History of Mexico

To the Brink and Back, 1982-88

The de la Madrid Sexenio, 1982-88

When he took office in December 1982, Miguel de la Madrid Hurtado faced domestic conditions arguably more serious than those confronting any postrevolutionary president. The foreign debt had reached new heights, the gross national product was contracting rather than growing, inflation had hit 100 percent annually, and the peso had lost 40 percent of its value. Moreover, and perhaps most critical, the Mexican people had begun to question and criticize the system of one-party rule that had caused this situation. Abroad, commentators (including United States president Ronald W. Reagan) speculated as to the potential for revolutionary upheaval in what had been considered a stable, if not democratic, southern neighbor. Some Mexicans shared this concern. The government and most in the PRI, de la Madrid included, believed that they could continue to hold power by keeping the people well fed and reversing economic trends.

Hand-picked by López Portillo, de la Madrid inherited the former president's economic mismanagement and that of several of his predecessors. Lack of fiscal restraint, encouraged by a sudden flood of oil wealth, lay at the root of the crisis. Overprinting of the peso cheapened the currency, fed inflation, and exacerbated rather than cured the economic sins that prompted it. And corruption, the traditional parasite of economic vitality in Mexico, made its contribution to the crash.

Although weak compared with earlier presidents, de la Madrid still wielded formidable power in both the economic and political arenas. The day of his inauguration, he recognized the nation's "emergency situation" by instituting a sweeping program of economic austerity measures. The ten-point program included federal budget cuts, new taxes, price increases on some previously subsidized items, postponement of many scheduled public works projects, increases in some interest rates, and the relaxation of foreign- exchange controls enacted during the waning days of the López Portillo administration. Aside from its anticipated adverse impact on the standard of living, many Mexicans resented the program for other reasons. Nationalists saw the measures as inspired and all but imposed by the International Monetary Fund, which reportedly had taken a hard line in debt talks with the government. Others resented the austerity edicts because they believed that the government and the PRI had brought the nation to the brink of ruin, but that the people would have to bear the burden of official incompetence.

The sudden reversal of a long trend of steady economic growth in Mexico threw the political system into turmoil, undermined the authority of the PRI, and raised the already high levels of popular skepticism. Economic austerity exacerbated the elitist aspect of the populist authoritarian system that developed after the Revolution. Conditions such as inflation, devaluation, and the withdrawal of subsidies hit the poor hardest. The wealthy found ways to insulate themselves from such developments; as a result, the rich grew richer. This was true both within the private sector and among the bureaucracy. In addition to the schism between the poor and the rich, the crisis and its impact on the PRI's authority sharpened the longstanding dichotomy between central and southern Mexico and the north. The immediate political beneficiary of the crisis was the PAN, a conservative, probusiness party with its roots in the northern border states.

To counteract the ferment, the government decided to allow some opening of the political system--enough to provide a safety valve for public discontent--but not enough to threaten the PRI's control, a balance difficult to attain. The first volley in the campaign against the PRI and its policies came with the elections of July 3, 1983. Although the PRI took a large majority of municipal and state legislative races in five northern states, the PAN captured an unprecedented nine mayoralties and registered gains in all five state legislatures.

In addition to the economic and political arenas, de la Madrid sought to exert influence in the area of ethics. Early in his administration, the president announced a program of "moral renewal." Despite its high-minded rhetoric, the program never enacted major legislation to discourage corrupt practices. One exception was a new rule that eliminated government subcontracting, a device that union leaders often used to earn kickbacks from contractors. In addition to instituting this new rule, the moral renewal campaign chose to make examples of a handful of corrupt officials, including former Pemex director Jorge Díaz Serrano and former Mexico City police chief Arturo Durazo Moreno, both of whom served prison sentences for illegal personal gain.

The United States and the Crisis in Mexico

Historically, United States relations with Mexico have followed a reactive pattern of neglect, activism, and intervention. The crisis of the 1980s, which appeared to threaten the longstanding stability of Mexico, triggered a new period of activist attention to its southern neighbor by the United States. The prospect of an economically overextended Mexico defaulting on US$100 billion in foreign loans caused alarm in Washington and throughout the industrialized world. The possibility of resulting political upheaval was particularly worrying to the United States. As a result, other lesser issues between the two countries--migration, drugs, environmental concerns, investment, and trade--received increased attention.

United States president Reagan, a former governor of California, brought to the White House an appreciation of the importance of the relationship between the two countries. Reagan met with President López Portillo in Ciudad Juárez on January 5, 1981, becoming the first United States president-elect to visit Mexico. One of the topics that the two leaders discussed in Ciudad Juárez was the political crisis in Central America, where the leftist Sandinista National Liberation Front (Frente Sandinista de Liberación Nacional--FSLN), also known as Sandinistas, held power in Nicaragua and supported guerrilla movements in El Salvador and Guatemala. López Portillo reportedly cautioned Reagan, a conservative who had strongly condemned the Nicaraguan government, regarding United States intervention in the region. At this time, Mexico considered Central America, particularly Guatemala, to lie within its geopolitical sphere of influence. Mexican policy, since the victory of the FSLN in 1979, had sought to provide an alternative to United States, Cuban, or Soviet influence on the isthmus. This Mexican strategy, however, eventually failed because Cuban influence on the Nicaraguan Sandinistas was rooted in years of clandestine support for the revolutionary cause.

The United States, however, rejected Mexico's conciliatory approach to Central American affairs in favor of military support to friendly governments, such as those in El Salvador and Honduras, and the even more controversial policy of backing anti-Sandinista guerrilla forces. After the economic crisis of 1982, Mexico lost much of its influence in Central America. Mexican governments, in turn, also became more guarded in their criticism of United States policy in order to assure Washington's support in financial forums such as the World Bank and the IMF.

Although the two nations did not always agree on the best strategy for dealing with Mexico's burgeoning foreign debt, the United States government continued to work with the Mexicans and support efforts to buoy the Mexican economy and reschedule the debt. Washington announced the first of several debt relief agreements in August 1982. Under the terms of the agreement, the United States purchased ahead of schedule some US$600 million in Mexican crude oil for its strategic oil reserve; the United States treasury also provided US$1 billion in guarantees for new commercial bank loans to Mexico. Privately, United States officials reportedly pressured commercial banks to postpone a US$10 billion principal payment that fell due that same month.

A bank advisory group representing 530 foreign creditors reached an accord with Mexico in late August 1984. The rescheduling agreement allowed Mexico to repay its foreign debt over a term of fourteen years at interest rates lower than those originally contracted. United States Federal Reserve Board Chairman Paul A. Volcker, among others, had pushed for the interest rate reduction, in part as recognition of Mexico's having instituted difficult austerity measures and needing some fiscal relief in order to restore economic growth.

Other concerns meanwhile strained the Mexican-United States relationship. Perhaps the most dramatic was drug trafficking. The consumption of cocaine rose steadily in the United States during the late 1970s and early 1980s, becoming a major law enforcement and public health problem. Mexico has never been a major producer of cocaine. Geography, however, made Mexico a conduit for the transshipment of cocaine hydrochloride from South America to the United States. Difficult terrain; sparse population in many rural areas; an adequate infrastructure for transporting goods by land, sea, and air; and the relative ease of bribing both local and federal officials all lured drug traffickers to use Mexico as a conduit.

Eventually, an isolated incident came to symbolize Mexican drug corruption and the friction between the two nations on the issue of drug trafficking. The United States Drug Enforcement Administration (DEA) maintained a comparatively large presence in Mexico. One of its resident offices operated out of the consulate in Guadalajara. In March 1985, Mexican authorities unearthed the body of DEA special agent Enrique Camarena on a ranch in Michoacán state, some 100 kilometers from Guadalajara. Mexican drug traffickers, reports later revealed, had tortured Camarena to death, perhaps in retaliation for his discovery of a major marijuana cultivation operation. Initial protest from the United States government brought little or no response from Mexican officials. As a result, the United States Customs Service closed nine lesser points of entry from Mexico to the United States and began searching every vehicle that passed northward. The resultant traffic backups, complaints, and economic losses infuriated the Mexican government. Mexicans claimed that the appearance of their inaction stemmed from misperceptions of the Mexican legal system, not from efforts to protect drug traffickers.

Despite the eventual arrest of a key suspect in the Camarena murder, relations between the United States and Mexico on the drug issue followed a rocky course. On April 14 and 15, 1985, United States Attorney General Edwin Meese III met with his Mexican counterpart, Sergio García Ramírez. The two agreed to closer monitoring of the two nations' joint counterdrug programs. The Camarena case, however, continued to cast a pall over these efforts. Leaked information from the United States Department of State and from law enforcement agencies indicated that Mexican authorities had made only token efforts against drug production and trafficking. According to Department of State figures, by the end of 1985, Mexico was the largest exporter of marijuana and heroin to the United States. Efforts at eradicating these crops had failed abysmally, and output in 1985 exceeded 1984 levels.

As controversy continued over Mexican drug policy, United States politics forced another bilateral issue to the fore. The United States had made sporadic efforts over the years to exert greater control over its porous southern border. Mexican and Central American illegal immigrants crossed the border almost at will to seek low-paid jobs. Organized labor, among others, urged the United States Congress to act. This pressure, based on the belief that illegal aliens took large numbers of jobs that United States citizens might otherwise fill, gave impetus to the Simpson-Rodino bill of 1986. The bill's two major provisions constituted a carrot and a stick for illegal immigrants. The carrot came in the form of an amnesty for all undocumented residents who could prove continuous residence in the United States since January 1, 1982. The stick imposed legal sanctions on employers of illegal aliens, an unprecedented attempt to deter migrants indirectly by denying them employment.

The Simpson-Rodino bill, which became law as the United States Immigration Reform and Control Act of 1986, represented the most serious effort to date to reduce illegal Mexican immigration. Northern migration had provided an economic safety valve from the Mexican economy's chronic inability to produce sufficient employment. Many Mexicans resented the timing of this new law, which came in the midst of severe economic distress in Mexico and relative prosperity in the United States. Although the level of migration dropped immediately after passage of the law, joblessness and poverty eventually drove the number of illegal migrants up again.

Despite the irritants of drug trafficking and migration, the United States concern for stability in Mexico led both countries to continue the search for a solution to Mexico's crushing debt burden. By the end of 1987, the United States government publicly recognized that Mexico could not "grow its way out" of the debt merely by stretching out payments and investing more borrowed funds. Acknowledging that some portion of the debt would never be repaid, the Department of the Treasury offered to issue zero-coupon bonds that would allow Mexico to buy back its debt at a discount. Although not a panacea, the plan represented a new approach to the debt problem, one that helped to improve Mexican public opinion of the United States.

Economic Hardship

While the Mexican government, with assistance from the United States, struggled to improve its status in the world financial community, conditions at home remained unsettled. After the GNP contracted by 5 percent in 1983, Mexican optimism surged briefly in 1984, when the economy posted a 3.5 percent growth rate. The next year hope faded as the economy contracted by 1 percent.

A major natural disaster in 1985 further depressed the economic situation. In mid-September, central Mexico experienced two major earthquakes. Between 5,000 and 10,000 people died as a result, and some 300,000 lost their homes. The cost of relief and reconstruction placed a heavy burden on an already struggling nation. The de la Madrid administration successfully cited the earthquakes as negotiating points in its efforts to obtain better terms from its creditors.

In the political arena, initial optimism also gave way to disillusionment. The liberalization that appeared to have begun in 1983 ended by 1984. The ruling PRI easily swept municipal elections in the northern cities of Mexicali and Tijuana, in Coahuila and Sinaloa states, and in the city of Puebla. Despite public protests alleging widespread fraud, the results stood. The PRI easily maintained its majority in congress, but some party leaders were concerned that of the combined vote in five large cities--Mexico City, Guadalajara, Nezahualcóyotl, Monterrey, and Ciudad Juárez--the PRI polled less than 45 percent. The vote in the northern cities could be seen to reflect the traditional regional schism, but the poor showing in the capital area and Guadalajara signaled a growing alienation from the PRI, particularly among the middle class.

Moreover, the persistent fall in oil prices and continuing high levels of foreign debt service forced a new round of austerity measures. De la Madrid effected an additional US$465 million in federal budget cuts by reducing subsidies and government investments, selling more than 200 state-owned parastatals, and placing a partial freeze on federal hiring. As the president announced these new belt-tightening measures, he could also point to some significant achievements. Inflation, which had exceeded 100 percent in 1982, had declined to 60 percent annually. The public-sector deficit had also decreased from 13.6 percent of gross domestic product to 6.9 percent. Although these figures fell short of the goals prescribed by the IMF, they represented progress.

De la Madrid did not exaggerate the importance of these positive economic indicators. In his 1986 State of the Nation address, he declared that "our austerity effort is permanent" and vowed again not to deviate from his economic course. Just months before, his administration had reached a precedent-setting agreement with the IMF in which the amount of new loans to Mexico would be tied to fluctuations in the world price of crude oil. But the crisis was far from over.

Mexico History Contents

SOURCE: Area Handbook of the US Library of Congress