From bad to worse in Mexico

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From bad to worse in Mexico: As fearful Americans stay home, already shaky economy shrivels

10/04/2001

By LAURENCE ILIFF / The Dallas Morning News

CANCUN, Mexico – Once, the top problem in Mexico's tourist haven of Cancún was a round-the-clock crowd of half-naked Americans partying in the streets and breaking all the rules.

Now, since the Sept. 11 terrorist attacks on the United States, the problem is that Americans on permanent spring break have all but disappeared and hotel occupancy has plunged. Locals want them back.

"Without the Americans, this place is dead," said Perkin Contreras, 22, who steers clients into a beachfront club and has seen his weekend earnings drop from $150 to $30. "I don't even know what to tell my wife at night."

The economic downturn in Mexico began before President Vicente Fox took office Dec. 1, and few are blaming it on the new president. But last month's events in New York and Washington are likely to plunge the country deeper into recession.

Across Mexico, the euphoria that came with last year's election of Mr. Fox, the nation's first president from an opposition party, is waning.

Mr. Fox's promises of rapid economic growth and a more open border with the United States now sound like a pipe dream as a litany of bad news fills TV newscasts and newspapers' front pages. Even his response to the U.S. attacks was criticized in some Washington circles as lukewarm. In response, Mr. Fox is scheduled to meet with President Bush in Washington on Thursday.

Some here are hoping that Mr. Fox can use his friendship with Mr. Bush to persuade the United States not to abandon Mexico after having earlier applauded its democratic transition and economic policies. Already, talk of easing immigration rules has been put on a back burner as the United States has turned its attention to the war on terrorism and its own increasing economic problems.Layoffs, recession, budget cuts and tighter borders are hardly what Mr. Fox expected in the first year of his administration.

"It's a historical irony that the end of the U.S. boom has coincided with the arrival of democracy in Mexico," said Lorenzo Meyer, a historian at the Colegio de México. "Now nobody knows when a U.S. recovery will come. And what's bad in the United States is worse in Mexico."

From the weakening money magnet of Cancún to the formerly booming factories of Ciudad Juárez, a new casualty is emerging south of the border: hope. "Rather than getting better, the economic situation has just gotten worse day after day," said Berenice Masareigos, 22, who was working in a mostly empty gift shop in Cancún. "We're talking about single mothers who've lost their jobs and can't pay their rent. The attacks were terrible for the United States, but they are also hurting us, too."

The local hotel association puts the number of layoffs at 7,000, excluding the ripple effects that have idled taxis and emptied restaurants. Local newspapers peg the total job loss closer to 50,000.

Americans make up nearly two-thirds of Cancún's visitors, and their absence sent hotel occupancy plunging by 20 percent, leaving the beaches to an older group of Canadians, South Americans and Mexicans.

Despite the economic downturn, Mexicans can still take pride in their emerging democracy, greater press freedom and a plural Congress, some here said.

"I think we're still very happy with the change in government, and I don't think we are feeling desperate yet," said Guadalupe Loeza, a newspaper columnist. "But we are also very worried."

It's easy to see why. Dollars that poured in from world-class tourism, booming exports, foreign investment and plentiful oil are slowing as fearful Americans stay home and pinch their pennies.

Many experts recommend that Mexicans jettison their hopes for turbo-charged development and hunker down for hard times. Mr. Fox's campaign promise of 7 percent economic growth yearly is facing the cold, hard reality of a shrinking economy and the fear that the United States' still-undefined war against terrorists could make things even worse.

"There has been a radical change from what we were expecting just a few months ago," said Raúl Feliz, an economics professor at the Center for Economic Research and Teaching in Mexico City. "There's a huge gap between what people were hoping for from the economy, and what they're actually going to get."

The shift represents more than just another headache for the Mexican president, political analysts say. Mr. Fox, who defeated a political party that had ruled Mexico for 70 years, has maintained high approval ratings by offering people a brighter future.

This year, however, as many as 500,000 people have lost their jobs nationwide. The economy has contracted for three quarters in a row, with no recovery in sight.

Mexico is dependent on the United States, which buys nearly 90 percent of the nation's exports, economists say. And even the brightest spots in Mexico's economy, such as tourism and manufacturing, are taking a hit.

Like picture-perfect Cancún, Mexico's northern border with the United States has been a land of steady job creation through maquiladora assembly plants.

A year ago, companies such as Panasonic, General Electric Co. and Sony Corp. competed for workers, offering benefits that included free transportation, subsidized meals, and signing bonuses, even as salaries remained low.

This year, however, 100,000 maquiladora jobs have been lost – nearly 10 percent of the total.

"We are hanging by a thread, and we don't know what's going to happen next," said Horne Jiménez, who assembles auto parts for Delphi Automotive Systems Inc. in Ciudad Juárez.

In Guadalajara, foreign-owned factories have thrived for years by pumping out gadgets from laptops to personal digital assistants for U.S. consumers. But those plants initiated layoffs even before the Sept. 11 attacks because of the slowing U.S. economy. Their future seems even darker now.

In Monterrey, some locals take pride in their city being more like Texas than like Mexico City. But the grim outlook in the United States has generated anxiety in the business community, which usually exudes a can-do optimism.

"People are scared because of all the uncertainty," said Fernando Villarreal, director of the Manufacturing Chamber in Monterrey. "The industrialists here are born exporters, and their market is the United States."

The best hope for Mexico, many say, is Americans' resolve to not live in fear.

Sharon Armstrong, 31, of Lincoln, Neb., was proudly wearing a "God Bless the U.S.A." T-shirt while honeymooning in Cancún. She said the number of Americans vacationing here had increased during her weeklong stay.

Her husband, Justin, 28, a police officer, said there was no doubt that U.S. vacationers would be back. "Let's get back to normal," he said.

Staff writer Brendan M. Case in Mexico City, and KHOU-TV/Houston's Mexico City bureau chief Angela Kocherga in Ciudad Juárez contributed to this report.

http://www.dallasnews.com/attack_on_america/economic/stories/487616_mexico_04int.A.html

-- Martin Thompson (mthom1927@aol.com), October 03, 2001


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