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Jerome Levenson

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.
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 CARDS ETC.?

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 IN 1988......

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 PICTURE?

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 murdered.

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.

LOAN REPAYMENT

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 Mexico City.

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.

AND TODAY?

Approaching 160 billion. Last number I saw was 158 some odd billion, at the end of 1996.



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