Mexico bustles with new hope

A sense of excitement permeates this great city.

Everyone you talk to - leaders of business and government, taxi drivers, clerks in the stores - exudes confidence.

In fact, the atmosphere in Mexico City is much like Brussels during the late 1980s as expectations for European economic unity and the EC '92 process began to grow.

In Mexico the rising expectations are the result of the aggressive and courageous actions by President Carlos Salinas to reform the country's economy.

Mexico's rate of economic growth has jumped from 1.1% to 2.9% during the past year. Real interest rates have fallen from more than 17% two years ago to less than 6% last year. Inflation is down from 160% in 1987 to less than 20% last year.

Foreign reserves are increasing, and half of Mexico's $94 billion external debt has been restructured. Mexico's budget deficit continues to plummet.

Efforts to diversify exports have succeeded. Petroleum, which accounted for 65% of Mexico's exports in 1983, now accounts for less than a third, even though Mexico exports an average of 1.2 million barrels of oil per day, up 100,000 barrels a day since the Mideast crisis began.

The pillars of this new success are privatization, deregulation and opening the economy to international competition, which includes closer economic ties with the U.S.

On the privatization front, more than 800 of 1,100 state-owned enterprises have been privatized since 1986 - including the telephone company and Mexicana Airlines. Banks are next on the list.

On the trade front, Mexico has cut tariffs from 40% to a maximum of 20%, and eliminated other trade barriers.

As a result, U.S.-Mexico trade has increased by 75% since 1986 and the level of U.S. exports to Mexico has more than doubled during this same period, form $12.4 billion in 1986 to $25 billion last year. And Mexico has replaced Germany as our third largest trading partner, surpassed only by Canada and Japan.

Because every $1 billion of exports generates approximately 25,000 jobs, exports to Mexico account for more than a half-million jobs in the U.S.

There are still many problems in Mexico. Unemployment is about 18%. Much more remains to be achieved in privatization and the removal of restrictions on foreign investment.

But with prospects dimming for success in the efforts to liberalize the world trading system - the so-called Uruguay Round of the General Agreement of Tariffs and Trade scheduled to be completed the first week in December - the time is ripe for U.S. business to look more closely at Mexico.

In a world of trading blocs, a North American trade group - including the U.S., Canada and Mexico - would be a formidable competitor.