WE OWE MEXICO

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01390R000100070016-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: November 6, 2012
• Sequence Number: 16
• Publication Date: July 2, 1986
• Content Type: MEMO

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Jack Anderson and Dale ifin Atta
We Owe Mexico
- ? - Much has been said about the massive foreign
debt that Mexico owes to banks in this country.
We'd like to say a few words about the intangible
but very real debt everyone in the United States
owes to the Mexican people and the administra-
tion of President Miguel de la Madrid.
By acting responsibly at serious cost to them-
selves, the Mexicans may well have averted a
devastating financial depression that would have
'crippled the United States?indeed, the entire
world.
If Mexico had defaulted on its foreign loans in
1982, as Fidel Castro later urged all Latin Ameri-
can debtor nations tad% it would almost certainly
have triggered similar defaults throughout the
hemisphere. Major.U.S. banks, holding the lion's
'share of Latin America's debt, would have col-
lapsed, dragging a string of smaller banks down
with them.
The disruption of the U.S. banking industry
would have had such a drastic impact on the
international financial community that the world's
economy could have gone into a tailspin as it did In
the Great Depression.
Instead of urging the easy, if shameful, way out,
President-elect de la Madrid urged his predeces-
sor, Jose Lopez Pordllo, to work outs salvage
'operation with U.S. bankers and government
officials to pay off its nearly $100 billion foreign
debt.
The embodiment of this responsible policy,
then and now; is Finance Minister Jesus Silva
-Herzog. Following de la Madrid's lead, Silva
'Herzog has hewed resolutely to a policy of repay-
ing the debt through severe austerity measures.
? A ?
The Mexican people accepted the stringent cut-
backs in government services and subsidies?aus-
terity that would probably have caused major riots
In most other countries.
Silva Herzog made clear how great his people's
sacrifice had been when he told Dale Van Atta in
Mexico City recently:
The Mexican society was used to a long period
of economic and social development. . . . lEivery
year people would think that their lives would be
better than the previous year. And now, for the
first time in their lives, they have come to
confront the reality that the country is going
through a difficult period."
The finance minister noted that real wages for
Mexican workers have fallen by 25 percent or 30
percent during this period.
Silva Herzog said the solidarity of the Mexican
people has been "most stimulating for the ones
that have to make some of the difficult decisions."
Part of this is due to the leadership. In other
debtor countries?Argentina, for example?the
governments have encouraged press reports that
suggest debtor-nation cartels as a means of solv-
ing the problem by simply ignoring the "paper
difficulties" of the New York bankers.
But de la Madrid and his top officials have taken
to the airwaves and the editorial pages to preach
just the opposite answer: self-sacrifice and fiscal
responsibility to pay off the debts.
The latest National Intelligence Estimate sent
to President Reagan on Mexico makes clear the
welcome relief that de la Madrid's attitude is to
the intelligence community.
The report, .classified Secret, had this to say:
tt
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"President de la 'Madrid's'tcugh austerity meat
sures have eased., _y ?the immediate
?manrncrisis -inherited To contin
making Ptoilrees?-aeleflotadrid_wiii_have to bold
the economy on relativetnightiviali weilintd
his administration,. .4
"His.task wikno&beeasYrDe?la MadricLwill
nule pr ressureto ttadt
faster
cost contintlet! Midi :inflation ? 'exPa
fore_laftr
Mexico's precarious situation was brought on
by the drastic drop in oil prices. "We are going to
lose something between $6 billion and $8 billion of
foreign exchange annually with the oil shock."
Silva Herzog said.
He has been earnestly reminding Mexico's
creditors that the world's economy is too interde-
pendent to withstand a headlong foreclosure. He
has proposed paying part of Mexico's debt service
on the basis of the price of oil. If oil goes up, the
payments go up.
While willing to shoulder Mexico's share of the
blame for its predicament, Silva Herzog correctly
points out that "the responsibility of the debt
problem Diesj with the debtors, the banks and the
governments of creditor countries that five years
ago were very happy and applauding the capacity
of the banks to recycle the oil money then?and
are now critical of the banks because they were
'irresponsible' in their lending procedures." He
added: "It's also a responsibility of the internation-
al financial institutions." To which we say: amen.
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Declassified in Part - Sanitized Copy Approved for Release 2012/11/06 : CIA-RDP90B01390R000100070016-5
,.41* 3 WASHINGTON POST
1S. I 18 June 1986
JACK ANDERSON AND DALE VAN PITA
Mexican President Fights Corruption
Sen. Jesse Helms (R-N.C.) has taken a lot of
heat for his hearings on corruption in Mexico.
But while he may be faulted for lack of tact,
there is no denying the seriousness of the problem.
In past columns, we have exposed massive,
top-to-bottom corruption.
Privately, the Mexicans themselves acknowledge
this. The same high Mexican officials who complain
about the indignity of the Senate disclosures readily
admitted to Dale Van Atta on his three recent visits
to Mexico that corruption is a critical problem that
must be curbed.
The CIA and other U.S. intelligence agencies
recognize this as well. But in their latest National
Intelligence Estimate on Mexico. they Rive
President Mivel de In Madrid frprlit fnr fining
more than his predecessors tolightcorruption.
11flates 'sea 'he has
worked173-&-tanc?e-hiM froiself n--the e us
corruption an ? ailures of Presi , z Portillo
(1976-1982) . b included the
auin rru tion
campaign that has nced the im
formerleast one -high official and revelations o
abuses by others, and by protmting an image of
fairness, competence and proaty."
In facts the secret report suggests that the most
serious threat to deli Madrursiuovernment woula
be the poeuTar perception that he is not living up to
his cam . se of "moral renovation;
? . exicans in a nt 11 said
be? 1, ? coun s current_crisis is the
fault of corrupt or inept officials who enriched
themselves while in office the intelligence report
states. It adds: -
tbrthe influence peddling and.,
nepotism and tprofiting have historically been
satemup6ue reacheisuch excessive and
conspicuous levels during theoll boom years.that
senToratvangsverameat-stricWs as well as.,
some
griiiler?Olitg&?jajggaanft714111drelIarrent
that de la will
I
persist m anbcorrupbon gn, at - fora
while, but warned of "dangers in his proceeding too
quickly or casting the net too widely.'
As we pointed out two years ago in a series on
the high-level corruption and profiteering that were
bringing the country to its knees. Mexico's
problems have a far more direct and important
effect on the United States than those of Nicaragua
and El Salvador combined.
The Helms Foreign Relations subcommittee that
deals with Mexico had planned to hold hearings last
fall. A key Helms aide wrote a memo to the senator
listing the topics for the hearing: U.S. economic aid
to Mexico; "Mexican crimes against Americans"
(such as the murder of a U.S. narcotics agent in
February 1985), 'corruption in Mexico," "fraud in
Mexican elections: "failure of land reform" and
"religious persecution."
The hearings were postponed because of the
Mexico City earthquakes last September, and then
they were delayed further by other foreign-policy
crises: the fall of Haitian dictator Jean-Claude (Baby
Doc) Duvalier and the ouster of Philippine
President Ferdinand Marcos.
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i
N POST
?
- - .
. FRIDAY, JUNE 27,1986 C19...,
JACK ANDERSON and DALE VAN ATTA rau--.1-1-mmuims
Reagan Warned of Instability in Mexico
The Central Intelligence Agency has told
President Reagan that there is at least a
1-in-5 chance that the Mexican government
will collapse within the next five years. This
alarming judgment was delivered to the White
House two years ago, but our CIA sources tell us
that, if anything, it was an optimistic appraisal. In
the last two years, they pointed out, Mexico's
problems have grown by quantum leaps as the price
of oil has fallen and charges of election fraud have
hit the headlines.
The prediction of possible disaster was contained
in a classified National Intelligence Estimate, the
most important appraisal of a country that the
intelligence community provides a president.
The 35-page estimate began: "The Mexican
political system is under greater stress today than
at any time under 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."
It continued: "We judge that in the end the
Mexican political system is likely to remain intact."
Then came the kick in the pants:
"But the majority of the 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
Niguel) 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."
Because the estimates represent the view of all
U.S. intelligence agencies, dissent is noted. In the
case of the prediction of Mexico's collapse, the
majority of the "intelligence community principals"
agreed, but five representatives disagreed with the
CIA's pessimistic opinion.
Among those who agreed were CIA Director,
William J. Casey; U. Gen. Lincoln Faurer,
then-director of the National Security Agency;
Rear Adm. John L. Butts, then-chietof naval
intelligence, and the Treasury Department's
intelligence unit.
Disagreeing were U. Gen. James A. Williams,
Defense Intelligence Agency boss; Hugh
Montgomery, head of the State Department's
intelligence and research bureau; Gen. William E.
Odom, Maj. Gen. James Pfautz and Brig. Gen.
Larry Smith, the intelligence chiefs of the Army.
Air Force and Marine Corps, respectively. All five
have since moved on to other jobs.
The dissenters' view was given at length: 'While
Mexico will experience increased political
instability associated with extremely difficult social
and economic problems, the probability that these
conditions will reach the extreme of political
destabilization during the period of this estimate is
remote . ? .
"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 dissenters
felt this was unlikely in the near future..
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iGTON POST
10151Jak10,0 Pu-sr
. WEDNESDAY, JULY 2,1986 E21
JACK ANDERSON and DALE VAN ATTA
In Mexico, the Pols vs. the Technocrats
Mexico's serious economic problems have
brought on a crucial struggle at the highest
levels of the country's political system. The
outcome will have a great impact on the United
States, for it could decide whether our neighbor
struggles out of its desperate situation or succumbs
to violent revolution.
The battle for control of the government?and
ultimately for the hearts and minds of the Mexican
people?is between the "technicos" (technocrats)
who are now in control and the "politicos" (old-line
party bosses) who yearn to regain their old power.
The struggle has drawn close scrutiny by U.S.
analysts, and is summarized like this in the most
recent, highly classified Natibnal Intelligence
Estimate:
"In contrast to the first six presidents in the
modern Mexican system, [President Miguel] de la
Madrid and his two predecessors all rose to the top
largely by dint of their performances as regime
bureaucrats. All three appointed men of similar
backgrounds to most of their Cabinet posts, and
most of [de la Madrid's] current Cabinet
secretaries have never held elective office.
"Opposition to this trend comes from the older
generation of state and regional political bosses and
from others concerned with economic
mismanagement. One critic. . . lamented the
declining role of the old political hands and
predicted that they will have to be brought back
into positions of influence to help guide the country
through its current problems. . . . They fear that
the new class of technocrats will be unable to
maintain the support of the masses."
In other words, the party bosses will be needed
to sugarcoat the bitter pill of austerity the
technocrats have prescribed for Mexico.
"The tension between technocrats and politicians
is one that is heavily freighted with historical and
psychological baggage," the intelligence estimate
continues, "because the former bear a striking
resemblance to the 'cientificos'?the scientific ones
who came to control the country's political
economy in the years before the Revolution. That
violent upheaval had many causes, but high among
them was the arrogance and detachment from the
masses of the president and his circle of
technocratic advisers."
Even if the technocrats are peacefully ousted, it
would have serious implications for the United
States. The Harvard-educated de in Madrid is
probably the most genuinely pro-U.S. president of
Mexico in decades.
- The president's popularity is slipping, though
how widespread the slippage is cannot be
determined. The derisive whistles that greeted him
at the World Cup soccer opening?considering the
high prices of the tickets?indicated only that
middle- and upper-class Mexicans are unhappy over
his austerity program.
As for the president, a few days after his
nomination by the ruling PRI party?which has
been tantamount to election for more than half a
century?a journalist asked him if he was a
technico or a politico.
"Politicians are the ones who win the nominations
and the elections," he replied.
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