Mexico's Monetary Crisis

The greatest threat to political stability in Mexico today, I
believe, is the current monetary crisis. Until the
administration of President Ernesto Zedillo identifies the
appropriate policies to stabilize the peso and avoid
uncontrolled inflation, it will be almost impossible to
address issues such as Chiapas and judicial and electoral
reform. Moreover, a prolongation of the crisis, with its
negative impact on living standards, raises the issue of labor
unrest, specifically, and societal discontent, in general. 

The inauguration of Ernesto Zedillo on December 1, 1994 as
president of Mexico appeared to open a new chapter in the
effort to modernize national politics. In his inaugural
address, Zedillo stressed the Importance of resolving
outstanding political scandals such as the assassinations of
1994; as a guarantee of transparency and he appointed as
Attorney General a member of the opposition National Action
Party (PAN). The new president called for judicial and
electoral reform and for a peaceful resolution of the year-old
insurgency in the southern state of Chiapas. He stressed the
need for transparency in government and the need to educate
and train the Mexican people. Zedillo's cabinet, drawn from
the same pool as that of his, predecessor, Carlos Salinas de
Gortari, gave the impression of competence and commitment. 

On December 20, Finance Minister Jaime Serra Puehe, the
successful negotiator of the NAFTA during the Salinas years,
suddenly announced the devaluation of the peso. In the fall
out from that decision, not shared with the international
financial community or foreign investors, Serra Puche resigned
and was replaced by Guillermo Ortiz. Ortiz had been number two
in the Finance Ministry in the Salinas government and had been
appointed as the Secretary of Communications and Transport by
Zedillo. 

Ortiz is now in charge of the government's recovery strategy.
In our opinion, until the government is successful in
stabilizing the peso, avoiding a sharp increase in inflation,
and regaining investor confidence, it will be difficult for
Zedillo to address the agenda of reforms identified on
December 1. There are three areas in which the current
monetary crisis can undermine political stability in Mexico.
The first is Chiapas; the second in the upcoming state
elections; and the third is the role of the labor unions,
their relationship to the government and the governing PRI. 

Riordan Roett, (September 10, 1938) is an influential American political scientist specialized in Latin America. He received his Ph.D. from Columbia University in Political Science and was a post-doctoral fellow at the Massachusetts Institute of Technology. He was assistant professor (1967–1973) and acting director of the Center for Latin American Studies at Vanderbilt University and is currently the Sarita and Don Johnston Professor of Political Science and Director of the Western Hemisphere Program at the Johns Hopkins University's Paul H. Nitze School of Advanced International Studies in Washington, D.C.

Dr. Roett is a member of the Council on Foreign Relations in New York and a former national president of the Latin American Studies Association. In 2001, the President of Brazil named Dr. Roett to the Order of Rio Branco with the rank of Commander. Fluent in Portuguese and Spanish, he is a renowned specialist on Brazilian, Mercosur and Mexican issues and the author of several books on Latin America’s political economy.

Dr. Roett has been an adviser to Chase Manhattan Bank. From 1989 to 1997, he served as a Faculty Fellow of the World Economic Forum at the annual meeting in Davos, Switzerland. Since 1999, Dr. Roett has served as a consultant to the National Intelligence Council of the Central Intelligence Agency. Dr. Roett is also independent director of a group of emerging market funds in New York and sits on the advisory council of CILAE (Centro de Investigación Latinoamérica Europa).

Zapatista memo
On January 13, 1995 the Chase Manhattan Bank sent a memo calling on the Mexican government to crush the indigenous Zapatista uprising, stating "While Chiapas, in our opinion, does not pose a fundamental threat to Mexican political stability, it is perceived to be so by many in the investment community. The government will need to eliminate the Zapatistas to demonstrate their effective control of the national territory and of security policy."<1> The memo was authored by Riordan Roett who claimed it was essential, from the investor point-of-view, to resolve the Chiapas issue as quickly as possible."<2> The memo was distributed just two days before Mexican president Ernesto Zedillo ordered a military (counter-insurgency) crackdown on the Zapatista rebels.