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A Tear In Mexico's Curtain Of Democracy


International Business: Commentary

A TEAR IN MEXICO'S CURTAIN OF DEMOCRACY

If there's one thing President Carlos Salinas de Gortari has sought for Mexico, it's credibility. When he took office four years ago, he boldly pledged to slash inflation, turn the government deficit into a surplus, and privatize like crazy--in short, to engineer an about-face for Mexico's battered economy. He has wooed foreign investment and negotiated a ground-breaking free-trade agreement with the world's greatest power.

That's why it's so hard to believe that Salinas has suddenly blundered so badly. At a dinner in his honor on Feb. 23, nearly 30 of Mexico's most powerful executives were presented with a proposal that most of them would find hard to refuse. Each was asked to contribute a cool $25 million to a proposed $1 billion trust fund aimed at providing Salinas' Institutional Revolutionary Party (PRI) with a permanent source of financing to help make it invincible in upcoming 1994 elections.

CLOSED DOORS. The executives didn't blanch. Most have benefited tremendously from Salinas' policies, such as his huge sell-off of state-owned assets. In attendance, for example, was Carlos Slim, a Salinas intimate and majority owner of Telefonos de Mexico (Telmex), the nation's only telephone company. Its market value has zoomed from $200 million to $26 billion since its privatization three years ago. Another was cement king Lorenzo Zambrano of Cementos Mexicanos, which has won many contracts in Salinas' drive to improve the country's infrastructure.

So when the $25 million question came up, at least one dinner guest was inclined to fatten the kitty. TV tycoon Emilio Azcarraga Milmo, whose Televisa network enjoys a near monopoly in Mexico, offered $30 million. "As long as the [Mexican] people are happy, the businessmen's investments will be safe. And the better off the [Mexican] people are, the more money the businessmen will make," says Antonio Ortiz Mena, a former finance minister.

Salinas' technocrats may have economic policy under control, and they're quite sophisticated at taking the political pulse of their northern neighbor. But this sorry episode shows that it's still business as usual when Salinas and his cronies go behind closed doors. The PRI, which has dominated the government for 64 years, has traditionally siphoned off public funds to build up a huge patronage system. At election time, money has flowed from grateful execs, who pick up the tab for buses or sound systems or that executive jet. And the PRI has always won.

Today, however, the PRI faces unprecedented challenges. Since Salinas narrowly squeaked into office in an election marred by charges of fraud, opposition parties have made big gains. Meanwhile, Salinas' privatization of big state companies has cut loose thousands of government workers who no longer pay regular tribute to the party. His stringent state spending cuts have also hampered the PRI's ability to use patronage the way it did before.

So, while the PRI still dominates, it has been forced to come up with more innovative financing. Two months ago, for example, the PRI introduced a Visa credit card to 30,000 supporters. From every purchase, the PRI gets a 0.5% cut. There's a new PRI-sponsored lottery, too, that has already pulled in about $1.3 million. Hundreds of PRI-owned billboards are now for rent, and the PRI will earn a commission on a r

Paula Dwyer in London


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