When he assumed the presidency in 1982, Miguel de la Madrid Hurtado inherited a country tottering on the edge of economic collapse. An 11% drop in the price of oil coupled with spiraling interest rates had left Mexico $85 billion in debt and forced international bankers to cobble together an emergency rescue plan. The Harvard-trained De la Madrid instituted a painful austerity program that devalued the peso, sharply curtailed imports and cut government spending, including costly subsidies on basic goods and services. In an effort to stimulate future growth, he sold off some state-owned enterprises and invited foreign investment. Now, halfway through De la Madrid's six-year term, another precipitous drop in the price of oil, which is expected to cost Mexico $6 billion in revenues, and $4 billion in losses caused by last September's catastrophic earthquake have pushed Mexico back to the brink.
Last week the World Bank agreed to lend Mexico $400 million to repair earthquake damage. But the country still needs an additional $6 billion to meet payments on its now $98 billion debt. De la Madrid recently met with TIME Assistant Managing Editor Richard Duncan and Mexico City Bureau Chief Harry Kelly. During the hour-long interview, De la Madrid, 51, appeared surprisingly optimistic about his country's future. Excerpts:
On comparisons with the 1982 crisis. The impact of the drop in oil prices is much more serious now than it was in 1981-82, but at present Mexico has monetary reserves it did not have at the end of 1982. We have moved forward in the restructuring of our foreign debt, and we do not have companies on the verge of bankruptcy, as was the case in 1982. I would also say that there is not as much tension among the people as there was at the end of 1982. By that, I do not mean that people are not nervous, but the situation is not as critical.
On reducing dependence on oil. Mexico needs to develop very aggressively its capacity to export goods other than oil. We need foreign investment to increase export capacity and [to enable us] to absorb modern technology. This goal requires considerable internal efforts and a climate abroad that will encourage investments in export products. No matter how hard we try in Mexico to increase exports, if the large markets do not give access to our export goods, the investor will not feel sufficiently encouraged to make the investments.
On international cooperation. We debtor countries should do our job, but that is not enough. There is a need to achieve more effective economic cooperation. Otherwise, we will continue to go from crisis to crisis. The countries of Latin America have been setting forth these ideas. We have a consultation group, the Cartagena Group, that has pointed out the problems and indicated that they cannot be dealt with on the basis of purely commercial or business criteria, and that since the fate of many nations is at stake, political criteria should be taken into account. I believe such ideas are gradually gaining acceptance. For example, what has been called the Baker Plan[*] is based on the idea that there can be no solution to the debt problem without economic growth. This is a very important idea. What is now needed is to give it shape.