241; L a t i n A m e r i c a n , 83; N o r t h American, 75,81-83,117-118,155, 209, 226-227; oil boom and, 222; potential for, 49; pursuing, 83,222; regional, 125; regulation of, 221; security and, 60; social consensus on, 223-224; wages and, 52 Intellectual property rights, 4 , 5 Interamerican Peace Forces, 207 Interdependence, 45, 56, 81, 118; increased, 39, 41, 51; international, 40; liberalization and, 40; North American, 40-41,101-102 Interdiction, 233; sensitivity to, 239-240. Intereconomy sequencing, 133 Interest rates, 161,192(n45), 238; changes in, 40, 55,231 Internal jurisdiction, 207,210,211 Internal security, national security and,

Japan, 197,239,253; bashing, 10; changes in, 134, 230; economic aid f r o m , 9, 28, 51, 138, 144, 151, 191(n35), 218; education in, 142, 148; F G formation and, 144; investment by, 8, 87, 103, 143, 236, 237; leadership of, 24, 134-136; m a n u f a c t u r i n g in, 149; maquiladoras and, 146; NICs and, 131; oil for, 15; promotion by, 150; relations with, 3, 9-12, 17-19, 26, 33, 95, 131, 225, 226; studies by, 150-151; success of, 126, 129, 133, 136; technology from, 11-12, 103, 129,138,151; trade surplus of, 13,26 Japanese-U.S. relations: Mexico and, 10-11,33,220; tension in, 230 Juárez, Benito, 96,97 Jurong Industrial Park, 141

61,65,70. See also Security Internal sequencing, 133,146; development and, 147 International Conference on the Environment (1992), 198 International Court of Justice, 205 International image: enhancing, 4, 8890; tourism and, 89 International law, 204-205 International Meeting for Cooperation and Development, 81 International Monetary Fund (IMF), 205,217; Mexico and, 13,84,238 International Support and Verification Commission, 196 Intervention, 249,250,257; fear of, 234 Investment, 41, 52, 83, 86-91,107,133, 143-144, 183, 209, 236; attracting, 29,40,45,136,152,233,239; longterm, 139; private, 68; regulation of, 31; sociocultural friction and, 146 Iran-Contra scandal, 254 Isolation, 23,123 Italy, relations with, 85

Labor, 145; cost of, 87; shortage of, 136, 238 L a b o r force: globalization of, 123; growth of, 43; size of, 48 Lajous, Roberta, 108 Latin America: abandonment of, 158160,163; changes in, 230; cooperation with, 29, 124; cooperation within, 131; economic trends in, 163-164; Europe and, 79-81,85,86, 89,112-113,117; exports from, 164; imports to, 165; relations with, 3, 14-16, 27, 32, 33, 95,110,155-161, 164, 166-168, 219, 225, 232, 252; trade with, 164-166; U.S. relations with, 217, 231, 232, 243. See also Central America Latin A m e r i c a n Economic System (SELA), 109-110,167 Latin American Free Trade Association (ALALC), 184 Latin American Integration Association ( A L A D I ) , 86, 120(n37), 164, 167,169(nl4), 192(n54), 193(n57) Latin American Regional Conference, 207

Jamaica, relations with, 181

Kaifu, Toshiki, 9,225 Kaohsiung Export-Processing Zone, 141 Knight, Alan, 247 Kohl, Helmut, 85

272 Law of Population, 180 League of Nations, 98 Left: discontent of, 68,258-259; foreign policy and, 69; future of, 69-70; offensive against, 67-68. See also Center-left coalition Lend-lease, 247,248 Liberalization, 16,18-19,31,33,39,50, 62, 67, 86, 118, 145, 256, 258; authoritarian methods of, 63; interdependence and, 40; national security and, 59; PRD and, 55-56; rapprochement and, 6; repercussions of, 63 Loans, long-term development, 182, 192(n48) López Portillo, José, 107,109,110, 111, 162,253,255 Malaysia, 134; economic condition of, 145; growth of, 143; New AID Plan and,144 Malvinas (Falkland) war, 79 Manufacturing, 137-138, 141; investment in, 143; knowledge- intensive, 149; labor-intensive, 143,144, 146,147,151; mass-produced, 149; r o b o t i z e d , 134. See also Industrialization Maquiladoras, 44, 48, 53, 55, 143, 151, 152, 218, 235; description of, 223; growth of, 47, 147; investment in, 103; Japan and, 9,87,137,146 Market sharing, 53 Market socialist economy, conversion to, 28 Massan Free Export-Processing Zone, 141 Maximilian, Archduke, 97,247 Melia Sol, 104 Mexico-bashing, 5,10,89 Mexico-Central America Professional Development Program (PDPMC), 188; establishment of, 186-187 MFP. See Multifunction polis Migration, 209,226,232; alternative to, 52-53; c o n v e r g e n c e and, 51; economic integration and, 237; restrictions on, 237-238. See also Border issue; Immigration Ministry of Trade and Industry (MITI),

Index 144,152 Mitterand, Francois, 80,107 Modernization, 64-65,68,75,76,82,95, 98,117,118,124,125,126,147,149, 151, 158, 171, 173, 187, 212, 238; economic, 106; industrial, 136-137; internal, 127 Montreal Protocol on the Protection of the Ozone Layer, 207 Mortality rates, fall in, 43 Mulroney, Brian, 46,224,225 Multifunction polis (MFP), 152 Multilateralism, 23,28 Multinationalism: assemblytransplanting stage of, 137-139; elementary stage of, 136 Multiparty system. See Pluralism Mutual Aid Council, 81 Mutual Security Act (1951), 252 Napoleon III, 97 Narcotics. See Drug issue National Action Party (PAN), 50, 55, 67,258,259 National Development Plan, 177; description of, 175; of 1983 (PND83), 60,61,65 National identity, foreign influence on, 105 National interests, 4,232,253; defining, 229, 234; internationalization of, 123 N a t i o n a l i s m , 67, 233, 250, 259; problems with, 177; revolutionary, 61-62,82; U.S., 255 Nationalist program: description of, 157-158; support for, 159 Nationalization, 247,255 National security, 99,177,178; constitution and, 60; domestic development and, 179; drug trafficking and, 64; economic development and, 66; future of, 69; improving, 180; internal security and, 61, 65, 70; new concept of, 67-70; threats to, 64, 69; transformation and, 5963,66-67 National Security Cabinet (NSC), 65, 66. See also Security NATO. See North Atlantic Treaty Organization Neighborhood effect, 141

Index

Neoliberal program, 166; description of, 157-158 New AID (Asian Industries Development) Plan, 151; description of, 144 New International Economic Order (NIEO), 81,100,199,254 New Yorker, quote from, 7 New York Times, quote from, 10-11 Nicaragua, 80, 111, 112,172,174, 196, 240, 247; aid to, 187; INS in, 180; oil-related debt of, 183; oil purchases by, 182; preferential credit for, 188; Reagan and, 162; reciprocal payment agreement with, 184; relations with, 79, 108, 187, 253254; U.S. relations with, 231,246 NICs, 129, 131, 146, 151, 153(n7); economic condition of, 145; education by, 142; exports by, 138; industrialization of, 139; Japan and, 130 N I E O . See New I n t e r n a t i o n a l Economic Order Nippon Kobe Steel, 10 Nixon, Richard, 255 Nonaligned movement, 209 Nonintervention, 99, 173, 189(n5); assessing, 249 Nontariff barriers, 13; elimination of, 12,50,114,235 Noriega, Manuel, 212(n2), 235; censure of, 189(n5); criticism of, 172-173 North Atlantic Treaty Organization (NATO), 79,100 North-South dialogue, 34, 95, 99, 109, 126, 161, 162, 210; Mexico and, 100-101, 155; replacement of, 27; UN and, 199-200 NSC. See National Security Cabinet Nuclear disarmament, 100,204,209,211 Observer Group in Central America, UN (ONUCA), 196 Observer Mission for the Verification of E l e c t i o n s in Nicaragua (ONUVEN), 196 O E C D . See O r g a n i z a t i o n for E c o n o m i c C o o p e r a t i o n and Development Office of Coordination of the President: creation of, 66; security and,

273 65 Oil, 171,248,249; boom, 151,156,160, 222,226,245,255; boycott of, 247; crisis, 102,110,136; exclusion of, 5; export of, 77-78, 87,104,217,235, 245, 247; i m p o r t a n c e of, 18; J a p a n e s e investment in, 136; nationalization of, 247; payment for, 181-183; price of, 15-17,25,40, 55, 77, 161; production of, 15-16; reserves, 16 O N U C A . See O b s e r v e r G r o u p in Central America, UN ONUVEN. See Observer Mission for the Verification of Elections in Nicaragua Openness, 32,39,51,52,53,67,82,127, 130,178,179. See also Liberalization OPEC. See Organization of Petroleum Exporting Countries O P T A D . See Organization of the Pacific for Trade and Development Organic Law on the Mexican Army and the Air Force (1986), 65 Organization for Economic Cooperation and Development (OECD), 8,114,150,174 Organization of American States (OAS), 172,173,207,237,243,244, 249,252 Organization of Petroleum Exporting Countries (OPEC), 15,161 Organization of the Pacific for Trade and Development (OPTAD), 125 Ortega Saavedra, Daniel, 175 Our Common Future (UN), 198 Outmigration, reducing, 52 Output: decrease in, 43; per capita, 42 Pacific Basin E c o n o m i c Council (PBEC), 125 Pacific Economic Cooperation Conference (PECC), 10,125 Pacific Rim, 209; economic integration of, 129; FG formation of, 131; industrial dynamism of, 129, 152; Mexico and, 9-10,83,123-126,129, 131,155,236 Pakistan, New AID Plan and, 144 Palestine Liberation Organization, 201

274 PAN. See National Action Party Panama, 162,184,219; invasion of, 82, 172-173, 200, 212(n2), 231, 234, 235, 244, 246, 256, 257; relations with, 172-173,181; Rio Group and, 189(n5) Party of the Democratic Revolution (PRD), 55-56,177,258 Paz, Octavio, 98 PBEC. See Pacific Basin Economic Council PDPMC. See Mexico-Central America Professional Development Program Peaceful coexistence, fostering, 89 Peaceful penetration, 76 Peacekeeping, 206-207,210,211 PECE. See Economic Stability and Growth Pact PEMEX, 87,171 Pérez de Cuéllar, Javier, 196 P e r m a n e n t C o n f e r e n c e of Latin American Political Parties. See Conferencia Permanente de Partidos Políticos Latinoamericanos Pershing, John: expedition of, 246 Persian Gulf Council, 81 Petroleum. See Oil Philippines, 148; growth of, 143; New AID Plan and, 144 Plan Chiapas, description of, 179-180, 191(n30) Pluralism, 85, 117, 234, 250, 257, 258; developing, 90, 240; security and, 60,70 PND. See National Plan for Development Poland, 253,261 (nl6) Political dialogue, 94(n33); promoting, 88-91 Political violence, 5,54,61-62,70 Pollution, 9, 89,198. See also Environmental issues Population: growth of, 43; distribution of, 41 Portugal, relations with, 85 PRD. See Party of the Democratic Revolution PRI. See Institutional Revolutionary Party Private initiatives, 147-152 Privatization, 30, 45, 51, 145,151, 168,

Index 176, 233, 256. See also Deregulation Production sharing, 53 Productivity: differences in, 83; increased, 54 Protectionism, 13,14,18,28,53,55,56, 61,137,157,167, 221; ineffectiveness of, 32; intraregional, 166; reductions in, 29,130 Public initiatives, 147-152 Purcell, Susan Kaufman: quote of, 232 Qaddafi, Colonel, 253 Rapprochement, 5, 177; liberalization and, 6; potential of, 29 Reagan, Ronald, 230, 254; Contadora Group and, 162-163; Mexico and, 174; Nicaragua and, 162 Reciprocal payments agreements, description of, 184. See also Debt, rescheduling of Reform, 19, 86, 90; economic, 25, 30, 233,240; foreign relations and, 25, 95; social, 96; tax, 233 Refugees, 252; aid for, 191(n35); asylum for, 160; C e n t r a l American, 191 (n34); policy for, 178-180 Regionalism, rebirth of, 39 Repsol, 87 Research and development, 7-8,11,17, 134,137,139,142,150,152 Restructuring, sequential, 148, 149, 157,158 Reynolds, Clark, 225 Rio Group, 16,93(nl8), 101,116; Eastern Europe and, 88; European Community and, 80; members of, 93(nl5), 169(n3), 189(n7); Mexico and, 156, 162, 163, 167, 168, 175, 210; Panama and, 173,189(n5) Rios Montt, Efrain, 177 Risk, 33; adapting to, 29-34 Rodriguez, Rafael, 111 Roett, Riordan, 25, 226; quote of, 209, 241 Roosevelt, Franklin D., 248 Ruiz Cortines, Adolfo, 251 Salinas de Gortari, Carlos, 3, 5, 34, 46, 50,113,158,188(nl), 189(n5), 225,

Index

233, 258; border control and, 180; on Brady initiative, 15; Bush and, 82, 102; Chile visit of, 167-168; democratization and, 259; on drug trafficking, 64,65; economic policy of, 63, 69,120(n37), 145,148,220; election of, 246, 257; European visit of, 12, 76, 82, 83, 86, 96,101, 104,107,112,116,145,166; foreign policy of, 100, 106, 167, 171, 172, 179, 189(n2); G A I T and, 17, 81; integration and, 256; interdependence and, 81; Japan and, 9-10, 166; national security and, 59, 66; opposition to, 54; Panama crisis and, 173; popularity of, 67-68, 69; PRI and, 234; rapprochement and, 6; reform and, 62, 64-65, 67, 75; security and, 62-67,70; style of, 63, 66; U.S. relations and, 4,82-83 Sandinistas, 111, 112, 261(nl8); COPP P A L and, 106; relations with, 108,176,187,253-254 Sandino, 247 San José Accord, 184, 186, 187, 188; Belize and, 192(n44); economic relations and, 181-183 Savings, encouraging, 31 SECOFI. See Commerce and Industrial Development Ministry Secretaría de Gobernación: Internal Bylaws of, 62, 65; role of, 62; security and, 65 S e c r e t a r i a t of F o r e i g n R e l a t i o n s ( S R E ) , 174, 175, 187; criticism from, 173 Security, 205; alternative conception of, 70; conceptual definition of, 70; international, 116; pluralism and, 70; regional, 174; t h r e a t s to, 229, 261(nl8); unity and, 70. See also Internal security; National security Security Council, 196,205; Mexico and, 195, 197; power concentration in, 211; Soviet Union and, 198 SELA. See Latin American Economic System Self-determination, 97,99, 111, 175,255 SEM. See Single European Market Senate Finance Committee (U.S.), 5 Sepúlveda, Bernardo: on security, 61

275 SHCP. See Treasury Ministry Shelton-Colby, Sally, 218 SI. See Socialist International Sicartsa steel plant, 9-10 Silva-Herzog F., Jesus, 225 Singapore, 141,142,146; industrialization of, 139; New A I D Plan and, 144; success of, 126,133,143 Single European Act (1986), 115 Single European Market (SEM), 101, 105, 117; creation of, 113 Social advancement, 205; U N and, 206 Social and Economic Council (UN), 205 Socialist International (SI), 106 Social needs, 178-179; deferring, 30 Solana Morales, Fernando, 105, 174, 189(n9); European visit of, 101, 107 S o u t h A m e r i c a : g r o w t h in, 191192(n42); per capita income in, 192(n43); relations with, 18, 33, 168; U.S. relations with, 176,236 Southern Frontier Highway, 180 South Korea, 141,143,146,253; education in, 142; industrialization of, 139; investment by, 236; success of, 126,133 Sovereignty, 67, 99,178, 207, 210, 211; national security and, 59; threats to, 69,224 Soviet Union, 195; changes in, 123,219, 230, 240; European Community and, 115, 236; expansionism of, 197; relations with, 88,97,98; U.S. relations with, 29, 175, 201, 204, 229-230 Spain: investment from, 87; relations with, 34, 80, 85, 91, 98, 104-109; trade with, 78 Special Committee of the General Assembly for Peacekeeping Operations (UN), revival of, 207 Special Session for Disarmament of the General Assembly (UN), 203-204 Special Session of the General Assembly for International Economic Cooperation (UN): declaration of, 200,206; difficulties for, 202 SRE. See Secretariat of Foreign Relations Stabilization, 45,86,127,139,160,252.

276

Index

See also Instability Stabilization and adjustment programs, failure of, 6 Stagflation, 44 Stagnation, 30,44; risks of, 26-27 Statism, decline of, 244 Structural adjustment, 176,245 Surplus capital, recycling, 138-139, 153(n6) Sweden, 201; aid from, 191(n35) Sz6kely, Gabriel, 83

Transition Assistance G r o u p for Namibia, UN (UNTAG), 196 Transportation infrastructure, improvement of, 239 Treasury Department, U.S., 160 Treasury Ministry (SHCP), 186 Treaty of Tlatelolco (1967), 99,100 Trinidad and Tobago, 173 Trust House Forte, 104 Two-track diplomacy, 110; pursuing, 12

Taiwan, 141,146; education in, 142; industrialization of, 139; investment by, 236; success of, 126,133 Tariffs, 32; CACM, 191 (n40); elimination of, 5,186; reduction of, 50,102, 184 Tax: incentives, 47; reform, 233 Technology, 18,127,130,149; access to, 4,16,17,26; diffusion of, 54; import of, 88; incentives for, 48; Japanese, 11-12,26,129,138; U.S., 26 Technology transfer, 103,104,133,138, 144,147-148,208,209 Tello, Carlos: hypothesis of, 157-158 Terrorism, 199 Textiles, 4; tariffs on, 32 Thailand, 134; economic condition of, 145; growth of, 143; New AID Plan and, 144 Third World: debt crisis of, 138; Mexico and, 13, 81, 99,108,109,160,161, 168,171,209,232,260(n2). See also Developing countries Thurow, Lester: quote of, 7 Thurston, Walter: quote of, 249-250 Tourism: importance of, 102; international image and, 89; investment in, 88-89,103-104 Trade, 133, 245; agreements, 17, 184185; apparel, 4; balanced, 45,164166,187,193(n61); diversification of, 8-9, 32, 34-35, 85; illegal, 32; increase of, 235; interregional, 176; just, 13; liberalization of, 16,29,33, 39, 40, 45, 81, 102, 127, 233; reassessment of, 32; surplus, 9,13,14, 26,44,137-139 Transformation, 60, 62, 84, 91-92,134; global, 126; national security and, 59,66-67

UNCTAD. See UN Conference on Trade and Development U N C o n f e r e n c e on T r a d e and Development (UNCTAD), 99, 202 UN Commission for Latin America and the Caribbean, 14 Understanding Concerning a Framework of Principles and Procedures for Consultations Regarding T r a d e and I n v e s t m e n t Relations (1987), 4 Understanding Regarding Trade and Investment Facilitation Talks (1989), 4 Unemployment, 48,179,238 United Kingdom: investment by, 13, 107; trade with, 79 United Nations, 125, 198, 243; bloc politics and, 200-201; consensus building in, 208; coordination by, 203; developing countries and, 211-212; Mexico and, 98, 99, 110, 195-197, 203-206, 208-212, 237, 241,248-249 United States: aid from, 28, 189(n4); Canadian trade of, 53; dependence on, 33, 131, 145; domination by, 130; education in, 147; exports to, 164, 217; imports from, 165, 166, 217; integration with, 48, 221; interdependence and, 41; investment by, 103; oil for, 15; per capita GNP of, 42; Soviet relations with, 29,175,201,204,229-230; relations with, 3-9,18,19, 24, 34-35, 39, 8283, 87, 95, 97, 102, 124-125, 130, 145, 156, 158, 159, 167, 174-177, 189(n9), 217-219, 225, 229, 232235, 243-253, 255-259; trade rela-

ITI

Index

tions with, 4-5,32,45,50,53-54,62, 68-69,75,82,102,163-164,217-218 United States-Canada Automotive Products Agreement (1965), 53 U N T A G . See Transition Assistance Group for Namibia, UN U R N G . See G u a t e m a l a n National Revolutionary Unity Uruguay, 167,193(n59) Venezuela, 162,163; exports from, 164; imports to, 165, 166; oil from, 192(n44); relations with, 15, 16, 101,181 Vienna Conference (1987), 198-199 Vitro, 149 Volkswagen, 84 Wages, 41,43,147; cut in, 47; disparities in, 33, 44, 51, 68; equalization of, 51; growth of, 40,136,143; integra-

tion and, 52; real, 30,52,54-55,68, 222 War Department, U.S., 247 War of Reform (1858-1861), 96 Western Europe. See Europe White, Francis, 260(n9), 260(nl2), 261(nl3); quote of, 251 Whitehead, Laurence, 220 World Bank, 13, 191(n30), 192(n45), 205,238 World Conference on the Environment (1992), 207 World Energy Plan, 81 World Food Program, 206 World War II, Mexico and, 247-248 Yugoslavia, relations with, 97 Zimmerman telegram, 247

About the Book

Examining the various components of Mexico's external relations—both political and economic—the authors explore possible scenarios for the country in the changing global environment of the 1990s. An overarching analysis of the context of Mexico's international relations is followed by a discussion of interdependence. Is interdependence the new paradigm with which to examine Mexico's relations with the world? Is national sovereignty, as traditionally defined, a relevant concept for Mexico in the 1990s? Drawing on the themes developed in the first sections, subsequent chapters assess options for Mexico vis-à-vis Western Europe, the Pacific Basin, the "South," Central America, and multilateral organizations. In the final section, the Mexico-U.S. bilateral relationship is examined from the Mexican, North American, and European perspectives, with an eye toward options for the next decade.

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