Created: 4/25/1984

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LJifccior ofentral lyj^jj) Intclligcacc

The Outlook for Mexico

Returnroduction Officer National Intelligence Council

National Intelligence Intimate

the outlook for mexico



Ihe following inlelligence organizations participated in the preparation of the Estimate:

The Centrol intelligence Agency. Ihe Defense Inlelligence Agency, the Notional Security Agency, and ihe intelligence organisations of 'he Department* of Slate and the Treasury.

Also Participating:

The Assistant Chief ol Slafl for Intelligence, Deportment of the Army The Director of Novel Intelligence, Deportment of the Navy The Assistant Chief ol Staff, Intelligence. Deportment of the Air Force The Direclor ol Intelligence, Headquarters, Marino Carpi









The Military and Security



A. Economic Stringencies nnd


B The Conservative

The National Action Party..

C Tlie

D Uftwing

E. Cuban and Soviet


A Generational

& Leftist


A De la


H. The Economy and


C Th*



The Mexican polilical system is under ureater stress today than at any time in the lastears. Ultimately, of course, the preservation of Mexico's stability will rest on the skill and competence of its leaders and on the strength of its political fabric. We judge that in the end thepolitical sy.'ltrm is likelynaiu in'.uct.'.

DiirinK the last several years, Mexican* have grown increasingly


fhtir highly centralized political system.esult, the popularity and vitality of the ruling Institutional Kevoluti<>narv Party (PRI) have ihtfply diminished. Moreover, political leaders have been slow to adapt the PRI to the profound changes that have occurred in Mexican society The two brandies of the parly that historically have been the mostblue-collar labor andhrinking in *iw relative to other social nimI interest groups Meanwhile, most of the millions ofwho liave come from the countryside to fill lhe sprawling slums around all of Mexico's major cities- sluiudwellers now eonstilute betweenndercent of thenot have [seen effectively brought into the system Thus the informal patron-client icbtioiiships that have helped glur the system together are in danger of breaking Not surprisingly. opimsition forces have gained strength.!

Hy pursuing an auticorrup-

When lie wh mauguratcd Presidentiguel de la Madridrisis inure encomiussiitg than any since the. Under conditions of liarsh ausleritv. high unemployment and underemployment, double- or Iriplo-digit inflation, widespread business failures,rippling shortage of capital, the economy3 contracted byercent. Virtually all social and economic groups have had to accept declining staiglards of living, scale down their expectations, and competenrfit5 and opportunitiesegative-sum economic environment.adrid has struggled to preserve social equilibrium and to restore public confidence in the political system. In particular, he has worked to distance himself froml

lion campaign that has included the imprivmmcnt of at least one former high official and revelations of abuses by others, and by projecting an image of fairness, competence, and probity, the President so lai liasgencrall* eltectivc and popular Icadenhlp

De la Madrid's most striking success has been inurnaround in Mexico's international economic accountsittleear, auslenty has broughl spending in line with available resources, inflation has begun to decline, and some confidence in the go vein men!'s policies has been restored By slashing imports and public-srrctor expenditures, raising the real costs of most goods, and making ofher lough adiiutmeiils the regime has met most of ihc stabilizationof the International Monetary Fundnterest is being paid

od the moreinn foreign debt, and by the end3 the current account surplus reachedillion. With some flexibility to increase imports of badly needed capital and intermediate goods, Mexico probably will be. able to stem the decline In economic activity and may perhaps recover this year.

De la Madrid's impressive performance thus far has prevented an immediate unraveling of live system, but hasen sufficient to dissipate the long-term threat to Mexico's stability. Although many variables will be involved, the outlook through this, decade and into the earlywill be shaped largely by the interplay of the following factors.

The most Important is probably de la Madrid himself: his outlook, psychology, skills, and leadership qualities.

The economy and labor will also be key. Kawtomic growth almost certainly will be insufficient to creale enough jobs for tbe burgeoning labor force. Resources probably will not be adequate to maintain traditional programs that have subsidised working-class groups and helped to keep them quiescent. Labor has suffered under austerity, and indefinite sacrifice is not likely. Thus, the President will increasingly have to make difficult trade-offs among economic objectives that will tend to alienate some politically important sectors while helping others. In lhe unlikely event that economic activity were to continue declining for another four or five years, the prospects for regime-threatening instability would rw significantly.

Conservative opposition forces generally will be more assert ice These forces are concentrated in tbe cniter-nght National Action Partye believe that the rise of opposition sentiment in the northern border region reflects the spectacular economic and demographic expansion there over the last decade or so. as well .is dissatisfaction with the regime's economic policies and statist philosophy and tampering with election results. These trends have been paralleled, moreover, hy indications of dlssidence in Mexico's poor and underdeveloi>ed southern states where Communist, radical, and othrr opposition groups are organizing

Meanwhile, extreme leftist groups are also active. Leaders of the Unified Socialist Party of Mexicoommunist-dominated coalition, reportedly have derided to increase their recruiting and organizational efforts in tlie southern-tier states closest to Central America. Working through radical peasant, student, and lain it groups, the PSUM could generate increased support for its causes, hut it will most likely pose smaller nnd more containable challenges than the rightwing opposition.

Cuba and the Soviet Union maintain contact with and provide funding am! other support to local leftists and revolutionaries from Central America and elsewhere, but with few exceptions they have been reluctant to support committed revolutionaries who would employ violent methods against the Mexican regime. Nonetheless, if levels of instability were to rise in Mexico, we believe it would be more likely that Cuba and the USSR would expand their subversive activities, and it would be easier for them to do so

As long as relative stability continues, the military would he disinclined to intervene in the political process. Such Intervention wmild vioI.iU rulesheir Iwliavjor

lany stgniticant increase in instability or external threat, military involvement in the policy process would rise as more areas ofconcern tookecurity dimension.

We are reasonably certain that some transformation of the Mexi-can political system is likely during the period of this

Whatever the true course of events, US political and economic interests will be affected substantially by conditions in Mexico during the period of this Estimate. The security of the US southern border depends on the continued existencetable, united, and peaceful Mexican neighbor. Other core

the flow ot illegal migrants and

arugs into tliis country, the availability of Mexican petroleum, bilateral trade and investment relationships, and Mexico's continued willingness to make payments on its foreignbe affected by Mexico's success in dealing with tin* challenges facing it.


Until Ihc foreign exchange crisis and economic collapse Inexico was perhaps llie mustsuccess rtory in the developing woild. From its inception in the, the country's unique political system had provided overears of relative social tranquillity, political stability, andstrmvthine presDlenti lure served in miliar PKeeraiori, svieldmc and yielding power according to elaborate constitutional and informal lines that are rootedears of the country's myth and history. Unlike most Latin Ameiicuu countries, lurlheimore. there have been no militaryserious coup plots, strong guerrilla or terrorist movement* or large outbursts of untiiegimc violence. Unlike all of them too. in Mexico the economy Brew withIran years and at impressive huth rule*alf century1 Id fact, with an average annual growth rate olercent durum those decades, cumulative materia! sain* in Mexico were anHiw the highest achieved anywhere in theworld The prospects for economic development and illsersilieation were buoyed in the, fuithermoro, when Mexico's extenslvn newlyoil reserve* began to be exploited.

2 Pressures on former President Lope/ Pottillo to increase public spending became lireuttihle after Mexicoet oil exporter, but Ihe former President* tendency toward grand,ear KiM-uimgiv.:l. in the dtsarfrou* boom aird bust cycle that followed Mexicoevelopment strategy in large part dependent on massive public investment of ml revenues. As public expenditures burgeoned, pushing growth rales to as higherceni annually, the economy began to overheat In thenflation mounted, the peso became highly overvalued, and the compel it ivrnev ofnonnal exports wasoreignwas stepped up to compensate for marine current account del kits even as interest rales were rising Lopez Portillo stubbornly refused to devalue ihe pesond foreign exchange policies servedositive inducement to capital flight. Billions ol dollars were expalrlated as Mexicans deposited, invested, and spent lavishly abroad. The foreign eichangc and debt crisis thai Lopez Portillo acknowledged Innil hit natunulirarion of the country't private banks the following month, strongly undermined the

privatr sector

Inaugurated 1'iosjdent inde la Madridrisis morethan any time thendei condllioiis of harsh authority, high unemployment am)double- or triple-digit inflation, widespiead business lailuret.rippling shortage of capital, the economy contracted byercentirtualocial and ec/cgMKnic group* have had to accept declining Marwlarcb of Irving. Kale down their exrxctattons, and compete for benefits andinnegative sum economic environmentL.iIiii-and to restore imblic confidence in the politicalIn particular, he has endeavored to distance him.sell from the egregious corruption and failures of Lope/ Portillo and other senior If trials of the last government Bs pursuing an aiUieorruptiuti campaign that has Included the imprbcairnent of at least one (onner high official and revelations of abuses by others, ami by protecting an image ol Mines*,and probity, ihe PresideM so lar has provided generally effective and popular leadeislup

la Madrid's most striking success has been inurnaround in Mexico's international economic accounts.ittle overyear. auMcrlly has brought ipending in line with available resources, inlbths hr-gun lo decline, and some confidence in theohcies has been terJored. ByImports and public-sector expenditures, raising the real cost* of most goods, and making oilier lough adjustments Ihe regime has met most of therequirements of the Interna Hoonetary Fundnterest is being paid on tlie moreillion foreign debt, and by the end3 the current account surplus reached aboutillion With sowe flexibility to increase importsI needed capital and irtmrsediat* goods Mexico probably wiB be able lo stem the decline In economic activity and may begin recovery this year This progress has been achieved, moreover without engendering any serious


social dbruptions or ruptures in Ihe "revolutionary family" of groups that support the regime.

he political system appears to be strong, but wc believe it it now under serious stress both because of the economic crisis and because it has been slow to keep up with profound social, economic, andchanges.ociety that has been rapidly transformedargely rural, agricultural one to an urban and Increasingly modern one, theone-paitv form ol government has come under great pressure. Mexicans arc more educated (there areillion universityoreand aware ol international developments than ever before. They are more diverse in their interests and outlooks, and, in the aftermath of2 economic shocks, show signs ol being moie dissatisfied with tbe corruption, inisiudgnienls, and the restricted nature of their polilical system.esult of these trends, the popularity and vitality of the InstitutionalParty (PRI) have diminished, at least temporarily.

6 Political leaders have been slow to adapt lite PRI to the profound changes in Mexican society The two branches of the party that historically have been lhe mostblue-collar labor and thebeen shrinking in size relative lo other


social and inteiesls group* Tin* I'M probably can still rely on its peasant organisation to turn out voters for its candidates, but the portion of thr population living in rural areas, which was two-thirds of the totalears ago. it now Irsa than one third There are abo iridicabons that the i- rorntac* of the Nleaican labor force affiliatedthr bine-collar Ubor sector of the(xirdedeiatiori id Meiican Workersbeen gradually shrinking in rr-rrntMeanwhile, most of the millions of people who have filled Ihe sprawling slums around all of Mexico's majornow constitute betweenndercent of litenot have been absorbed effectively by tho PHI or the systemSo far. however, lhe inlormal patron-clientthat have hrlprd glue the system together have not broken down

the last art-oral yean, opposition forces have gained strength The most powerfulero is theNational Action Parlyt has made substantial gains over lhe las! year or so in Yucatan and especially In lhe northern border regions We believe lhat lhe rise of opposiUoo senllmenl in the north reflects that regions siaYtacular economic and demographic expansion over Ihe last decade or so. the desire of vibrant private-sector Interests there toexchange with lhe United Stales, andwith Ibe regime's economic policies and statist philosophy Antagonism between private-sectoria the north and lhe regime intensified under the Impact of the econoraic crisis. Three trends have been paralleled, moreover, try uaiic-atlons of dlssidence in Mexico's poor andeloped soulhrrn statesCoerunurusi. radtral. aad other oppontsoo groups have been active


political system, one of the mostlex and iiiscrulable In the developing world, has monopolized power for over five decades. President serve for six years with enormous powers that are largely derived from ihelr control of both thePRI and Ihr largr federal Imreaurracy.leaders and parly liorers have been skilled In employingpragmatic mil of pndciea and tactics tacking as necessary in chancing polilical winds:lhe Ubncr ofpown among elite groups. isolating duasdergt, manipulating lheigh drgiee ofand mystery in the system;onopoly of reprcsrive power, and exercising exclusive lights lo Ihe "revolutionary" ideals thai provide the system legitimacy as aforce. Traditionally, lhe system has demonstrated resiliency and adaptability by adjusting lo newco-opting newly arising dissident factions, and claiming lo represent and satisfy nearly all major interest groups The regime's total control overand the apportionment of material rewards has been perhaps its most powerful asset in preserving its monopoly of power.

(In marginal anil basically nori political role it has assigned lo Ihe military.otal force olexicoinallei percentage ol men in uniform than any other lailm American countryCosta Rica. The shaie of the federal budget has remainedercentnd has generally diminished since then. With raresenior mililary officers have given unconditional support lo the country's civilian leadership, and their loyalty is encouragedariety of informal

espite the military's relulively small size and share of public expenditmes. Use last thiec presidents have endeavored In upgrade and modernize itsto fulfill its more complicated mission. Troop ttienglh has grown by aboutercent over the past

ersonnel strength ofhe Army is the largest of the services, and the one with the principal responsibility for maintaining internal security. Withew infantry and cavalry units created sinceArmyresence in many cities and rural areas The basic deployment pattern remains focused, however, on Mexico Oity awl its environs (seelthough (he regular armed forces have ihe primary responsibility for internal as well as external security. Mexican governments have used civilian security services as the first line of defense against domestic iiurest Regular police forces handle demon-slraluins staged by students, teachers, or other groups, and plainclothes security units polled intelligence on dissident movements.l


ly staffed, trained, and equipped: local police and security forces rely heavily on tlie Army lo help control any sizable demonstrations.

he most effective civilian internalis the Federal Directorate of Securityto Manuel Bartlctt. the Secretary ofDPS fieldsIts Mexico Clly headquarters and at branches in all of the stales. Heller trained and armed than other civilian security personnel. DFS teams probably have increased covert intelligence operations along lliebolder in reiwnl years and have stepped up in Iof Opposition pulliioal groups Themain responsibility is to monitor suspected dissidents and opposition groupsiew toand investigallng any possible subversivehe DFS does nol hesilale to conduct seaiches and sclzuies and even to detain and interrogate Individuals .suspected of subversion.

Revohrtionory Ideology

volutionary ideology has played an essential role in the political process and culture. Derivinganoply of myths and accomplishments associated

with tbe Revolution nnd ils aftermath, this ideologyrameworket of egalitarianthat give legitimacy to the system Fought in large part by and for Indians, peasants, and Ihe working class generally, the Mexican Revolution gave impetus lo decades ol reforms that have realigned relationships among the country's social groups, for the first time since the Spanish conquest, the Indian peoples and their rich heritage were nourished officially as the very essence of the Mexican identity Aztec heroes were lionized, Indian art and architecture exalted, and Indian characteristics and culture came to sufluse the national consciousness.

n contrast lo Ihls "revolutionary" hagiography are the many foreign intruders andconquistadors, French imperial pretenders, andinterlopers from the Unitedof whom are seen as having injured and exploited the rightful owners of Mexico's resources Even more vilified than such "predatory" outsiders are Ihe Mexican traitors who conspired wiih the foreigners. They are known specifically as malinches after tlie Indian woman who translated lor Cortes. lApez Portillo provided the most recent example of revolutionary demagogucry when he nationalized tbe private banks and imposed inugh foreign exchange controls, arguing that sacadalares. unpatriotic Mexicans who removed capital from the country, had brought on the economic crisis.

Despite the mythology. Indians and peasants have been relatively neglected by the politicaland progressively so during the lastrears Their share of polilical power and lhe material rewards dispensed in recent decades has beencompared lo what the middle da* awl organised labor gel, and there is little chance that the situation will improve any time soon Wc do not know to what extent conditions in the countryside havehe aftermath ol the economic crisis. Land seizures and other violence have occurred, although the levels of such unreal do noi appear to be unusually high.

Revolutionary ideology strongly influences Mexico's foreign policy. Certain principles--the juridical equably of nations, and the right ol all peoples tobased on Mexico's osvu experiences and constitute the founda-hnn nf its loieign policies, especially in relations wiih the United Slates and the rest of Latin America. In particular, these well-established beliefs provide tbe rationale lor Mexican activities and rhetoric in support of Central American revolutionaries The officialmost Central American countries can only benefit, as Mexico ultimately did. from the catharsis of violent socialhas substantial support among key interest groups. More important, however, everything that Mexican leaders say and do in behalf ol revolutionaries in the region serves lo mollify the domestic extreme lefi and allowegitimate means of venting ils liustratlons.ideology serves the greater interests of the regime, therefore, by helping to reinforce it-


rofound political, social, economic, andchanges have occurred in Mexico over the last Iwo decades. Key factors In this changinglandscape are:

Rapid population growth. (Nearly SO percent of Ihe people are)

Urbanization and the corresponding decline ol the rural Sector. (Agricultural production has declined to lessercent of CDP fromercent)

The slrable expansion of middle-class groups and of their educational aspirations and acront-phshmenls-

Glaringly uneven distribution of income and wealth (In recent decades Use share of nalional income of the poorest half of ihc population has steadily declined, though in absolute tetms the poor improved their lot gradually, at least1

The concentration of economic and political power in Mexico City and the suffocating growth of lhal metropolis ol more thanillion nearly lo lhe limits lhal water and other resources will permit.

The steady growlh in the sh*e, complexity, pow-ei.

the central government.

North-south polarizing trends lhat arc pulling economic activity in Mexico's northern border regions away from the capital and toward the United States, ami the emergence of radical groups in poor southern stales.

associated with the

The dislocations and oil boom and bust cycle

These and other problem* illustrate the seriousness of lhe threat posed by the following specific challenges to the system.

A. Economic Stringencies ond Constraints

'rroViVntadrid's touch austerity imv ures have cased crxtsaderabhi the immediate financial crtsii he inherited, hut have not solved Mexico's deep structural problem* By bringing Mexico's iorrigri financial accounts hugely intobalaiuc and bysome economic reforms, he has helped ihc country regain some access to foreign capital markets But in the near term, these severe adjustments have la-en accompaniedhaip decline in economic activity and sharply reduced living standards Ivrsl year. GDP fell Ii percent asand guvernnw-ut (pending were slashed, sonsumer subodies redused. price controls relaicd. and tlie inn sliarply devalued

o continue making progress, de la Madrid will have to hold the economyelatively tight leash well into his administration If he holds fast totoound foundation far eventual economic recovery, inflation would be reduced, the foreign cichange rategln to sttbtlUe. and linancialwould be partially regained through restraining the expansion af the debt service Irurden Accompanyingolicy however, would be furlliei uneinploymenrostponement In any improven living standards.

k will not be easy. De Ij Madrid will be under pressure to attack unemploymentaster lebounrl in industrial production even at the cost of continued high InlUhon and expanded foreign debt lie wilt also have toless rntilt Use inseilment and trade corgrnb lo reduce the numlier ol bankruptcies ol inefficient domestic firms and show he has nol forleited control of national decisionmaking authority.

Regardless of the policy mil cbovn. we believe it is unlikely lhat Mexico will regain normal access to foreign capital markets and reeriablbh economicjoba suslairsabte bub within tbe nest lew sears. The depth ol Mexico's problems and the magnitude of its foreign dehlensure that production iv not likely to reach the level of iheor af leasl another few years Real personal consumption will remain below01 levels during the remainingo years of de la Madrid's tern

In artempting to steer through this maw of problems, de La Madrid and bis advisers will he guided, we believe, by four basic economicach hocked by various political elite* andwide tuppoit among the populace1 The-a- goals, however, cannot all be achieved simullaneously.

and Fxehanee Siohililv. Hieconcern of the government is toprice* and lo strengthen the pesostable prices and exchange uleaconsumption and living standards

however. hypCT-.nlLr.lion las shavedf

real wages ami hai ledharp drop in ihe peao Lost foreign purchasing |rower has had an especiallyimpact on middle-class groups who. durinu tin-years ol oil-fueled giowth, became accustomed to spending overvalued pesos for loreian luxury and consumer goods fV l< Madrid's comress conference last (Maker that "inflation hi ibe rnost serious problem facing the country" indicates bp conlinuintt commitment to this key objective

Independence. The secondof government economic policy i> lhal olspending to levels that can bea Madrid's currentarc aimed al regaining financialending ill* need for "massive new loans 'past com mil menu. This has led to afcgefgn borrowing program and dcLivingwlren potsible. De la Madrid bdeveWmveiil innd incrrMUng localan ellort lo pay government debt andout id domestic savings.

Economic- /leiorcry nnd Veic Join. Mexican leaders realize that economic performance must Ivrgin to improve soon if key conslituencse* in tliefamily'* are to remain uusescent and if new eniplosment oppottufUlies are to be created Only with economic recovers can the condition" he created for economic mobibty and openings tor ambitious Mexicans ol all classie* who might otherwise become threats to ihe ivstcm.

Balancedonomu- Mexicanarc In many ways as coricetned almut how the economy grows as how fast it does Irr veloprnent strategy has long reflected the overriding principle of economic' iMitoruhun. characteruedlectionrsin. restrxliom on lorergn investment, and corueivation ofctpeciallvTheret odes have resulted In the rapidly expanding role ofand lame public enterprises in the economy. Nevertheless, Mexico's private sector continual tothe bulk of employment and. under the strictures imposed by the IMF program, the private sector will

have In generate lhe jobs to utbfy rapid expansion ul the labor (orce.

Differenl Approtxhei

Economic Irrnb and policies durine die restrill be determined in Urgehe .ora promise* and liadr-offi imom lhe basic economic objectives made bv de la Madrid and his successor While wepproaches, wc believe actual policies and trends will fall somewhere helsveen the two. In the lirsl case, de la Madrid could relax auslcrity and reflate the economy soon In response to growing polilical iirnssiuns ami social unrest, but this course would probably lead lo recuirent lirunuia) crises- Alternatively, he could lontinue toough stahllixataon program, followed by yean of restrained growth In either case, we believe thai during Ihe next two yean Meiieo will be unable lo finance sufficient imports loubstantia! increase in productive capacity or economic activity For the balance of tlielow increase in export earnings and foreign bankers' resistance loexpand commitments lo Mexico will act to bold back economic expansion

If Mexico relaxed iiuslerilvhewould grosv soiuesvhal Nevertheless, unernploy-rnenl and underemployment would not improve much Tlie costs would be substantial

Greatly increased government delkits

Near Irlple-digit InfUtion

Sharply higher fs>re*gn br* rowing requuernents.

Rapid drprrciallori of the peso

These pressures would proliahlv leadew and more serious foreign exchange ends unless de la Madrid chose lo open Ihe economy wide to foreign investment and lo provide guarantees thai wmild eiK.wrage foreign bunks lo irncw and increase loan and Irade credit lines.

hould de la Madrid pursue this course,economic siabdiration program would heIf higher spending insed Mexico to ma. IMF performance target-ide margin, we brln-vradrid would llnd il nrcrs-tary to clamp down on the eeonomy again to ensure continued access lo esamtial foreignntroducing such start-stop policies could drag out economic rrcc-very. cause recurrent financial crises, and undercut lhe gos-eriunent's longer term -shirt live of creating enough jobsapidly growing Ubor force.

de la Madrid continues austerity,fiscal lestratnl, and depressed Importsforeign borrowing reriuiietumts. Once afor renewed growth in economic activityile la Madrid could introduce stimulativewould spui growth hut avoidonce again Even utsdet llsrserales for lhe balance of the tiecade wouldiem4In belowercentachievedperiod IWO-TO Mexico stall wouldcosts

Reductions In per capita consumpti>n. through most of de la Madrid's admi nisi ration.

Rising unemployment and underemployment

In this case. Mexican learlers would in all likelihood come under mounting pressure from labor. Ihe middle class, government workers, and others lo expandspending

make lough dectskau mMMcomplex for de la Madrid andmuch will depend onhrvnndA srlbaek in the current worldu fall in nil prices,eterioration InI er national lendingperhaps btuugbt ondebt delault Inorld

Mii rales, undermine demand for Mexican exports, and constrict credil availability Under suchMeikan policy makers' options would berrslrvrtrd On the otherajorin world oilon by conflict in thr Persian Gull area, fortemporarily boost Mexico's od rr-veoues and allowithout aggravating lorrlgn payments problems

hus, we conclude that economic laclors will ciHitiisue to constrain policymaking Ihronnliout. The choice of direction and means will Involve tradeoffs among economic objectives lhat will lend lo ahenale some sectors while helping others I'ntjrss Mexico benefits Irooi an unexpected windfall eco-ii'-ixii' gn-wthhe insutticient to create enough jobs for the burgeoning Ubor force. Available resourcr* will Ire utvif(Mien! to rnaintain Iradlllonal programs Sulisnlies. for example. wiD continue lo he csil, while housing, schoolingublic services will Mill lie wanting in many urban and rural areas. Al Ihr same lime, introducing long-promised sliuctuial reforms lhat aie necessary ii Mexican industry Is to meet international com petition will threaten established and highly protected businesses, while aiding innovative

entrepreneurs. Evenompetitiverate to spur export growth will keep foreign travel and purchases prohibitively expensive for many in the middle class who had previously enjoyed such opportunities.

he Conservative Opposition

lthough greater Mexico City has grown at rapidis now home to more titanilliontwo dozen next largest cities haveat similar and even higher rates. The mostgrowth has been in the northern tier states, wheref the country'sarge-fl cities are locatediles of the US border (secnd tabic0 each of these cities had grown touarterillion people. Duringheir average rate of growth was aboutercent higher than Mexico City's, and we estimate that together they now account forercent of Ihe nationalhare that will Increase toercent by the end of Ihe decade II recent high rales ol expansion persist. Six of the largestTijuana on Ibe Pacific to Matamoros on ihe Gulf ofon the border with tho United Slates, and nil have doubled or nearly doubled in size0 while becoming Increasingly vibrant as ix>mmcrcial and industrial cenlers and funnels for contacts with the Uniied Slales.

he flow of people and economic activity into the northern border regions has considerable political significance Most of the growth has been the result idr initiatives and of commerce and other exchange with the Uniied Slates. With the exceptions of Hcrmosillo and Tampico, which have benefited considerably from national government efforts toeconomic activity in regional development zones, the northern lier cities have seemingly grown primarilyesult of "pull" forces from the Uniied Slates rather than planning in Mexico City. Monterrey. Mexico's premier center ol private-sector industrial activity. has grown rapidly, while tiiaior entiepots like Ciudad Juarez, Mexicali, and Tijuana were Irans-

Table 2

I rhanUalion in Mexico

rVculauco of IM II latgrat(iroenh Halt



raj* rr^

Mocjurot, Nmvo _

Ciadacl Jagrta. Clurraata*

t CMcnm

Metkak loja CalilortM


Torraoo. _


Mtvtta, iJ

Sao la.

Atagalw (P* JWW





Nuew Urrdo, J




borarr** " "J

Morrt-. _ _ _

unhid0astd no IVTH-B0 annual iruuih rat*

1annualV. wtadlng Paltnlertcrii

' th* Pop-Uixni of il* Mcricn Titi antr^liun iramierorM bft"se. Federal DMntt.iket arcn anch own rir*0>

Ttiir. labia


from tawdry border towns Into large and diversified entrepreneurial centers

ong belore the economic collapseerror* between these border rrrjsons and Men, Qty were multiply inc. The formerarger share ol* political power, less restricted exchange with the I'nited Slates,lice of the fedeial budget compatible wilh their increased importance- Thecrisis, moreover, exaeerliuied these tensions as tbe border economies were especially damaged by the devaluations of the peso, foreign exchange controls, and the slurp drop In imports from the I'liited States.

the Notional Action Party

he National Aclion Party (PAN-which means bread in Spanish) has been growing over the lastears as the leudlng alternalive to the PHI, and its greatest gain* have been in the northern border regions and in Yucatan According to the government's count.

PAN rapturedorecnl of tho vole in (lie2 presidential elrxtiom That was more ihan all of the olher opposition purlin combined, and PAN* Urges! share ever The PAN vote probably wai larger, hut wc doubt it reached theercent lhal the party's own official electionims Since then. PAN ha* been victorious In an iinpreerdenled series of local electrons and In sotnr northern cities and regions il appears to br ihr de facta majority parts. In2 it won mat-oral contests In ihr state capitals of Sonora and. in alliance with another conservative party, in San Lub Potosi In. il won mayoralties in Duiango. thr capital td the stale of tbe same name and. more Imporlanl, in Chihuahua stale where il took (he lliree largest cities. Including tbe state capital and Clududhich is the country's fifth-largest clly.j

umhci of factors seem to explain the gi-iss-lli of PAN's support The parly traditionally has appealed primarily lo wealthy, middle-class, business, and church-nrli ntid constituencies Wiih modcrui/atinn and urbanization, those sectors have heeome Urgrrercentage of the total Mexican population over the last two decades, thus accounting in part for PAN's greater popuUnlt In addition to thu growth by accretion of Ms natural constltueiKT. the party has probably also suoerded in extending its appral to some group* not previously inclined toward ita Urge share of the ballots 1'AN candidates have won In recent elections have been protest voles rather than enduring expressions of tuppotl for lhe opposition PAN probably has benefited from the widespread dissatisfaction resulting from ihrand the disastrous economic polictn of lhe Last gosernmerrt But. even with the added support of tbe many middle-claw and other Mexicans now opposed lo continued PHI hrgemony. the PAN It handicapped by many serious problems: the paucity of leaders with national experience, lhe weakness of ils Infrastructure. Us failure lo come up wiih national political pUtfomis,eneral perception lhal il is the party of wealthy elites

trevallvc hirers generally, and thedissatisfied urban mterests in the northern Iirgiotn and Yucatan In particular, will bein Mexican politics during the periodCrowing numbers of lhe provincialarr disillusioned with lhe resuhi nfgovernment and party Influence inand are searching lor allematlves theyAmong these are lite new- church relatedindependent schools, neighborhood,olhei activist groups, andarietyorganizations thai share an interestindividual and family salontight religious and secular groups nutbegin lo pby pohtieal roles during de Uand beyond, batew would be likelylo stolencr. even if they

bv the reglme

n buUneo, we lielieve thai the PAN has expanded Its core constituency In rcictit years, and lhat II will mount progressively more efleclivcto lh* system. As the population hat la-come louimrr and more urbanized, the PAN has probably icqiured Urge new fallowings that could remain more st km permanrotlv in tbeir camp Aemding lo one Kwdrmle study, lhe PAN has made ngnif leant liuuadt anions wiKkiirg-rbiss people in Baia California None, and we have sraUered additional indlraliom lhatlso the case elsewhere in the northern border

C. The Slums

lthough urbanization has been widelythe most explosive growth has been In the colonins populates, the teeming slums and squatter setllements around the principal cities. One of these. Netzahualcoyotl. on the outskirts of the capital, lias been burgeoning at an annual rate of more thanercent during the lastears or so0 it appeared for the first time in Mexican censusthe fourthdargest "city" in the country.ith an estimated population of closeillion, it was no longer listed separately, perhaps because thedoes not want to call attention to it Many other huge new slum settlements like il have mushroomed on the outskirts of most of the other cities too, expanding in fact more rapidly in relative terms in lhe provinces than in the metropolitan capital area. The extraordinary rapidity of slum expansion has resulted in new arrivals coming to be known asparachutists, who seemingly drop in silently and in such numbers as to transform completely tlte. places where they alight. Even before the economic crisis, unemployment and underemployment rales in the slums were Ihe highest In the country.

espite such conditions, however, there have been no large riots like those that have occurred in some cities In the United Stales and olher countries over the lastears. Rioting and bus burnings occurred in Nelzahualcoynt)1 billowing has fare Increases and levels of crime have increased notably as economic conditions have deteriorated. In contrast, during the decades when the economy was growing rapidly and creating many new jobs and opportunities, lhe realistic expectation of betterwork, material gains, lite chance to move up on the economictheto the cities, sustained their hopes, and kept them quiescent

t is not clear to what extent tbe majority of slumdwellers are being effectively absorbed Into the PRI's patronage networks or the regime's socialThe PHI created the Federation of Lower Class Areas to protect the interests of slumdwellers in the party. The popular ssclor of the paity to some extent has organized low-level urban entrepreneurs such as street vendors and lottery ticket sellersi Ihose- wiih steady lobs have probably joined one of lhe progovern-ment unions; and lhe party also creates somerelationships in the slums by empoweringcaciques (or bosses; who help provideand other services to the poor Party affiliation, however, wins generally lo reward ihose who have already achieved some limited success and upward mobility, rather than lo actacilitator for such advancement The government bureaucracy provides some basic health, sanitary, and subsistence service* in the shmitytowns. and in Monlerrcy tbe citybuild* low-cost housing, provides subsidized credit, and has established some small Industries. We are unable to nidge to what extent such support results in backing for the regime.

pposition parties and independent masshave been making gains in some ol the colontasim PAN reportedly has made inroads in some northern slums, and the Communist-dominated coalition has had some limited success as well The greatest growth has been experiencedubculture, ol slum institutions and associations that often provide services normally the exclusiveof the government and the PRl Independent squatter organizations active in Monterrey and Ciudad Juarez provide police protection, people's courts, schools, and utility services lo people in the shanly-towns. Slum organizations have also formed in Acapul-iv.ational slum coordinating body was founded, to provide national leadership, and by early the following year it had affiliatedonfederations of squatter settlementsew northern cities. We have no further knowledge of its activities or size, but the implications of such opposition party andorganizing in tbe slums could be highly significant over the longer term.

D. Leftwing Opposition

eftwlng political parties small, weak, andbeen constantly eclipsed by therevolutionary PHI that claims to represent all of the groups that in other countries are the nalural constituencies of the far left. In llie lasl presidential elections leftwlng candidatesercent of the vote by the officiala (airly accurate reflection of their actual appeal As long as they eschew violence bolh in theory and practice. Marxist and radical parties are allowed to exist because ihey arc stabilizing lorces in tbe polilical system. Radical parties are often co-opted by the PRI, alternately running Iheir ownare secretly fund-

ed by (tinsupporting PRI candidates who.esult, presumably gain greater leftist hacking Independent leftwing pa Hie* have tended also to serve PRI inlrieau bv lending credibility lo the quenw.rublr authentsetlv of the electoral process, providing the regime's IcJlwmg critic* with peaceful arid nuv.-nair.'e avenuoi through which lo channel their illisenl. and giving additional meant of criticizing conservative forces, leaving the PRI to appearent rial force Tbey abo reeve Mexican foreign policy neech and obrectivct by enhancing the illusion of an open and democratic society, bv acting as lightning rods for outside extiemists who attempt to meddle, and by giving Ihe regimo indlioel access to and Intelligence about international Marxist ami radical organizations

he largest and brat organized force on thehe Unified Soeiahst Party ol Mexico (PSl'MX an amalgam offew minuscule. Marxist and ladtcal factions and the Mexican Communis! Partyin I'lHl. largely to Improve the Communists' prospect* in the presidential elections, the PSUMnly0 rnembenraxy-rjm't of contentious factions Iu greatest strength Ls wilh university professors and students, particularly at the huge National Autotmmous University in the capita] andew slate universities. Thehave not been able to retain the support of most university students once tbey lease the campuses, however, and tbe emphasis on organiTing arnoog nHBtlvyouth has tended to detract from the party's appeal among workers and peasantsreceiil reverses, tho Communists are strongniversity workers' orgaidiatlon They have made inroads In the large teachers union tbatomponent of the PRI* popular sector The party alto stays busy ewseasortag to cement* and mergers with other leftist parties and splinter groups thioughout the countiy lo twister its claim lo lie the preeminenl leftist challenger to the PRf. It is prominent, lor instance, in the newly formed National .Association of Workers and Praia Ms. which unsinievfully attempted on two recent orcaooos to organize national strike*

adders of the PSUM reportedly have Added to increase their recruiting and organizational efforts in tlie states closest to Central Amenta They work with tlie radical leaders of theCoalition ofeasants, and StiMserts of the Isthmus- in Oaxaca and may have made some progress in atli-iiu*-ing loase among leflwing otiponenls of the government. The PSUMs best prospects forMs Influence may lie In such activities In tlte troubled soul hem tier slates. Working through radical, leftist, peasant, and labor front groups, the party could generate increased support for its causes.

ther recognlnrd parlies on ihe extreme left include the small Popular Socialist Party and the Socialist Workers Party, but both arc to some degree manipulated by the PHI Unlike them, the Tiotskylte Revolutionary Worker* Party tPRTX with anmemlierihip of several thousand, hai attracted considerable attention because of its strident antigov-minvent potitsons. lb charismatic presMlentuIRraurlo Ibarra defirst woman to run for thatan indefatigable campaigner who, thoughember of the party, wasbecause of her connections with assorted human rights and activist group* Tbe PUTood chance of attracting new support from then*led youth and disenchanted rruddk- class professionals, especially if Ibarra continues toeadership role. Finally. Ihe Mexican Workers Partyhich benefits from the support of several internationally known Mexican writers and intellectual* and the prominence of Its lender. Ilebcrto Castillo, could abo expand by appealing to youths and intellectuals Apparent!)the potential thicai posed by livehe government has repeatedly denied it official party status, which prevents it from competing In elections.

Radical leftist activist* abo are presentlytn southern Mexseo. The COCtl has expanded its support in Oaxaca1 when its youthful and radical candidate won Ihe mayoralty in Jm hilaii, that state's tccrjiid-larsjest city. Though federal and state governmentspectrum of leverage against the waywardcoercion toofhas expanded in activities in nearby cities and ptobalrly elsewhere In Oaxaca. and perhaps too in nriglitiorliig Chiapas Increasinglv concerned. PRI officialsiolentin Juchitan in3 that resulted in several deaths Thai violence provided tbe pretext lor state authorities to impeach the Jus lulan goxrrnmenl and to empower an interim administration In3 government foiees forcibly evicted COCEI members who had for months occupied the city hall

hough the regime now seems to have ibe group undertill has the capability to mount demon* rations as it has in the past, and thus lo attract atteniwn to lb cause in Mexico gad internalhmally Some of its leaders have gone into hiding, and some analyst* believe il may now be committed loclandestinely. Developments in Juchitan have

made il more likely thai extremists from around the country will become interested in conditions in Oaxa-cu, and seek lo become involved in behall ol poor peasants and regime opponents. That statey Zapotec Indians, whoistory of resisting centra) government authority that dates back lo beloie Ihe Spanish conquest. In pariesult. Ihey have benefited relatively little from the economic development that has occurred through most of the rest of the country.

E. Cuban and Soviet Involvement

hrough (heir large Embassy and inlelligence contingents in Mexico City, Cuba and the Soviet Union maintain contact with and provide landing and other support to local leftists, to revolutionaries from Cenlral America and elsewhere, and almost certainly to the Mexican Communbt Party. Havana reportedly funds and gives clandestine support lo severaland propaganda ventures that support Cuban policies and objectives We knowew firms In Mexico that are fronts for Hie Castro

ith one notable exception, tbe USSR has been reluctant lo support committed revolutionaries who would employ violent methods against the Mexican


| While

its contacts with Mexican rclnsls and intellectuals are more extensive, the Castro regime lias alwaysigher priority on maintaining constructive relations with successive Mexican governments than onopposition to them. Thus, unlike virtually every ollspr country in Latin America, Mexico hasigh degree of immunity from Cuban meddling, and in return has consistently been one of Havana'ssupporters in tbe region Under mostwc believe this tacit understanding willto serve the interests of both countries and that Castro will refrain from activities thai could link Cuba with direct and serious threats to the stability ol the Mexican political system.


Castro and his hardline advisers may now Iwlicve thai they should have done more in recent years to help the left organize and develop links to the masses. We would expect lhat small and deniable efforts to train small numbers of Communist Parly and othermight soon begin, if they arc not already In progress.

Mexican revolutionary completed two years otin Cuba2 Thus, if levels of instability were to rise in Mexico, wc believe it would be more bkely lhat Cuba ami the USSR would expand theiractivities, and it would be easier for them to do so.

addition, many analysis believe thatMarxist-Leninist threat to Mexico wouldifndgroups svere to prevail elsewhereAmerica. Mexican military, business, andinterests wouldevolutionary victorywith more alarm than in El Salvador,would probably generate some significantin tbe leadership. Tensions might bemoreover, if Mexican Communist and othergroups were emboldenedarxist victoryloore conspicuous presenceor other southern slates Wc suspect that dewould share the concerns of his generalsfirmly to contain and repress anywho became more active in such aor Marxist gains in Central Americaresult iu greater Mexican Iroop andcommitments in Chiapas. De la Madriddiscreetly seek additional foreign senilityand intelligence cooperation.


A. Generational Strife

their huge numbers, youthselatively quiescent inridrban youthsa disproportionate share of the ruingand many ol those who soon will tryihc labor force svill be frustrated andIn the foreseeable future. The aspirationsplans of educated, middle-classbe in the vanguard of any generationalprobably been threatened by thecrisis They typically do not become illegal migrant

woikm. enter lhe nontraditiunal or underground economy.elreat lo family plot* or villain* when urban opportunities disappear If the economyue? to devllne. (hen, in some respects :il lejsl, llieir alternatives may hr even more limited ihan ihose of working-class youth

ane and powerful youth movrmenl could coalesce (airly quickly tnby startintmall nucleus al otar of the unnrerotica in the capital andrge following at other campuses and secondary schools In the presmtadical or dissident youth movement could lie*ajor destabilizing force with an Impact far out of proportion to ils original numbers Youth movements characteristically seek alliances with tabor und peasant groups, and on many occasions in Latin America, have organized around the grievances of those groups rather than any specifically their own Dissident youth are abo more likely ihan almost any other group to be snsceptilJe io ihe entreaties and doctrines ol lefrwiog intellect uab and organizers Until eronornKabate, tbe ability of the gosernmenl to co-opt dissatisfied youth, through expanded piibllcsesctorlor instance, will he minimal

B. Lgflltt Dissidents

he leglllmarv and aulhority of the system could abo be challenged by new radical group* like those lhat were active in Mexico in the Ute IftfiO* ande believe there are many lellislprofessors, students, and others who are seeking the means lo mount extralegal opposition to the regime Under the likeh leadership of Marxistradical university youth, and members of the established leftist parties, radical leftists might be able to attract followers by exploiting Ibe hardships and discontent resulting from economic stringencies, and benefit from the assistance ol some of (ho radical political exile* and activist* fromtincountries now living in Mexico

n addition, senior gosernmenl and security officials reportedly are concerned about lhe possibility that guerrillas will becomeuerrero state where small groups were actise In tbendfter years of exile lo Cuba, sesrral mmis of that earlier insurgency were allowed to return to Mexico under an amnesty declared by President Lopez Portillo and securily officials are worried thai llry may initiate guerrilla tattles again. Govcmiuviit leaders are concerned, moreover, that leftist students from other couniries in Lalin America at the stale university will assist local radicals

he Mexican Government is concenied about the impact of guerrilla activity across Us border with Guatemala, especially inumber oframps have been established in Chiapas that are being used by Guatemalan guerrillas as safehavens. The camps have also attracted lhe interest ofhuman rights and Olher activist groups, and of Mexicans and foreign

il is clear, nonetheless, lhatadrid and his advisers are concerned. The President's first tripof Mexico City after his inauguration was to Chiapas, and the man he selected as governoretired general. In the summer3 ihcannounced lhal it will invest large amounts in Chiapas in social and economic development piojects,

InS the governmentet mililary rone in Chiapas and Ls in the process ol assigning additional troops there. Tlie government's silence belles its concern over the issue anil II has posed obstacles to lorelgn official travel in the region


exico's leaders are confrontingami political prubtcius lhatquickly, our by traditional fixesnng lhe period ol thisthe remainder of de la Madrid's lei in and the first few years alter his successor Is sehnduled to take office in IVcembcrproblems are likely to gene-rah* greater pressures and demands for structuial changes inpolitical economy

n dealing with these problems in lheof Mniran presidents, de la Madrid so farto plat both sides of the issues Hisio decentralize the system and lolhe PRI's candidate selection prouraa, as wellunprecedented series of local election victories

apparently mean! lo salisly retormers at high level, ol the parly and government and to assuage (heof many In lhe middle cUss. includingyoulhs, and provincial and private-sector elements


believe J

| that other reformers arclhat the system has become too centralized and rigid.

inceowever, de la Madrid has seemed to lavot hardline parly and government stalwarts Since the hotly contested local elections In Ilaja California state in tbat month, PRI candidates have been certified winners in several cities where opposition parties the elections,eaders will

to reinforce the hegemony of power long enjoyed by the PRI and the larger political system. Organized blue-collar labor leaders, many PRI stalwart*,'government bureaucrats, and other vested interests are anxious to maintain their monopoly ol power and undoubtedly lavoe the use ol more openly authoritarian methods by the regime to do so. Some of theseinin the forefront of efforts duringo curb the political relorms that were enacted by Lopez 1'ortillo because they realized that any reshuffling of political power would further dilute their share. We speculate that such traditional and hardline inleresls lobbied solast summer against the certification of further


During the per tod ul this Kttmuleadrid ami

other kcv leaders will have


ii akeriutl" nronurak drtrkminmt grotrgtes. IdtMioi Ihr row ot the cwtnl sovero-mrntmproving thr 'til ad productni'v of thr private lector

Him' lo rebi nat tonal ulic foreign liade andrndei lo help lusanre. renewed economic Bio-ili whilr lodisting iradf hairier* to enhance productivity and promote exports

How ti service the foreign debl wliilv increasing Imports notrwarv lor growth

Polibcol ond Socid Probbmt

to inform and revitalise ilwand refend Ml reach inlti tueh rcblivrivarea* as ihr ilumi and south

Ureioom on oprmroi ibe lyilero lo oppqqtioB

polrtKtd partrn wNborrltoo much loo


lo dandi ihr ctuwtli of Mexico City and some other tariir Hue*.

electoral gains by thr PAN In local and municipal elections that de la Madrid bowed lo their wishes. We believe, however, if hardliner* continue in theand are able lo prevent PAN candidates from winning Inhere ccMuervatite sentiment is strong, thersonupolv of power wille more rather than leu threatened Much will depend on the interaction of themajorlong with tlie many others already discussed

A. De lo Madrid

he most important is probably de la Madrid himself', his outlook. psychoWv. skills, and leadership qualities Mexico's presidents are commonly described as six-year caesars Thr chief executive exercisespowers over thousands of lobs in the executive branch ranging from Ihr cabinet and nunirrou* gov-ernment agencies and enterprises to thr select lor. toward the end of his term of the man who will sneered him In addition, srttators. deputies, state goveencrs. inayors of Important cities, and other localnominallyin factby theand they In turn are expected to demonstrate overriding loyalty to him rather than to iheii constituents, lie also appoints mllitaiy leaders lo key positions,

Politicalflows downward throughorganized interest groupunions, peasant confederations. charnbei ofonly the president has Ibe final authority ami legitimacy to arbitrate disputes and apportion ginernment favors among them He can dernand that groups comply with poheset they oppose and has thr power lo coerce tHem into ctoing so il all rise fad*

Perhaps the paramount danger to thr system. Iheicfoie. Is that any serious vacuum of pnvvci at the top could resull in its paralysis, or in the evtieuic. In lis breakdown There is no vice presidentalthough ihe legislature has the duty under the constitution toeplacementresident who dies or Is In otlice, thb might leadolitical crisis, particularly If his successor is weak ot Isonlyower struggle. There are abo other danger*ystem lhat concentrate* to much real and symbolic poweringle individual The pretkleiscs also could Ire iiitdcrmincd for instance, il de La Madrid were Implicated in Urge-scale conuplwn ot were to conspicuously vacillate aboul how lo deal wilh any picsslng political problem, or appear weakor

During llie year or so he has been In office, de la Madrid's performance has been generallyand his record remains unblemished by any major failure* or ernes llr and bis advisers have mananed thr economy ably, and he has pragmatically and decisively defused several potentiaUs seriousto the regime Confronted on two *rparatr occasion* by striking leftist government wcrkers, de la Madrid stood lino, and without having to resort to public demons! rat ions of force, compelled ihe union* lo back down He also skillfullyrntiacted confrontation in Oaxaca state between PHI and."ilhoiillrts on the one side and nn inheiiadical new left group on ihe other.lthough prior2 he had little experience outside of finance and public administration, de la Madriddeseloped keen biireaijcratic-political skillsthr many year* he spent rising through the federal hierarchy Another view, however is thai de laha* done little to csnsolidate hb power, that be has knt cpportuTutins to provide decisiveon kry problems, and that he lends to vacillate under the conllscting counsel of different advisrrs.

hvadv. tiueslions about his political powers and loadeidnp abilities remain. He was criticised foi lackluster pcrlorttutnccs in public appearance* during his presidential campaigning, and tends lo lie remote


The Economy and Labor

Economic performance will also be key. After almost five decades of strong economic growth and the evolutionolitical system in svhich opposition and dissident groups have been co-opted or absorbed once accepting greater material rewards, the zero and negative sum economics of the last few years arc undercutting the traditional rules ol Ihe game. With stagnation or continued economic decline, elite groups within the "revolutionary family" will be likely lo begin competing more forcefullyarger share of tlie diminishing per capita economic pie Although the Pill's blue-collar labor sector has suffered greatwithout much clamor, indefinite sacrifice is not likely Labor will be likely to escalate demandse and other benefits later ibis year ororeover, the chances lor wildcat strikes aod possibly violent labor unrest would increase

Such developments would piobably have an unsettling effect throughout the political system, and could provoke otherorparty members lo employ similar tactics They would probably also have deleterious effects on tliendermining public confidence, bul we doubt thai by itsell labor unrest uf the lype described

would be regime threateningchance oftin


I be

seem to be grooming1 any partic lhe several likely candidates ice replace him ll seems highly un able to stay in charge of the labor movement through lhe period of this Estimate, and probably will be forced lo start sharing power with subordinates within the next few years. Thus, decentralizing pressures from within the labor movement seem likely to in-

crease uvrr the next few years, though we cannot say thatrend would in itself necessarily be oWabilizing

If thr economy were to continue to decline for another four or five years, lhe piospntt lot irgintr-thrratemni inrlabilitv wouldilthough unlikely, aeconornlc nisi* could result finni dlveisc combinations ol events involving, for outiincr. outbursts of violence either by or against the legime. conflict and Indecision among de la Madrid's circle of advisers resulting in weakealrrnal shocks to lhe economy, or die appear-ant*harismatic new opcxMltun lewdrr with credibility In establish merit circles. In an alotcaphere of deep and enduring economic stringent tes in which working-choa and dtundwellmg people (onllnued to suffer reductions in living standards and well-hclng, the potential lor anliregimc violence would increase Food riots, bus burnings, police brutality, or other localized incidents could then spark largerthat would reuuiie major commitmeiiu offorce. Even if order were soon rearmed, tlie damage lo uV polilical system and the economy would be substantial

In Ihe unlikely event that lhe military and security forces were unable lo intimidate dhitrienbT or overwlielm protestors

armed torces would be hard pressed to keep under control should widespread disturbances occur. Thr military is notterms of manpower, logistics, transportation, or commandcontend wiih major simultaneous threats in several parts of theystem and would be disinclined to intervene in the political process because this would violate informal rules that have governed llu-ir behavior since' iu- i

/at leasl some, oiticers have beeni. i i

eemeu over the polilical leadership's ability lo deal wiih current economic and polilical problems.

instance control i

ome transformation of the traditional order Is likely nvet lhe period of ibis Estimate In lhe lint expect to see lhe PRI try to maintainealise mix of co-optation,and the selective use of lorec. We note lhat. Ihiougbout its history, the PRI has been remarkably skilled In adapting itselfhanging social, political, and eionotnicthat Indeed some leforms designed lo revitalize the PRI arc even now In brain We wdge therertleihance lhal lhe PRI will continue loapaUlriy lo co-opt or assuage lhe leader, of all major interest

C. The Military

S2 As long as relative stability prevails, we expect thai de Is Madrid will continue to cultivate the military through public gestures and tome gosrrnmmt appointments De la Madrid if likely, in part-cub) r. to involve defense and sccsirity officials In lhe planning and policy processes in their areas of responsibility. The mililary will continue lo be used at an Inslruineut of rural economic and social development, especially in the soul hem stales.

ny significant increase in instabdily or ester nal threat lhat reguurs rnUilary refpensr would beo resultommensurate rise of mihtary involvement in the pohev process at moreconcerns lakeecurity dimension. We believe thai lhe great majority ol mililary officer* support the





S political and economic interests will be affected substantially by conditions in Mexico dining the period of this Estimate. 'The security of our southern bolder depends on the continued existencetable, united, and peaceful Mexican neighbor.

Other cote in tcicsts-/"

I low ol illegal

migrants and drugs into tms country, the availability of Mexican petroleum, bilateral trade and investment relationships, and continued Mexican willingness lo make payments on its foreignbe affected by Mexico's success in dealing with the challenges facing it.

ompliance with the IMF's stabilizationand keeping up with its sizable debt Service obligations willhallenge to Mexican leaders even under favorable political and economic assumptions. Wc believe that both the current leadership and the conservative opposition are committed to meeting the debt burden and will remain so. unless lliedebt climate is radically altered. Furtherof Mexico's foreign debt will doubtless behowever, beginning5 Mexican leftists and nationalists will energetically denounce the tough terms ol ihe IMF austerity and the conditions of repayment to US and other foreign commercial banks, pressing the government toough negotiating stance. Moreover, further deterioration of Ihecould rcsunccl the threate laeto default on part or all of the debt, putting pressure on the United Stales lo provide emergency financial assLstaivce and other concessions as it did during the summer2

The tempo of illegal migration to the United States, for instance, will probably reflect inciemental changes in employment patterns and economicas well as levels of stability in Mexico. Bottom-line rates will undoubtedly be high for decades, asillion Mexicans come ol age every year and seek to enter into the labor market on one side of the border or the other. Significant recovery of theeconomy might slow migratory Hows. Substantial deepening of the economic crisis or increased use of force to maintain PHI hegemony, however, would result in additional migrants or refugees, and many of llvem would probably be skilled workers andwhose departuies would further undermine Mexico's economic prospects.

ilateral trade and investment issues are likely to become more contentious, regardless of the political path Mexico takes. Mexican leaders will slillarger share of US markets for their agricultural and other exports, while imposing even greater restraints on the import of goods and services from the United States. They will probably inteitslly their arguments that Mcsico must be euabled to sell more on the US market if il is to earn sufficient hard currency to meet debt service obligations. Nationalists in and out of government will be likely to oppose any significant relaxations of Mexico's slrict foieign in*-estment codes, although pragmatic leaders will want to attractUS and other foreign investment to help in economic recovery. The "In-hond" border industries lhat produce goods in Mexico for the US andmarkets may increasingly become targets of leftist criticism. Over the longerore open political system might result In more favorablefor US and other foreign investors^

exican petroleum production levekumber ol factors, including the availablllly of investment capital, world market conditions, the status of Mexico's foreign debt obligations, the degree of labor militancy in the oil sector, and the political stability of the country. While sporadic disruptions due to strikes mightexico's i


needevenue indicates that the country willtoenerally reliable supplier unless political fragmentation occurs

exico's foreignitsapproaches to Ontial America andwill almost certainly continueource of friction in relations with the United Stales.

he myriad US relationships with Mexico will remain complex, contentious, and cumbersonw over Ibe permd of this Estimate They- willpectrum of social, economic, cultural security, and other relationships that flow relatively freely acrossiln border, and they will inevitably behy Ihr forces anil trends that are chamurig Mexico's political and economic lanckcapr Many of the challenge* Mexico will face user the period ol thts Estimate will be difficult lo manage)"

While we judgr that, on bal-

Mexico will be able lo adjust and cope,could provoke crises threatening the system and US interests!

Original document.

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