Why some prefer Zapata to Nafta: The Mexican miracle was always flawed. Larry Birns and John Nagel explain

THE UPHEAVAL in the southern state of Chiapas has devastated Mexico's carefully crafted image of an emerging democratic candidate for First World status. And the irresistible re-emergence of Old Mexico in the form of the peasant rebellion has more than a little embarrassed politicians in the three signatory nations of the North American Free Trade Agreement. Undoubtedly, this one event will be chilling the deliberations of multinational corporations as to whether to make major investments in Mexico.

In the past two years more than dollars 100m ( pounds 69m) has been spent in Mexico, Canada and the United States on a public relations campaign touting Nafta and lauding Mexico's model modernisation. But last weekend's insurgency by hundreds of Indians in the highlands of Mexico's most benighted region represented far more than an opera bouffe uprising of gun-toting banditos. Rather, it was an act of desperation by descendants of the ancient Mayas who for centuries had been exploited by their Spanish overlords and, once the country became independent, alternately neglected or brutalised by central government. In effect, the revolt reminded the world of some of the uglier realities behind Mexico's tarted-up image.

Nominally the brainchild of Mexico's President Carlos Salinas de Gortari, Nafta was of US rather than Mexican paternity. Essentially, the idea was to repackage International Monetary Fund-World Bank austerity measures of the Eighties as a development model for the Nineties and beyond. The Bush administration's 'trade, not aid' formula particularly targeted Mexico because Mr Salinas was unusually hospitable to the approach, and already was offering US and other foreign financial investors almost concessional terms, along with the region's largest inventory of public enterprises for possible takeover. To attract overseas capital, Mexico promised to contain industrial wages and make labour more 'disciplined'. The wages of its industrial workforce, in real terms, declined 40 per cent on average during the Eighties (the second-worst skid in Latin America). In the same period, minimum wages dropped 58 per cent (the region's third-worst decline).

Nafta may not be as bad as some of its critics maintain, but it demonstrably falls short of fulfilling one of the missions lately assigned to it - the democratisation of Mexico. Its enactment could have marked a once-in-a-lifetime opportunity for an authoritarian society to be transformed, had Washington and Ottawa insisted that this be a precondition for trade. Instead, Mr Salinas was able to snooker the White House into signing on to what is basically a technocratic document with few social guarantees. It is a lack of democratic compatibility with Mexico's northern neighbours, rather than economic disparities, that provides its unfair advantages.

Of course, Nafta turns some Mexicans into winners. But at least half, including most of the 3 million-plus citizens of Chiapas, are fated to be losers, as they have been throughout Mexico's history.

A society possessing a strong democratic system could, although poor, absorb free-market reforms and encase them in equity and distributive justice. Trying to justify Mexico's suitability to be part of Nafta, Al Gore, the US vice-president, disingenuously cited as a parallel the entry into the European Community of Ireland and Portugal, both relatively poor countries. But the flaw in this analogy is that those nations, unlike Mexico, were and still are flourishing democracies with free trade-union movements. The White House, under challenge, was eventually forced to admit that Mexico was hardly an open society.

The rag-tag army of less than 1,000 ill-equipped Zapatistas - now fading into the forest while Mr Salinas's forces shamelessly direct unrestricted violence against them - has created a very deep dent in the three-year-old effort to reinvent Mexico. In Washington the Mexican insurrection is being seen as not nearly as threatening as, say, the rise of nationalism in Eastern Europe nor as hair-raising as the prospect of nuclear arms in North Korea. However, this view may be mistaken, if only because Mexico is there, on the American border, with even more of its citizens prepared to join the several million Mexicans who threaten to overwhelm US border patrol officials.

The US-Mexican relationship historically has been troubled. Hardly anywhere in the world has a nation so rich bordered on one so poor; with one being so strong, the other so weak, so exotic, so incomprehensible. Mexico has repeatedly been humiliated at the hands of the gringos, from the annexation of Texas in 1845 to the Mexican-American war of 1846-48 - in which Mexico lost a third of its territory - to General Pershing's punitive expedition of 1916, in which a military force of almost 5,000 pursued the legendary revolutionary leader Pancho Villa.

In turn, out of sullen resentment at the neighbouring behemoth's arrogance born of overweening power, Mexico evolved in this century a sophisticated skein of protectionist measures to buffer itself against American influence. This was epitomised by President Lazaro Cardenas's expropriation of Mexico's foreign-

owned oil companies in 1938, a move that deeply antagonised the US petroleum industry.

Throughout the Eighties, Mexico was a target of the Reagan administration's wrath because of its sympathy for the Sandinistas and other Central American revolutionary movements. In the late Seventies, a group of 100 Republican legislators placed a full-page advertisement in several national US newspapers describing the Mexican government as a Bolshevik conspirator and dictatorship. But under Mr Salinas since 1989, whatever Mexico had been underwent a Merlinesque transformation on Wall Street, as he waved his wand in the shape of a raft of free-market reforms.

Over the past decade, the country has been transformed from a bankers' nightmare - the debt crisis of 1980 - into a lustrous example of neoliberal economic development based on export-driven growth, slashed tariffs, and privatisation of publicly owned industries. But while Mexico was being ebulliently identified around the world for its stock- market killings, the country's underlying realities had hardly been touched by Mr Salinas' cosmetic social reforms.

There are hard economic facts that put into perspective the violence in Chiapas, the salient one being the precipitous decline in living standards of the contemporary Mexican. This free-fall particularly affected rural regions, such as the south, harming those engaged in small-scale agriculture as well as cottage industries. Even Nafta supporters admit that since 90 per cent of Mexican companies employ fewer than 100 workers, unemployment will skyrocket as withering competition from foreign multinationals causes massive plant closures.

The benefits enjoyed by the big Mexican companies and the country's growing ranks of the super-rich (fourth in the world in billionaires) may obscure the fact that the country lags far behind in per capita income. It is out of the ranks of the dispossessed that Latin American guerrilla movements are born. The Chiapas rebellion has long been simmering, but has been totally invisible to Washington, which had its attention more drawn to Mexico's rosy financial prospects than its inequities and human rights failings.

As US global economic power declines in relative terms, Washington seems to have fashioned a new strategy based on freeing markets and utilising cheap local labour while breaking down barriers to commerce and investment. Although this approach has further disadvantaged Mexico's already marginalised population, Washington hopes to use the hemisphere as a springboard for its re-emergence as a more competitive player in the world market.

But the average Mexican is likely to pay a disproportionate share of the price for this renewal, something the Zapatistas may have had in mind when they quixotically picked up their shotguns and raised the flag of revolution.

Larry Birns is director of the Washington-based Council on Hemispheric Affairs (Coha); John Nagel is a fellow at the University of Southern California's Center for International Journalism.

Thomas Sutcliffe is away.

(Photographs omitted)