Jorge Castaneda, a prominent political scientist and intellectual leader in Latin America, harshly criticized the reform plan of former Mexican President Carlos Salinas in a speech last night.
Castaneda, the Montgomery Fellow this term, gave his speech, "Mexican Meltdown," to a packed crowd in Cook Auditorium. He explained the reasons for the recent downfall in the Mexican economy.
When Salinas came to power in 1988, he launched massive economic reforms that Castaneda referred to as "Reaganomics in the Tropics" --privatizing state-owned industries, opening Mexico's markets indiscriminately to encourage foreign investment and increasing competition and productivity to win the support of the middle class.
Castaneda said these economic reforms are "only beneficial in out years and not at first because people lose jobs.
"The way in which you bridge the gap between short-term, unpopular medicine and long-term benefits in the midst of democratization and political reform in a non-authoritarian country is to create a stable but overvalued currency deeply dependent on the exchange rate," Castaneda said.
Castaneda said the only way Salinas could keep the currency stable and finance the increasing deficit was to sell off Mexican assets.
Castaneda said an increase in imports prevented the modernization of Mexican agriculture and industry needed to produce revenue to finance the trade gap.
"In order to create lasting and effective flow of foreign U.S. investment in Mexico, Salinas engineered [the North America Free-Trade Agreement] in 1990," Castaneda said. "The negotiations took too long because it became a U.S. election issue."
Castaneda said the recent divestment in the Mexican economy and currency devaluation was caused by the much publicized peasant's armed revolt in Chiapas, which scared off foreign investors.
The Federal Reserve's increase of interest rates, the assassinations of two political candidates, the upcoming election and the cash shortage were other reasons cited by Castaneda for the current crisis.
Current president Ernesto Zedillo had no choice but to devalue the currency, Castaneda said.
Castaneda said if Mexicans "can keep the exchange rate stable, they will be able to combat inflation and import more goods which keeps the United States content with a trade surplus in Latin America."
During questioning following the speech, former Dartmouth Government Professor Dick Sterling said Castaneda's speech did not do justice to Salinas' or Zedillos' political reforms. He challenged Castaneda's facts on inflation and corruption in the Salinas' administration.
"Professor Sterling was acting as devil's advocate when he questioned Castaneda adding spice to the discussion and giving Castaneda a forum to brilliantly defend his criticism of Salinas," said Andrea Wetzler '95, founder of the Organization of Awareness on Latin American Issues.
Unai Montes-Irueste '98, president of La Alianza Latina at Dartmouth, said, "NAFTA has had adverse effects on the Mexican economy not only because of Mexican corruption and inefficiency, but because it is controlled by Americans who really don't understand the depth of Mexico's problems and are in it for profit."
