THE OUTLOOK FOR MEXICO

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00126R001301740003-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 22, 2016
• Document Release Date: September 10, 2009
• Sequence Number: 3
• Publication Date: April 25, 1984
• Content Type: NIE

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Director of Secret
Central
Intelligence
The Outlook for Mexico
National Intelligence Estimate
Secret
NIE 81-84
25 April 1984
Copy 575
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Warning Notice
Sensitive Intelligence Sources and Methods Involved
(WNINTEL)
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
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NIE 81-84
THE OUTLOOK FOR MEXICO
Information available as of 25 April 1984 was
used in the preparation of this Estimate.
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THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL
INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS,
EXCEPT AS NOTED IN THE TEXT.
The following intelligence organizations participated in the preparation of the
Estimate:
The Central Intelligence Agency, the Defense Intelligence Agency, the National Security
Agency, and the intelligence organizations of the Departments of State and
the Treasury.
Also Participating:
The Assistant Chief of Staff for Intelligence, Department of the Army
The Director of Naval Intelligence, Department of the Navy
The Assistant Chief of Staff, Intelligence, Department of the Air Force
The Director of Intelligence, Headquarters, Marine Corps
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CONTENTS
Page
KEY JUDGMENTS .............................................................................. 1
DISCUSSION ........................................................................................ 7
1. KEY CHARACTERISTICS OF THE SYSTEM ............................
The Institutional Revolutionary Party ...........................................
The Military and Security Forces ...................................................
Revolutionary Ideology ....................................................................
9
9
9
11
11
12
13
II. IMMEDIATE CHALLENGES TO THE SYSTEM ..................... 15
A. Economic Stringencies and Constraints ................................... 16
Different Approaches ................................................................ 17
B. The Conservative Opposition ................................................... 18
The National Action Party ........................................................ 19
C. The Slums .................................................................................. 21
D. Leftwing Opposition ................................................................. 21
E. Cuban and Soviet Involvement ................................................ 23
III. POTENTIAL CHALLENGES TO THE REGIME ................... 23
A. Generational Strife .................................................................... 23
B. Leftist Dissidents ....................................................................... 24
IV. THE OUTLOOK .......................................................................... 24
A. De la Madrid ............................................................................. 26
B. The Economy and Labor .......................................................... 27
C. The Military .............................................................................. 28
VI. IMPLICATIONS FOR THE UNITED STATES ....................... 30
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KEY JUDGMENTS
The Mexican political system is under greater stress today than at
any time in the last 30 years. 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 the Mexi-
can political system is likely to remain intact. But the majority of
Intelligence Community principals also judge there is roughly a 1-in-5
chance that during the period of this Estimate-through the remainder
of President de la Madrid's term, which ends in 1988, and the first few
years after his successor is scheduled to take office-centrifugal forces
now at work within the system, combined with internal political
opposition and perhaps external pressure, will result in the political
destabilization of Mexico.
Five Intelligence Community principals take issue with the above
conclusion.' They believe that, while Mexico will experience increased
political instability associated with extremely difficult social and eco-
nomic problems, the probability that these conditions will reach the
extreme of political destabilization during the period of this Estimate is
remote. This view further holds that Mexico's leadership is keenly
aware of these challenges and is taking forthright steps to meet them.
The complete political destabilization of Mexico would require an
extremely well-organized opposition with dedicated leaders capable of
challenging one of the most durable and resilient political systems in
Latin America. The holders of this view believe that there are few, if
any, indications that such an opposition now exists or will develop
within the time frame of this Estimate. They further believe that the
employment of the probability schema in the Estimate may in effect
rule out any middle ground between the two extremes focused on by
these Key Judgments.
Despite these differences of opinion, we judge unanimously that
in the coming years Mexico will suffer a series of incidents and crises
stemming from the forces now at work within that country's society-
incidents and crises which, in light of its proximity and importance to
the United States, US policymakers will need to monitor closely to
protect US vital interests.
' The holders of this view are the Director of Intelligence and Research; Department of State; the Di-
rector, Defense Intelligence Agency; the Assistant Chief of Staff for Intelligence, Department of the
Army; the Assistant Chief of Staff for Intelligence, Department of the Air.Force; and the Director of In-
telligence, Headquarters, Marine Corps.
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During the last several years, Mexicans have grown increasingly
dissatisfied with
their highly centralized political system. As a result, the
popularity and vitality of the ruling Institutional Revolutionary Party
(PRI) have sharply diminished. Moreover, political leaders have been
slow to adapt the PRI to the profound changes that have occurred in
Mexican society. The two branches of the party that historically have
been the most important--organized blue-collar labor and the peas-
ants-have been shrinking in size relative to other social and interest
groups. Meanwhile, most of the :millions of people who have come from
the countryside to fill the sprawling slums around all of Mexico's major
cities-slumdwellers now constitute between 20 and 25 percent of the
population--may riot have been effectively brought into the system.
Thus the informal patron-client relationships that have helped glue the
system together are in danger of breaking. Not surprisingly, opposition
forces have gained strength.
When he was inaugurated President in December 1982, Miguel de
la Madrid inherited a crisis more encompassing than any since the late
1930s. Under conditions of harsh austerity, high unemployment and
underemployment, double- or triple-digit inflation, widespread business
failures, and a crippling shortage of capital, the economy in 1983
contracted by about 6 percent. Virtually all social and economic groups
have had to accept declining standards of living, scale down their
expectations, and compete for benefits and opportunities in a negative-
sum economic environment. De la Madrid has struggled to preserve
social equilibrium and to restore public confidence in the political
system. In particular, he has worked to distance himself from F_
resident Lopez Portillo and other
senior officials of the previous government. By pursuing an anticorrup-
tion campaign that has included the imprisonment 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 far has provided generally effective and popular leadership.
De la Madrid's most striking success has been in engineering a
turnaround in Mexico's international economic accounts. In a little over
a year, austerity has brought spending in line with available resources,
inflation has begun to decline, and some confidence in the government's
policies has been restored. By slashing imports and public-sector
expenditures, raising the real costs of most goods, and making other
tough adjustments the regime has met most of the stabilization require-
ments of the International Monetary Fund (IMF). Interest is being paid
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on the more than $85 billion foreign debt, and by the end of 1983 the
current account surplus reached about $4 billion. 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 the system, but has not been 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
early 1990s will 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. Despite the President's
performance thus far, questions about his political powers and leader-
ship abilities remain. Moreover, the Mexican political system grants its
president enormous power, with no clear successor should the incum-
bent die in office. Thus there is an inherent fragility in a system in
which stability depends so heavily on the performance, and health, of
just one individual.
The economy and labor will also be key. Economic growth almost
certainly will be insufficient to create enough jobs for the burgeoning
labor force. Resources probably will not be adequate to maintain
traditional programs that have subsidized 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 the unlikely event that economic activity were to continue declining
for another four or five years, the prospects for regime-threatening
instability would rise significantly.
Conservative opposition forces generally will be more assertive.
These forces are concentrated in the center-right National Action Party
(PAN). We 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 as dissatisfaction with
the regime's economic policies and statist philosophy and tampering
with election results. These trends have been paralleled, moreover, by
indications of dissidence in Mexico's poor and underdeveloped southern
states where Communist, radical, and other opposition groups are
organizing.
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Meanwhile, extreme leftist groups are also active. Leaders of the
Unified Socialist Party of Mexico (PSUM), a Communist-dominated
coalition, reportedly have decided to increase their recruiting and
organizational efforts in the southern-tier states closest to Central
America. Working through radical peasant, student, and labor groups,
the PSUM could generate increased support for its causes, but it will
most likely pose smaller and more containable challenges than the
rightwing opposition.
Cuba and the Soviet Union maintain contact with and provide
funding and 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 be
disinclined to intervene in the political process. Such intervention
would violate rules that have governed their behavior since the 1940s.
any significant increase in instability or external threat, military
involvement in the policy process would rise as more areas of govern-
mental concern took on a security dimension.
We are reasonably certain that some transformation of the Mexi-
can political system is likely during the period of this Estimate.
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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 existence of a stable, united, and peaceful'
Mexican neighbor. Other core interests-
drugs into this country, the availability of Mexican petroleum, bilateral
trade and investment relationships, and Mexico's continued willingness
to make payments on its foreign debt-will be affected by Mexico's
success in dealing with the challenges facing it.
US relationships with Mexico will remain complex, contentious,
and cumbersome. Mexico's foreign policy-particularly its independent
approaches to Central America and Cuba-will almost certainly contin-
ue as a source of friction in relations with the United States. We do not
expect de la Madrid to abandon easily the foreign policy precepts that
have been upheld by Mexican presidents for decades.
In sum, it is at this point impossible to predict Mexico's future with
certainty or even with a high level of confidence. On the one hand,
Mexico's 54-year record of stability, combined with de la Madrid's
impressive performance thus far, lead us to conclude that the odds are
strong that the centrifugal forces now at work within the country will in
the end lack sufficient velocity to tear apart the system. On the other
hand, there is concern and some evidence to suggest that these forces
will intensify during the period of this Estimate, even to the point that
the PRI and the-political system will not be able to survive in their pres-
ent forms.
the flow of illegal migrants and
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DISCUSSION
1. Until the foreign exchange crisis and economic
collapse in 1982, Mexico was perhaps the most unqual-
ified success story in the developing world. From its
inception in the late 1920s and 1930s, the country's
unique political system had provided over 50 years of
relative social tranquillity, political stability, and eco-
nomic growth. Since 1934, nine presidents have served
in regular succession, wielding and yielding power
according to elaborate constitutional and informal
rules that are rooted in 150 years of the country's myth
and history. Unlike most Latin American countries,
furthermore, there have been no military interven-
tions, serious coup plots, strong guerrilla or terrorist
movements, or large outbursts of antiregime violence.
Unlike all of them too, in Mexico the economy grew
with few lean years and at impressive high rates for a
half century until 1981. In fact, with an average
annual growth rate of over 6 percent during those
decades, cumulative material gains in Mexico were
among the highest achieved anywhere in the develop-
ing world. The prospects for economic development
and diversification were buoyed in the late 1970s,
furthermore, when Mexico's extensive newly discov-
ered oil reserves began to be exploited.
2. Pressures on former President Lopez Portillo to
increase public spending became irresistible after
Mexico became a net oil exporter, but the former
President's tendency toward grandiose scheming con-
tributed significantly to the disastrous boom and bust
cycle that followed. Mexico pursued a development
strategy in large part dependent on massive public
investment of oil revenues. As public expenditures
burgeoned, pushing growth rates to as high as 8 and 9
percent annually, the economy began to overheat in
the late 1970s. Inflation mounted, the peso became
highly overvalued, and the competitiveness of Mexi-
co's nonoil exports was undermined. Foreign borrow-
ing was stepped up to compensate for soaring current
account deficits even as interest rates were rising.
Lopez Portillo stubbornly refused to devalue the peso
until 1982, and foreign exchange policies served as a
positive inducement to capital flight. Billions of dollars
were expatriated as Mexicans deposited, invested, and
spent lavishly abroad. The foreign exchange and debt
crisis that Lopez Portillo acknowledged in August
1982, and his nationalization of the country's private
banks the following month, strongly undermined the
private sector.
3. Inaugurated President in December 1982, Mi-
guel de la Madrid inherited a crisis more encompass-
ing than any since the late 1930s. Under conditions of
harsh austerity, high unemployment and underem-
ployment, double- or triple-digit inflation, widespread
business failures, and a crippling shortage of capital,
the economy contracted by about 6 percent in 1983.
Virtually all social and economic groups have had to
accept declining standards of living, scale down their
expectations, and compete for benefits and opportuni-
ties in a negative sum economic environment. De la
Madrid has struggled to preserve social equilibrium
and to restore public confidence in the political sys-
tem. In particular, he has endeavored to distance
himself from the egregious corruption and failures of
Lopez Portillo and other senior officials of the last
government. By pursuing an anticorruption campaign
that has included the imprisonment of at least one
former high official and revelations of abuses by
others, and by projecting an image of fairness, compe-
tence, and probity, the President so far has provided
generally effective and popular leadership.
4. De la Madrid's most striking success has been in
engineering a turnaround in Mexico's international
economic accounts. In a little over a year, austerity has
brought spending in line with available resources,
inflation has begun to decline, and some confidence in
the government's policies has been restored. By slash-
ing imports and public-sector expenditures, raising the
real costs of most goods, and making other tough
adjustments the regime has met most of the stabiliza-
tion requirements of the International Monetary Fund
(IMF). Interest is being paid on the more than $85
billion foreign debt, and by the end of 1983 the
current account surplus reached about $4 billion. 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 begin recovery this year. This progress has been
achieved, moreover, without engendering any serious
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Figure 1
Principal Cities and Administrative Units
Boundary representation is
not necessarily authoritative.
social disruptions or ruptures in the "revolutionary
family" of groups that support the regime.
5. The political system appears to be strong, but we
believe it is now under serious stress both because of
the economic crisis and because it has been slow to
keep up with profound social, economic, and demo-
graphic changes. In a society that has been rapidly
transformed from a largely rural, agricultural one to
an urban and increasingly modern one, the central-
ized, one-party form of government has come under
great pressure. Mexicans are more educated (there are
about 1 million university students), more sophisticat-
1. Hidalgo
2. Mexico
3. Morelos
4. Queretaro
5. Tlaxcala
6. Distrito federal
population greater than 250,000. Unclassified
ed, and aware of international developments than ever
before. They are more diverse in their interests and
outlooks, and, in the aftermath of the 1982 economic
shocks, show signs of being more dissatisfied with the
corruption, misjudgments, and the restricted nature of
their political system. As a result of these trends, the
popularity and vitality of the Institutional Revolution-
ary Party (PRI) have diminished, at least temporarily.
6. Political leaders have been slow to adapt the PRI
to the profound changes in Mexican society. The two
branches of the party that historically have been the
most important-organized blue-collar labor and the
peasants-have been shrinking in size relative to other
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social and interests groups. The PRI probably can still
rely on its peasant organization to turn out voters for
its candidates, but the portion of the population living
in rural areas, which was two-thirds of the total 35
years ago, is now less than one-third. There are also
indications that the percentage of the Mexican labor
force affiliated with the blue-collar labor sector of the
party-the Confederation of Mexican Workers
(CTM)-has been gradually shrinking in recent de-
cades. Meanwhile, most of the millions of people who
have filled the sprawling slums around all of Mexico's
major cities-slumdwellers now constitute between 20
and 25 percent of the population-may not have been
absorbed effectively by the PRI or the system general-
ly. So far, however, the informal patron-client rela-
tionships that have helped glue the system together
have not broken down.
7. Over the last several years, opposition forces
have gained strength. The most powerful of them is
the center-right National Action Party (PAN). It has
made substantial gains over the last year or so in
Yucatan and especially in the northern border regions.
We believe that the rise of opposition sentiment in the
north reflects that region's spectacular economic and
'demographic expansion over the last decade or so, the
desire of vibrant private-sector interests there to in-
crease exchange with the United States, and dissatis-
faction with the regime's economic policies and statist
philosophy. Antagonism between private-sector inter-
ests in the north and the regime intensified under the
impact of the economic crisis. These trends have been
paralleled, moreover, by indications of dissidence in
Mexico's poor and underdeveloped southern states
where Communist, radical, and other opposition
groups have been active.
1. KEY CHARACTERISTICS OF THE SYSTEM
8. Mexico's political system, one of the most com-
plex and inscrutable in the developing world, has
monopolized power for over five decades. Presidents
serve for six years with enormous powers that are
largely derived from their control of both the hege-
monic PRI and the large federal bureaucracy. Govern-
ment leaders and party bosses have been skilled in
employing a pragmatic mix of policies and tactics:
tacking as necessary in changing political winds; ad-
justing the balance of political power among elite
groups; isolating dissidents; manipulating the media;
upholding a high degree of secrecy and mystery in the
system; maintaining a monopoly of repressive power;
and exercising exclusive rights to the "revolutionary"
ideals that provide the system legitimacy as a progres-
sive force. Traditionally, the system has demonstrated
resiliency and adaptability by adjusting to new cir-
cumstances, co-opting newly arising dissident factions,
and claiming to represent and satisfy nearly all major
interest groups. The regime's total control over patron-
age and the apportionment of material rewards has
been perhaps its most powerful asset in preserving its
monopoly of power.
The Institutional Revolutionary Party
9. The interests of influential groups-organized
blue-collar labor, professionals, federal bureaucrats,
and others in the middle class, small business, industry,
agriculture, peasants, and the military-are represent-
ed in one fashion or another in Mexico's unique
political system. But only some of these groups are
considered full members of the so-called revolutionary
family and thus incorporated in the three sectors of
the PRI. The peasant sector has steadily lost influence
over the years. The blue-collar labor sector is the best
organized and most assertive of the three sectors: we
estimate it has between 1.5 million and 2 million
workers syndicalized in the Confederation of Mexican
Workers, and more than another half million in other
confederations (see table 1).
10. The largely white-collar, middle-class sector-
the so-called popular sector of the party-has regis-
tered the greatest growth over the last 15 years or so. It
includes a large percentage of federal workers, teach-
ers, and other professionals, and some marginal pri-
vate-sector groups such as taxi drivers and street
vendors. Despite its large size and concentration in
Mexico City, however, the popular sector is not a
cohesive organization. Generally reflecting the bour-
geois, urban values of its membership, it is less mono-
lithic and hierarchically organized and less dominated
by bosses than the other two wings of the PRI.
Nonetheless, the standards of living, opportunities, and
incomes of members of the popular sector have im-
proved more than those of any other group in the
revolutionary family, and it has been the principal
beneficiary of the enormous growth of the public-
sector work force since the late 1960s, of public
spending generally, and of political rewards the system
dispenses.
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Table 1
Blue-Collar Labor
Leading Progovernment
Union Organizations a
Leadership Membership Estimates b Geographic Area of Strength
Confederation of Mexican Fidel Velazquez At least 1.5-2 million workers; Mexico City, Mexico State,
Workers (CTM) includes aviation, cement, con- Sonora, Puebla, Guadalajara,
struction, electrical, farm, ho- Queretaro
tel, paper, printing, and sugar
workers
Regional Confederation of Antonio J. Hernandez 150,000 members; includes tex- Veracruz, Mexico City
Mexican Workers (CROM) tile, shoe, garment, and mari-
time and port workers
Revolutionary Confederation of Alberto Juarez Blancas 500,000 members; includes Mexico City
Workers and Peasants (CROC) food and beverage, textile,
transportation, and hospital
workers
General Confederation of Lorenzo Valdepenas Machuca 30,000 members
Workers (CGT)
National Federation of Inde- Center right Claims 13,000, PRI says 70,000, Monterrey
pendent Unions (FNSI) works closely with management
Independent Workers Union Nonideological 20,000, in decline; strongest in Mexico City
(UOI) automobile industry and air-
lines
Union Workers Union Dominated by Unified Socialist 60,000
(SUNTU) Party
Single National Union of nu- Close ties with Unified Socialist 3,500
clear Workers (SUTIN) a Party
Authentic Labor Front (FAT) Christian-Democrat, militant, Unknown, controls a handful of Puebla, Queretaro
associated with opposition left- locals
ist parties
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The Military and Security Forces
18. The Mexican political system has been unique
in the region over the last 50 years or so with respect to
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the marginal and basically nonpolitical role it has
assigned to the military. With a total force of about
124,000, Mexico has a smaller percentage of men in
uniform than any other Latin American country ex-
cept Costa Rica. The defense share of the federal
budget has remained below 5 percent since 1960, and
has generally diminished since then. With rare excep-
tions, senior military officers have given unconditional
support to the country's civilian leadership, and their
loyalty is encouraged through a variety of informal
19. Despite the military's relatively small size and
share of public expenditures, the last three presidents
have endeavored to upgrade and modernize its capa-
bilities to fulfill its more complicated mission. Troop
strength has grown by about 60 percent over the past
decade.
20. With a personnel strength of about 95,000, the
Army is the largest of the services, and the one with
the principal responsibility for maintaining internal
security. With over 100 battalion-size units-including
20 new infantry and cavalry units created since
1970-the Army has a presence in many cities and
rural areas. The basic deployment pattern remains
focused, however, on Mexico City and its environs (see
figures 2). Although the regular armed forces have the
primary responsibility for internal as well as external
security, Mexican governments have used civilian
security services as the first line of defense against
domestic unrest. Regular police forces handle demon-
strations staged by students, teachers, or other groups,
and plainclothes security units collect intelligence on
dissident movements
Inadequate-
ly staffed, trained, and equipped, local police and
security forces rely heavily on the Army to help
control any sizable demonstrations.
21. The most effective civilian internal security
force is the Federal Directorate of Security (DFS),
subordinate to Manuel Bartlett, the Secretary of Gov-
ernmentF__7 The DFS fields about 1,300 agents
at its Mexico City headquarters and at branches in all
of the states. Better trained and armed than other
civilian security personnel, DFS teams probably have
increased covert intelligence operations along the Gua-
temalan border in recent years and have stepped up
infiltration of opposition political groups. The Direc-
torate's main responsibility is to monitor suspected
dissidents and opposition groups with a view to discov-
ering and investigating any possible subversive efforts.
The DFS does not hesitate to conduct searches and
seizures and even to detain and interrogate individuals
suspected of subversion.
Revolutionary Ideology
22. Revolutionary ideology has played an essential
role in the political process and culture. Deriving from
a panoply of myths and accomplishments associated
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with the Revolution and its aftermath, this ideology
provides a framework and a set of egalitarian stand-
ards that give legitimacy to the system. Fought in large
part by and for Indians, peasants, and the working
class generally, the Mexican Revolution gave impetus
to decades of 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 suffuse the
national consciousness.
23. In contrast to this "revolutionary" hagiography
are the many foreign intruders and enemies-Spanish
conquistadors, French imperial pretenders, and assort-
ed interlopers from the United States-all of whom
are seen as having injured and exploited the rightful
owners of Mexico's resources. Even more vilified than
such "predatory" outsiders are the Mexican traitors
who conspired with the foreigners. They are known
specifically as malinches after the Indian woman who
translated for Cortes. Lopez Portillo provided the most
recent example of revolutionary demagoguery when
he nationalized the private banks and imposed tough
foreign exchange controls, arguing that sacadolares,
unpatriotic Mexicans who removed capital from the
country, had brought on the economic crisis.
24. Despite the mythology, Indians and peasants
have been relatively neglected by the political estab-
lishment, and progressively so during the last 15 or 20
years. Their share of political power and the material
rewards dispensed in recent decades has been shrink-
ing compared to what the middle class and organized
labor get, and there is little chance that the situation
will improve any time soon. We do not know to what
extent conditions in the countryside have deteriorated
in the aftermath of the economic crisis. Land seizures
and other violence have occurred, although the levels
of such unrest do not appear to be unusually high.
25. Revolutionary ideology strongly influences
Mexico's foreign policy. Certain principles-noninter-
vention, the juridical equality of nations, and the right
of all peoples to self-determination-are based on
Mexico's own experiences and constitute the founda-
tion of its foreign policies, especially in relations with
the United States and the rest of Latin America. In
particular, these well-established beliefs provide the
rationale for Mexican activities and rhetoric in support
of Central American revolutionaries. The official ex-
planation-that most Central American countries can
only benefit, as Mexico ultimately did, from the
catharsis of violent social upheaval-apparently has
substantial support among key interest groups. More
important, however, everything that Mexican leaders
say and do in behalf of revolutionaries in the region
serves to mollify the domestic extreme left and allow it
a legitimate means of venting its frustrations. Revolu-
tionary ideology serves the greater interests of the
regime, therefore, by helping to reinforce it.
II. IMMEDIATE CHALLENGES TO THE SYSTEM
26. Profound political, social, economic, and demo-
graphic changes have occurred in Mexico over the last
two decades. Key factors in this changing socioeco-
nomic landscape are:
- Rapid population growth. (Nearly 80 percent of
the people are under 35.)
- Urbanization and the corresponding decline of
the rural sector. (Agricultural production has
declined to less than 9 percent of GDP from 18
percent in 1955.)
- The sizable expansion of middle-class groups and
of their educational aspirations and accom-
plishments.
- Glaringly uneven distribution of income and
wealth. (In recent decades the share of national
income of the poorest half of the population has
steadily declined, though in absolute terms the
poor improved their lot gradually, at least until
1981.)
- The concentration of economic and political
power in Mexico City and the suffocating growth
of that metropolis of more than 15 million nearly
to the limits that water and other resources will
permit.
- The steady growth in the size, complexity, pow-
er, inefficiency
~o f the central government.
- North-south polarizing trends that are pulling
economic activity in Mexico's northern border
regions away from the capital and toward the
United States, and the emergence of radical
groups in poor southern states.
- The dislocations and excesses associated with the
oil boom and bust cycle.
These and other problems illustrate the seriousness of
the threat posed by the following specific challenges to
the system.
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A. Economic Stringencies and Constraints
27. President de la Madrid's tough austerity meas-
ures have eased considerably the immediate financial
crisis he inherited, but have not solved Mexico's deep
structural problems. By bringing Mexico's foreign
financial accounts largely into balance and by initiat-
ing some economic reforms, he has helped the country
regain some access to foreign capital markets. But in
the near term, these severe adjustments have been
accompanied by a sharp decline in economic activity
and sharply reduced living standards. Last year, GDP
fell 6 percent as wages and government spending were
slashed, consumer subsidies reduced, price controls
relaxed, and the peso sharply devalued.
28. To continue making progress, de la Madrid will
have to hold the economy on a relatively tight leash
well into his administration. If he holds fast to auster-
ity to lay a sound foundation for eventual economic
recovery, inflation would be reduced, the foreign
exchange rate would begin to stabilize, and financial
independence would be partially regained through
restraining the expansion of the debt service burden.
Accompanying such a policy, however, would be
further unemployment and a postponement in any
improvement in living standards.
29. His task will not be easy. De Ia Madrid will be
under pressure to attack unemployment through a
faster rebound in industrial production even at the cost
of continued high inflation and expanded foreign
debt, He will also have to weigh demands for less
restrictive investment and trade controls to reduce the
number of bankruptcies of inefficient domestic firms
and show he has not forfeited control of national
decisionmaking authority.
30. Regardless of the policy mix chosen, we believe
it is unlikely that Mexico will regain normal access to
foreign capital markets and reestablish economic
growth-and job creation--on a sustainable basis
within the next few years. The depth of Mexico's
problems and the magnitude of its foreign debt over-
hang ensure that production is not likely to reach the
level of the early 1980s for at least another few years.
Real personal consumption will remain below the 1981)
and 1981 levels during the remaining five or so years
of de ]a Madrid's term.
31. In attempting to steer through this maze of
problems, de Ia Madrid arid his advisers will be
guided, we believe, by four basic economic objectives,
each backed by various political elites and command-
ing wide support among the populace. These goals,
however, cannot all be achieved simultaneously.
32. Price and Exchange Stability. The current
priority concern of the government is to reestablish
stable prices and to strengthen the peso. Traditionally,
relatively stable prices and exchange rates facilitated
rising consumption arid living standards. Since 1982,
however, hyperinflation has shaved off one-third of
real wages and has led to a. sharp drop in the peso. Lost
foreign purchasing power has had an especially delete-
rious impact on middle-class groups who, during the
years of oil-fueled growth, became accustomed to
spending overvalued pesos for foreign luxury and
consumer goods. De la Madrid's comment in a press
conference last October that "inflation is the most
serious problem facing the country" indicates his
continuing commitment to this key objective.
33. Financial Independence. The second impera-
tive of government economic policy is that of adjusting
domestic spending to levels that can be supported by
domestic resources. De Ia. Madrid's current austerity
policies are aimed at regaining financial independence
by ending the need for "massive new loans" and
honoring past commitments. This has led to a greatly
reduced foreign borrowing program and delaying loan
drawdowns when possible. De la Madrid is scaling
back development projects and increasing local taxes
in an effort to pay government debt and capital
purchases out of domestic savings.
34. Economic Recovery and New Jobs, Mexican
leaders realize that economic performance must begin
to improve soon if key constituencies in the "revolu-
tionary family" are to remain quiescent and if new
employment opportunities are to be created. Only
with economic recovery can the conditions be created
for economic mobility and openings for ambitious
Mexicans of all classes who might otherwise become
threats to the system.
35. Balanced Mixed Economy. Mexican decision-
makers are in many ways as concerned about how the
economy grows as how fast it does. Development
strategy has long reflected the overriding principle of
economic nationalism, characterized by protectionism,
restrictions on foreign investment, and conservation of
natural-and especially oil.-resources. These attitudes
have resulted in the rapidly expanding role of govern-
ment and large public enterprises in the economy.
Nevertheless, Mexico's private sector continues to pro-
vide the bulk of employment and, under the strictures
imposed by the IMF program, the private sector will
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have to generate the jobs to satisfy rapid expansion of
the labor force.
Different Approaches
36. Economic trends and policies during the rest of
the 1980s will be determined in large part by the
compromises and trade-offs among the basic economic
objectives made by de la Madrid and his successor.
While we project two approaches, we believe actual
policies and trends will fall somewhere between the
two. In the first case, de la Madrid could relax
austerity and reflate the economy soon in response to
growing political pressures and social unrest, but this
course would probably lead to recurrent financial
crises. Alternatively, he could continue to follow a
tough stabilization program, followed by years of
restrained growth. In either case, we believe that
during the next two years Mexico will be unable to
finance sufficient imports to support a substantial
increase in productive capacity or economic activity.
For the balance of the 1980s, a slow increase in export
earnings and foreign bankers' resistance to substantial-
ly expand commitments to Mexico will act to hold
back economic expansion.
37. If Mexico relaxed austerity in 1984, the econo-
my would grow somewhat. Nevertheless, unemploy-
ment and underemployment would not improve
much. The costs would be substantial:
- Greatly increased government deficits.
- Near triple-digit inflation.
- Sharply higher foreign borrowing requirements.
- Rapid depreciation of the peso.
These pressures would probably lead to a new and
more serious foreign exchange crisis unless de la
Madrid chose to open the economy wide to foreign
investment and to provide guarantees that would
encourage foreign banks to renew and increase loan
and trade credit lines.
38. Should de la Madrid pursue this course, Mexi-
co's economic stabilization program would be endan-
gered. If higher spending in 1984 caused Mexico to
miss IMF performance targets by a wide margin, we
believe de la Madrid would find it necessary to clamp
down on the economy again to ensure continued
access to essential foreign funding. Introducing such
start-stop policies could drag out economic recovery,
cause recurrent financial crises, and undercut the
government's longer term objective of creating enough
jobs for a rapidly growing labor force.
39. If de la Madrid continues austerity, lowered
inflation, fiscal restraint, and depressed imports would
reduce foreign borrowing requirements. Once a sound
basis for renewed growth in economic activity was
laid, de la Madrid could introduce stimulative policies
that would spur growth but avoid overheating the
economy once again. Even under these circumstances,
growth rates for the balance of the decade would most
likely remain below the 6-percent average achieved in
the period 1950-80. Mexico still would experience
considerable costs:
- Reductions in per capita consumption through
most of de la Madrid's administration.
- Rising unemployment and underemployment.
In this case, Mexican leaders would in all likelihood
come under mounting pressure from labor, the middle
class, government workers, and others to expand pub-
lic spending.
40. To make tough decisions on macroeconomic
issues even more complex for de la Madrid and his
advisers, much will depend on factors beyond their
control. A setback in the current world economic
recovery, a fall in oil prices, or a deterioration in the
international lending climate-perhaps brought on by
a debt default in another country-could boost world
interest rates, undermine demand for Mexican exports,
and constrict credit availability. Under such circum-
stances Mexican policymakers' options would be se-
verely restricted. On the other hand, a major disrup-
tion in world oil supplies-brought on by conflict in
the Persian Gulf area, for instance-could temporarily
boost Mexico's oil revenues and allow increased im-
ports for a time without aggravating foreign payments
problems.
41. Thus, we conclude that economic factors will
continue to constrain policymaking throughout the
1980s. The choice of direction and means will involve
trade-offs among economic objectives that will tend to
alienate some sectors while helping others. Unless
Mexico benefits from an unexpected windfall, eco-
nomic growth will be insufficient to create enough jobs
for the burgeoning labor force. Available resources
will be insufficient to maintain traditional programs.
Subsidies, for example, will continue to be cut, while
housing, schooling, and public services will still be
wanting in many urban and rural areas. At the same
time, introducing long-promised structural reforms
that are necessary if Mexican industry is to meet
international competition will threaten established and
highly protected businesses, while aiding innovative
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Figure 3
Major Population Centers in Northern Mexico
Sa-Mo. iego
Tijuana icali
Phoenix.
Arizona
N
TED)., STATERS
New Mexico
Q City with National Action
Party (PAN) mayor
Estado (state) boundary
.,` r ( '\ Leon neyx"a -
Mata oros
Sinaloa ~.' `a *Monterrey
STorredn Saltillo'
Durango \\'
Cuh an
1'~.Duran Tamaulipa oft
goe 1 Mexico
Zacatecas ~
San Luis k'
G Potosi \..\
Tampico
`-~~U~ ~`? an Luis Potosi
00 C ~S J .
entrepreneurs. Even maintaining a competitive ex-
change rate to spur export growth will keep foreign
travel and purchases prohibitively expensive for many
in the middle class who had previously enjoyed such
opportunities.
B. The Conservative Opposition
42. Although greater Mexico City has grown at
rapid rates-and is now home to more than 15 million
people-the two dozen next largest cities have expand-
ed at similar and even higher rates. The most spectac-
ular growth has been in the northern tier states, where
12 of the country's 25 largest cities are located within
260 miles of the US border (see figure 3 and table 2).
By 1980 each of these cities had grown to over a
quarter of a million people. During the 1970s their
average rate of growth was, about 12 percent higher
than Mexico City's, and we estimate that together they
now account for nearly 9 percent of the national
population, a share that will increase to 12 percent by
the end of the decade if recent high rates of expansion
persist. Six of the largest cities-from Tijuana on the
Pacific to Matamoros on the Gulf of Mexico-are on
the border with the United States, and all have
doubled or nearly doubled in size since 1970 while
becoming increasingly vibrant as commercial and
industrial centers and funnels for contacts with the
United States.
43. The flow of people and economic activity into
the northern border regions has considerable political
significance. Most of the growth has been the result of
private-sector initiatives and of commerce and other
exchange with the United States. With the exceptions
of Hermosillo and Tampico, which have benefited
considerably from national government efforts to de-
centralize economic activity in regional development
zones, the northern tier cities have seemingly grown
primarily as a result of "pull" forces from the United
States rather than planning in Mexico City. Monterrey,
Mexico's premier center of private-sector industrial
activity, has grown rapidly, while major entrepots like
Ciudad Juarez, Mexicali, and Tijuana were trans-
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Table 2
Urbanization in Mexico
Population of the 25 Largest Cities a
Annual Growth Rate
1980 1990
(esti
mated) b
1970-80c
Federal District d
4,871
6,874
9,991 14,5
07
3.8
Guadalajara, Jalisco
737
1,194
2,178 3,9
75
6.2
Monterrey, Nuevo Leon
597
858
1,702 3,3
80
7.1
Puebla, Puebla
289
402
771 1,4
75
6.7
Ciudad Juarez, Chihuahua
262
407
680 1,1
40
5.3
Leon, Guanajuato
210
365
596 9
71
5.0
Tijuana, Baja California Norte
152
277
542 1,0
56
6.9
Mexicali, Baja California Norte
175
267
495 9
20
6.4
Tampico, Tamaulipas
123
180
428 1,0
13
9.0
Torreon, Coahuila
180
223
416 77
4
6.4
Chihuahua, Chihuahua
150
257
402 63
0
4.6
Merida, Yucatan
171
212
344 56
0
5.0
San Luis Potosi, San Luis Potosi
160
230
338 49
6
3.9
Acapulco (De Juarez), Guerrero
85
174
335 64
7
6.8
Veracruz, Veracruz
145
214
333 51
7
4.5
Hermosillo, Sonora
96
176
304 78
8
10.0
Cuernavaca, Morelos
37
134
295 64
9
8.2
Culican, Sinaloa
85
168
281 47
1
5.3
Nuevo Laredo, Tamaulipas
93
149
272 49
6
6.2
Matamoros, Tamaulipas
92
138
258 48
4
6.5
Saltillo, Coahuila
99
161
243 36
7
4.2
Reynosa, Tamaulipas
74
137
240 42
2
5.8
Durango, Durango
97
151
239 37
8
4.7
Morelia, Michoacan
101
161
238 35
2
4.0
Toluca, Mexico
77
114
234 48
2
7.5
a Cities ranked on 1980 population.
b Based on 1970-80 annual growth rate.
c Average annual growth rate (1970-80), excluding Federal District,
6.0 percent.
d The population of the Mexico City metropolitan area is at least 50
percent larger than the Federal District; in the period 1970 to 1980,
it grew much more rapidly.
formed from tawdry border towns into large and
diversified entrepreneurial centers.
44. Long before the economic collapse in 1982,
tensions between these border regions and Mexico City
were multiplying. The former sought a larger share of
political power, less restricted exchange with the
United States, and a slice of the federal budget
compatible with their increased importance. The eco-
nomic crisis, moreover, exacerbated these tensions as
the border economies were especially damaged by the
devaluations of the peso, foreign exchange controls,
and the sharp drop in imports from the United States.
The National Action Party
45. The National Action Party (PAN-which means
bread in Spanish) has been growing over the last 30
years as the leading alternative to the PRI, and its
greatest gains have been in the northern border regions
and in Yucatan. According to the government's count,
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PAN captured 16 percent of the vote in the July 1982
presidential elections. That was more than all of the
other opposition parties combined, and PAN's largest
share ever. The PAN vote probably was larger, but we
doubt it reached the 46 percent that the party's own
official election postmortem claims. Since then, PAN
has been victorious in an unprecedented series of local
elections, and in some northern cities and regions it
appears to be the de facto majority party. In Septem-
ber 1982 it won mayoral contests in the state capitals
of Sonora and, in alliance with another conservative
party, in San Luis Potosi. In July 1983, it won
mayoralties in Durango, the capital of the state of the
same name and, more important, in Chihuahua state
where it took the three largest cities, including the
state capital and Ciudad Juarez., which is the country's
fifth-largest city.
46. A number of factors seem to explain the growth
of PAN's support. The party traditionally has appealed
primarily to wealthy, middle-class, business, and
church-oriented constituencies. With modernization
and urbanization, those sectors have become larger as
a percentage of the total Mexican population over the
last two decades, thus accounting in part for PAN's
greater popularity. In addition to this growth by
accretion of its natural constituency, the party has
probably also succeeded in extending its appeal to
some groups not previously inclined toward it. Pre-
sumably a large share of the ballots PAN candidates
have won in recent elections have been protest votes
rather than enduring expressions of support for the
opposition. PAN probably has benefited from the
widespread dissatisfaction resulting from the corrup-
tion and the disastrous economic policies of the last
government. But, even with the added support of the
many middle-class and other Mexicans now opposed
to continued PRI hegemony, the PAN is handicapped
by many serious problems: the paucity of leaders with
national experience; the weakness of its infrastructure;
its failure to come up with national political platforms:
and a general perception that it is the party of wealthy
elites.
48. Conservative forces generally, and the increas-
ingly dissatisfied urban interests in the northern bor-
der regions and Yucatan in particular, will be more
assertive in Mexican politics during the period of this
Estimate. Growing numbers of the provincial bour-
geoisie are disillusioned with the results of steadily
expanding government and party influence in their
lives and are searching for alternatives they can
control. Among these are the new church-related and
other independent schools, neighborhood, community,
and other activist groups, and probably a variety of
private-sector organizations that share an interest in
restoring individual and family values. Additional
"new right" religious and secular groups may emerge
and begin to play political roles during de la Madrid's
term and beyond, but only a few would be likely to
resort to violence, even if they are forcefully repressed,
by the regime.
49. On balance, we believe that the PAN has
expanded its core constituency in recent years, and
that it will mount progressively more effective opposi-
tion to the system. As the population has become
younger and more urbanized, the PAN has probably
acquired large new followings that could remain more
or less permanently in their camp. According to one
academic study, the PAN has made significant inroads
among working-class people in Baia California Norte,
and we have scattered additional indications that this
is also the case elsewhere in the northern border
regions
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C. The Slums
50. Although urbanization has been widely dis-
persed, the most explosive growth has been in the
colonias populares, the teeming slums and squatter
settlements around the principal cities. One of these,
Netzahualcoyotl, on the outskirts of the capital, has
been burgeoning at an annual rate of more than 50
percent during the last 15 years or so. In 1970 it
appeared for the first time in Mexican census data-as
the fourth-largest "city" in the country. By 1980, with
an estimated population of close to 3 million, it was no
longer listed separately, perhaps because the govern-
ment does not want to call attention to it. Many other
huge new slum settlements like it have mushroomed
on the outskirts of most of the other cities too,
expanding in fact more rapidly in relative terms in the
provinces than in the metropolitan capital area. The
extraordinary rapidity of slum expansion has resulted
in new arrivals coming to be known as paracaidistas-
parachutists, who seemingly drop in silently and in
such numbers as to transform completely the places
where they alight. Even before the economic crisis,
unemployment and underemployment rates in the
slums were the highest in the country.
51. Despite such conditions, however, there have
been no large riots like those that have occurred in
some cities in the United States and other countries
over the last 20 years. Rioting and bus burnings
occurred in Netzahualcoyotl in 1981 following bus
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, the realistic expectation of better
times-steady work, material gains, the chance to
move up on the economic ladder-attracted the mi-
grants to the cities, sustained their hopes, and kept
them quiescent.
52. It is not clear to what extent the majority of
slumdwellers are being effectively absorbed into the
PRI's patronage networks or the regime's social serv-
ices. The PRI created the Federation of Lower Class
Areas to protect the interests of slumdwellers in the
party. The popular sector of the party to some extent
has organized low-level urban entrepreneurs such as
street vendors and lottery ticket sellers; those with
steady jobs have probably joined one of the progovern-
ment unions; and the party also creates some depend-
ency relationships in the slums by empowering neigh-
borhood caciques (or bosses) who help provide electri-
cal and other services to the poor. Party affiliation,
however, seems generally to reward those who have
already achieved some limited success and upward
mobility, rather than to act as a facilitator for such
advancement. The government bureaucracy provides
some basic health, sanitary, and subsistence services in
the shantytowns, and in Monterrey the city govern-
ment builds low-cost housing, provides subsidized
credit, and has established some small industries. We
are unable to judge to what extent such support results
in backing for the regime.
53. Opposition parties and independent mass orga-
nizations have been making gains in some of the
colonias populares. The 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 experienced by a
subculture of slum institutions and associations that
often provide services normally the exclusive preroga-
tives of the government and the PRI. Independent
squatter organizations active in Monterrey and Ciudad
Juarez provide police protection, people's courts,
schools, and utility services to people in the shanty-
towns. Slum organizations have also formed in Acapul-
co. In 1979 a national slum coordinating body was
founded, to provide national leadership, and by early
the following year it had affiliated 14 confederations
of squatter settlements in a few northern cities. We
have no further knowledge of its activities or size, but
the implications of such opposition party and inde-
pendent organizing in the slums could be highly
significant over the longer term.
D. Leftwing Opposition
54. Leftwing political parties-small, weak, and
divided-have been constantly eclipsed by the ostensi-
bly revolutionary PRI that claims to represent all of
the groups that in other countries are the natural
constituencies of the far left. In the last presidential
elections leftwing candidates won 8 percent of the vote
by the official count-probably a fairly accurate
reflection of their actual appeal. As long as they
eschew violence both in theory and practice, Marxist
and radical parties are allowed to exist because they
are stabilizing forces in the political system. Radical
parties are often co-opted by the PRI, alternately
running their own candidates-who are secretly fund-
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ed by the regime-or supporting PRI candidates who,
as a result, presumably gain greater leftist backing.
Independent leftwing parties have tended also to serve
PRI interests by lending credibility to the questionable
authenticity of the electoral process, providing the
regime's leftwing critics with peaceful and observable
avenues through which to channel their dissent, and
giving additional means of criticizing conservative
forces, leaving the PRI to appear as a centrist force.
They also serve Mexican foreign policy needs and
objectives by enhancing the illusion of an open and
democratic society, by acting as lightning rods for
outside extremists who attempt to meddle, and by
giving the regime indirect access to and intelligence
about international Marxist and radical organizations.
55. The largest and best organized force on the left
is the Unified Socialist Party of Mexico (PSUM), an
amalgam of a few minuscule Marxist and radical
factions and the Mexican Communist Party. Constitut-
ed in 1981, largely to improve the Communists'
prospects in the presidential elections, the PSUM
claims only about 30,000 members among a crazy-
quilt of contentious factions. Its greatest strength is
with university professors and students, particularly at
the huge National Autonomous University in the
capital and at a few state universities. The Commu-
nists have not been able to retain the support of most
university students once they leave the campuses,
however, and the emphasis on organizing among;
mostly middle-class youth has tended to detract from
the party's appeal among workers and peasants. De-
spite recent reverses, the Communists are strong in a
university workers' organization. They have made
inroads in the large teachers union that is a component
of the PRI's popular sector. The party also stays busy
endeavoring to cement alliances and mergers with
other leftist parties and splinter groups throughout the
country to bolster its claim to be the preeminent leftist
challenger to the PRI. It is prominent, for instance, in
the newly formed National Association of Workers
and Peasants, which unsuccessfully attempted on two
recent occasions to organize national strikes.
56. Leaders of the PSUM reportedly have decided
to increase their recruiting and organizational efforts
in the states closest to Central America. They work
with the radical leaders of the COCEI--the Coalition
of Workers, Peasants, and Students of the Isthmus-in
Oaxaca and may have made some progress in attempt-
ing to establish a base among leftwing opponents of
the government. The PSUM's best prospects for ex-
panding its influence may lie in such activities in the
'troubled southern tier states. Working through radical,
leftist, peasant, and labor front groups, the party could
generate increased support for its causes.
57. Other recognized parties on the extreme left
include the small Popular Socialist Party and the
Socialist Workers Party, but both are to some degree
manipulated by the PRI. Unlike them, the Trotskyite
Revolutionary Workers Party (PRT), with an estimat-
ed membership of several thousand, has attracted
considerable attention because of its strident antigov-
ernment positions. Its charismatic presidential candi-
date, Rosario Ibarra de Piedra-the first woman to run
for that office-proved an indefatigable campaigner
who, though not a member of the party, was nominat-
ed because of her connections with assorted human
rights and activist groups. The PRT stands a good
chance of attracting new support from alienated youth
and disenchanted middle-class professionals, especially
if Ibarra continues to play a leadership role. Finally,
the Mexican Workers Party (PMT), which benefits
from the support of several internationally known
Mexican writers and intellectuals and the prominence
of its leader, Heberto Castillo, could also expand by
appealing to youths and intellectuals. Apparently rec-
ognizing the potential threat posed by the PMT, the
government has repeatedly denied it official party
status, which prevents it from competing in elections.
58. Radical leftist activists also are presently orga-
nizing in southern Mexico. The COCEI has expanded
its support in Oaxaca since 1981 when its youthful and
radical candidate won the mayoralty in Juchitan, that
state's second-largest city. Though federal and state
governments applied a spectrum of leverage against
the wayward administration-from coercion to with-
holding of funds-COCEI has expanded its activities
in nearby cities and probably elsewhere in Oaxaca,
and perhaps too in neighboring Chiapas. Increasingly
concerned, PRI officials provoked a violent confronta-
tion in Juchitan in August 1983 that resulted in several
deaths. That violence provided the pretext for state
authorities to impeach the Juchitan government and to
empower an interim administration. In December
1983 government forces forcibly evicted COCEI
members who had for months occupied the city hall.
59. Though the regime now seems to have the
group under control, it still has the capability to mount
demonstrations as it has in the past, and thus to attract
attention to its cause in Mexico and internationally.
Some of its leaders have gone into hiding, and some
analysts believe it may now be committed to organiz-
ing clandestinely. Developments in Juchitan have
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made it more likely that extremists from around the
country will become interested in conditions in Oaxa-
ca, and seek to become involved in behalf of poor
peasants and regime opponents. That state is populat-
ed largely by Zapotec Indians, who have a history of
resisting central government authority that dates back
to before the Spanish conquest. In part as a result, they
have benefited relatively little from the economic
development that has occurred through most of the
rest of the country.
E. Cuban and Soviet Involvement
60. Through their large Embassy and intelligence
contingents in Mexico City, Cuba and the Soviet
Union maintain contact with and provide funding and
other support to local leftists, to revolutionaries from
Central America and elsewhere, and almost certainly
to the Mexican Communist Party. Havana reportedly
funds and gives clandestine support to several publish-
ing and propaganda ventures that support Cuban
policies and objectives. We know of a few firms in
Mexico that are fronts for the Castro regime-a
61. With one notable exception, the USSR has been
reluctant to support committed revolutionaries who
its contacts with Mexican leftists and intellectuals are
more extensive, the Castro regime has always placed a
higher priority on maintaining constructive relations
with successive Mexican governments than on promot-
ing opposition to them. Thus, unlike-.virtually every
other country in Latin America, Mexico has enjoyed a
high degree of immunity from Cuban meddling, and
in return has consistently been one of Havana's stron-
gest supporters in the region. Under most circum-
stances, we believe this tacit understanding will con-
tinue to serve the interests of both countries and that
Castro will refrain from activities that could link Cuba
with direct and serious threats to the stability of the
Mexican political system.
62. Nonetheless
Castro and his har6nne visers may now believe t at
they should have done more in recent years to help the
left organize and develop links to the masses. We
would expect that small and deniable efforts to train
small numbers of Communist Party and other subver-
sives might soon begin, if they are no in
progress. a
Mexican revolutionary completed two years of train-
ing in Cuba in 1982. Thus, if levels of instability were
to rise in Mexico, we believe it would be more likely
that Cuba and the USSR would expand their subver-
sive activities, and it would be easier for them to do so.
63. In addition, many analysts believe that the
external Marxist-Leninist threat to Mexico would in-
crease if Soviet-, Cuban-, and Nicaraguan-supported
revolutionary groups were to prevail elsewhere in
Central America. Mexican military, business, and oth-
er interests would view a revolutionary victory in
Guatemala with more alarm than in El Salvador, and
it would probably generate some significant policy
disputes in the leadership. Tensions might be aggravat-
ed, moreover, if Mexican Communist and other radi-
cal groups were emboldened by a Marxist victory in
Guatemala to establish a more conspicuous presence in
Chiapas or other southern states. We suspect that de la
Madrid would share the concerns of his generals and
move firmly to contain and repress any Mexican
radicals who became more active in such a situation.
Radical or Marxist gains in Central America would
probably result in greater Mexican troop and other
military commitments in Chiapas. De la Madrid might
also discreetly seek additional foreign security assist-
ance and intelligence cooperation.
Ill. POTENTIAL CHALLENGES TO THE
REGIME
A. Generational Strife
64. Despite their huge numbers, youths and stu-
dents have been relatively quiescent in Mexico since
the late 1960s and early 1970s. Urban youths are
bearing a disproportionate share of the rising unem-
ployment, and many of those who soon will try to
enter the labor force will be frustrated and unem-
ployed in the foreseeable future. The aspirations and
career plans of educated, middle-class youth-who
would be in the vanguard of any generational move-
ment-have probably been threatened by the econom-
ic crisis. They typically do not become illegal migrant
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workers, enter the nontraditional or underground
economy, or retreat to family plots or villages when
urban opportunities disappear. If the economy contin-
ues to decline, then, in some respects at least, their
alternatives may be even more limited than those of
working-class youth.
65. A large and powerful youth movement could
coalesce fairly quickly in Mexico, by starting from a
small nucleus at one of the universities in the capital,
and attracting a large following at other campuses and
secondary schools. In the present environment, a
radical or dissident youth movement could become a
major destabilizing force with an impact far out of
proportion to its original numbers. Youth movements
characteristically seek alliances with labor and 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
also more likely than almost any other group to be
susceptible to the entreaties and doctrines of leftwing
intellectuals and organizers. Until economic stringen-
cies abate, the ability of the government to co-opt
dissatisfied youth, through expanded public-sector hire
ing, for instance, will be minimal.
B. Leftist Dissidents
66. The legitimacy and authority of the system
could also be challenged by new radical groups like
those that were active in Mexico in the late 1960s and
early 1970s. We believe there are many leftist intellec-
tuals, professors, students, and others who are seeking
the means to mount extralegal opposition to the
regime. Under the likely leadership of Marxist intel-
lectuals, radical university youth, and members of the
established leftist parties, radical leftists might be able
to attract followers by exploiting the hardships and
discontent resulting from economic stringencies, and
benefit from the assistance of some of the radical
political exiles and activists from several Latin Ameri-
can countries now living in Mexico.
67. In addition, senior government: and security
officials reportedly are concerned about the possibility
that guerrillas will become active in Guerrero state
where small groups were active in the late 1960s and
early 1970s. After years of exile in Cuba, several
members of that earlier insurgency were allowed to
return to Mexico under an amnesty declared by
President Lopez Portillo and security officials are
worried that they may initiate guerrilla tactics again.
Government leaders are concerned, moreover, that
leftist students from other countries in Latin Amer'
at the state university will assist local radicals.
68. The Mexican Government is concerned about
the impact of guerrilla activity across its border with
Guatemala, especially in Chiapas. A number of refu-
gee camps have been established in Chiapas that are
being used by Guatemalan guerrillas as safehavens.
The camps have also attracted the interest of interna-
tional human rights and other activist groups, and of
Mexicans and foreign observers
it is clear, nonetheless, that de la Madrid and his
advisers are concerned. The President's first trip out-
side of Mexico City after his inauguration was to
Chiapas, and the man he selected as governor is a
retired general. In the summer of 1983 the govern-
ment announced that it will invest large amounts in
Chiapas in social and economic development projects,
In September 1983 the government created a new
military zone in Chiapas and is in the process of
assigning additional troops there. The government's
silence belies its concern over the issue and it has posed
obstacles to foreign official travel in the region.
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IV. THE OUTLOOK
69. Mexico's leaders are confronting serious eco-
nomic and political problems that will not be reme-
died quickly, nor by traditional fixes alone. During the
period of this Estimate-through the remainder of de
la Madrid's term and the first few years after his
successor is scheduled to take office in December
1988-these problems are likely to generate greater
pressures and demands for structural changes in Mex:i-
co's political economy.
70. In dealing with these problems in the traditional
manner of Mexican presidents, de la Madrid so far has
attempted to play both sides of the issues. His repeated
promises to decentralize the system and to democra-
tize the PRI's candidate selection process, as well as
the unprecedented series of local election victories by
fir 1 11111 1 - __ _
apparently meant to satisfy reformers at high levels of
the party and government and to assuage the discon-
tent of many in the middle class, including intellectu-
als. youths, and provincial and private-sector elements.
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that other reformers are con-
cerned that the system has become too centralized and
rigid.
71. Since September 1983, however, de la Madrid
has seemed to favor hardline party and government
stalwarts. Since the hotly contested local elections in
Baja California state in that month, PRI candidates
have been certified winners in several cities where
opposition parties probably won
the elections. Hardline leaders will press de la Madrid
to reinforce the hegemony of power long enjoyed by
the PRI and the larger political system. Organized
blue-collar labor leaders, many PRI stalwarts, en-
trenched government bureaucrats, and other vested
interests are anxious to maintain their monopoly of
power and undoubtedly favor the use of more openly
authoritarian methods by the regime to do so. Some of
these elites-labor in particular-were in the forefront
of efforts during the 1970s to curb the political
reforms that were enacted by Lopez Portillo because
they realized that any reshuffling of political power
would further dilute their share. We speculate that
such traditional and hardline interests lobbied so stren-
uously last summer against the certification of further
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During the period of this Estimate de la Madrid and
other key leaders will have to make tough decisions
involving:
Central Economic Dilemmas
- The merits of alternative economic development
strategies, including the role of the central govern-
ment in guiding the economy, and improving the
confidence and productivity of the private sector.
- How to relax nationalistic foreign trade and in-
vestment codes to help finance renewed economic
growth while reducing trade barriers to enhance
productivity and promote exports.
- How to service the foreign debt while increasing
imports necessary for growth.
Political and Social Problems
- How to reform and revitalize the system and
extend its reach into such relatively neglected
areas as the slums and youth.
- Decisions on opening the system to opposition
political parties without giving too much too
quickly.
- How to stanch the growth of Mexico City and
some other large cities.
electoral gains by the PAN in local and municipal
elections that de la Madrid bowed to their wishes. We
believe, however, if hardliners continue in the ascen-
dancy and are able to prevent PAN candidates from
winning in locales where conservative sentiment is
strong, the system's monopoly of power will eventually
be more rather than less threatened. Much will depend
on the interaction of the following major variables,
along with the many others already discussed.
A. De la Madrid
72. The most important is probably de la Madrid
himself: his outlook, psychology, skills, and leadership
qualities. Mexico's presidents are commonly described
as six-year caesars. The chief executive exercises pa-
tronage powers over thousands of jobs in the executive
branch ranging from the cabinet and numerous gov-
ernment agencies and enterprises to the selection
toward the end of his term of the man who will
succeed him. In addition, senators, deputies, state
governors, mayors of important cities, and other local
officials-though nominally elected--are in fact desig-
nated by the president, and they in turn are expected
to demonstrate overriding loyalty to him rather than
to their constituents. He also appoints military leaders
to key positions.
73. Political power flows downward through hierar-
chically organized interest group structures-labor
unions, peasant confederations, chambers of com-
merce-and only the president has the final authority
and legitimacy to arbitrate disputes and apportion
government favors among them. He can demand that
groups comply with policies they oppose and has the
power to coerce them into doing so if all else fails.
74. Perhaps the paramount danger to the system,
therefore, is that any serious vacuum of power at the
top could result in its paralysis, or in the extreme, in its
breakdown. There is no vice president and although
the legislature has the duty under the constitution to
appoint a replacement for a president who dies or is
incapacitated in office, this might lead to a political
crisis, particularly if his successor is weak or is appoint-
ed only after a power struggle. There are also other
dangers in a system that concentrates so much real and
symbolic power in a single individual. The presidency
also could be undermined, for instance, if de la
Madrid were implicated in large-scale corruption or
were to conspicuously vacillate about how to deal with
any pressing political problem, or appear weak., un-
manly, or "un-Mexican."
75. During the year or so he has been in office, de
la Madrid's performance has been generally impres-
sive and his record remains unblemished by any major
failures or crises. He and his advisers have managed
the economy ably, and he has pragmatically and
decisively defused several potentially serious chall-
lenges to the regime. Confronted on two separate
occasions by striking leftist government workers, de la
Madrid stood firm, and without having to resort to
public demonstrations of force, compelled the unions
to back down. He also skillfully handled a protracted
confrontation in Oaxaca state between PRI and gov-
ernment authorities on the one side and members of a
radical new left group on the other. Thus, although
prior to 1982 he had little experience outside of
finance and public administration, de la Madrid obvi-
ously developed keen bureaucratic-political skills dur-
ing the many years he spent rising through the federal
hierarchy. Another view, however, is that de la Ma-
drid has done little to consolidate his power, that he
has lost opportunities to provide decisive leadership on
key problems, and that he tends to vacillate under the
conflicting counsel of different advisers.
76. Clearly, questions about his political powers and
leadership abilities remain. He was criticized for
lackluster performances in public appearances during
his presidential campaigning, and tends to be remote
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and aloof from the actual problems of the mass of the
population. His credibility with blue-collar labor was
known to be low before he became President, and,
though union leaders have collaborated with him
closely since then, many may have serious doubts
about his long-term commitment to their interests.
Although he has been tough with dissident groups on
the fringes of or outside of the political system, we do
not know how he will fend off such traditional sectors
as blue-collar labor, public workers, and private
groups. Thus some analysts are not persuaded that de
la Madrid has the political and leadership skills-to
appeal directly and charismatically to mass audiences,
for instance-that could be required over the next five
years.
77. Regardless of whatever personal strengths and
liabilities may shape de la Madrid's performance,
moreover, we are not certain that the presidency itself
continues to enjoy the strong legitimacy that it did
B. The Economy and Labor
78. Economic performance will also be key. After
almost five decades of strong economic growth and the
evolution of a political system in which 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 are
undercutting the traditional rules of the game. With
stagnation or continued economic decline, elite groups
within the "revolutionary family" will be likely to
begin competing more forcefully for a larger share of
the diminishing per capita economic pie. Although the
PRI's blue-collar labor sector has suffered great depri-
vation without much clamor, indefinite sacrifice is not
likely. Labor will be likely to escalate demands for
wage and other benefits later this year or in 1985.
Moreover, the chances for wildcat strikes and possibly
violent labor unrest would increase.
79. Such developments would probably have an
unsettling effect throughout the political system, and
could provoke other groups-slumdwellers or opposi-
tion party members-to employ similar tactics. They
would probably also have deleterious effects on the
economy by undermining public confidence, but we
doubt that by itself labor unrest of the type described
would be regime threatening. There might also. be a
greater chance of labor-inspired instability once Fidel
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seem to be grooming any particular successor among
the several likely candidates jockeying for position to
replace him. It seems highly unlikely that he will be
able to stay in charge of the labor movement through
the period of this Estimate, and probably will be
forced to start sharing power with subordinates within
the next few years. Thus, decentralizing pressures
from within the labor movement seem likely to in-
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crease over the next few years, though we cannot say
that such a trend would in itself necessarily be
destabilizing.
80. If the economy were to continue to decline for
another four or five years, the prospects for regime-
threatening instability would rise significantly. Al-
though unlikely, a protracted economic crisis could
result from diverse combinations of events involving,
for instance: outbursts of violence either by or against
the regime, conflict and indecision among de la
Madrid's circle of advisers resulting in weak leader-
ship, external shocks to the economy, or the appear-
ance of a charismatic new opposition leader with
credibility in establishment circles. In an atmosphere
of deep and enduring economic stringencies in which
working-class and slumdwelling people continued to
suffer reductions in living standards and well-being,
the potential for antiregime violence would increase.
Food riots, bus burnings, police brutality, or other
localized incidents could then spark larger disturb-
ances that would require major commitments of mili-
tary force. Even if order were soon restored, the
damage to the political system and the economy would
be substantial.
system and would be disinclined to intervene in the
political process because this would violate informal
rules that have governed their behavior since the
1940s.
but at least some officers have been con-
cerned over the political leadership's ability to deal
with current economic and political problems.
84. Some transformation of the traditional order is
likely over the period of this Estimate. In the first
instance, we expect to see the PRI try to maintain
control through a creative mix of co-optation, assimila-
tion, and the selective use of force. We note that,
throughout its history, the PRI has been remarkably
skilled in adapting itself to a changing social, political,
and economic environment-and that indeed some
reforms designed to revitalize the PRI are even now in
train. We judge there is a better-than-even chance that
the PRI will continue to demonstrate a capability to
co-opt or assuage the leaders of all major interest
groups.
81. In the unlikely event that the military and
security forces were unable to intimidate dissidents or
overwhelm protestors earl
t e
armed forces would be hard pressed to keep protests
under control should widespread disturbances occur.
The military is not prepared--in terms of manpower,
logistics, transportation, or command structure-to
contend with major simultaneous threats in several
parts of the country
C. The Military
82. As long as relative stability prevails, we expect
that de la Madrid will continue to cultivate the
military through public gestures and some government
appointments. De la Madrid is likely, in particular, to
involve defense and security officials in the planning
and policy processes in their areas of responsibility.
The military will continue to be used as an instrument
of rural economic and social development, especially
in the southern states.
83. Any significant increase in instability or exter-
nal threat that requires military response would be
likely to result in a commensurate rise of military
involvement in the policy process as more governmen-
tal concerns take on a security dimension. We believe
that the great majority of military officers support the
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VI. IMPLICATIONS FOR THE UNITED STATES
91. US political and economic interests will be
affected substantially by conditions in Mexico during
the period of this Estimate. The security of our
southern border depends on the continued existence of
a stable, united, and peaceful Mexican neighbor.
Other core interests-
country, the availability
of Mexican petroleum, bilateral trade and investment
relationships, and continued Mexican willingness to
94. Compliance with the IMF's stabilization pro-
gram and keeping up with its sizable debt service
obligations will be a challenge to Mexican leaders even
under favorable political and economic assumptions.
We believe that both the current leadership and the
conservative opposition are committed to meeting the
debt burden and will remain so, unless the internation-
al debt climate is radically altered. Further rescl;edul-
ings of Mexico's foreign debt will doubtless be neces-
sary, however, beginning in 1985. Mexican leftists and
nationalists will energetically denounce the tough
terms of the IMF austerity and the conditions of
repayment to US and other foreign commercial banks,
pressing the government to take a tough negotiating
stance. Moreover, further deterioration of the econo-
my could resurrect the threat of a de facto default on
part or all of the debt, putting pressure on the United
States to provide emergency financial assistance and
other concessions as it did during the summer of 1982.
make payments on its foreign debt-will be affected
by Mexico's success in dealing with the challenges
facing it.
95. Bilateral trade and investment issues are likely
to become more contentious, regardless of the political
path Mexico takes. Mexican leaders will still demand a
larger 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 intensify their arguments
that Mexico must be enabled to sell more on the US
market if it is to earn sufficient hard currency to meet
debt service obligations. Nationalists in and out of
93. The tempo of illegal migration to the United
States, for instance, will probably reflect incremental
changes in employment patterns and economic condi-
tions as well as levels of stability in Mexico. Bottom-
line rates will undoubtedly be high for decades, as
nearly a million Mexicans come of age every year and
seek to enter into the labor market on one side of the
border or the other. Significant recovery of the Mexi-
can economy might slow migratory flows. Substantial
deepening of the economic crisis or increased use of
force to maintain PRI hegemony, however, would
result in additional migrants or refugees, and many of
them would probably be skilled workers and profes-
sionals whose departures would further undermine
Mexico's economic prospects.
government will be likely to oppose any significant
relaxations of Mexico's strict foreign investment codes,
although pragmatic leaders will want to attract in-
creased US and other foreign investment to help in
economic recovery. The "in-bond" border industries
that produce goods in Mexico for the US and interna-
tional markets may increasingly become targets of
leftist criticism. Over the longer term a more open
political system might result in more favorable condi-
tions for US and other foreign investors
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96. Mexican petroleum production levels will de-
pend on a number of factors, including the availability
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 might occur
Mexico's continuing need for mas-
sive oil revenue indicates that the country will contin-
ue to be a generally reliable supplier unless political
fragmentation occurs.
97. Mexico's foreign policy-particularly its inde-
pendent approaches to Central America and Cuba-
will almost certainly continue as
relations with the United States.
Estimate will be difficult to manage
the challenges Mexico will face over the period of this
99. The myriad US relationships with Mexico will
remain complex, contentious, and cumbersome over
the period of this Estimate. They will involve a
spectrum of social, economic, cultural, security, and
other relationships that flow relatively freely across the
2,000-mile border, and they will inevitably be compli-
cated by the forces and trends that are changing
Mexico's political and economic landscape. Many of
While we judge that, on bal-
lations could provoke crises threatening the system and
ante, Mexico will be able to adjust and cope, miscalcu-
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