Zedillo Seeks Cutbacks, Privatization
President Ernesto Zedillo on Tuesday unveiled an emergency austerity plan packed with sacrifices for business, labor and government in an effort to overcome Mexico’s worst economic crisis in more than a decade - after wresting key concessions from corporate, union and peasant leaders to hold down prices and wages despite a crushing devaluation of the peso.
In a speech to the nation seen as a major first test of Zedillo’s governing skills, the president confirmed his economic rescue plan also offers sweeping privatization of stateowned railroads, airports, seaports and the telecommunications industry.
Analysts called the move a clear attempt to lure back foreign investors, who reportedly lost billions of dollars in the week after Zedillo’s government suddenly allowed the peso to float freely against the dollar last month.
Declaring a national “economic emergency,” Zedillo punctuated his address with such words as “drastic,” “grave” and “urgent,” as he appealed for unity and sacrifice throughout Mexican society.
“We must confront it in the knowledge that (the current crisis) will mean sacrifices for all of us, without exception,” the president said, surrounded by the labor and business kingpins who ultimately agreed to bite the bullet on profits and raises during 1995. “We must face it, above all, clearly aware that it is a problem that can be overcome and that together we are going to overcome it.”
Most political analysts said Zedillo’s speech, delayed 20 hours while his economic team fought through the night to win the wage and price concessions, was an important measure of the president’s credibility and persuasiveness with key sectors of Mexican society, as well as his skill in governing through consensus.
Specifically, Zedillo’s emergency plan concedes that inflation may run as high as 15 percent in the short term, far more than the 4 percent his government predicted a month ago. But the pact he signed Tuesday with labor and big business holds wages at just 7 percent. And he projects economic growth of 1.5 percent to 2 percent, far less than the 4 percent originally predicted. But his new plan aims to cut government spending by 1.3 percent and sell key stateowned companies that were spared the initial free-market reforms of his predecessor, Carlos Salinas de Gortari.
Zedillo conceded that the devaluation, combined with the austerity plan, “will mean a drop in real earnings” for nearly every Mexican during the coming year.
The 42-year-old, Yale-educated economist profusely thanked the union and corporate presidents who gathered to hear his speech at the presidential residence for their courage and faith in signing a pact that holds minimum-wage increases at the same level they agreed to before the devaluation and prohibits sudden price increases, except on imported products.
In his nationally televised speech, Zedillo spoke firmly and with confidence in his government’s ability to manage its way out of an economic emergency that many analysts blame largely on Salinas, who stubbornly refused to devalue the peso before his term ended last Nov. 30 - despite the fact that his government was spending billions of dollars supporting it at overvalued levels.
Zedillo indicated he will not separate his emergency program from rapid rural development and his promised democratic reforms.