573 April 7, 1987 KEYS TO UNDERSTANDING MEXICO CHALLENGES FOR THE RULING PRI INTRODUCTION Mexico faces mounting crises. Its economy is in shambles, and its $1 13 billion debt is the largest in Latin America. E ven worse is its political crisis. At stake is the legitimacy of a political system forged in a violent ower struggle that has continued since 1910 among Revolucionario lnstltutional (PRI The basis of PRI legitimacy, its claim to rule for all Mexicans, is being challenged by such important sectors of the country as the middle class Mexico's controlling elite known as t E e "Revolutionary Family" or the Partido the independent Left, grass-roots organizations concluded that the system no longer works for int e llectuals, university 0 students, and Catholic clergy of both the Left an They apparently have to adapt to the material needs and democratic aspirations of a Mexican society much changed since the PRI consolidated control in the early post-Revolutionary p e riod Huge U.S. Stake. The United States has a huge stake in Mexico's future stability and economic prosperity. Mexico is its third largest trading partner after Canada and Ja an petroleum consumption. U.S. banks hold over a third of Mexico's outstanding $ 8 0 billion commercial debt, and U.S. business investments account for over one-third of the $17 billion in foreign direct investment in Mexico. Economic and political collapse in Mexico would send disruptive waves across the entire U.S. economy In 1986, Me xico's growth rate fell 3.5 percent, while inflation topped 100 percent.

Mexico's foreign debt has increased by $30 billion, and its capacity to pay has deteriorated.

At the same time, the beleaguered government has had to face a democratic revolt in the economically important northern states. Repressing this revolt, although accomplished Mexico supplies the U.S. with 15 percent of its imported petroleum and 5 percent o P its This is the first in a series of Heritage studies on Mexico. Future papers will e xamine other Mexican political parties as well as the nation's economic and foreign policies. easily and without significant violence, has hurt the PRl's political credibility in Mexico and abroad and has deepened rather than resolved Mexico's acute polit ical crisis.

Madrid, is perceived throughout Mexico, as well as by his own party, as weak and ineffectual. This strikes at the heart of a system whose powers are heavily weighted in the presidency. The inability of its most powerful official to cope adequa tely has aggravated the PRl's efforts to restore confidence in the system. De la Madrid's personal weakness moreover, has sparked well-publicized internal challenges to his power that threaten the system's unity and contribute to public perceptions that t he PRI is decaying.

The opular foundations of the system have also been weakened by the failure of the Instead, the governments of Luis Echeverria, Lopez Portillo, and Miguel de la Madrid Mexico's presidents since 1968, have relied on upper middle-class te chnocrats, often educated abroad, whose loyalty is to the President rather than the system. The ruling government has become increasin I isolated from sustaining popular bases. This has Isolated Government. Adding to its problems, Mexico's current preside n t, Miguel de la ruling e P ites in Mexico City to integrate local political leaders into the government undermined the political strength o FK t e system Reformulating U.S. Policy. With the presidential succession and elections scheduled for July 1988, th e challenge for the PRI is to restore confidence in a system that no longer seems to work. It must overcome the many economic difficulties, reduce the foreign debt burden, revitalize the productive sectors, and mollify or eradicate with a minimum of violen c e the political opposition. Washington must watch close1 what happens with the PRI. U.S. policy toward Mexico, which needs dramatic reformu Y ation, will be shaped to a great extent by how well the PRI addresses its current dilemma and whether it can rest o re public confidence in the political system THE POLITICAL CRISIS The PRI or the "System" has worked traditionally through a process of internal consensus building, cooptation of external opponents, and, when necessary, repression of potentially threateni n g rivals. Prior to the late 196Os, the PRl's politics were essentially pragmatic in their nonideological emphasis on economic growth through a mix of state and private sector effort. Indeed, from the mid-1940s to the mid-l960s, Mexico enjoyed a period of r apid economic growth. This economic development created new problems among them a large urban poor class, as many Mexicans left the rural areas in search of opportunities in the rapidly industrializing cities. Significantly, the economic changes also prod u ced a large and diverse middle class, which was demanding a greater voice in the nation's development. These demands, however, conflicted with an aging system that was losing its ability to adapt and becoming increasingly authoritarian in its effort to ma i ntain control. Robert Newell and Luis Rubio noted This impeded public expression and freedom of the press for a population that was rapidly acquiring not only a high standard of living but also the education and the values commonly found in more developed societies Broken Consensus. Student riots in 1968 and the harsh reaction to them by the overnment of President Gustavo Diaz Ordaz marked a turning point in the political ortunes of the PRI. The revealed a Mexico much changed since the 1920s--more modern a n d more comp ex--they brought to the surface simmering tensions and Y 3 1. Robert Newell and Luis Rubio,'Mexican Dilemma. The Political Oriains of Economic Crisis (Boulder and London Westview Press, 1984 p. 110 2established the middle class as a major poli t ical pressure group, but one decidedly excluded from the system. By responding to the demands of the students with unusually violent and harsh repression, the PRI exposed the weakness of its control over society and damaged its political image. Internal d i visions began to form within the government and broke the political and economic consensus that had held the PRI together since its final consolidation of power that emerged from the Revolution of 1910 The Mexican Revolution of 1910 Following the overthro w of the Porfirio Diaz dictatorship in 1910, Mexico suffered a protracted and bloody power struggle that finally ended in 19

26. Numerous groups took part, from peasants in the south under the leadership of Emilio Zapata to a host of political and military factions who were all competing for power and control. Eventually the liberal faction under Venustiano Carranza won out long enough to see a Constitution drafted in 191 7 and the foundations laid for a new Mexican state continuance of the power struggles and unstable governments. Eventually a liberal elite gained control under Plutarco Elias Calles, who consolidated the new "hegemonic state" in 1929 by creating the National Revolutionary Party, a precursor of the PRI. Calles sought legitimacy for his gove r nment through alliances with peasant groups and labor. They were given land, rights, and a role in the new party in return for their crucial support Carranza's own weakness and the opposition to his liberal faction ensured the Lazaro Cardenas (1 934-1 940 the institutional rule of the party and gave the Revolution, now identified with the state, a socialist ideological content. By broadly interpretin the radically liberal Constitution of life Lazaro Cardenas succeeded Calles in 1934 and completed the proce s s of consolidating 1917, Cardenas was able to justify the expanded ro 7 e of the state into all aspects of Mexican In the name of social reform, Cardenas enlarged the role of the state over education created 19 state enterprises, expropriated foreign-owne d oil companies, and launched an agrarian reform that distributed confiscated lands to state-run cooperatives known as institutionalizing the new order created by Calles and by expanding the state's Es,%ardenas legitimized the reeminent role of the state i n Mexican society and thus PRI In the intervening years between Cardenas and Echeverria, Mexican presidents modified and tempered Cardenas' socialist policies in favor of a more pragmatic and less ideological approach. This was designed in part to gain the cooperation of the rising middle classes and the economically powerful private sector in order to promote Mexico's rapid economic growth ensured the political dominance o P the new Institutional Revolutionary Party (now the Echeverria-The Populist Antidot e Ordaz in 1969 selected his successor without consulting members of the PRI. His Breaking with traditional PRI consensus-building methods, outgoing President Diaz 3candidate, Luis Echeverria Alvarez, had been the Minister of Interior and was directly resp onsible for crushing the 1968 student revolt.

Echeverria was Mexico's first technocrat, an administrator who had not risen in the PRI ranks through political skill but who had been handpicked by the President. Believing that Echeverrla's successful repression of the explicitly Marxist students had sa v ed the nation Diaz Ordaz chose Echeverria to maintain a hard line against the Left in Mexico. After becoming president, however, Echeverria began to court the Left and gave many of the student leaders positions in his government. He continued to seek thei r support throughout his Sexenio the six-year presidential term.

Echeverria's leanings toward the Left went far beyond the practical coopting of opponents. It revealed his strong bias toward the socialist mo4el of economic development through what the Mexi can Left calls "revolutionary nationalism." He broke with his predecessors by openly embracing the cause and activities of the international communist movement in the name of Third World solidarity. In so doing, Echeverria deepened the divisions within th e PRI and alienated the majorii of Mexican society, which is predominantly conservative and anti-communist. As a consequence, the system weakened Ideologues'Ascendancy. While leftist tendencies have always been strong inside the PRI, they long had been mod e rated by practical considerations and the balancing weight of moderates wlthin the party. But since Echeverria did not have to create a supporting power base from among the various groups within the party to strengthen his candidacy, he was free to pursue policies that reflected his personal style and highly ideological view of the world.

Echeverria eventually administered through an elite group of men who shared his ideological view. The traditional system of PRI checks and balances that had been built in to the system over time was neutralized. Most significant was Echeverria's restructuring of the Finance Ministry. Long dominated by practical moderates, the Ministry acted as a brake on government spending. Echeverria dismissed the moderates, replacing th e m with ideologues who supported the drastic increases in state spending that eventually led to economic crisis in 1976 Breaking the Rules Echeverria's policies alienated the middle class and the important business sector. Here again, he broke the rules of the PRI game. Although the private sector had never been incorporated into the system, previous governments had recognized it as an important player in Mexico's economic miracle of the 1950s and 1960s. Private sector leaders often were invited to consult with the president and his cabinet over economic programs and policies. The private sector hence was given a voice in Mexico's economic development, and the PRI obtained the crucial cooperation of an important sector outside the system.

Under Echeverria th is changed. The private sector was excluded from its traditional, if informal, participation in the system. Politically alienated and squeezed hard by the inflationary spending of the government, the private sector began gravitating to the main opposition party on the Right, the National Action Party or PAN. In the 1972 municipal and congressional elections, the PAN scored its first victory against the PRI at the 2. Coined by Lenin, the term revolutionary nationalism has been applied by Mexican leftist wri t ers to mean an intermediary phase that would lay the groundwork for socialism by attacking the capitalist system (the private sector as the source of social injustice and the tool of U.S. imperialism 4-municipal level, launching an opposition movement tha t plagues the PRI today and deepens its political problems.

By 1976, Mexico was facing the worst economic predicament since the world recession of the 1930s. Yet rather than address the structural deficiencies that fostered it, Echeverria tried to recharge Mexicos economy by s ending more money and relying on foreign banks instead of the productive private sector. e ltimately Echeverrias policies contributed to the erosion of the PRls political credibility by adding to an already troubled political system a protracted economic crisis Lopez Portill0 Echeverrias successor Lopez Portillo Alvarez thus took office in 1976 amidst a growing political and economic crisis. His approach initially was to conciliate opposing factions reform the party, and seek the coop e ration of opponents outside the system. These measures had only limited success: in some cases, they contributed to worse problems later To reduce the polarization inside the PRI, Lopez Portillo included in his cabinet members of the different factions. T his did not lead to the desired resolution of the differences, however, and schisms even worsened as Lopez Portillo programs leaned to the populist Left.

Portillos efforts to combat Mexicos economic difficulties through an International Monetary Fund auste rity program encountered predictabl&leftist opposition, particularly as the government turned to the conservative private sektovfor support. To appease the Left, political arties outside the system were. legalized, whi,ch were dominated mainly by the refo r m created new pressures for the PRI. It acknowledged that the PRI was not the sole representative of the peoples will. Lopez Portillos reform, moreover, re uired the would continue to undermine its legitimacy as the demands increased for real political pa r ticipation the Left. Whi P e moderating the Lefts opposition to the governments austerity program PRI to act as a modern political party instead of a monolithic system of contro 9 This Fleeing Capital. Eventual1 Lopez Portillo abandoned his bridge-buildin g efforts with the moderates in the party an J the private sector and reverted to the populist-leftist levels. of economic growth. And during 1980 an 3 1981, government growth averaged 24.4 policies of his predecessor. By 1978 buoyed by Mexicos new oil wea lth, Lopez Portillo pushed an economic program that consisted of reater public spending to achieve higher percent while the economy grew an average of 8.2 percent.

Alarmed by a growing government deficit and anticipating the coming crisis, the middle-class and private business sectors began shipping their capital out of Mexico sharply curtailing their investments at home. By 1982 the oil boom went bust and Mexico was bankrupt. Without consulting even his closest advisors Portillo then nationalized the bank s . He did this in part to restore his personal credibility with the Mexican people and rally the Left to his side. Yet he crippled the private sector economically and increased the states share in the economy to almost 50 percent. Writes Alan Riding, a New York Times Latin American specialist: By seizing the banks, the government not. only politicized the delicate financial sector, but also convinced many businessmen of the states hunger to control the rest of the economy. Moreover, since top bankers had co me to represent all 5regions and economic areas of the country, an importapt channel of communication between the government and the private sector was eliminated."

Bank nationalization, because it was arbitrary and devastating to the economy undermined th e PRl's unity and polarized its factions further. Most important, it eliminated the essential regenerating feature of the system, the PRl's ability to negotiate a consensus among the competing factions and interest roups both inside and outside the credib l e claim by the PRI that it represented the will of the people The Corruption Issue official corruption reached un recedented hei ts. Accusations by the Mexican press that among Mexicans sufferin because of the economic crisis. Since then the corruption is s ue against the government system. This had been the source of its political strengt a and the basis of the almost With greater PRI involvement in the econom under Echeverria and Lopez Portillo President Lopez Portillo left o R. ice with almost billion rai sed a storm of protest has continued to plague t a e PRI and has provided the opposition with a major weapon THE CURRENT CRISIS Miguel de la Madrid became Mexico's 23rd President in 19

82. Washington has viewed him as a "pragmatic" technocrat opposed to th e populism of his predecessors. While this has been true to some extent, as in the case of Mexico's joining the General Agreement on Tariffs and Trade de la Madrid's policies general1 echo the "revolutiona nationalism" of an economic and political crisis. He too has failed to address the need for real structural changes in both the economic and the political systems. Under his administration Mexico's living conditions and political conflicts have worsened. Nor does the future look promising; Mexico's reces s ion is expected to deepen by 1988 his predecessors. And just as they did, de la Ma J rid is nearing the end o 'y his sexenio facing Internal Conflicts The problems of internal unity and consensus building have been exacerbated by the personal weakness of d e la Madrid. Usually by the fifth year of the six-year term Mexican presidents begin to enjoy the full fruits of presidential power. De la Madrid has not. His weakness thus has added to the political worries of the PRI, since much of the system's strength depends on the skill and personal power of its president. His weakness, moreover has prompted paralyzing factionalism in the party and forced some of the internal struggles into public view. Contributing to the system's weakness is the uncertain nature of its two major pillars of support, labor and the peasantry.

The government-controlled labor confederation, Confederacion de Trabajadores Mexicanos or CTM, under the iron rule of 86-year-old Fidel Velazquez, has played a pivotal role in maintaining civil or der during times of economic distress by preventing mass strikes among its 1 1 ,OOO affiliated unions Workers' wages have been halved, and union leaders have patiently accepted wage increases far below the inflation rate. In this sense Velazquez personall y has held the PRI together, making him more powerful and indispensable than ever. Velazquez also could be adding to Mexico's long-term difficulties. He has maintained pressure on the government of de la Madrid to continue 3. Alan Riding, Distant Neiahbors (New York Alfred A. Knopf, 1985 p. 88 6 I the socialist-populist policies of Echeverria and Lopez Portillo, and he has opposed any kind of economic liberalization and reform that might help the private sector Socialist Line. To make matters worse, Velazqu e z has not groomed a successor. His death could create a power vacuum in the CTM and trig er some of its factions to split off since man of them oppose the dominance of what has ecome its socialist line and are government's economic policies could break do w n at that point The peasant sector generally remains loyal to the PRI since it depends on the government to subsidize the unproductive state-controlled cooperatives or Biidos Despite their preeminent place in Mexican revolutionary mythology, the peasants h ave benefited least from the system. Resentment has begun to manifest itself in the growth of local action groups and such new coalitions as the Peasant Alliance and the National Coordinating Board of the Ayala Plan. For the first time in PRI history, som e peasants are being drawn into opposition movements, including the PAN The Factions frustrated i y the government's economic failures. Crucial labor support for the Variously named and identified are three tendencies inside the ,PRI. All support the PRl's continued political control over Mexican society, but they disagree on the extent of state power needed to maintain this control The most active and ideological tendency, currently re resented by former President President Lazaro Cardenas. Its representat i ves are referred to as "Echeverristas" or Cardenistas" or as re resented through the labor unions "Lombardistas" after Cardenas advisor and labor lea 8 er Vicente Lombard0 Toledano. Some of its well-known members include Porfirio Munoz Ledo and Cuanhtemoc Cardenas. This tendency favors a strong centralized and authoritarian state to direct the political, economic, and social activities of Mexican society. It op oses democratic elections and favors the carro completo or final Luis Echeverria, carries forwar d the revolutionary-nationa P ist line first articulated by 1930s roll back of the politica P opposition led by the conservative PAN On international positions, the "Echeverristas" identi with Third World radicals, are pro-Soviet, pro-Castro, and pro-Sandi n ista, and anti-U Invoking anti-imperialism this faction opposes foreign direct investment in Mexico. Instead, its representatives, when in office, have consistently favored borrowing from foreign banks to finance the growing state sector Retreating "Echev e rristas Most recently this group attempted, in the name of democratic reform or corriente democratizadora to advance one of its leading members, Porfirio Munoz Ledo, as a presidential candidate. Calling for a more open and democratic" selection of the nex t PRI president, this was widely viewed as a political comeback attempt by Echeverria. It is assumed that he would gain control of the PRI through Munoz Ledo. The "Echeverristas schemes frightened the other PRI factions, unifying them. The Echeverristas ha v e retreated for the time being They tend to be isolated individuals who lack the organizations and ideological lue of the private sector initiative and foreign direct investments to develop Mexico's economy. Until Isolated "Pragmatists The second faction w ithin the PRI is the graamaticos Echeverristas. The praamaticos favor a more liberalized economic system that 7l arnesses 7-, Echeverria, they were influential in the Finance Ministry, which acted as a restraint on government spending. After Echeverria re m oved them from the Finance Ministry, their influence waned. Leading p-are Antonio Ortiz Mena, formerly with the Finance Ministry of Presidents Adolfo Lopez Mateos (1 958-1 964) and Diaz Ordaz Eclectlc 'Technocrats Positioned between these two tendencies a re the "technocrats."

Their ideolo ical and philosophical perspectives tend to be eclectic, drawin from both the socialist an 8 pragmatic factions. Technocrats favor a "mixed economy" un f er the management or rectorship" of the state; they favor some econ omic restructuring such as limited privatization and streamlining of the inefficient parastatal industry; and they want only limited foreign investments. Politically they now support the Carro completo blocking the electoral gains of the opposition partie s , claiming that in Mexico political legitimacy does not derive from elections. This tendency is best represented by de la Madrid and most of his cabinet me Succession De la Madrid will select his successor by this fall. "Elections" confirming his choice a re to follow in July 19

88. Although the decision lies ultimately with the President various hopefuls have begun maneuvering for position in the line up.

Parastatal Industries. His greatest strength is his close personal relationship with de la Madrid, who has promoted him into the higher circles of the government.

Political analysts in Mexico believe del Mazo to be the candidate favored by labor leader Fidel Velazquez Following closely behind del Mazo is Minister of Interior M anuel Bartlett. His chances have been strengthened by his successful and nonviolent repression of the opposition in last year's gubernatorial elections. He now faces another test. He must deal with the student strike at the government-controlled "Autonomo u s" University (UNAM) in Mexico Ci His and ignited widespread and violent anti-government protests Leading at the moment is Alfredo del Mazo, the Secretary of Energy, Mines, and chances of succeeding de la Madrid would be seriously jeopardized if the strik e spi Y led over Long Shots. Trailing behind these two candidates is Salinas de Gortari, the Secretary of Federal Programs and Budget. His position was strengthened when Jesus Silva 'Herzog, long the front-runner in the succession race, resigned last June a s Minister of Finance. Because of Salinas control over the budget allocations, he wields considerable power within the system and uses it to gather supporters. Salinas also hopes to garner regional support from the governors through his allocation of fede r al funds to their states The presidential long shots are Gonzalez Avelar, the Secretary of Education, and Ramon Aquirre, the appointed governor of the Federal District that includes Mexico City. Both are close friends of de la Madrid and could be chosen f o r their loyalty to the out oing president. By choosing Avelar or Aquirre, de la Madrid might be hoping to avoi 8 attacks on his record and personal integrity The Opposition competitors by bringing them into the system. If that has failed, then the opposit i on has Much of the PRl's success as an enduring political system derives from its coopting its a I been repressed. Opposition parties and groups have been tolerated to the extent that they legitimize the systems claim to be democratic. Once they begin to threaten the P,Rls control, their momentum is stopped. Vote stealing is a common ploy.

The major source of the PRls problems from outside the system has been the traditionally conservative National Action Party that was organized in 19

39. PANS popular ba se is the middle class and those in the private sector who have become increasingly alienated by a political system The most influential is the parties built around the old some civic action groups, the Catholic Church CONCLUSION Since its emergence from t he revolution of 1910, the PRI has had to renew continually its claim to rule for all Mexicans. The need to establish its legitimacy over the years pulled the PRI in different, sometimes contradictory directions. This has required the PRI to adapt to chan g ing political, social, and economic conditions, to negotiate with,and coopt rivals, and to resort to repression when other means failed Today the PRI seems to have lost its famous political resiliency. Its leaders are isolated from those they govern. They are discredited by widespread official corruption, vote tampering and an apparent inability to pull Mexico out of the worst economic depression in its history.

Even the PRls most convenient escape hatch--blaming its giant northern neighbor--no longer work s. Most Mexicans now blame the system for perpetuating economic misery, and many have responded through. the ballot box. The PRI has successfully repressed this opposition but at significant cost to its political credibility Borrowing Abroad, Spending at H ome. To regain popular support and survive its mounting difficulties, the PRI is counting on improved economic conditions in coming years. It hopes to achieve this by borrowing from foreign banks and the international lending institutions and spending mor e money on public projects and programs. But this will perpetuate the very policies that first led to the crisis in 1983 It is unlikely, then, that the PRls economic problems will be resolved in the negr future.

With a no-growth economy, the political pres sures and conflicts will grow. Should the opposition continue to grow in diversity and size, the chance for widespread and violent eruptions would increase. Faced with such disorder, a weakened PRI maybe faced with challenges it can no longer deflect and c ontrol Impact on U.S. The impact of a weakening PRI on U.S. economic and securii interests is potentially enormous. U.S. economic interests are adversely affected by Mexicos deteriorating economy, and the burden of maintaining the solvency of the Mexican g overnment will inevitably be felt by American taxpayers. Political and economic instability, moreover, will continue to force large numbers of immigrants to cross into the U.S straining an already overloaded U.S. capacity to absorb such flows into its soc i al and economic structures 9 Finally, at stake in this crisis is the security of the U.S. This security has long been assured by the stability and friendship of its neighbors and could be jeopardized by unexpected externally supported takeover by interest s directly opposed to the U.g Ultimately, U.S securii will depend on its ability to help Mexico make the changes needed to ensure long-term political and economic security. This will require a closer evaluation of the PRls ability to change and survive oli tioal changes arising from Mexicos crises. A collapse of Mexicos political system most P ikely would create a power vacuum. This would leave Mexico wide o en to the possibility of an Esther Wilson Hannon Policy Analyst 10-