DCI TALKING POINTS NSC RE MEXICO 11 AUGUST 1986, 11:00

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00874R000100310001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: July 27, 2011
• Sequence Number: 1
• Publication Date: August 11, 1986
• Content Type: MISC

Sanitized Copy Approved for Release 2011/07/27: CIA-RDP91 B00874R000100310001-7
DCI TALKING POINTS
NSC re Mexico
11 August 1986, 11:00
phi 25X1
11 Aug 86, 0745
We believe that in his Washington visit President de la Madrid will want
to emphasize positive developments in Mexico and keep critical underlying
realities off the table and invisible.
Chief among these realities are these:
-- Mexico's economic problems did not begin with the recent collapse
of oil prices. The Mexican government began stimulating the economy two years
ago in anticipation of mid-term elections. It would have been in financial
trouble even had oil prices not declined.
-- The new $12.billion rescue package the Mexicans are putting
together, of which the IMF agreement is the centerpiece, is a short-term
palliative, not a long-term cure. Mexico City will be back seeking additional
financial help in 1988, if not sooner.
The Mexicans have not been ready to make the structural changes
needed to put their economy on a sound footing. We believe de la Madrid
understands what is needed but with a few exceptions--negotiating entry into
GATT, closing down a bankrupt steel parastatal, and talk of additional airline
divestitures--has yet to bite the political bullet. Moreover, we believe
that these moves are largely intended to satisfy Washington and international
creditors and that the pace of reform will grind to a halt late next year when
a new presidential campaign season opens.
-- Poor economic conditions in Mexico contribute heavily to the
continuing and growing surge of illegal aliens across our southern border.
One half of the workforce is either unemployed or underemployed.
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-- The Mexicans have greatly overstated their oil reserves, are
using them inefficiently, and not investing enough in exploration. Yet
oil is the backbone of the economy. In recent years it has generated over
70 percent of export earnings and 45 percent of national revenues.
-- Little progress has been made on the narcotics front, despite
de la Madrid's personal commitment.
-- The Mexicans stopped selling oil to Nicaragua last year, but
they continue to offer strong diplomatic support to the Sandinistas. Their
Foreign Minister is in the"lead in pushing fora Contadora agreement which
would facilitate consolidation of the Sandinista regime.
The Mexicans are reluctant to deal with these underlying realities
because many of the problems associated with them are deeply rooted or would
require more political capital than the present administration is able or
ready to use.
-- If the de la Madrid administration continues to look for temporary
"fixes" rather than long-term solutions, it will be increasingly difficult to
bail them out.
-- we nei~eve tnat ae is Maaria has the poiittca~ gout to do more,
At present, he is under little external pressure to reform
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For this reason, the Mexicans want to highlight positive aspects of
bilateral relations in Washington and to avoid the more contentious underlying
issues. There are some areas where we believe the Mexicans could do more to
ease their next crisis and develop greater credibility to meet it.
-- They can adopt more evenhanded policies in Central America and,
in particular, support efforts to promote democracy in Nicaragua. This would
require that de la Madrid personally provide stronger leadership.
-- The Mexicans can take steps to open their economy to greater
foreign investment, not just by altering regulations but by changing their
attitudes and eliminating red tape.
-- They can do more on illegal immigration.
-- They can develop ways to bring foreign investment and talent
into their oil sector. They can take steps to diversify their export base
to protect it from shocks associated with a volatile oil market. Brazil, all-6-ou~ ~
o~~l ex~or~e~~ b,~s ber~e~~~e-~J ~y di~erS~~~d~ its ~~Qori's?.
-b~-d~xtie~.
-- They can show a will to reduce the Mexican government's role
in the economy by selling off additional state companies. A bolder move,
such as returning banks nationalized in 1982 to the private sector, would
require even greater political courage but would clearly signal a policy
shift of the kind necessary to get the attention of its creditors.
-- With stronger leadership from de la Madrid, the Mexicans can
make greater headway on the narcotics problem. We believe de la Madrid is
sincere in wanting to stem the-flow of drugs.
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Finally, one of the underlying realities of the Mexican situation is that
many, if not most, of their difficulties are interrelated.
-- If Mexico does not open its economy to greeter foreign investment,
~~
fails to reduce trade barriers, or does not invest more ~ its oil industry,
for example, its economy will suffer.
=-- If the economy declines, in turn,. more Mexicans will emigrate
to the United States, whether legally or otherwise. In addition, a greater
number of Mexicans will enter the drug trade, and the .potential for political
instability will rise.
-- Unless these underlying realities are. addressed by the Mexican
government, our economic and security concerns to the south will be intensified
and both we and the Mexicans will have an even greater set of problems..to
confront in the next round. _
25X1
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 Sanitized Copy Approved for Release 2011/07/27 :CIA-RDP91 B00874R000100310001-7
Sanitized Copy Approved for Release 2011/07/27 :CIA-RDP91 B00874R000100310001-7