MEXICO CITY -- Two months ago, just as Mexican leaders began proclaiming that the nation's economy was on the mend, Juan Dominguez finally gave up on his small business and joined the growing ranks of street vendors.
"The situation is very critical," Mr. Dominguez said as he waited on the back of his pickup truck for customers to buy his mangoes, melons and other fruit.
"I had to do something. Everyone is just trying to survive," said Mr. Dominguez, who closed a fruit kiosk in a Mexico City market because he could not afford the $100-a-month rent. Now his sales average $6 to $8 daily, he said, just enough to buy food.
From the exponential increase in sidewalk vendors -- a sign of rapidly rising unemployment -- to the proliferation of "For Rent" signs in closed businesses on the major avenues of the capital, Mexico's economic crisis is hitting home and hitting hard.
Dozens of Mexicans -- from business executives and professionals to small merchants and peasants -- say this is the most severe economic crisis in memory. Times are far worse than after the 1976 devaluation, the 1982 debt crisis and the last abrupt devaluation in 1987. Most everyone expects the economy to get worse before it gets better.
The latest crisis comes on the heels of what foreign investors considered the glory days of Mexico, with billions of dollars finding their way to Mexico City's stock exchange. But when some foreign and domestic investors became worried about the overvalued peso, capital flight set in and forced the Dec. 20 peso devaluation.
Within weeks, the government imposed a severe austerity program to curb inflation by slashing government spending, increasing interest rates and raising taxes. More government cuts have followed, and Mexico has plunged into a recession that could mean the economy will shrink by as much as 5 percent this year.
Mexican finance officials say their austerity program is working, pointing to the lower inflation rate in July, higher foreign reserves, growing trade surplus and punctual payment of more than $20 billion in high-interest government bonds seven months after the peso devaluation.
"This is the most painful, but the best medicine we can apply to meet the objectives," said Alejandro Valenzuela, the Mexican Finance Ministry's official spokesman for the economic program.
Comparing Mexico's economic ills with ailments is frequent in Mexico these days.
Political commentator Raymundo Riva Palacio repeats the cruel joke circulating in Mexico: "The treatment may be right, but will the patient survive?"
From opposition parties to business leaders, many are calling for the government to reactivate the economy to speed recovery.
"We are on top of a bomb that could explode at any moment," warned Diego Fernandez de Ceballos, former presidential candidate of the conservative opposition, the National Action Party.
While the government has managed to meet its financial obligations to foreign investors -- earning President Ernesto Zedillo's team plaudits in Washington -- Mexican commerce is collapsing.
Companies went heavily into debt in the past three years to expand their production for the economic boom expected from the North American Free Trade Agreement.
But after the devaluation, domestic interest rates rose from 30 percent to more than 120 percent. They now hover at about 60 percent. Many home and business owners have been forced to sell their property to pay off their debt. Banks are even planning their first auction of defaulted property.
"We are plunging the Mexican economy into a recession the dimensions of which already surpassed the 1929 crisis in the United States," said economist Jose Luis Calva, who is with the National University. "We are standing before a graveyard of companies."
Everywhere, the pain is evident:
Economic activity tumbled 14 percent in April compared with the year before.
Mexican farmers reaped only 4.5 million tons of grain during the winter growing season this year, 60 percent below the 11.5 million-ton production in 1994. Strapped by overdue loans and financing costs that rose 400 percent, with no hope of higher grain prices, many farmers chose not to plant. A deep drought cut yields among farmers who did plant. Estimates of the summer harvest are 40 percent lower than last year.
Domestic sales have dropped at least 50 percent since the start of the year, with new car sales plunging by 70 percent from 1994.
The amount of money in circulation has been cut in half under the austerity program imposed as a condition for the Clinton administration's $20 billion bailout.
Unemployment levels are the highest in modern times. Even government officials have conceded that layoffs will reach more than 1 million this year.
With inflation on the rise and wages held firm, the minimum wage is one-third lower than it was at the beginning of 1982.