Mexico's woes are our worries

There's an old saying among Mexicans: "Poor Mexico! So far from God; so close to the U.S." This view reflects Mexico's long-standing vulnerability to the U.S. that began with our annexation of Texas in 1845. In the ensuing half century, the U.S. seized nearly half of Mexico's national territory. When the Great Depression hit the U.S. in the 1930s, Mexico's employment, export earnings and GNP plummeted. Since that tune, the economies of the two nations have become increasingly intertwined.

Today, Mexico is in trouble. The peso fell 40% in one month. There is a census of confidence among foreign investors -- not only in Mexico but with other "emerging markets" in Latin America and Asia. The Republican Congress and the Clinton administration are now working on legislation to prevent a serious and prolonged economic crisis in Mexico. A key element is a $40 billion U.S. loan guarantee for Mexico. It's in America's interest to stop the hemorrhaging as soon as possible. Reason: The relationship between the U.S. and Mexico is a two-way street. We are mutually vulnerable.

Consider the economic aspects: Mexico is our third largest trading partner -- behind Canada and Japan (and is close to overtaking Japan). More than 700,000 U.S. jobs depend directly on exports to Mexico. Border states like Texas ($13 billion in exports) and California ($5 billion) have a huge stake in the Mexican market -- as do others, such as Michigan ($6 billion). States such as Arizona and New Mexico sell up to 20% of their exports to Mexico so that economic problems in Mexico will cause job and income losses in the U.S. In today's global economy, when Mexico catches a cold, we sneeze. Like it or not, we are stuck

Consider the demographics. If Mexico's economy goes into the tank, illegal immigration to the U.S. could explode by more than 30% -- which means an additional 500,000 economic refugees in the U.S. this year. As a Mexico City lawyer -- friend said to me over
the weekend, "If Congress says 'no' on the loan guarantees, Gov. Pete Wilson of California will need a Proposition 374 -- twice as strong as Prop. 187 -- to keep the illegals out."

This interdependence between the U.S. and Mexico is not because of NAFTA -- the recently ratified North American Free Trade Agreement. It's actually the other way around: NAFTA exists because of the economic interdependence of our two nations -- an
example of public policy rushing to catch up and codify what is already happening through informal, cross-border regionalism.

Today, a problem in one country is a problem for the other. A 2,000-mile common border and the information revolution, which permits Mexican farmers and laborers to know everything that is going on across the border, including prevailing wage rates for immigrants in California, Arizona, New Mexico and Texas, are powerful reasons why Americans must be attentive to developments in Mexico.

The loan guarantee agreement needs tweaking, in part. to make sure that Mexico continues its economic reforms, including privatization and deregulation. But this "ounce of prevention" also needs to be supported by members of Congress in both parties. If it isn't, the emerging North American community -- including U.S. wage earners and border towns in the Southwest -- will be losers.