TALKING POINTS FOR THE DCI

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00874R000100310002-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 27, 2016
• Document Release Date: July 27, 2011
• Sequence Number: 2
• Publication Date: August 8, 1986
• Content Type: MISC

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Talking Points for the DCI
8 August 1986
Today, some of. our more immediate concerns about Mexico's economy have eased.
It now appears that new lending, and possibly debt payment concessions, will buy-time
for President de la Madrid, allowing him to cope with his country's immediate economic
problems. Such assistance probably represents little more than a short-term palliative,
however, for Mexico City remains unwilling to adopt the politically difficult structural ad-
justments that are needed to cure Mexico's economic ills. .
The IMF Agreement
Mexico is seeking to put together a $12 billion rescue package to extend from now
until the end of 1987. The centerpiece of this package is an IMF agreement signed on
22 July. The agreement will provide $1.5. billion in Fund financing over 18 months be-
ginning in September. In addition, the program contains unprecedented contingency
measures to allow for increased external financing if oil prices fall or the economy does
not rebound sufficiently.
--The IMF agreement also features relatively easy targets for this year. For exam-
ple, Mexico's deficit as a share of GDP is targeted at 16.9 percent this year, even
though negotiations were deadlocked for months while the Fund pushed for a 5 to 6
percent level and Mexico argued for 13 percent.
--On the whole, Mexican policymakers are buoyed by the IMF agreement and, for
the time being, seem convinced that they got a good deal.
As expected, the IMF agreement has set the stage for negotiations with commercial
banks, which could begin as soon as next week.
--So far, Mexico has told bankers that it will need $6 billion--$3.5 billion this year
and $2.5 billion next year--as part of the overall $12 billion, 18-month new money
package.
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--The bank negotiations are likely to be difficult and could go on for several months
or more. The reluctance of European and smaller regional banks to increase their
exposure to Mexico at this time may prolong negotiations, but eventually most of
them will fall in line. Those opting out probably will not carry enough weight to
jeopardize the loan package.
The Longer Term is Troubling
Despite these positive developments, Mexico is clearly not out of the woods yet.
GDP is now projected to fall 4 to 5 percent this year and inflation is expected to reach
100 percent. Next year, the inflation level could reach 120 percent.
More importantly, many of the policies that are at the root of Mexico's economic
problems have not changed.
--We have seen progress on some fronts, most notably the commitment to join
GATT, but movement in other areas, for example privatization and easing of foreign
investment laws, has been piecemeal.
De la Madrid is unlikely to push hard for politically difficult structural adjustments
since he feels relatively little external pressure. In addition:
--Powerful vested interests in Mexico, such as organized labor, strongly oppose
such moves.
--De la Madrid
has adopted a 25X6
Because de la Madrid has failed to make the fundamental economic changes needed
now, his successor will inherit an economy in trouble and a public clamoring loudly for
improvements in living standards.
Today some 800,000 jobs must be created annually to keep pace with the growing
labor force. With some 50 percent of the population under 17 years of age, the pres-
sure to increase jobs will be even more intense.
Political Implications
Mexico's economic difficulties, which are likely to grow if Mexico City does not alter
its course, increasingly will translate into political ones, in our judgment. In particular,
we believe election-related and labor unrest will increase.
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--Opposition protests, so far largely peaceful, could turn violent in September when
newly-elected officials take over offices currently held by the PAN.
--Leftist parties also have been hurt by the government's election tactics. In re-
sponse, they are stepping up efforts to work together and unify.
At the. same time, organized labor, which has long been a bulwark of the regime, is
becoming a source of greater uncertainty,
--After four years of declining real wages, labor will demand higher salaries. De la
Madrid will find it hard to resist, even though he knows it will fuel inflation.
--Powerful independent unions, including the economically-vital Oil Worker's Union,
increasingly have been willing to confront the government over political as well as
bread-and-butter issues.
--Mexico's octogenarian labor leader, Fidel Velazquez, will not remain on the scene
for many more years. His departure almost certainly will weaken labor discipline
and could herald greater labor unrest.
As the government and ruling party decline in popularity over the next several years,
Mexico City probably will become increasingly repressive.
--The government can control the Church by invoking constitutional provisions that
prohibit priests from engaging in politics.
Although top military leaders have been grumbling about the government's policies,
the armed forces show no sign of changing their traditional role as a force for stability.
Mexico's longer-term prospects will depend in large part on who is named to suc-
ceed de la Madrid. A decision will be announced in late 1987 after a complicated pro-
cess of consultations in which de la Madrid will have the greatest influence.
--Key contenders now include Energy Minister del Mazo, Budget Minister Salinas,
and Interior Minister Bartlett. None is a radical, but Mexican presidents have tradi-
tionally not defined their policies until after assuming office.
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--All of the probable successors are highly nationalistic. Each is likely, as de la
Madrid has done, to regard foreign policy as a leftist preserve.
De la Madrid's successor will inherit an economy in growing trouble, a trend that
will increasingly affect the United States.
--In the years ahead, the Mexicans almost certainly will look repeatedly to the Unit-
ed States to arrange financial bailouts, 25X6
--Mexico City's strained resources will limit its ability to combat narcotics traffick-
ing and will stimulate emigration pressures.
--At the same time, the Mexicans will oppose any linkage of financial matters to
foreign policy, narcotics, or other questions.
In the final analysis, the Mexicans have no real alternative to working with the Unit-
ed States.
--Although Soviet Foreign Minister Shevardnadze will visit Mexico in September and
General Secretary Gorbachev next year, Moscow's ties with Mexico City will remain
largely symbolic.
Prepared by ALA/MCD/MX
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SECRET
National Security Council Meeting
Monday, 11 August 1986
TAB A - Agenda
TAB B - Talking Points
TAB C - Background Reading
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CONFIDENTIAL
/.,
August 4, 1986
MEMORANDUM FOR MR. DONALD GREGG
Assistant to the vice President for National
Security Affairs
MR. NICHOLAS PLATT
Executive Secretary
Department of State
MS. SHERRIE COOKSEY
Executive Secretary
Department of the Treasury
COLONEL JAMES F. LEMON
Executive Secretary
Department of Defense
MR. JOHN N. RICHARDSON
Senior Special Assistant to the
Assistant to the Attorney General
and Chief of Staff '
Department of Justice
MR. L. WAYNE ARNEy
Associate Director for National
Security and International Affairs
Office of Management and Budget
NATIONAL SECURITY CCUiNC;L
.J V s tem.. I T
90568 -'.:-
Central Intelligence Agency
AMB HUGH MONTGOMERY
Deputy U.S. Representative for
United Nations Political Affairs
REAR ADMIRAL JOHN BITOFF
Executive Assistant to the Chairman
Joint Chiefs of Staff
MR. LARRY TAYLOR
Chief of the Executive Secretariat
U. S. Information Agency
Executive Secretary
SUBJECT: National Security Council Meeting,
August 11 19
There will be a National Security Council Meeting on Mexico on
Monday, August 11, at 11:00 a.m. in the Cabinet Room. Attached
for your,. information is the agenda fop, yh),s, meeting?
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Rodney B.
3tta^lmon_
Agenda
Executive Secretary
!M I
4L:;',! r ice: y i-:L
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CONFIDENTIAL,
National Security Council Meetin
Mon ay, August 11, 1986
Cabinet Room
11:00-12:00 p.m.
Agenda
I.
II.
Introduction
Intelligence Assessment
John M. Poindexter
(5 minutes)
Director Casey
III. Policy Options
(5 minutes)
Secretary Shultz
(5 minutes)
IV.
Financial Considerations
Secretary Baker
(5 minutes)
V.
Discussion
All participants
(35 minutes)
VI.
Summary
John M. Poindexter
(5 minutes)
CONFIDENTIAr.
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10 August 1986
--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 failed to make the structural changes needed to
put their economy on a sound footing. De la Madrid apparently
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 explain why there has been a
surge of illegal aliens across our southern border. One half of
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the workforce is either unemployed or underemployed.
--The Mexicans have greatly overstated their oil reserves and are
investing little 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,
They continue to offer strong diplomatic support to
the Sandinistas.
The Mexicans are reluctant to deal with these underlying realities
because many of the problems associated with them are deeply rooted
--Nonetheless, we are convinced that de la Madrid has the political
clout to do more. At present, he is under little external pressure
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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 under-
lying issues. It may be in our interest, however, to raise some of the
tougher questions, particularly in cases where we believe the Mexicans
could do more.
--We can ask the Mexicans to adopt more evenhanded policies in Central
America and, in particular, to work to promote democracy. This may
require that de la Madrid personally provide stronger leadership in
this area.
--We can impress upon the Mexicans our desire to see them open their
economy to greater foreign investment, not just by altering regulations
but by changing their attitudes and eliminating red tape.
--We can ask them to do more on illegal immigration.
--We can inform the Mexicans they need to invest more in their oil
sector and that their present policy is penny wise but pound'foolish.
At the same time, they need to diversify their export base to protect
it from shocks associated with a volatile oil market.
--Perhaps most important, we can urge the Mexicans to do more to
reduce the Mexican Government's role in the economy-and to restore to
the private sector its rightful place. In part, this can be done
by selling off additional parastatals. 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.
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--Then too, with greater leadership from de la Madrid, the Mexicans
should be able to make greater headway on the narcotics problem.
We believe de la Madrid is sincere in wanting to stem the flow of
drugs.
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 greater foreign investment,
fails to reduce trade barriers, or does not invest more in 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.
--Clearly, therefore, it would appear prudent to address some of the
underlying realities during de la Madrid's visit and, more generally,
to consider how they might affect US economic and security interests
not just at present but in the years ahead.
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Talking Points for the DCI
8 August 1986
The financial bailout Mexico is getting from the IMF and the banks, which will total
around $12 million through 1987, will ease Mexico City's immediate financial concerns,
but will provide only a temporary respite.
--The terms of the IMF agreement are lenient and will not force the Mexicans to
make the structural adjustments needed to put their economy on sound footing.
Mexico City has made a few moves to reform its economy in recent months. Most
notably, it has closed a government-owned steel mill and negotiated entry into GATT. It
is considering selling the two publicly-owned airlines.
--We believe that these measures are largely being taken to convince external
creditors that Mexico is deserving of greater financial support.
--Such moves are politically difficult and de la Madrid is unlikely to push hard for
additional reforms if, as is likely, they prove unpopular.
More generally, de la Madrid is trying to muddle through to the end of his term in
1988 without facing a new economic crisis or major social unrest.
--He knows that the popularity of his ruling party is waning.
In Washington, however, he will emphasize positive developments. De la Madrid will
blame financial problems on the plunge in oil prices and assert that his government is
acting responsibly.
--He will underscore his commitment to combatting drug cultivation and narcotics
trafficking. We believe this commitment is genuine, and it is likely to be reflected in
greater action in the weeks ahead, although progress in this area will be slow.
--De la Madrid will avoid Central America, fearing US pressure to change his pro-
Sandinista diplomacy.
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W shington. D.C 20505
DIRECTORATE OF INTELLIGENCE
18 July 1986
Mexico: Prospects for GATT Entry and Compliance
Summary
Mexico City is moving toward GATT entry this summer, downplaying longstanding
domestic objections to membership. We believe President de la Madrid has decided
GATT membership is in Mexico's best interests and, unlike his predecessor in 1979,
will push the necessary legislation through the political system, probably allowing little
or no further discussion with groups still opposed to its passage. In our judgment, de
la Madrid almost certainly is counting on GATT entry to serve as a sign to the
international economic community of Mexico's willingness to initiate economic
reforms. In return, Mexico is likely to begin pushing for greater access to US markets
and new foreign loans.
petroleum revenues to boost economic growth.
Mexico City's changing attitude toward the treaty over the past year, in our
judgment, stems largely from the realization that the country no longer can depend
most knowledgeable Mexicans agree the country's prospects for economic
recovery depend to a large extent on boosting nonpetroleum exports. However, we
believe domestic expectations for immediate benefits and trade
concessions--particularly in separate bilateral talks with the United States--are
unrealistically high.
Mexico, making it more difficult for the President to sell GATT membership.
the international financial community would precipitate a nationalistic reaction within
Even with domestic support, we expect Mexico will have some difficulty
complying with some of the provisions of its GATT agreement, particularly elimination
of its controversial official pricing system. In addition, although Mexico City seems
positively inclined toward the treaty, the process could still be sidetracked if debt
negotiations with the IMF or international bankers become stalemated. A rebuff from
Middle America-Caribbean Division
This memorandum was prepared byl the Office of African and Latin
American Analysis. Information available as of 18 July was used in its preparation.
Comments and queries are welcome and may be directed to the Chief, Mexico Branch,
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Laying the Groundwork
At the beginning of his term in office, President de la Madrid provided clear sign s
of his seriousness about liberalizing Mexico's protectionist trade regime to make Mexican
goods more competitive internationally. The President's official and publicly proclaimed
program hinged on eliminating regulatory barriers, maintaining a competitive exchange rate,
and moving toward entry into GATT to obtain more favorable terms from Mexico's major
trading partners. His trade initiatives also projected a move from import licensing to
tariffs, which he eventually planned to reduce in compliance with GATT regulations.
During his nearly four years in office, the President has made progress, but it has
been forged as much by outside pressure as by voluntary action. Pressure from the IMF
caused de la Madrid to eliminate some of the more onerous regulations imposed by former
President Lopez Portillo. Permit requirements have been discontinued for about 90 percent
of exports, and most export tariffs have been reduced or eliminated. Further compelled by
the IMF, the President announced in early 1985 that Mexico would liberalize its import
regime by removing import license requirements for a number of products. This was
followed up in July 1985 by the elimination of licenses for 90 percent of all import items.
A need to compensate for falling oil export revenues over the past year added
impetus to de la Madrid's nonpetroleum export drive, according to the US Embassy. In
November 1985, he announced Mexico would begin serious negotiations with GATT
member countries in preparation for entry this summer, in time to participate as a full
member in a new round of negotiations to be launched in September in Uruguay. De la
Madrid moved quickly to consolidate support for entry within the National Chamber of
Deputies, despite complaints from Mexico's national labor union and private business
organizations. The President also publicly affirmed that Mexico was negotiating a $500
million World Bank trade liberalization loan that would be contingent largely on GATT entry.
These announcements were accompanied by moves to make Mexico's exchange rate more
competitive, a verbal commitment to begin removing official reference prices on imports,
and tariff reductions on a number of items.
Marketing GATT Domestically
Anticipating a negative reaction from domestic labor and some business
organizations, President de la Madrid and Commerce Secretary Hernandez over the next
several weeks probably will try to manipulate public opinion by spearheading a nationwide
campaign to highlight the benefits of joining GATT and concessions obtained in
negotiations. They are likely to point out that entry in August would allow Mexico to join
other developing nations this fall in pressing for greater access to developed country
markets. Mexico City already has joined a 'Group of 20' developing countries in
formulating an agenda for the upcoming trade negotiations, providing further evidence of
Mexico's intention to join. Secretary Hernandez also is likely to stress that Mexico City
successfully argued for developing nation status and special protection for the country's
agricultural and energy sectors.
We also expect Mexican officials to soften?resistance to GATT entry by domestic
industries by committing the government's help to ease the transition. Some evidence of
such 'a commitment is already occuring. Mexico City has publicly announced it will spend
almost $5 billion dollars as part of a concerted effort to promote exports of nonpetroleum
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products. According to Secretary Hernandez, the program will concentrate on loans to
increase production, export competitiveness, and imports of raw materials and industrial
equipment. The Commerce Secretary also has vowed to reduce or remove taxes and
duties that make Mexican products less competitive abroad. Changes in foreign exchange
rules also are slated to allow exporters to use 100 percent of the foreign currency earned
from sales to pay for imports.
We believe President de la Madrid almost certainly will meet privately with prominent
business leaders concerned over GATT entry to allay fears their companies may be shut
down by competition from cheaper foreign products. He is likely to stress that Mexico City
will continue to apply taxes and surcharges on imports that directly compete with domestic
goods. We expect the President also will promise to push for justification under GATT
regulations for import quantity restrictions in areas where companies become threatened.
Prospects for Passage
There appear to be no major obstacles to joining GATT this summer, according to a
wide variety of US Embassy sources.
Now that GATT members have signed the agreement, Mexico City will have until
15 August to declare its readiness to join. We believe
that Mexico City probably will sign the agreement next month in order to
become eligible to participate in the upcoming round of trade negotiations. ~
Mexico's change in attitude toward GATT entry over the past year
stems largely from the realization that the country no longer can depend
on petroleum revenues to boost economic growth. In 1979, in the midst of an oil boom,
former President Lopez Portillo could easily afford to declare Mexico's prospective GATT
protocol unacceptable because it would impinge on the country's ambitious development
plans. Now, however, de la Madrid has stated Mexico's prospects for development depend
almost exclusively on boosting sales of nonpetroleum products. With domestic demand
plummeting in the midst of a major recession, Mexican businessmen have told US Embassy
officials that they have little alternative but to seek foreign markets for their goods.
Even though many Mexican entrepreneurs have complained that the President has
moved more rapidly than expected, local business leaders, in general, support entry into
GATT. The strongest private sector support for GATT membership comes from the large
manufacturers in Monterrey, Mexico's biggest industrial city. Many are operating well
below capacity and are counting heavily on government export loans and the opening of
new overseas markets. On the bilateral front, we believe that a number of companies are
depending on GATT entry to help gain favorable trade conccessi.ons .fjom Washington.
Opposition to entry by small and medium size firms in the agriculturally-based Guadalajara
area may have been at least partially neutralized by strong language in the GATT
agreement protecting Mexico's agricultural sector, according to the US Embassy.
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Complying With Tough Entry Terms
President de la Madrid has agreed to a much stricter interpretation of GATT principles
than his predecessor, Lopez Portillo, had negotiated in 1979.F
Even though Mexico City initially
pushed for broad exceptions to GATT rules for nine of Mexico's economic sectors,
Mexico eventually accepted the standard terms of accession,
with exceptions only for agriculture and energy. The only other concession Mexico gained,
according to the draft protocol for Mexican accession to GATT, was specific note of the
country's present status as a developing country. This allows Mexico to apply quantitive
restrictions on imports if they threaten domestic industries, the country's foreign reserve
position, or implementation of the government's National Development Plan or its sectoral
and regional programs.
In our judgment, Mexico City probably will attempt to comply with most of the basic
terms required of GATT members. Mexico will find it relatively easy to stay within the 50
percent tariff ceiling imposed by the accession agreement--most of the country's tariffs
already are at or below this level. The government already has gone far toward reducing
the number of items requiring import permits. We believe, on the basis of US Embassy
reporting, Mexican Government officials probably will argue that the
remaining permits--controlling about one-third of the value of total imports--are needed
to protect domestic industries from excessive competition. Mexico almost certainly will
take advantage of the extended time period--until 1990--allotted to reduce taxes and
surcharges on imported goods.
Despite a general willingness to conform to GATT regulations, de la Madrid will have
difficulty making progress in some areas. In our view, Mexico City is unlikely to keep its
reluctant promise to eliminate its controversial official pricing system--a mainstay of the
government's import restriction policy--over the next 18 months. The government still
depends greatly on official prices to keep imports from undercutting domestic industries,
and has indicated to local businessmen that it will continue to use pricing yardsticks,
according to the US Embassy. By the same token, the six-month time limit agreed to for
adherence to four nontariff barrier codes (licensing, customs valuation, antidumping, and
standards) and to initiate negotiations for accession to the code for subsidies and
countervailing duties, in our judgment,will be difficult for the government to meet.
Domestic business demands for subsidies and customs protection almost certainly will
cause officials to continue practices in these areas that are contrary to GATT principles.
Mexico City, even at this late stage, still could change its mind at the last moment
and refuse the GATT entry offer presently being voted on by member countries in Geneva.
Should negotiations with the IMF or international bankers be stalemated, Mexico probably
would be tempted to use GATT entry as a negotiating pawn. De la Madrid almost certainly
would argue that Mexico could not be expected to proceed further with import,
liberalization without inflows of new money to finance the resulting increases in foreign
purchases. A final rebuff from the international financial community probably would
precipitate a nationalistic reaction within Mexico, making it exceedingly difficult for the
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President to be seen as submitting the Mexicans to the dictates of the developed
countries--particularly the United States--by joining GATT. In such a case, de la Madrid
could choose to throw the issue open for public discussion--as Lopez Portillo did in
1979--encouraging groups within Mexico to publicly oppose GATT entry.
Implications for the United States
If de la Madrid does proceed with plans to join GATT, he is likely to present Mexico's
membership to foreign creditors and government officials as a significant sign of his
country's seriousness about economic reform.
Mexico City almost certainly will use GATT entry to push for greater access to US
markets. Officials are likely to argue that US pressure to accede to GATT will impose a net
burden on Mexico and that it, therefore, should be compensated for reversing its trade
policies. Mexican negotiators probably will try to capitalize on US interest in Mexico's
GATT entry by pushing for liberalized treatment of Mexican exports of winter vegetables
and fruits, a relaxation of restrictions on meat and textile shipments, or improvement in the
US GSP program, especially in the competitive need limitations.
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A. Hughes (Commerce)
D/DCI-DDCI Executive Staff
DDI
O/DDI
LA/NIO
A. Vila, Commerce
M. Coile, Commerce
C. Klein, USTR
T. Bennet, USTR
N. Lee, Treasury
NIC/AG
PDB Staff
C/DDI/PES
DDI/CPAS/ISS
D/ALA
ALA/PS
ALA/Research Director
CPAS/IMC/CB
D/OGI
C/SRD/OGI
C/PRB/OGI
C/MCD
C/MX
MX Files
' ~~ Declassified in Part -Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874R000100310002-6
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874ROO0100310002-6
The Director of Central Intelligence
Washington, D.C. 20505
National Intelligence Council
NIC 03684-86
6 August 1986
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM: Robert D. Vickers, Jr.
National Intelligence Officer for Latin America
SUBJECT: Scheduled NSC Meeting on Mexico
1. The purpose of the scheduled NSC meeting on Mexico on 11 August is
to discuss longer-term policy options towards Mexico and to better
coordinate such options within the Administration. The recent IMF agreement
with Mexico and the decision by the US Treasury and Federal Reserve to
support additional lending will only buy time for Mexico's troubled
political and economic system. There is concern within the NSC and State
Department that this support does not force Mexico to take any hard actions
to revamp its economy. Without fundamental changes and reforms, Mexico is
likely to go from economic crisis to economic crisis, each time requiring
large US and international bailouts.
2. The last NSC meeting on Mexico was held in 1982 shortly after the
initial massive US bailout of the Mexican economy. At that time, the NSC
participants were optimistic that as a result of our assistance, we could
expect greater efforts on the part of the Mexican government to reform its
economic and political system, opening them up to greater competition. In
particular, the Administration was hoping that Mexico would allow greater
initiative to private enterprise and open up the country to more foreign
investment. Unfortunately, this has not been the case, and four years later
Mexico still has failed to make the basic reforms necessary to revamp the
economy.
3. The IMF agreement allows Mexico to pursue a policy of economic
stimulation and growth rather than a policy of austerity, and sets economic
guidelines which the Mexicans are unlikely to meet. Without opening up
their economic system to increased competition and foreign investment, the
Mexicans are likely to stimulate growth through greater government spending,
higher inflation and.larger budget deficits. This may buy de la Madrid the
political and economic support he needs to take his party into the 1988
Presidential elections, but it is unlikely to address the more fundamental
problems within the system and will risk continued political and economic
instability.
Robert D. Vickers, Jr.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874ROO0100310002-6
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874R000100310002-6
SUBJECT: Scheduled NSC Meeting On Mexico NIC 03684-86
DISTRIBUTION:
1 - DCI
1 - DDCI
1 - ER
1 - D/Exec. Staff
1 - AC/NIC
1 - VC/NIC
1 - NIO/Econ
1 - NIO/LA
NIO/LA/RVickers/MM
6Aug86
Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874R000100310002-6
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874R000100310002-6
Declassified in Part - Sanitized Copy Approved for Release 2012/01/30: CIA-RDP91 B00874R000100310002-6