MEXICO: ECHEVERRIA'S FOREIGN POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001100160078-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: August 22, 2006
• Sequence Number: 78
• Publication Date: October 31, 1973
• Content Type: IM

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Confidential
-D I c'R~s
Intelligence Memorandvrn
Mexico: Echeverr`a's Foreign Policy
State Dept. review completed
Confidential
31 October 1973
No. 2460/73
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Mexico: Echeverria's Foreign Policy
31 October, 1973
Summary
A major feature of the administration of President Luis Echeverria, now about
half way through his six=year term, has been a break with Mexico's passive foreign
policy of the past. Mexico, under Echeverria, is diversifying its sources of external
economic support, defending the causes of the Third World, and demanding equi-
table economic relations for itself and other developing nations.
Echeverria's most significant foreign policy initiative takes the form of a
proposed UN charter which would set down the "economic rights and duties" for
states. The charter, though still rather vague in concept, is visible proof of Mexico's
heightened interest in the developing countries of the Third World. Echeverria
believes the wants and needs of the developing nations and the response .of the
developed nations will go a long way to determine the future shape of the world,
and he hopes the charter will help fill these wants and needs.
To broaden its contacts, Mexico has over the past year established diplomatic
relations with six nations, received commercial delegations from 17, and sent out
numerous trade missions. Mexico is increasing exports, expanding foreign markets,
and enticing new foreign capital into areas where its developmental needs are the
greatest.
The most eye-catching act in Echeverria's diplomatic show was his month-long,
six-nation tour last spring to Canada, Western Europe, the USSR, and China. The
trip produced some modest trade agreements, some support for his proposed charter
on economic rights and duties, and some backing for the Latin American th nucllari-
zation pact (the Treaty of Tlatelolco). Most of all, the trip permitted Mexico, at
least temporarily, to appear on the stage of big-league international politics.
Mexico's heightened attention to the problems of the Third World and its
greater activities on the world scene have not altered Mexico's view that good
relations with the US are essential. Individual issues may produce conflict, but
Mexican leaders apparently feel that the reservoir of mutual good will is deep
enough to withstand the occasional ripples that their more assertive and more
independent foreign policy will cause.
At home, conservatives in business and politics are somewhat concerned over
Echeverria's foreign policy. Although most are persuaded that Echeverria is no
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socialist reformer at home, they still worry about what they see as a drift toward
left-wing nationalism in foreign affairs. The leftists, on the other hand, want him to
press on with his progressive policies.
Some of Echeverria's initiatives are no more than an attempt to improve
Mexico's image and his own. He is, however, serious in his belief that the ideas he
champions can help solve Mexico's and-by extension-the developing world's eco-
nomic and social problems.
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Echeverria's approach to the rest of the world is a far cry from the introverted
one of past administrations. Echeverria has definite opinions on the world's political
and economic problems and is not reluctant to expound them. Practically every
visiting foreign delegation is treated to a monologue on the economic rights of
developing nations.
As Echeverria sees it, the world has arrived at an historic juncture. He believes
that the end of the cold war is at hand and that the two power blocs that emerged
after World War II are now almost fully disintegrated. "Developing countrie's are
now claiming participation in decisions affecting the common future. Tensions have
diminished. Old enemies now conclude open agreements." Isolation, according to
Echeverria, is no longer possible.
Despite these promising political developments, Echeverria says that economic
relations among nations leave much to be desired. He believes that the world
economic order is still haunted by a war psychology and the old ways of exploita-
tion. Echeverria is saying, in effect, that the rich nations are getting richer and the
poor poorer. Developed nations have not. followed through on promises of trade
preferences, and the less developed nations are not being consulted on problems that
affect them. Political colonialism is giving way, but economic colonialism is as
healthy as ever.
Policies that hurt the economies of the Third World are, he warns, a threat to
world peace and unless changed will soon provoke crises in the industrial nations'
themselves. He is convinced that collective security depends to a large degree on
whether Third World nations get "we financial and technical resources necessary to
transform the old structure of misery and exploitation."
In short, Echeverria believes that world peace will be endangered unless
underdeveloped states get a fair share of the benefits of modern economy through
trade, financial aid, and technological help. He is asking the centers of great
economic. power to give developing nations a better break economically. Mexico, he
asserts, is uniquely suited to help solve this particular economic problem because of
its "special respectability" in international forums. Mexico, in fact, is no longer
willing to be a "passive spectator of history, and has a "duty" to participate in world
affairs.
The best way to redress these felt wrongs, Echeverria says, is to give the rules
governing international economic matters the force of international law. To do this,
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he has proposed to the UN a "charter of economic rights and duties of states." First
outlined in a speech to the UN Conference on Trade and Development in Santiago,
Chile, in 1972, the proposed charter would define the obligations of developed
countries toward the developing countries in the fields of international trade and
aid. Echeverria wants the charter to be considered the economic counterpart to the
UN declaration on human rights, the Universal Declaration of the Rights of #.'.an. He
wants his charter to be the basic instrument for managing economic relations
between the industrialized countries and the Third World.
Working from Echeverria's outline, a committee of UNCTAD has been strug-
gling to produce a draft. The Mexicans want to bring a final draft to the floor of the
UN General Assembly this fall, but they are probably overly optimistic. The General
Assembly is likely to do no more than hear the report from the committee and
extend its mandate.
As it now stands, the cl', erter poses problems for the developed countries. While
praising some parts, the developed nations question what is meant by "duties, rights,
and responsibilities." They think there is .too much emphasis on the duties of the
developed countries and the rights of the developing countries. Most oppose
Mexico's plan to write a legally binding charter. They will accept at the most only a
declaration of a moral obligation to harmonize economic relations in the world.
They acknowledge that they should not be indifferent to the problems of developing
countries, but say that the world is not ready for the legal commitments the charter
contains.
The US and other developed countries also object to other provisions of the
charter that would:
-establish the correctness of nationalizing resources and reject any interna-
tional standard for compensation.
-alter economic structures to establish a just division of labor.
-provide preferential treatment in trade.
-provide steadily increasing economic aid.
-insert peripheral and contentious issues, such as environmental and seabeds
problems, and disarmament.
The British have been cool to the charter idea all along, but have followed
through on their promise to send teams to Mexico to consult on the subject. Canada,
which like Mexico feels the weight of US economic power, has publicly endorsed the
idea. Privately, Ottawa admits the charter will have to be a practical document,
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acceptable to all nations. Japan considers the charter to be one-sided in favor of the
less developed over the industrialized nations. The USSR and China, on the other
hand, profess support for the proposal.
The Third World countries naturally are enthusiastic. Some are so seized with
the idea of a charter on economic rights that they are using it to push their
individual grievances against the developed world. They want the charter to prohibit
discrimination in trade (most-favored-nation policies are the target) and technology.
They want to ensure a role for themselves in international economic decision-
making, to stress national sovereignty and the duty of states not to use economic
coercion or pressure against other nations, and to make sure that aid be given with
no strings attached.
A final version of the charter is clearly far down the road. Mexico will have to
compromise on some of the provisions that the big powers find unacceptable. Some
Mexican officials are saying that the charter will be "moderate and balanced," but
according to the US delegation in Geneva, the Mexican drafters have not yet toned
down the more radical formulations. If anything, they have leaned further to the
left, perhaps to try to keep a step ahead of the more "revolutionary" governments.
Mexico would in any case have trouble moving these governments toward modera-
tion.
Despite objections of the big powers and demands of the radicals, Mexico will
not abandon its diplomatic efforts on behalf of the charter. Echeverria campaigned
hard for it on his world tour last spring, he alludes to it often in speeches and-
meetings with foreign representatives at home, and his ambassadors are promoting it
overseas. Foreign Secretary Rabasa solicited support for it at the Nonaligned
Conference in Algiers in September and at the UN General Assembly session in
October. Mexico clearly faces a problem in reconciling the radical demands of
developing countries with the stand-pat attitude of the developed nations. No matter
how large the obstacles, Mexico is determined to get the charter in writing and
approved by the UN.
Impact on the US
Mexico's identification with Third World causes ;,'!s not yet caused serious
problems for US-Mexican relations, but the potential for conflict is clearly there.
The charter could be a source of discord. Other troubles could come in the trade and
investment fields, though here the problems will be tempered by the advantages
both countries realize from their commercial ties. The US is by far the leading buyer
of Mexico's products and the leading supplier of goods to Mexico. American
investment in Mexico amounts to nearly $2 billion, and it brings most of the
investors an excellent return. It also benefits Mexico. Foreign investors will still do
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well, but during Echeverria's remaining time in office and in future Mexican
administrations, those investors probably will have to contend with more restrictive
operating conditions.
While stressing that he does not intend to damage commercial relations with
the US, Echeverria is quick to blame Washington for many of Mexico's trade
problems. For example, early in Echeverria's term Mexico had serious balance-of-
trade difficulties. It announced a crash program of export promotion to diversify
products and markets. Shortly thereafter, the US, in an effort to improve its own
balance-of-payments position, announced a 10-percent import surcharge in the
summer of 1971. This hurt Mexico's export drive, and was one of the factors that
pushed the Echeverria government to chart n more independent economic course.
Mexico has, in the intervening years, increased be percentage of its exports
going to France and Great Britain. Instead of channeling foreign trade through
North American intermediaries, Mexico now sells cotton, fertilizers, and sulphur
directly to Peking. Still, its dependency on the US market remains high. The share of
Mexican exports going to the US increased to 79.3 percent in 1972, a jump of 7.5
percent from the previous year.
Mexico is negotiating for more trade with the Andean countries in South
America, with the Common Market, Japan, the USSR, and China. Echeverria's hope
is that, apart from establishing contacts, he can open more broadly based trade
channels and especially in West Europe or Japan, encourage capital investment in
Mexican industrial development.
A start was made this summer when Mexico put on sale in Japan $33 million in
government bonds. Money from the sale of the bonds will be channeled into electric
power plants, irrigation projects, and communications facilities in Mexico,
Mostly because of concern over the implications of the laws governing foreign
capital and technology passed in 1973, the US-Mexican relationship over the past
year in the investment field has not been a smooth one. It may continue to be
uneasy for some time. The foreign investment law, in effect since May, requires at
least 51-percent Mexican ownership in new companies, restricts foreign take-overs of
established firms, and requires government permission for the sale to foreigners of
companies that are more than 25-percent Mexican-owned. The foreign technology
law, adopted in February, is meant to reduce the royaltie ,s parent companies earn
from the use by their subsidiaries of product designs and pr' ,-_'uction processes.
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American inve.3tors are widely divided on the implications of the new foreign
investme-t !'tw. Most US businessmen have adopted a wait-and-see attitude, but
some ';re pessimistic.
In general, new inves ors are being
cautious, while is existing companies re ng their way. The laws have not been
sufficiently tested to determin -:nether they will be a major problem in US-
Mexican relations or if, in practice, Mexican officials will so interpret and en.'Orce
them that desired American investments will still come in. The official Mexican
position is that additional foreign investment will be encouraged and the 51-percent
Mexican ownership requirement of the new law will be waived if new capital meets
three crit, a: it brings in new and needed technology, it opens new sources of major
employn,,c 't, and it leads to more exports.
Too much is at stake for Mexico to allow any sharp deterioration in relations
with Washington. Though US-Mexican friendship his at times been strained, Mexico
realizes that it is essential to Mexicans. Echeverria concedes that the American
investment now in Mexico benefits the country. The trade policies of the two
countries will cause friction, but this is not likely to affect the volume of commerce
substantially. Mexico's identification with Third World concerns, although at times
troublesome to the US, is riot calculated to damage anyone's basic interests. Mexican
leaders believe that the US, given its difficulties elsewhere in thr. hemisphere, his a,
considerable stake in maintainint; good relations.
In this context, Echeverria sees Mexico's role as that, of a potomial honest
broker between the US and Latin America. On several occasions he has offered to be
the middleman between the US and other Latin Americans. He has proposed to
senior US officials that a Latin American summit be held in Mexico. He would like
the meeting to be a kind of informal get-acquainted gathering where chiefs of state
could discuss common problems.
By extension, though Echeverria does not admit it, he believes that Mexico can
also be an intermediary between members of the developed and developing world.
He would like to encourage a stronger US commitment to economic development in
the developing world. Believing that the problems in those areas can no longer be
ignored, Echeverria is searching for some method by which Mexico, together with
the United States, can work to alleviate them.
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The Domestic Reaction
Conservative Mexican businessmen and politicians do not favor many of the
government's forays in the international field. Although most do not regard Echever-
ria as a full-blown socialist, they are concerned over what they view as a drift toward
left-wing nationalism in foreign affairs. And they do see a corollary between
Echeverria's identification with the world's underprivileged and his domestic pol-
icies. Many believe his policies help foment leftist terrorism and student dissent at
home.
Some fear that Echeverria may stop cooperating with private business and set
himself irrevocably on the path of radical reform. Bankers, industrialists, and other
businessmen are upset over administration charges that they are not doing enough to
advance the country's social development. They see their interests threatened by the
expansion of state control and are worried that the new investment law may dry up
foreign sources of capital.
The response of the business community to two recent unrelated incidents-the
downfall of the Aliende government in Chile and the murder of an influential
business leader in Monterrey-illustrates the intensity of the dissatisfaction with
Echeverria. On each occasion, moderates and conservatives alike have angrily at-
tacked the administration.
In the eyes of conservatives, the Echeverria government's almost emotional
reaction to the Chile coup was typical of its "leftist" tendencies, but their wrath did'
not really boil over until a prominent Monterrey businessman was murdered a few
days later. At the funeral, which Echeverria attended, the traditional eulogy for the
deceased was a bitter denunciation of the government. The eulogist charged that the
government's hostility toward business and warmth toward extremist ideologies
were encouraging subversive and criminal elements. A business organization declared
that the government's pro-Ahende posture was encouraging left-wing terrorism.
Other business leaders took up the attack in newspaper advei-tisements. In Monter-
rey, business firms countered the government's three-day mourning period for
Allende with a full week of mourning for their slain colleague.
This criticism has been unprecedented in its sharpness, and has stung the
government, which is unaccustomed to direct attacks from this quarter. The admin-
istration is defending its position by criticizing what a semi-official newspaper calls
the "instigators of hate," but the attacks by the conservatives could still influence
Echeverria to tone down his overtures to the left and respond more to the rumblings
on the right. Unless l'e does, Echeverria can expect more attacks from conservatives
and even moderates on policies they consider unprofitable in terms of Mexico's
interests.
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Contending Forces
Echeverria is under press- n from reformist, left-wing groups to establish his
credentials as a true champion of Third World causes, to assert Mexico's independ-
ence of US influence, and to rid Mexico of "economic colonialism." Domestically,
the reformers are pushing him to take decisive action in furtherance of his declared
policy of redistributing the wealth.
At the same time, conservative elements are seeking assurances that the govern-
ment will tone down its leftist slant in foreign policy and be less receptive to alien
ideologies. Domestically, he will be pressed to resist calls for increased controls, tax
reform, and other "socialist" measures.
Echeverria has so far skillfully walked the tightrope on the domestic side. He
has avoided committing himself to either extreme. His cautious and pragmatic
approach provides for increased social reform measures, yet upholds the role of the
private businessman in the Mexican system.
In foreign policy, Echeverria is setting new goals for Mexico and, in many cases,
breaking new ground. Thus far, his conservative critics are not deflecting him from
this course. Nor is he deterred by the thought that other Third World leaders may
not want, need, or even recognize him as a spokesman for their, interests, much less
as the spokesman. Indeed, it is likely to be more of the same in the remaining three
years of Echeverria's term.
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