Stop the Mexico-Bashing

January 20, 1995

All the usual suspects -- the protectionists, the xenophobes, the ultra-nationalists -- are coming out of the woodwork to take another bash at Mexico. The pretext last time was the North American Free Trade Agreement, a pact already benefiting the U.S. and its neighbor. This time it is a bipartisan Clinton-Gingrich plan to provide $40 billion in U.S. loan guarantees to bolster the Mexican financial system after a crash in the value of the peso.

Ross Perot is at it again, talking about "a great sucking noise" as greenbacks pour south of the Rio Grande. This canard has as much merit as his flatly wrong warnings of huge U.S. job losses under NAFTA. The loan guarantees are equivalent to co-signing a note. Payouts would take place only in the event of default -- an exposure Speaker Newt Gingrich rates at no larger than $10 billion. A more likely outcome is U.S. collection from Mexico of a $3 billion fee for providing the guarantees.

Fortunately, Mr. Perot does not vote in Congress. Nor does TV provocateur Patrick Buchanan, who is promoting the notion that Mr. Gingrich and Senate GOP leader Bob Dole succumbed to "patriotic reflex" in supporting President Clinton on this issue. Mr. Buchanan has lined up ten House Republicans, most of them freshmen, to urge Mr. Gingrich to reverse his position.

That such smart veteran legislators as Mr. Gingrich and Mr. Dole could be taken in by Democrats they taunt day by day is laughable. If the GOP leaders have any concerns on this issue, it is that the Clinton White House will again lose control of protectionists in Democratic ranks who salute when organized labor barks orders.

Actually, quite on his own, Mexican President Ernesto Zedillo is pursuing political reforms to calm the social unrest that had so much to do with the plunge of the peso. This week he signed a historic accord with all major opposition groups to end government subsidies for his ruling party, put controls on campaign spending and require popular election of the mayor of Mexico City. In addition, he has gained a cease fire from insurgents in Chiapas by opening the prospect of reversing fraudulent election results in their state and neighboring Tabasco. If domestic protest slackens, the Mexican government will be under less pressure to engage in the profligate economic policies that contributed to the latest peso crisis.

U.S. loan guarantees for Mexico are strictly in U.S. interests, not only in developing a lucrative trade-surplus market on our doorstep but in controlling immigration. If the Mexican economy collapses, the administration estimates that the number of illegal entrants could jump 30 percent.

For these and other reasons it is clear that another prolonged NAFTA-style brouhaha on Capitol Hill would be intolerable. International financial markets are watching nervously, ready to flee the peso at the slightest sign of congressional wobble. Once reasonable conditions are agreed, Congress should act before the end of January.

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