Thursday, May 24, 2001

MEXICO CITY — The peso is soaring against the dollar, foreign investment is hitting unprecedented highs in Mexico and the nation is vying for an influential world leadership position.
It all has many Mexicans worried and suspicious.
Just six years ago, Mexico displayed eerily similar signs of strength and optimism — and its currency and economy soon plunged. The boom-bust phenomenon has hit Mexico a total of four times in the last two decades.
“Theres a lot of distrust out there,” said Guadalupe Loeza, whose books have chronicled Mexicos survival through the economic ups and downs.
The latest anxiety in Mexico contrasts with assurances by outside investors that its economy is among the most attractive in Latin America.
In late 1994, the peso was climbing against the dollar, then-president Carlos Salinas jetted around the world pursuing the presidency of the World Trade Organization and foreign investors snapped up Mexican government bonds bearing high interest rates.
But the peso, propped up by the government at a time when monetary reserves were shrinking, soon crashed in a stunning reversal of fortune and foreign investors fled.
Two presidents later, Vicente Fox, who swept into office as Mexicos first victorious opposition candidate and a charismatic free market reformer, has fueled an enthusiasm among foreign investors reminiscent of the Salinas years.
Direct foreign investment in Mexico is projected to nearly double this year to $24.5 billion, including last weeks $12.5 billion deal by Citigroup to buy Mexicos second largest bank.
Riding the investment wave, the Mexican peso has advanced 7 percent from the beginning of the year.
Mr. Fox is leading Mexicos lobbying effort for a rotating seat on the U.N. Security Council, the powerful global decision-making body. He talks of Mexico taking “a protagonist role in world affairs” and stimulating economic growth as far south as Panama.
You wont hear him mention joining the industrialized “first” world, which in Mexico could stir anxious memories of the Salinas vision that came crashing down.
“Hell avoid that phrase like the plague,” said writer and pop historian Jose Agustin. “He doesnt want to make that same mistake.”
While the recent financial euphoria here can bring back memories, there are important differences — both good and bad.
The Mexican economy, which was booming in 1994, is now getting dragged down by the economic slowdown in the United States. Mexico sends 85 percent of its exports to its northern neighbor.
“You hear on the news about all the big money coming in, and you think it will create jobs,” said school teacher Briseida Gonzalez, whose $330 monthly pay wont even cover rent on a decent Mexico City apartment. “But then you talk to relatives and friends, and theyre getting laid off.”
On a positive note, Mexicos foreign reserves are now about $40 billion, compared to only $3 billion at the end of 1994.
Mexico also boasts a lower budget deficit and less debt. All of which leads experts to say the kind of debt crunch and insolvency of 1994 wont happen again.
Mexicans, many of whom lost their homes and jobs in 1994, arent buying it. “They always say that,” said Ignacio Campos, a 44-year-old chauffeur who managed back then to keep his job. “But from experience, you know it could happen at any moment.”
Mexican businesses, which export $100 billion a year, also are pessimistic. The strong peso is pushing up the price of their products abroad, hurting competitiveness.

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