Created: 3/29/1973

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the Central Intct.genceAgoT'cy'ond Ho- intnlligertceiheol Stale,A,-and

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of Intelligence and. Research, Oeporlmenl of State Th* ObW, Defense In-olligMce Agency The Dtrottw, National Soturl7 Agency

The Director. Division ofAffairs] Atom* trergyThe'Special Aiflsfanl to tho Secretary of .'no Treasury


Th. Aufstart CWlor. FeaVal So.eoo of Invosl^oKoe.jeer wing otrtstae







President Luis Echeverria is more sensitive to his country'sthan most of his recent predecessors. He is concerned about the threat that poverty and uneven development pose to political stability and economic growth, and about the ability of the long dominant party, the 1'IU, to provide political continuity and social peace. So far he has moved cautiously to attack these problems. He will probably remain cautious, because of limitedear that rapid change would itself endanger stability,esire not to undermine his own position or that of the PPJ.

For domestic political reasons. Echeverria, like his predecessors, projects the strong nationalism that pervades Mexican society. This accounts in part for his criticism of the US and other rich nations for their policies toward the developing countries, and his more assertive line toward the US generally. He wants toonspicuous role as spokesman in Latin America and the Third World, not only to demonstrate Mexico's independence, but also to increase its prestige and toid for regional leadership.

Mexico's circumstances and Echeverria's domestic objectivesthat he maintain good relations with the US. He is in any event

not viscerally anti-American and hearge measure offor the US. His intention is to maintain his nationalisticand play an assertive role abroad without damaging his much more important relationship with the US. Since Echeverria's asser-tiveness must be public, he tries to balance it by giving the US private explanations and assurances, and hopes that in Washington's eyes this will suffice. He also argues lhat Mexico can help the US byoderating role with the nationalistic leaders of theand in the Third World.

If Echeverria felt forced to chooseontinuation of bis critical posture and tbe maintenance of good relations with the US, he would opt for the latter. In doing so, he would need room tohis way without appearing to bow to US pressure.



he behavior of President Luisip flee l* an Increasingly assertive line towards thehis rolepokesman for tbe Third World but also his Sponsorship of additional controls over foreign business. This Estimate assesses the meaning ofctivities in the Mexican cou-tcxt and considers their implications for US interests.


Echeverriahrewd, tough, practical politician, who worked his way to the top tlirough the Institutional Revolutionary Party (PHI) and the Ministry of Government, which handles security and intelligence. The PRI lias controlled Mexico's politics for decades. Under the Mexican system, Echeverria exercisesunchecked authority over theduring his single, tltough he must take into account the interests of the middle class groups and the party bosses that dominate the PRI.

Echeverria is more energetic than most of his recent predecessors and more aware of his country's problems. He sees the system that has providedears of politicaland economic growth under challenge, and he intends to revitalize it. He has two broad domestic concerns. One is for poverty and uneven development and the threat they pose to political stability and continuedgrowth. The other Is for the health and effectiveness of the PRI, which he sees asisolated and unresponsive toneeds, and in danger of losing its historical ability to provide for political con-tinuity and social peace.

bis many statements onIt is difficult to know the extentchanges Echeverria hits in mind.of interpretation goes beyondgap between actionsegree of uncertaintythe existence of contradictorygoals.

The Problems of Uneven Development

Over half of Mexico'sillion people are locked into poverty. During the postwar period the economy has growneryrate of six percent per year, but the population is now expanding by well over three percent. The emphasis of government policy has been on modernization and rapid development, rather than on social welfare. The poor are still quiescent,esult of apathy and fear of authority, but theirkeep rising. Echeverria fears that in time the sheer magnitude of Ihe problem will create an avalanche of pressure against constituted authority. Yet he knows that any substantial reduction of poverty will take decades,generations, andajor attack on it would overtax available resources.

arrage of propaganda, Echeverria has castigated the privileged classes for their indiffeienee to the problem of poverty, and has called for far-reaching change. Hehopes to placate the poor and disarm radical critics of the system. But Illsobjective is to convince the conservative elites that it is in their own best interest to join him in addressing tbe problems of poverty and uneven development in practical and measured ways.

Despite his rhetoric, Echeverria has moved cautiously so far. There have been some tax and budget changes aimed at

distributing Income, dome changes inpriorities designed lo stimulatedevelopment innd tbe beginningsrogram to reduce ihe birth-rale. He will probably Mick to cautious and limitedecause of the constraint under which He must operate: limitedtbe need to maintain rapid growth even as its fruits are distributed moreand the fear that rapid change wouldacklash among Investor* and In the PRI and endanger political stability.

Dealing with Political Tension*

ho PRI ha* Piled unchallenged lor

As in other countries,rowing rnislni-lion among the politically articulate at the inability of new or critical political groups to make their views fell within the system. Eche-venia is worried about the growing political tensions and the need to revitalize the PRI. He lias tried to Ingratiate his administration with students, young professionals, and other disaffected elements, inviting them to make their influence frit within the PRI. or outside itoyal opemoition.

lthoughrobably sincere in wanting to co-opt or accoounoitate bis critics, there are limit* on what be can do. The main constraint to an unwillingness to jeopardize tbe political monopoly of tbe PBI or to undercut his own primacy. Also. Eche-vcrria and his colleagues are products of the system. They see the PRI as tho onlyruling farce, and their instinct is to equate any organized .utility againstpolicy wilh subversion. Thus, thehas roacled forcefully to political activity widen it views ai unacceptableto its. studentpressures for greater local autonomy, and demandsenuine two-party system.

the conflicting desiderata, itwhether Eclievenia canwhat amountslancingwill be able to maintain politicalhis own term, but it is doubtfulcan prevent the buildup of politicaland frustrations over the longer run.


ressures and values are also at work in Echeverria's relations wilh tbe US. His attitude toward the USarge measure of admiration, mixed though it is with envy and resentment He accepts as inescapable that Mexico's national destiny is tied closely to that of the US. But for domestic political reasons, he also feels it imperative toationalistic posture.

Echeverrii realizesooperative relationship is essential to Mexico's economic development and. ultimately, to its political stability. Whereas trade between the two countries accounts for three percent of total US eaports and imports, it accounts forercent of Mexico's- Total Mexican imports, which are mostly capital goods and rawneeded for industrial growth, currently exceed exports by aboutillion per year. This deficit is made up by earnings from US tourism, by remittances from Mexicansin tho US, and by foreign investment and credit, mostly from the US. Thus, the Mexican economy is vulnerable to aof relations with the US.

Nevertheless, Echeverria feels he must be responsive,reater or lesser degree, to the strong nationalism that pervadessociety. Itationalism much like that of many other developing nations. It abo reflects the acute sensitivity of Mexicans to the overwhelming power and wealth of their

neighbor to (he north. Even on relatively minor issue* theyigorous defense ol national intereits by their Piraidentthe source, theyt what they view as interference io their affairs or as threatsheir rational lntweatv Echo rrria. who is wary of communiim. wai quick to expel five ranking metnben of the Soviet Embassy*ecause the USSRn indirectly Involved in the movement ol Mexicanto North Korea for training in guerrilla

Echeverria is ambitious torominent role for Mexico as spokesman for the developinge wants toMexico's independence, elevate Itsprestige, andid for leadership in regional affairs. From his point of view, the more independence of USbe can exhibit tlie greater the payoff domestically andperhaps, increased leverage on US actions towards Mexico. He has posited an adversary relationship between ihe developed countries and the have-notnd he has been highly critical of tlte IS and olher richfor alleged injustices perpetrated against the underprivileged Third World Still,has no intention of damaging his much more important relations with the US to achieve the gains he anticipatesore assertive role tn Third World and regional affairs.

Since hii asserti'r ruleublic one, be balances It by giving the US frequent private explanations of hb purposes andof bis basic friendship He insists that Mexico will beosition tooderating role among nationalbt nations and to serve as counterpoise to such vociferous ex. ponents ofas Castro and Alleixle. But Echeverria fech he musta credible independence of US policy tooderating role. This dualism will be reflected in efforts by Echeverria to serve as diplomatic bridge between Washington and some of the capitals of Latin America, as he has privately offered to do.

is essential to Echeverria thatunderstand and accept the gameBecause of what he sees as arecord of support for the US whencounts, he probably believes thatdoes. If he became convinced thatconsidered his words and actionsto its own interests, he wouldprovided he did not feci pushedwall.


Restrictions on Foreign Investment

relationship betweenbusiness in Mexico in recent yearsdescribed as an "alliance forin past decades Mexico led tbeLatin America in imposing controlscapital, the impact of the varioushas been outweighed by specialfor US investors:elatively large domesticfinancial management, andstrong record on such sensitive mattersremittance of profits andnationalized foreign assets. Ibere nowthanillion of direct foreignin Mexico, of which about two-thirdsthe US.

IS. Mexico has recently passed laws which expand government control over foreignThey call for closer scrutiny of newproposals, majority Mexican control over new enterprises, and government review of contracts involving the import ofThe laws will make Mexico somewhat

less attractiveocale for foreignThey are in part,esponse to requests from foreign businessmenlear statement of the rules of the game, and tbey will probably blunt die thrust of ultra-nationalistic elements who would like tocurtail the role of foreign capital. The measures affecting investment represent for the mostodification of existingand they give tlie government broad discretionary powers to grant exceptions. Such exceptions nil) be forthcoming, if only because Mexico cannot produce the capital to1 percent share of all new enterprises.

Through these and subsequentEcheverria will aim In increase theshare of ownership and management of business enterprises, to channel newand technology in accord with Mexican priorities, and to reduce the visibility of US participation in the economy. To the latter end, he will also encourage European and Japanese investment.esult, some US businessmen will experience reducedcloser supervision of their activities, and, in certain cases, smaller profit margins.

But Echeverria gives every indication that he intends the impact of his measures to be gradual and mcderale, and that foreign investment will be welcome as long as itood export potential, introduces newand helps to reduce unemployment He will work to avoid damage to theclimate by consulting regularly with the leaders of the American commuidty, bynew measures judiciously, and by backtracking discreetly should that prove necessary. Echeverria realizesroad loss of confidence in Mexico would ruin the now strong prospectsontinued high rate of economic growth.


has staked his personalon gaining an equitable solutionproblems of the Mexican* region,waters of the Colorado Hiver flowingthe USaline content whichaffects agriculture. He has ledpublic to expect some dramaticfrom the US. and he appearsthetudy, personallyby President Nixon, will resolveimpasse. Unless he seesprogress soon, Echeverria will feelto seek adjudicationhirdlaim for redress at the

Drug Control

isroducer offor the US marketonduitproduced elsewhere. Thehas agreed to cooperate fullyUS effort against the drug traffic. Itconsiderable resources tocommitment, and in response to USprobably commit more. But evenof Echevcrria's political clout, thedrugs will be difficult to slow and allto stop, so long as the USprofitable.^

ecause of these domestic constraints and because he will wan) to avoid theof acting under US pressure,will feel it necessary to move gradually

and carefully. Tbe control of drugs could thereforeerious bilateral issue. Echeverria would expect, and accept, some US criticism of the Mexican effort. But he would resent an accusation that he personally was being non-cooperative, and he wouldUS pressures to put intotronger control effort than he thought feasible- He would probably react by charging the US with interference in Mexican affairs and byMexican cooperation, at least temporarily. He would almost certainly try lo minimize the impact of the drug issue on other aspects of bilateral relations.


he principal finding of this assessment is that Eclievern* needs and want* arelationship with (he Is. His initiatives tat the areas of Third World leadership and control over foreign mvrstmenl are lessto him. even though for domesticreasons he feels It imperative toa generally nationalistk ttance. Thus, if it became dear that he was endangering Mexico's relations with the US. he would modify his publiche would need room to maneuver his way, withoutto bow to US pressure.

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