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Recent Developments in Mexico and Ur Economic Implications for the United States

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RECENT DEVELOPMENTS IN MEXICO AND UR ECONOMIC IMPLICATIONS FOR THE UNITED STATES HEARINGS BEFORE THE SUBCOMMITTEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES NINETY-FIFTH CONGRESS FIRST SESSION JANUARY 17 AND 24, 1977 Printed for the use of the Joint Economic Committee rLKTRARY cc' (PLEASE RETURM Ls? [v~&s' SENAjTE C-_ LAN U.S. GOVERNMENT PRINTING OFFICE 91-139 WASHINGTON: 1977 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 -iI - F 't - 4 JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) RICHARD BOLLING, Missouri, Chairman HUBERT H. HUMPHREY, Minnesota, Vice Chairman HOUSE OF REPRESENTATIVES SENATE HENRY S. REUSS, Wisconsin JOHN SPARKMAN, Alabama WILLIAM S. MOORHEAD, Pennsylvania WILLIAM PROXMIRE, Wisconsin LEE H. HAMILTON, Indiana ABRAHAM RIBICOFF, Connecticut GILLIS W. LONG, Louisiana LLOYD BENTSEN, Texas OTIS G. PIKE, New York EDWARD M. KENNEDY, Massachusetts- CLARENCE J. BROWN, Ohio JACOB K. JAVITS, New York GARRY BROWN, Michigan CHARLES H. PERCY, Illinois MARGARET M. HECKLER, Massachusetts WILLIAM V. ROTH, JR., Delaware JOHN H. ROUSSELOT, California JOHN R. STARK, Executive Director COURTNEY M. SLATER, Assistant Director Louis C. KRAUTHOFF II, Assistant Director RICHARD F. KAUFMAN, General Counsel ECONOMISTS WILLIAM R. BUECHNER KENT H. HUGHES PHILIP MCMARTIN G. THOMAS CATOR SARAH JACKSON RALPH L. SCHLOSSTEIN- WILLIAM A. Cox JOHN R. KARLIK GEORGE R. TYLER ROBERT D. HAMRIN L. DOUGLAS LEE MINORITY GEORGE D. KRuMRHAAE, Jr. CHARLES H. BRADFORD STEPHEN J. ENTIN M. CATHERINE MILLER MARK R. POLICINSKI SUBCOMMITTEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS GILLIS W. LONG, Louisiana, Chairman HOUSE OF REPRESENTATIVES SENATE LEE H. HAMILTON, Indiana JOHN SPARKMAN, Alabama MARGARET M. HECKLER, Massachusetts LLOYD BENTSEN, Texas JOHN H. ROUSStLOT, California EDWARD M. KENNEDY, Massachusetts- I?i. ' ,. __. (II) Fo C- '. I 0; 1 -, - 41, - , CONTENTS WITNESSES AND STATEMENTS MONDAY, JANUARY 17, 1977 Long, Hon. Gillis W., chairman of the Subcommittee on Inter-American Pace Economic Relationships: Opening statement - _-_-_- __-__- 1 Wilkie, James W., professor of Latin American history, UCLA - _- 3 Opie, Redvers, economic consultant, Mexico City, Mexico-- _- _- 17 Reynolds, Clark W., professor of economics, Food Research Institute, Stanford Universitvy- 37 Wichtrich, Al R., president, American Chamber of Commerce of Mexico 57 MONDAY, JANUARY 24, 1977 Long, Hon. Gillis W., chairman of the Subcommittee on Inter-American Economic Relationships: Opening statement - 85 Bentsen, Hon. Lloyd, member of the Subcommittee on Inter-American Economic Relationships: Opening statement -__-_-_-__- __ 87 Castro, Hon. Raul H., Governor, State of Arizona -_ 90 Olivarez, Graciela, State planning officer, State of New Mexico - 341 Blair, Calvin P., professor of resources and international business, De- partment of Marketing Administration, the University of Texas at Austin - _--------_---- _350 Hillman, Jimmye S., head of the Department of Agricultural Economics, University of Arizona -_---------- -------- _ 361 SUBMISSIONS FOR THE RECORD MONDAY, JANUARY 17, 1977 Opie, Redvers: Prepared statement - 20 Reynolds, Clark W.: Prepared statement -_-_-__-_- _ 43 Wichtrich, Al R.: Prepared statement - 61 Wilkie, James W.: Prepared statement -_-_-_ 6 MONDAY, JANUARY 24, 1977 Blair, Calvin P.: Prepared statement - 355 Castro, Hon. Raul H.: Prepared statement - 93 Hillman, Jimmye S.: Prepared statement - 367 Long, Hon. Gillis W.: Prepared statement of Hon. Richard C. White, a U.S. Representative in Congress from the 16th Congressional District of the State of Texas - ----------------------------------------- 384 Prepared statement of Hon. Abraham Kazen, Jr., a U.S. Representa- tive in Congress from the 23d Congressional District of the State of Texas - .385 Letter, with an enclosure, from Hon. Morris K. Udall, a U.S. Repre- sentative in Congress from the Second Congressional District of the State of Arizona, to Representative Long, dated February 2, 1977, regarding a nonprofit Cochise County, Ariz., corporation providing hospital care for the area's medically indigent - _-_-_- 386 Statement entitled "United States-Mexico Employment Problem," from The Environmental Fund, Washington, D.C., dated January 7, 1977 - 388 Olivarez, Graciela: Prepared statement -_-__-_- _- _ 345 (111) RECENT DEVELOPMENTS IN MEXICO AND THEIR ECONOMIC IMPLICATIONS FOR THE UNITEDI STATES MONDAY, JANUARY 17, 1977 CONGRESS OF THE UNITED STATES, SUBCOMMITrJEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS OF THE JOINT ECONOMIC CoMMurRrE, Washington, D.C. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 345, Cannon House Office Building, Hon. Gillis W. Long (chairman of the subcommittee) presiding. Present: Representatives Long and Hamilton. Also present: Kent H. Hughes, Sarah Jackson, and John R. Karlik, professional staff members: Michael J. Runde, administra- tive assistant; and Mark R. Policinski, minority professional staff member. OPENING STATEMENT OF REPRESENTATIVE LONG, C.sARMAN Representative LONG. The Subcommittee on Inter-American Re- lationships will come to order. Today we are starting a series of hearings on recent developments in Mexico and their economic implications for the United States. Gentlemen, we are particularly appreciative of you and our audi- ence coming today, in view of the fact that I understand this is the coldest day that Washington. D.C., has had in 38 years, and that is not counting the wind-chill factor. I think this meeting is particularly timely. The new administra- tion in Mexico of Jose Lopez Portillo has just taken office and the new administration of Jimmy Carter about to be installed here in Washington. Now is a good time to look at the situation in Mexico, including the prospects for the future and the implications for the United States. It is often said that the American press fails to give sufficient attention to Latin America. We all know that that simply has not been true as far as Mexico is concerned. The surprising, sometimes even disturbing, recent developments in Mexico have garnered our attention and the attention of the media for a very good reason. As an immediate neighbor. as a vital trade partner for the United States, as a prime location for United States investment. as a tour- ist mecca. even as a new home for many Americans. Mexican events are bound to draw our attention. (1) 2 This is especially the case when the turn of events breaks the accustomed pattern. This certainly happened last year. For example, after 22 years of an absolutely stable dollar exchange rate, the Mexican peso was set free and suffered a swift devaluation. There seems to be a loss of business confidence and a sharp downturn in the rhythm of economic growth. As one of its final acts, the outgoing Mexican administration ordered a substantial land expropriation and redistribution. Some Americans believed that bloodshed was in the offing; discontent and uncertainty seems to have replaced the previous confidence and growth. The purpose of today's hearing is to explore what happened in Mexico last year and try to determine what it means for the future of both countries. Perhaps the events of the recent past can be interpreted as a part of Mexico's long revolutionary tradition, a heritage that the world recognizes, I believe, and respects. The question still remains: What are the implications for the future? And, more particularly, how will these developments af- fect the interests of the United States. This, of course, is our major area of concern. Relations between the United States and Mexico are generally good and both countries have benefited from a long history of close interchange. Thus. we are looking at Mexico not with an eye to point out difficulties or in any way to second-guess their policy- makers; nor, are we looking at Mexico paternalistically. Rather, we want to have the kind of substantive information that will allow us to plan the future relationship sensibly, recognizing the inter- dependence that exists between our two economies. Although new administrations will control both of our countries, we have at least the outlines of the prospective economic policies to be followed and we should consider how they are likely to mesh. Still the focus of our hearing is on Mexico. We are looking forward to learning from our distinguished witnesses what they see to be the problems and prospects of that country and the implications for the United States. The second hearing to be held in this same room next Monday the impact of recent events on that region of the United will consider so States which borders Mexico. Obviously, since that region is closely involved with Mexico, there may well be special problems that ought to be dealt with. While our focus is on economic events and their implications, we certainly recognize that it is impossible to make a clean separation of economic reality from the social and the political context in which the economy functions. I am sure that our witnesses will not try to draw the line too clearly. I would now like to introduce our very distinguished panel. Be- my left Mr. Al R. Wichtrich is the president of the ginning on I American Chamber of Commerce of Mexico, in Mexico City. This. think is an especially good position, from which to tell us about the climate for the United States business in Mexico. Mr. Clark WIT.Reynolds, is a professor of economics, Ford Re- search Institute, Stanford IUniversity. He has studied the Mexican 3 economy from an academic viewpoint and his specialty is political -economy and institutional relationships. Mr. Redvers Opie is an economic consultant in Mexico City whose newsletter I understand has been one of the most accurate predictors of economic development in Mexico during the past year. In his many-sided career, AMr. Opie has been both a diplomat and a specialist in monetary and financial areas.
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