HOW COME WE'RE NOT HEARING MORE ABOUT WHAT YOU WERE JUST SAYING --A
MILLION PEOPLE LOSING THEIR JOBS, A HUNDRED PERCENT INTEREST RATES ON CREDIT
|Jerome Levenson is an international banking expert and
former general counsel at the Inter-American Development Bank.
He is a professor at American University Law School.|
Well because that destroys the myth that everything is moving along in a
satisfactory way in Mexico. You just saw Mexico repay three million dollars, or
three billion, whatever it was, the last payment on the loan that they received
from the United States. So there is an interest here in this town on the part
of the administration, that is deeply committed to the Mexicans on the part of
the multilateral financial institutions, meaning the World Bank, the
International Monetary Fund, and The InterAmerican Development Bank, to give
the impression that things are beginning to move in the right direction. And if
you look only at the financial indicators there is some evidence of that.
But if you get down to the level of the people, we still don't see any evidence
of an improvement in their condition. That's why a man like Imaz comes up to
Washington, so that people understand that below the surface there is this
continuing human dimension to the Mexican financial crisis. We only see, or
tend to think of it, here in Washington, in financial terms.
HOW DO YOU ASSESS EL BARZON, THAT WHOLE MOVEMENT OF THE WORKING AND MIDDLE
CLASS TAKING TO THE STREETS AND SAYING WE CAN'T DEAL WITH THIS ANYMORE?
Well for Mexico it's a very significant development, and hopefully a very
positive development because what it means is that people have broken out of
the official organizations and combined together to demand relief from the
government. Now, I think the other part of it is that because they have gotten
together it has defused the potential for violence, because they feel that by
acting together, politically they may be able to get some relief. The
government will have to respond to that. Therefore I think it's a very
significant development in terms of the evolution of Mexico from being a
society where labor unions and industry associations are really indirectly
controlled by the government. So I think this degree of autonomous, if you
will, civic action by individuals getting together is significant.
At the same time what I think is perhaps the most significant
aspect of this, is that they have given people whose frustrations otherwise
might have exploded in violence an outlet. By giving them an organized way of
demanding redress, in which after all, they did go to the courts and at least
in some of the states they have gotten significant redress..
That means people are convinced that they don't necessarily have to resort to
violence, that there are at least some institutions in Mexico that are
responsive to them. What is I think potentially politically explosive is that
if having gotten these positive indicators, that the government succeeds in
reversing them without giving any effective relief to the underlying economic
distress. That's the problem.
AND JUST HOW SERIOUS IS THE SITUATION? MR. IMAZ HAS SAID WE
CAN'T DEAL WITH THE BANKS ANYMORE. COULD YOU DESCRIBE THE BANKING PROBLEM IN
MEXICO FOR ME?
Well it's very serious. As a matter of fact the banking system may be the
Achilles Heel of the whole Mexican recovery, because when they privatized the
banks, the people who bought the banks, it's generally acknowledged, now,
overpaid in terms of whatever standard you want to use, the book value. The
government then used the proceeds to help solve its fiscal problem. But that
meant that the banks had to react. The people who bought the banks had to
recover what they paid for them. Well how did they do that? They really
relaxed all credit standards, and as a result they have an enormous bad debt
portfolio. Now some of that bad debt portfolio has been bought up by the
central bank for other institutions of the government through these loans from
the World Bank and the InterAmerican Development Bank.
But then the question is, if the people like Mr. Imaz with whom you talked
still have the obligation of repaying these loans to the banks, how did this
money that came from the World Bank and the InterAmerican Development Bank
benefit them? That's what he's complaining about - that they haven't seen the
relief, that the relief has gone to the owners of the banks.
LET'S GO BACK TO THE BASICS. THE SITUATION BEGAN WITH CARLOS SALINAS, ELECTED
Well he was elected, although now I think it is generally accepted that he was
probably elected by fraud. Remember that when the count was going against him,
there was a sudden stoppage of the - there was an electric outage which stopped
the count and subsequently they burned all the ballots. So I think that you
would find in Mexico now, and in among the people who follow Mexico in the
United States there is a general acceptance that he probably lost the election
and only won by electoral fraud.
Now that's very important in terms of understanding everything that follows
after that. Precisely because he lost and particularly lost in Mexico City and
particularly among the middle class and among many skilled working class, the
first priority of Salinas politically and of the PRI, that is the governing
party in Mexico, was to rebuild support in that middle class, in which they
appeared to have lost so heavily in the 1988 election.
AND THE TRADITIONAL POWER BASE, REPRESENTED FOR EXAMPLE BY PEOPLE SUCH AS
CARLOS HANK GONZALES, CARLOS HANK ROHN.... WHERE DO YOU PUT THEM IN THE BIG
I think it would be a big mistake to underestimate them. I think there is a
tendency even in the derogatory term "dinosaur" here, to cast them as the
villains of the piece and that they are on their way out. I think the PRI
has shown it is an extremely resilient organization, very tough, that
resorts to murder and assassination if necessary to maintain its power. I'm
not only talking about the more well known assassinations of Colosio and so on,
I'm talking about what takes place that we don't hear about , in the interior
where the so-called Center Left PRD competitor.....hundreds of them have been
THE JORGE HANKS....WHY DON'T WE SEE THEM?
Few of them speak English, although Hanks does, Jorge Gonzales does. Secondly
there's been a very deliberate policy of putting forward to the international
community it's much more attractive thin human infrastructure of the ones who
have been educated in the United States.
I think you have to understand this repayment in terms of
domestic Mexican political terms. This means that the Mexicans are out from
under the surveillance of the U.S. Treasury and the very tight and tough
austerity program that the U.S. Treasury imposed upon them as the condition of
the $12 billion U.S. loan.
Well why is that significant ? It's significant because Mexico is going to
have congressional elections and for the first time is going to elect in Mexico
City, a mayor, which is very politically significant. I believe it's in June
of this year. This will enable, like any out-from-under the Treasury, this
will enable the Mexicans to do what they did prior to the 1994 Presidential
elections which is to expand economically, you'll see all kinds of public works
in little towns and so forth. In order to maintain the congressional dominance
of the PRI and to try and win the election in the Federal District of
WHAT ARE YOU OPTIMISTIC OR PESSIMISTIC ABOUT FOR MEXICO?
I suppose, frankly, I'm more pessimistic than the conventional wisdom here,
because I do not see them addressing the underlying social problems, I don't
see where the stimulus for employment is going to come from in this dual
economy which is so oriented towards maximizing foreign direct investment,
which means repressing wages and repressing workers. So it seems to me you're
accumulating social tensions, and laying on top of this a veneer of financial
advances whichbenefit a very narrow sector of Mexican society...
SO THE LID COULD JUST BLOW OFF THE WHOLE POT?
Unless they were explicitly to acknowledge and address the underlying social
inequities. I mean you have already got exaggerated income inequalities which
are being further exaggerated by the economic strategy.
AND WHAT WOULD YOU SAY IS CARLOS SALINAS'S LEGACY?
I think it is on balance a profoundly disappointing legacy. Because what he did
was to accentuate all the worst tendencies in Mexican society, that is to say
exaggerate income inequalities, the corruption, the indifference to the plight
of the great majority, and the uncritical embrace of the orthodoxies of a
narrow technocratic elite in the multilateral financial institutions, the US
Treasury, and Wall Street, and transport those uncritically all the policy
prescriptions to Mexico in the belief that he could make Mexico into a modern
version of southern California. And thus it seems to me he ignored the
underlying Mexican social reality. Where it seems to me the priority has got
to be upon narrowing the income inequalities, of how to address the plight of
the great majority, and of investing Mexican workers with at least a minimum
capacity to negotiate effectively on their own behalf.
THE OTHER BIG QUESTION OF COURSE IS CORRUPTION....JUST TO GIVE AN
EMINENT EXAMPLE, CARLOS'S BROTHER RAUL SALINAS IS IN PRISON. WHAT DO YOU MAKE
OF THAT ASPECT IN MEXICO?
Well, I think if anything it's become more accentuated because of the increase
in the influence of the drug culture, and the inability of the Mexican judicial
system to solve and give a plausible explanation for these very traumatic
assassinations. This man Colosio who was supposed to be Salinas's successor,
and others. It's now three years and we still don't have an explanation of who
was behind this kind of thing. Now when you have this kind of lawlessness,
this kind of lack of confidence in the basic rule of law, you have a real
vulnerability in that society, because people don't have confidence that
elementary justice can be achieved.
THERE'S A LOT OF TALK OF A POLITICAL WAR GOING ON IN MEXICO TODAY. THAT IS,
AFTER THE REIGN OF REFORM OF CARLOS SALINAS THE MORE TRADITIONAL POLITICIANS
ARE TRYING TO GET BACK SOME OF THEIR OWN....
I think Mexico is at an important political crossroads because you see, the
belief has grown that you are going to be able to achieve political change
through the political system. The congressional elections, the anticipation is
that there may be a change and that the PRI may lose its congressional
majority, that the opposition may actually elect the mayor of Mexico City, a
very powerful and prestigious position.
Now if all that is frustrated, if all that is in the end frustrated and the
perception is that the PRI once again bought the election, as I believe they
will try and do, and in the more remote areas not only through intimidation,
but physical beating up of opposition - then I think you dash those
expectations of peaceful change, and then you create a potentially very
explosive social situation.
THE DEBT. BEFORE THE NAFTA AGREEMENT . . . WHAT WAS MEXICO'S DEBT?
Approximately a hundred billion.
Approaching 160 billion. Last number I saw was 158 some odd billion, at the end