MEXICO: ADJUSTING FOREIGN POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP04T00367R000100310001-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: March 30, 2010
• Sequence Number: 1
• Publication Date: May 4, 1984
• Content Type: REPORT

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Central Intelligence Agency
Washington, D. C. 20505
DIRECTORATE OF INTELLIGENCE
4 May 1984
MEXICO: ADJUSTING FOREIGN POLICY
Summary
President de la Madrid has avoided his predecessor's
confrontational diplomacy and downplayed international issues at
home, in large part because of his conservative background,
familiarity with the US, and desire for continued US economic
assistance. Foreign Minister Bernardo Sepulveda also has
presented a more subdued style than his predecessor, Jorge
Castaneda. Longstanding invitations for de la Madrid to visit
Nicaragua and Cuba have been ignored--probably for fear of
offending Washington. Recent steps, including financial aid to
Argentina and the President's trip to South America, signal de la
Madrid's intention to look beyond more parochial interests to
deal with economic and political issues in a hemispheric
setting.
As a result of his trip, De la Madrid succeeded in
strengthening ties with key South American governments and took
advantage of heightened regional concern about the situation in
This memorandum was requested by the Senior Staff Member for
Latin America of the National Security Council. It was prepared
by the Office of African and Latin American Analysis and
coordinated with the Directorate of Operations. Information as
of 3 May 1984 was used in preparation of this paper. Comments
and questions are welcome and should be addressed to Chief, South
America Division,
ALA-M-84-10044C
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in particular might take the lead in pushing for a more
aggressive stance if the renegotiations with bankers collapse.
Central America to give a boost to the Contadora process. None
of the major debtor countries favors a cartel at this juncture,
but Mexico's efforts to promote debtor unity in order to seek
more favorable terms is striking a responsive chord. Argentina
Moral and political support for Nicaragua's Sandinistas
remains the keystone of Mexico's Central American policy. The de
la Madrid government continues to supply non-military assistance
to revolutionary groups from El Salvador, Guatemala, and
Honduras. For example, the official political--but not the
military--headquarters for the Salvadoran insurgents is still
located in Mexico City, and radical leftist groups from elsewhere
in Latin America are allowed to proselytize, raise funds, and
mount anti-US demonstrations on Mexican territory. In sum, we
see little likelihood of fundamental change in Mexico's activist
foreign policy, although tactical and stylistic adjustments are
being made.
Recent Mexican Actions in Central America
Nicaragua and the Sandinistas. Although economic backing
for the Sandinistas has been reduced somewhat, moral and
political support for Managua remains the keystone of Mexico's
Central American policy. Continuing frequent contact with
Sandinista leaders and public rejection of foreign military and
political intervention in Nicaragua reflect the depth of Mexico
City's commitment to the survival of the Sandinista regime.
Moreover, despite the potential damage to the efforts of the
Contadora Group, Mexico was the only Contadora member to endorse
the recent Sandinista resolution in the UN Security Council
condemning the mining of Nicaraguan ports. Indeed, according to
Under President Lopez Portillo, Mexico City reinforced its
political support with economic assistance. In 1981-82, Mexico
was Nicaragua's largest official hard currency lender. Loans and
supplier credits totaled $250 million in 1981 and $145 million in
1982, including 100 percent financing for all the oil it sold to
Nicaragua, loan guarantees, direct aid, and supplier credits for
Mexican goods. Additionally, in 1982 Mexico became Nicaragua's
sole petroleum source, supplying about 15,000 b/d, after the
actively worked to promote the resolution.
the US Embassy, Mexico's permanent representative in the UN
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Venezuelans ceased exporting because of Managua's mounting
payments arrears.
Since taking office, however, President de la Madrid has
gradually curtailed his predecessor's largesse. In mid-1983, in
an apparent effort to use its economic leverage to persuade
Managua to adopt a more moderate course, Mexico renegotiated
contracts, cut back oil shipments and tightened payment terms.
Apparently because of Managua's inability to meet new terms, oil
shipments are now running two-thirds below earlier levels.
As long as other suppliers--primarily the
Soviets--appear willing to pick up a major part of concessional
oil shipments to Nicaragua, we estimate Mexican deliveries
through July will not exceed contracted levels of 9,500 b/d. E
Although Lopez Portillo's thesis that restricting Mexican
aid would drive the Sandinistas into the Soviet camp clearly has
less merit with de la Madrid. Mexico still refuses to shut
Managua off completely.
By agreeing to Managua's recent request for
agricultural advisers, de la Madrid also signaled his intention
to maintain technological and trade links.
Insurgent Groups. The desire to avoid a direct
confrontation with the United States, calm the concern of
conservative elements of the polity, and be viewed
internationally as peacemakers, keeps Mexico's governing elite
fastidious about limiting assistance for revolutionary groups to
nonmilitary support. Such nonmilitary support is being provided
to groups from El Salvador, Guatemala, and Honduras. Since de la
Madrid took office, we have no evidence that the government has
supplied Central American leftists with arms or other military
aid.
Mexico City appears to be reducing its hospitality to all
Central Americans, including insurgent groups, in part because of
concern that if large numbers of Central Americans entered Mexico
they could overburden domestic resources at a time when the
administration's harsh austerity program already holds the risk
of increasing domestic dissension and fostering radicalism.
According to recent US Embassy reporting, efforts by the
Salvadoran insurgent alliance to move elements of their
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organizational structure from Managua to Mexico City faltered
because of lack of cooperation from Mexican officials. The
guerrillas' official political headquarters remains in Mexico,
however, and insurgent groups still are allowed the freedom to
proselytize, raise funds, and mount anti-US demonstrations on
Mexican territory.
Mexico's Relations with Key South American Governments
President de la Madrid's recent trip to South America--his
first outside the country since taking office--underscores the
increasingly important role Mexico's interests as a major debtor
will play in shaping its foreign policy. By calling on the South
American leaders he visited to coordinate their efforts in
dealing with national economic problems, de la Madrid sought to
increase regional solidarity--and negotiating power--for a long
term solution to Latin America's. enormous debt repayment
problems. The timing of the trip--one month before a scheduled
visit to Washington--also suggests that de la Madrid hoped to
gain support for peace efforts in Central America.
Dealing with the Debt Issue. During the trip, de la Madrid
called on his fellow Latin debtors to form a united front in debt
negotiations, not in order to declare a debt moratorium but
rather as a means of seeking more favorable terms. The.Argentine
rescue package, conceived by Mexico's finance minister and sold
to other Latin leaders by de la Madrid, according to US Embassy
was presented as an example of the
responsible results achievable through Latin solidarity. Facing
a heavy debt burden and further rescheduling exercises during his
term, de la Madrid realizes that maverick actions by any debtor
could damage Mexico's interests. Mexico City benefited
immediately from the Argentine package because it calmed credit
markets, and bankers could then proceed with the completion of
Mexico's 1984 jumbo loan.
Mexico City also worked toward greater regional cooperation
on debt issues in order to encourage creditor nations,
particularly the US, to take a broader view of the debt
problem. In several speeches, de la Madrid castigated the
developed countries for exacerbating Latin problems through high
interest rates and trade barriers. For example, every percentage
point rise in world interest rates adds about $700 million to
Mexico's debt burden. De la Madrid also called for
revitalization of regional economic mechanisms to promote Latin
interests.
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So far, the South American debtors have consistently opposed
a cartel, and we have no evidence that such an effort was
discussed during de la Madrid's trip. According to the US
Embassy, Brasilia believes that a cartel would be unrealistic
because each Latin American country has its own unique
problems. The US Embassy in Caracas reports that Venezuela
favors realistic debt renegotiations with lenders, and President
Lusinchi is on record as opposing any debtors group or joint
effort to reschedule debt. Argentina might be more receptive to
such a proposal if the renegotiations with bankers collapse.
Nevertheless, despite tough rhetoric in dealing with bankers last
month, President Alfonsin ultimately was willing to cooperate
with lenders.
We estimate that South American debtors will be able to
manage the liquidity strains that are likely to persist in
1984. In our view, the region's debtors will remain committed to
honoring external obligations and sustaining necessary
adjustments, progress will be made in refinancing old credits,
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headway will have been made toward easing the debt crisis. 25X1
In the near-term, Argentina is likely to be under the
greatest strain, and renewed intransigence by Buenos Aires in
negotiating its debt could cause a financial impasse. This would
heighten prospects that Argentina might cease all payments,
thereby effecting an undeclared moratorium. In our judgment,
Brazil would also probably resort to radical actions later this
year if bankers.ceased cooperating with its rescue program. Any
unilateral moves by these two regional leaders would be likely to
tempt Chile, Peru, and Venezuela--all encountering strong
domestic pressure to engineer recovery--to follow, probably
causing the rescue programs to collapse. 25X1
Seeking Support on Central America. During his trip to
South America de la Madrid took advantage of growing concern in
the region over escalating violence in Central America to try to
resuscitate the flagging Contadora process. None of the four
governments with which he held talks--Colombia, Argentina,
Brazil, and Venezuela--altered its policy, but the Mexican
President succeeded in focusing attention on what he contends is
the destabilizing role of external actors, including the US.
De la Madrid's effort to promote the theme of isolating
Central America from "East-West" tension sparked the most
outspoken response from Colombia's President Betancur, who
publicly blamed the US. Soviet Union, and Cuba for sabotaging
the Contadora Group. 25X1
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In Venezuela, de la Madrid solidified an already warm
relationship with President Lusinchi and probably helped
reinforce his host's unease about aspects of US policy toward
Central America. A senior Venezuelan official told the US
Embassy that the trip by Foreign Minister Morales to Washington
in mid-April was aimed at eliciting "genuine support" for
Contadora. Morales' willingness to present a strident demarche
to Honduras regarding its support for anti-Sandinista groups
further underscored Venezuela's frustration with the lack of
progress by the Contadora Group.
these moves do not represent ,a
softening of Venezuela's policy toward Central America.
Moreover, Lusinchi recently praised the response
the Venezuelan demarche on Contadora and told Ambassador
Shlaudeman that there appeared to be renewed US support for a
regional settlement.
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In both Brazil and Argentina de la Madrid gained endorsement
from the host governments for Contadora, and a Mexican diplomat 25X1
told US officials that President Alfonsin had expressed an
interest in attending a future Contadora summit meeting as an
observer. The Contadora Four have consistently demonstrated a
reluctance to broaden participation, and we are aware of no
evidence that such a move was discussed during de la Madrid's
trip. Nevertheless, the Venezuelans are probably not alone in
worrying that the Contadora process may be irretrievably
stymied. If the Group fails to make significant progress in the
months ahead many of the participants will likely begin casting
about for new Latin American-sponsored mechanisms to prevent
violence in Central America from spreading. 25X1
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Economic Ties
Following up on proposals to increase intraregional trade
made at the Latin American Economic Conference in Quito last
January, several bilateral trade and financial agreements were
signed or discussed during de la Madrid's trip. Mexican
officials, who believe that Latin America is their natural long
term market, have been distressed at the decline of non-oil sales
to the region. To avoid the use of scarce dollars, Mexico City
set up reciprocal credit lines for $50 million with Brazil and
Argentina and for $20 million with Colombia. Brasilia and Mexico
credit
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City also agreed to modifications to their ex
arrangement to clear up past payment problems.
De la Madrid initialed agreements to purchase Argentine
grain and oilseeds and to import Colombian coal in exchange for
Mexican manufactures. Tariff rates were also reduced on most
Colombian exports to Mexico. Venezuela and Mexico agreed to
increase bilateral trade particularly in petroleum industry
equipment and technology. They also announced their intention to
renew the San Jose oil accord, under which they provide oil to
several Caribbean and Central American nations at concessional
rates. While the credit terms will not be hardened, the two
countries will try to encourage recipients to invest the credits
in projects that will provide sales opportunities for Mexico and
Venezuela.
We believe Mexican oil provides very little leverage with
the Brazilian Government and virtually none with Argentina.
Although the proportion of Brazil's crude and product imports
furnished by Mexico was about 8.5 percent last year, Brazil would
have little trouble replacing these supplies from other sources
under current market conditions. Argentina is almost self-
sufficient in energy and would have little trouble supplementing
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its needs from non-Mexican sources.
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SUBJECT: Mexico: Adjusting Foreign Policy
Distribution:
Copy # 1 - Requestor
2 - Executive Director, 7E12
3 - NIO/LA, 7E62
4 -NIC/AG, 2G40
5 -
6 - C DDI PES,
7 - DDI/CPAS/ISS, 7G50
8 - D/ALA, 3F45
9-10 - ALA/PS, 3F38
11 - ALA Research Director, 3F44
12-15 - CPAS/IMC/CB, 7G02
16-17 - MCD Files
18-19 - SAD Files
DDI/ALA/
(4 May 1984)
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