Mexico Project
Jude Wanniski
May 2, 1989


Polyconomics and Price Waterhouse are jointly undertaking a study of Mexico's economic superstructure, on behalf of a broad array of Mexican and multinational industrial enterprises. The goal is to provide a clear, sharp understanding of the myriad impediments to economic and commercial efficiency that have crept into the system, for the most part since the first peso devaluation in September 1976. In an editorial I wrote for The Wall Street Journal at the time ("The Nickel Peso," 9/21/76) I warned of the adverse consequences that would befall the economy unless monetary and fiscal reforms quickly followed, which of course they did not.

The practical utility of such a study at this time is tied to the emergence of the new Third World debt initiative taking shape in the Bush administration, the "Brady Plan." Clearly, debt relief or "forgiveness" has to be part of any growth strategy in Mexico and all of Latin America. IMF schemes that have simply sought to extract payment from the debtor nations have forced perpetual austerity and contraction on the economies of the region. The Poly-PW study, to be completed by December, would provide the first analysis of this most important of the Latin American economies in a supply-side framework. The report will include specific recommendations on monetary, fiscal and regulatory policies that we believe the Government would be pleased to consider in conjunction with future debt relief packages supported by creditor interests, public or private.

I've outlined this Poly-PW concept to the most important of the senior officials of the Bush administration, who assure me they would welcome this private, completely unofficial approach. The problems associated with any official undertaking of this kind are correctly seen to be insurmountable, given the complex and delicate relationships of the creditors and debtors, public and private. The report would be assured the highest possible visibility and provide a focal point for all parties in discussions of the debt crisis and the future of the Mexican economy.

My belief is that the situation is ripe for a Mexican perestroika that would propel its economy into the ranks of a fully-fledged industrial nation by the year 2000. I've observed the economy ravaged by obsolete economic theories and believe we can help revive it more easily than most imagine, perhaps even easier than the effort it took to turn around the U.S. economy in the Reagan years. Rapid, non-inflationary growth in Mexico would make feasible a North American common market. The implications for investment are profound, not only relating to real and financial assets in Mexico, but for the value of U.S. multinationals that have assets in Mexico. Price Waterhouse, which has a major office in Mexico City, will be of incalculable help in providing and processing information related to the mechanisms of the Mexican government. Other country studies are in mind following successful completion of this pilot effort.

We will keep you informed on the progress of this endeavor as it unfolds. We're now engaged in assembling the sponsorship and finances of the study. I'll be in Mexico City May 10-12, meeting with sponsors and prospective sponsors as well as bringing the initiative to the attention of the government. If you'd like to learn more of the project, contact Chris Jacobs, who has joined Polyconomics from Institutional Investor to supervise it. We expect to have a team of economists in Mexico from June to September. Alan and I will be involved throughout. It could be of historic importance and a great pleasure too.