MEXICO: POLITICAL AND ECONOMIC OVERVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00874R000100170011-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: August 31, 2011
• Sequence Number: 11
• Publication Date: June 1, 1986
• Content Type: MISC

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June 1986
President de la Madrid is now in the fourth year of his 6-year
term. Overall, he is a good deal weaker politically than previous
Mexican leaders, and he has made little headway in coping with the
country's serious economic problems.
--Real wages declined for a fourth consecutive year in 1985 and
almost certainly will fall once again this year.
--The purchasing power of the average worker has declined
40 percent since late 1982, when de la Madrid assumed office.
--Key cabinet ministers already are jockeying to succeed the
President, business confidence in the administration is low,
and the military is seeking gradually to expand its political
role.
The sharp decline in international oil prices in the past six
months has deepened Mexico's financial problems at a time when
political pressures for debt relief have been growing.
--In recent weeks, hardliners on the debt issue, led by Budget
Minister Salinas, appear to have gained the upper hand in the
President's inner circle at the expense of Treasury Minister
Silva Herzog and other moderates.
Mexico City may calculate that a bold move on the debt front is
needed because talks with the IMF and creditor banks are stalled.
I the talks fail,
the President almost certainly will threaten unilateral action,
in our judgment.
--The most contentious issue remains the size of Mexico's public
sector debt. The Fund is also pressing the Mexicans to sell
more government-owned firms and liberalize trade and foreign
investment. De la Madrid appears willing to take modest steps
to reform the economy, as seen by the recent closure of a
publicly-owned steel mill and his decision to join GATT. In
our view, however, he lacks the political mettle to adopt the
bold reforms that would be needed to turn the economy around.
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At the same time, de la Madrid is re that postponing
reforms and taking a tougher stance on the debt issue are politically
popular.
--Such policies could help the PRI in this year's elections.
Thirteen governorships and numerous municipal offices will be
at stake later this year.
--The PRI will cede no governorships and little else to the
opposition, in our judgment
--The toughest races will occur, beginning in July, in the
northern states of Chihuahua, Durango, and Sinaloa. We believe
there is a strong potential for violence in Chihuahua, where
the conservative National Action Party (PAN) has considerable
support.
Regardless of domestic economic and political conditions, Mexico
will continue to pursue an independent foreign policy, in our view.
--We expect little softening in Mexico's firm diplomatic support
for Nicaragua's Sandinistas.
--We know that Mexico City plans to receive a visit from Soviet
Foreign Minister Shevardnadze later this year and from General
Secretary Gorbachev, in 1987.
At the same time, Mexico's leaders almost certainly would like to
maintain good relations with the United States, to which they will
look for economic assistance.
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Consumer Price Index (1970=100)
1982
1983
1984
1985
1986(2)
(2) Mexican Government Projection
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I
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Real GDP (Percentage Change)
101
5........... ...... ................................................................................................................._............
1982 1983 1984 1985(1) 1986(2)
(1) Revised by Bank of Mp-yirn (7) ato,r;,-- t'-errnant Projection
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Public Sector Deficit as a Share of GDP
1982
1983
1984 1985(1) 1986(2)
(1) Revised by Bank of Mexico (2) Mexican Government Projection
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i
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Oil Export Revenues
1978
1979
\1980 1981 1982 1953 1984
(b) Oil Prices-$12/bbl; Exports-1.25mbd
1985
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Current Amount Balance (Billions of Dollars)
a
-s
19w
1983 684 1983(1) 1986(2)
(1) Revised by Bank of Mexico (2) Mexican Goverment Projection
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Oil Export Prices
1979 1980 1951 1982 1983 1954 1985
(a) Projected
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1986(8)