Mexico - Reconciliation and Redistribution, 1970 76

Reconciliation and redistribution, 1970-76

Despite the groundswell of urban protest unleashed against the government, the PRI candidate easily won the 1970 presidential election. The new president, Echeverr�a, was expected to continue his predecessor's policies. Contrary to expectations, however, once in office Echeverr�a swung the ideological pendulum of the regime back to the left. The government embarked on an ambitious public relations campaign to regain the loyalty of leftist intellectuals and the young. To solidify the support of its core labor and agrarian constituencies, the PRI also launched a barrage of social welfare programs.

Echeverr�a was determined to coopt the dissatisfied elements of the middle class that had become radicalized during the 1960s. Government patronage became an important mechanism of rapprochement. Thousands of intellectuals and young leftists were given posts in the government's bloated bureaucracy, and prominent student leaders were brought into the president's cabinet. To attract support from the young--who now represented a majority of the population--Echeverr�a lowered the voting age to eighteen, and the ages for election to the Senate and Chamber of Deputies to thirty and twenty-one, respectively. In addition, he freed most of the demonstrators arrested during the raid on UNAM and the Tlatelolco massacre.

Despite warning signs of a looming financial crisis, deficit spending continued unabated throughout Echeverr�a's sexenio . The public sector's foreign debt rose by 450 percent to US$19.6 billion in six years, while the peso was allowed to become overvalued. By the end of his sexenio , Echeverr�a was facing the consequences of his administration's unrestrained spending. In August 1976, mounting currency speculation, large-scale capital flight, and lack of confidence in Mexico's ability to meet its debt repayment schedule forced the government to devalue the peso for the first time since 1954. The outgoing president bequeathed to his successor, Jos� L�pez Portillo y Pacheco, an economy in recession and burdened by severe structural imbalances. The only bright spot in an otherwise bleak economic picture was the discovery in the mid-1970s of vast reserves of oil under the Bah�a de Campeche and in the states of Chiapas and Tabasco.

In addition to providing broad subsidies for agriculture, the government embarked on several costly infrastructure projects, such as the US$1 billion L�zaro C�rdenas-Las Truchas Steel Plant (Sicartsa) steel complex in Michoac�n state. State subsidies to stimulate private and parastatal (see Glossary) investment grew from 16 billion pesos (US$1.2 billion) in 1970 to 428 billion pesos (US$18.6 billion) by 1980. Although this type of spending generated high economic growth throughout the 1970s, much of the money was either wasted in unnecessary and inefficient projects or lost to corruption. The government relied heavily on deficit spending to finance its domestic programs, incurring heavy debt obligations with foreign creditors to make up the shortfall in public revenues.

Despite his aversion to domestic communist movements, Echeverr�a became a champion of leftist causes in Latin America. He was a strong advocate of the proposed "new international economic order" to redistribute power and wealth more equitably between the industrialized countries and the developing world. Demonstrating his independence from the United States, Echeverr�a became only the second Latin American head of state to visit Castro's Cuba. In 1974 he warmly received Hortensia Allende, widow of leftist Chilean president Salvador Allende Gossens, as a political refugee from Chile's right-wing military dictatorship.

In domestic economic affairs, the Echeverr�a administration ended the policies of stabilizing development that had been pursued since the early 1950s. Echeverr�a abandoned Mexico's commitment to growth with low inflation and undertook instead to stimulate the economy and redistribute wealth through massive public-spending programs. The new policy of "shared development" was premised on heavy state investment in the economy and the promotion of consumption and social welfare for the middle and lower classes.

Under Echeverr�a, the historically uneasy relationship between the PRI and the national business community took a sharp turn for the worse. Echeverr�a's antibusiness rhetoric and the government's interference in the economy deterred new foreign and domestic investment. Although the government avoided full-scale expropriations, it increased the state's role in the economy by buying out private shareholders and assuming control of hundreds of domestic enterprises. By the end of Echeverr�a's term, the government owned significant shares in more than 1,000 corporations nationwide.

The focus of Echeverr�a's social welfare policies was the Mexican countryside. Despite ample evidence that the ejidos were less efficient than private farming, Echeverr�a resumed the redistribution of land to ejidos and expanded credit subsidies to cooperative agriculture. The government also pursued an extensive program of rural development that increased the number of schools and health clinics in rural communities. By refusing to defend rural property owners from squatters, the Echeverr�a government encouraged a wave of land invasions that reduced land pressure in the countryside but seriously undermined investor confidence.

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