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More Economic Light in Mexico

Key gains are being recorded, but a jobs boom is not at hand

August 25, 1996

The latest figures on economic growth in Mexico are encouraging, a 7.2% spurt in the second quarter compared with that quarter of 1995. Gains like this should bolster trust in the country's ability to pull out of recession. It would be wise, however, to view them with caution. An overdose of hope that turns out to be unwarranted could damage the spirit of the Mexicans, who have been badly bruised of late.

President Ernesto Zedillo's prudence in announcing the news was proper. "To claim this economic recovery will restore immediately the standard of living prevalent before the crisis would amount to cheating the people," he said. The Mexicans are on a long road to recovery. At its end may be more jobs and better pay for the majority, but no sensible economist is even pondering the word "miracle" at this point.

Nevertheless, indicators are positive in a number of areas. Exports have grown at a whopping 60% over the last two years. The manufacturing sector climbed 13.9% in the second quarter and, for the first time since 1994, the construction sector posted a gain, 7.8%. Car sales boomed 32% in the first six months of this year. These numbers add up to consumer confidence, a missing element of the economy in recent times.

The relatively good times have been built on an increasingly solid foundation under the Zedillo regime. A key gain this month was the announcement of a partnership between the American telephone company MCI and Grupo Banamex Accival, a major Mexican financial institution. Earlier there was the advance repayment of most of the $13.5-billion bailout put forward by the Clinton administration after the disastrous peso devaluation of 1995. Now only $3.5 billion of that loan is outstanding. The nation does have to deal with the new debt it incurred to partially pay off Washington, but even that debt indicates progress: The treasury's ability to raise more than $7 billion in the international markets reflects a more optimistic international assessment of Mexico's fiscal picture.

Clearly Zedillo and his advisors have mastered the rhythms of international finance. But juggling the budget does not count for much, certainly not for future votes, if it does not translate into confidence for the Mexican citizen.

New jobs still cannot keep pace with births in this country of more than 92 million. The banking system remains weak, interest rates are prohibitively high and wages cannot fill family cupboards. Inflation hovers around 30%.

It is reassuring to hear Zedillo say he will stay the economic course. He knows that the populist economic policies of the 1970s laid out his country's structural woes. As an economist he sees the light; as a politician he feels the heat. The Mexicans can be patient, and they can read the second-quarter figures with some satisfaction. But it is jobs they want and need.


Coming Back

Mexico's gross domestic product is up. Figures measure growth from the same quarter a year earlier.

1996: 7.2%

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