U.S. State Department Geographic Bureaus: Latin America Bureau

U.S. DEPARTMENT OF STATE
95/02/23 SPEECH: ALEXANDER WATSON ON "US-MEXICO
RELATIONS
BUREAU OF INTER-AMERICAN AFFAIRS

(As Prepared)


ADDRESS BY
ALEXANDER F. WATSON
ASSISTANT SECRETARY OF STATE
FOR INTER-AMERICAN AFFAIRS
TO THE WORLD AFFAIRS COUNCIL OF NORTHERN CALIFORNIA
SAN FRANCISCO, CALIFORNIA
February 23, 1995

"UNITED STATES - MEXICO RELATIONS"

Good morning and thank you for that introduction. I want to thank Ambassador Fischer and the World Affairs Council of Northern California for organizing today's program. I am particularly honored to participate this morning after you have heard from one of America's most distinguished Secretaries of State, George Shultz. I know that this is not the first time the Council has focused on Mexico for one of its town meetings. You had one in 1993 to consider the North American Free Trade Agreement and that provided the basis for a wide ranging discussion regarding our relations with our neighbor to the south.

And I congratulate you for deciding to take another look at our relations with Mexico now. You have selected what is certainly a front burner topic.

I do not need to remind San Franciscans that our ties to Mexico are unique. This city and this state -- from their very beginnings -- have links to Mexican history and heritage which have remained strong through the centuries. Today, our ties with Mexico go beyond California and other border states and impact on the entire nation.

Mexico is our third largest trading partner and is united with us and Canada in the North American Free Trade Agreement. Mexican-Americans constitute an increasingly important part of our ethnic fabric. Mexican culture has a growing impact on ours. We share a vibrant 2,000 mile border. Millions of people cross that border legally every year. But the border relationship is complicated. It entails a number of important issues, including the crossing of illegal migrants, the flow of illegal narcotics, other law enforcement concerns and environmental issues, on which we must cooperate.

I can tell you that our partnership with Mexico in dealing with these issues -- and that is what it is, a partnership - - has never been better. Unlike previous historical periods marked by excessive sensitivities -- as well as insensitivities -- nationalism and recriminations, our governments now seek to cooperate on a pragmatic basis to resolve the problems which exist.

In that past two months, we have faced one of those problems. It was of great significance to both our nations and had potential to do damage throughout the region and beyond.

FINANCIAL CRISIS

As you know, Mexico has made tremendous advances in the last decade. In 1987, inflation was 159 percent and the budget deficit was close to 17 percent of GDP. A new generation of economic reformers moved boldly to reverse that trend by implementing strict macro-economic stabilization policies and far-reaching structural reforms. They privatized some 1,000 state-controlled industries and drastically reduced Mexico's bloated public sector. Mexico used most of the revenues from privatization to reduce its debt. Tariff barriers were lowered, opening Mexico's economy to world trade. By the end of 1994, inflation was brought down to just seven percent, the government's budget was in balance, and exports were booming. By its willingness to enter into negotiations for a North America Free Trade Agreement, Mexico showed it had broken with its past and moved forward to integrate into the North American economy.

The Mexican experience has shown us, though, that there are vulnerabilities even for relatively successful economies. The growth of international investment has provided countries with new sources of savings, but also for financing large current account deficits. These deficits are not intrinsically bad; they help bring in goods and capital to generate productive enterprises and to create jobs.

But Mexico became excessively dependent on short term debt. The country found itself in a difficult situation when foreign investors, reacting partly to political events and partly to external factors, such as rising U.S. interest rates, stopped increasing their Mexican portfolios. The Mexican Government tried to reduce pressure on the peso by issuing dollar denominated government debt instruments and by using its foreign exchange reserves. The Government assumed investor confidence would return following the national elections in August, or following the inauguration of President Zedillo on December 1. However, neither event restored confidence sufficiently and pressure on the peso continued, leading eventually to the decision to devalue and eventually to float the peso.

Let me state clearly that we have a national interest in a stable and prosperous Mexico. President Clinton and the bi- partisan leadership of the Congress realized that an acute economic crisis in Mexico would directly affect our exports, American jobs, U.S. investments in Mexico and the growing commercial ties between the two countries. In addition, it would impair Mexico's capacity to address the myriad issues that are critical to our bilateral relationship, from law enforcement and narcotics to immigration.

As President Clinton told a recent gathering of national governors:

"[Assisting Mexico] is in the interest of America . . not because there are large financial interests at stake, but because there are thousands of jobs, billions of dollars of American exports at stake, the potential of an even more serious illegal immigration problem, the spread of financial instability to other countries in our hemisphere, and indeed to other developing countries throughout the world, and the potential of a more serious narcotics trafficking problem."

The crisis in Mexico has had the potential to disrupt other emerging markets in the region and the world. This would have imperiled the hard won efforts at political and economic reform and progress towards free markets and free trade not only in Mexico, but also elsewhere in the hemisphere. This is why, once it became apparent that the legislative package developed with the U.S. Congress had bogged down, President Clinton moved on January 31 to use his executive authority.

Two days ago, we signed four agreements with Mexico to implement our commitment to provide financial support to Mexico. Under these agreements, Mexico should be able to take the steps necessary to end its liquidity crisis, and in time the Mexican economy, which is fundamentally sound, should stabilize. The ultimate success of this program depends on Mexico. Mexican Finance Secretary Ortiz reiterated this point when he signed the agreements. Mexico has made it clear that it intends to take the stringent economic medicine this program requires. Among the measures it has committed to are a tight monetary policy with negative real money growth, reduced government spending leading to a surplus of 0.5 percent of GDP in 1995, and further privatization and other structural reforms. The Bank of Mexico and the Ministry of Finance have committed to make publicly available key fiscal and financial data on money and credit, international reserves, public sector debt, and other important measures of economic performance. These measures will be painful in Mexico -- credit will be very tight and spending reduced.

Mexico's difficulties certainly do not invalidate its basic market-based economic model and that which other Latin American countries are following. Indeed, Mexico has shown its commitment to a free market approach even through this crisis. Rather than retrench behind protectionism, nationalism and statist policies as it might have done ten years ago, Mexico has responded to the crisis by announcing plans to accelerate its privatization, particularly in ports, airports, telecommunications, and secondary petrochemicals. The government has already moved to liberalize rules on foreign investment in MeU.S. DEPARTMENT OF STATE 95/02/23 SPEECH: ALEXANDER WATSON ON "US-MEXICO RELATIONS BUREAU OF INTER-AMERICAN AFFAIRS

(As Prepared) ADDRESS BY ALEXANDER F. WATSON ASSISTANT SECRETARY OF STATE FOR INTER-AMERICAN AFFAIRS TO THE WORLD AFFAIRS COUNCIL OF NORTHERN CALIFORNIA SAN FRANCISCO, CALIFORNIA February 23, 1995

"UNITED STATES - MEXICO RELATIONS"

Good morning and thank you for that introduction. I want to thank Ambassador Fischer and the World Affairs Council of Northern California for organizing today's program. I am particularly honored to participate this morning after you have heard from one of America's most distinguished Secretaries of State, George Shultz. I know that this is not the first time the Council has focused on Mexico for one of its town meetings. You had one in 1993 to consider the North American Free Trade Agreement and that provided the basis for a wide ranging discussion regarding our relations with our neighbor to the south.

And I congratulate you for deciding to take another look at our relations with Mexico now. You have selected what is certainly a front burner topic.

I do not need to remind San Franciscans that our ties to Mexico are unique. This city and this state -- from their very beginnings -- have links to Mexican history and heritage which have remained strong through the centuries. Today, our ties with Mexico go beyond California and other border states and impact on the entire nation.

Mexico is our third largest trading partner and is united with us and Canada in the North American Free Trade Agreement. Mexican-Americans constitute an increasingly important part of our ethnic fabric. Mexican culture has a growing impact on ours. We share a vibrant 2,000 mile border. Millions of people cross that border legally every year. But the border relationship is complicated. It entails a number of important issues, including the crossing of illegal migrants, the flow of illegal narcotics, other law enforcement concerns and environmental issues, on which we must cooperate.

I can tell you that our partnership with Mexico in dealing with these issues -- and that is what it is, a partnership - - has never been better. Unlike previous historical periods marked by excessive sensitivities -- as well as insensitivities -- nationalism and recriminations, our governments now seek to cooperate on a pragmatic basis to resolve the problems which exist.

In that past two months, we have faced one of those problems. It was of great significance to both our nations and had potential to do damage throughout the region and beyond.

FINANCIAL CRISIS

As you know, Mexico has made tremendous advances in the last decade. In 1987, inflation was 159 percent and the budget deficit was close to 17 percent of GDP. A new generation of economic reformers moved boldly to reverse that trend by implementing strict macro-economic stabilization policies and far-reaching structural reforms. They privatized some 1,000 state-controlled industries and drastically reduced Mexico's bloated public sector. Mexico used most of the revenues from privatization to reduce its debt. Tariff barriers were lowered, opening Mexico's economy to world trade. By the end of 1994, inflation was brought down to just seven percent, the government's budget was in balance, and exports were booming. By its willingness to enter into negotiations for a North America Free Trade Agreement, Mexico showed it had broken with its past and moved forward to integrate into the North American economy.

The Mexican experience has shown us, though, that there are vulnerabilities even for relatively successful economies. The growth of international investment has provided countries with new sources of savings, but also for financing large current account deficits. These deficits are not intrinsically bad; they help bring in goods and capital to generate productive enterprises and to create jobs.

But Mexico became excessively dependent on short term debt. The country found itself in a difficult situation when foreign investors, reacting partly to political events and partly to external factors, such as rising U.S. interest rates, stopped increasing their Mexican portfolios. The Mexican Government tried to reduce pressure on the peso by issuing dollar denominated government debt instruments and by using its foreign exchange reserves. The Government assumed investor confidence would return following the national elections in August, or following the inauguration of President Zedillo on December 1. However, neither event restored confidence sufficiently and pressure on the peso continued, leading eventually to the decision to devalue and eventually to float the peso.

Let me state clearly that we have a national interest in a stable and prosperous Mexico. President Clinton and the bi- partisan leadership of the Congress realized that an acute economic crisis in Mexico would directly affect our exports, American jobs, U.S. investments in Mexico and the growing commercial ties between the two countries. In addition, it would impair Mexico's capacity to address the myriad issues that are critical to our bilateral relationship, from law enforcement and narcotics to immigration.

As President Clinton told a recent gathering of national governors:

"[Assisting Mexico] is in the interest of America . . not because there are large financial interests at stake, but because there are thousands of jobs, billions of dollars of American exports at stake, the potential of an even more serious illegal immigration problem, the spread of financial instability to other countries in our hemisphere, and indeed to other developing countries throughout the world, and the potential of a more serious narcotics trafficking problem."

The crisis in Mexico has had the potential to disrupt other emerging markets in the region and the world. This would have imperiled the hard won efforts at political and economic reform and progress towards free markets and free trade not only in Mexico, but also elsewhere in the hemisphere. This is why, once it became apparent that the legislative package developed with the U.S. Congress had bogged down, President Clinton moved on January 31 to use his executive authority.

Two days ago, we signed four agreements with Mexico to implement our commitment to provide financial support to Mexico. Under these agreements, Mexico should be able to take the steps necessary to end its liquidity crisis, and in time the Mexican economy, which is fundamentally sound, should stabilize. The ultimate success of this program depends on Mexico. Mexican Finance Secretary Ortiz reiterated this point when he signed the agreements. Mexico has made it clear that it intends to take the stringent economic medicine this program requires. Among the measures it has committed to are a tight monetary policy with negative real money growth, reduced government spending leading to a surplus of 0.5 percent of GDP in 1995, and further privatization and other structural reforms. The Bank of Mexico and the Ministry of Finance have committed to make publicly available key fiscal and financial data on money and credit, international reserves, public sector debt, and other important measures of economic performance. These measures will be painful in Mexico -- credit will be very tight and spending reduced.

Mexico's difficulties certainly do not invalidate its basic market-based economic model and that which other Latin American countries are following. Indeed, Mexico has shown its commitment to a free market approach even through this crisis. Rather than retrench behind protectionism, nationalism and statist policies as it might have done ten years ago, Mexico has responded to the crisis by announcing plans to accelerate its privatization, particularly in ports, airports, telecommunications, and secondary petrochemicals. The government has already moved to liberalize rules on foreign investment in Mexican financial firms.

Let me outline the President's and the international community's commitment to assist Mexico. Briefly, the principal element of the President's financial support plan for Mexico consists of $20 billion from the U.S. Exchange Stabilization Fund and the Federal Reserve System. This is a combination of short and medium term swap facilities and loan guarantees. The funds will be used to facilitate the restructuring of Mexico's short-term debt into longer maturities to help resolve liquidity problems. The drawings on swap facilities and the issuance of guarantees will be conditioned on an IMF approved comprehensive financial plan and the implementation of strong economic adjustment and reform measures.

While no loan guarantee is without risk, the risk in this case is minimal. There is no cost to U.S. taxpayers in this program. The program uses existing funds from the Exchange Stabilization Fund. The proceeds from the export of Mexican oil and oil products will serve as an assured source of repayment. Mexico will pay interest on any drawdowns of the short and medium term swaps and will pay fees for the use of any loan guarantees. The cost to Mexico will be sufficiently high to provide a strong incentive for the Mexican Government to return to private capital markets as soon as conditions permit.

The international component of the package consists of $17.8 billion from the IMF, which includes a stand-by arrangement and additional contributions from governments and central banks and, if necessary, the IMF itself. Separately, central banks of major European countries and Japan have stated their intention to increase their swap line, organized by the Bank for International Settlements, from $5 billion to $10 billion. Other assistance will come from a group of Latin American countries, Canada and a consortium of commercial banks.

We continue working closely with our Mexican partners to restore investor confidence in Mexico. Growth this year is likely to slow considerably, but the reforms which Mexico has undergone in the past decade provide a solid foundation for long-term growth.

I want also to say that the currency crisis in Mexico will not affect plans to expand NAFTA and to move toward a Free Trade Area of the Americas. We and our hemispheric partners ratified our commitment to free trade at last year's Summit of the Americas and continue working to make this a reality.

Let me also address here the relation of the NAFTA to Mexico's current problems.

First, NAFTA is a success. Trade between our two countries in the first year of NAFTA increased over 20 percent. Our exports to Mexico went from around $40 billion in 1993 to just over $50 billion in 1994. And California has a significant stake in our trade with Mexico. In 1994, California sold about $7 billion to Mexico. And a large percentage of California's exports are high-tech products which generate high-wage jobs and help the state maintain its leadership in this area.

Second, the NAFTA had helped lock in market openings for U.S. business in Mexico and it establishes new levels of protection for U.S. business and investors. Without NAFTA, investor confidence would be lower without a doubt.

NAFTA did not cause the Mexican crisis. Mexico faces a liquidity crunch which would have occurred whether NAFTA existed or not. It is true that the problems in Mexico will have short term negative impact on our exports to Mexico. We are likely to see our trade surplus with Mexico ($1.3 billion in 1994) turn into a deficit in 1995. This is why it is so important that we assist Mexico in getting through its economic difficulties and help it resume economic growth. Our two countries are increasingly integrated economically. We cannot wish this away, even if we wanted to, and in fact, it is a source of strength for both, as trade creates jobs and improves economic conditions on both sides of the border.

But as I mentioned at the outset, our relationship with Mexico is tremendously varied. We are finding that as our economies have become increasingly integrated, so too are the aspects of the relationship which touch upon our daily lives. Let me review a few of them for you.

COUNTERNARCOTICS/LAW ENFORCEMENT

Our two governments are firmly committed to fighting the scourge of drug trafficking and production of illicit narcotics. President Zedillo, in his inaugural address, told the Mexican people that illegal narcotics have become Mexico's most serious national security problem.

We have worked with the Mexican government for more than two decades on counter drug programs and the past six years have been the most productive. During this period, the Mexican Government has seized over 120 metric tons of cocaine, made tens of thousands of arrests and eradicated thousand of hectares of opium poppy and marijuana.

One of our largest cooperative efforts is the Northern Border Response Force aimed at interdicting smuggling through Mexico into the United States. Through the Response Force, we share narcotics intelligence, cooperate on joint operations, and provide training on technical aspects of identifying illicit crops and transshipments.

Last week, we held two high level meetings with the Government of Mexico on migration, and law enforcement and narcotics issues. Both meetings were positive and constructive. I'll touch on the migration meeting in a moment.

At the law enforcement meeting, we agreed to intensify cooperation to combat narcotics and to improve mechanisms for dealing with the precursor and essential chemicals, money laundering, prisoner transfers, extradition, and domestic prosecution of fugitives. We are working closely with Mexico to improve implementation of the extradition treaty and to define categories of exceptional cases in which Mexican citizens who commit crimes in the United States might be extradited to stand trial here. We are also looking at ways to improve implementation of the Stolen Car Convention and to combat arms smuggling.

We discussed how to increase the number of prisoners transferred under our existing prisoner transfer treaty. We agreed to exchange information regarding the status and location of all transferred prisoners. This new exchange of information should alleviate concerns expressed by some states regarding the length of time that transferees spend in jail in Mexico. These concerns have been the justification for some states not to participate in the program, or, as is the case in California, for setting very restrictive criteria for transfer eligibility so that few prisoners qualify.

ENVIRONMENT

Our joint efforts to protect our shared environment date to the establishment in 1889 of the International Boundary and Water Commission (IBWC) and the 1944 Water Treaty. The IBWC maintains the land and water boundary between our two nations, including water management and border sanitation problems.

Our mutual obligation to protect our common environment was extended through the NAFTA. In conjunction with the Agreement, the U.S., Mexico and Canada become partners in a unique agreement to protect our shared environment and to ensure that economic growth is consistent with principles of sustainable development. Separately from NAFTA, the United States and Mexico have set up two unique bilateral institutions -- the Border Environment Cooperation Commission, known as the BECC, which will evaluate and recommend environmental infrastructure projects for funding along the border, and the North American Development Bank, or NADBank, which will provide funding for such projects. We are full partners with Mexico in both these endeavors which have considerable local government and public sector input.

It has taken a while to negotiate and establish these organizations, but I am pleased to tell you that they are preparing to open their doors for business. The BECC held its first public meeting last November and its second public meeting is scheduled for early spring. The BECC will be soliciting public input on border project needs shortly.

MIGRATION

Immigration from Mexico -- legal and illegal -- is, I am sure, of great interest to this audience.

You have here today two of the U.S. government's leading experts on migration and I yield to them on the subject. I also prefer to let them take the heat from the audience during the question and answer period.

But I do need to underscore that in migration and consular matters, the U.S. and Mexico enjoy a healthy and productive exchange on a number of difficult migration issues. We have a standing Migration and Consular Affairs working group under our formal Binational Commission which meets regularly. That group held a two-day meeting this past February 13-14 to discuss a range of action proposals designed to deal with a range of migration issues along the U.S.-Mexico border. A lot of very positive decisions were taken at that meeting and I'll let Doris Meissner, who chaired the U.S. delegation, discuss it further during her remarks.

DEMOCRACY

Our bilateral relationship is not simply one based on resolving the problems we share. We also share a commitment to certain core values of society and government -- democracy, good governance and the provision of decent standards of living for our peoples.

Mexico, despite lingering problems that are being courageously confronted today by its leaders, is continuing the profound political and economic transformation underway there for more than six years. In particular, political reforms are fulfilling the aspirations of the Mexican people for a more complete democracy. President Zedillo is clearly committed to furthering these reforms. We firmly support his leadership and the actions he is taking.

The August 21 elections were a milestone for Mexico's democratic process. Nearly 78 percent of the registered electorate went to the polls in an orderly and peaceful fashion. For the first time in Mexican history, civic organizations fielded more than 80,000 trained and accredited electoral observers throughout the country, foreigners -- many from the United States -- were invited to witness the process, and numerous independent "quick count" operations and exit polls validated the official vote tabulation. There were irregularities in the elections, but even the sternest critics concluded that they did not alter the outcome of the vote.

In his inaugural address, President Zedillo put his administration firmly behind the task of deepening the political reform process. He called for Congressional action on campaign and party financing, media access, and greater autonomy of electoral institutions. He repeated his campaign pledge to separate his government from the ruling PRI party and to remove himself from PRI party decision- making, including the selection of future candidates.

Words alone are not sufficient to bring about further reform. President Zedillo has embarked on an energetic and extensive action agenda. He appointed as Attorney General a respected member of the opposition PAN party, the first time an opposition member held a Cabinet post in Mexico. In December, Zedillo initiated consultative meetings with leaders of Mexico's major political parties, including a first-time ever meeting between a sitting president and the opposition PRD party leadership. These meetings led to the signing on January 17 by the four major parties of a political pact in which the parties agreed to cooperate on the legislation needed to implement pending reforms.

On February 12, we witnessed a major step forward in Mexico's democratic reform process. State and local elections in Jalisco were held in a peaceful and orderly manner, the votes were tabulated without incident and the results were accepted as legitimate by all parties. No one cried "foul." No one filed legal challenges. No one staged post-electoral protests. The Jalisco vote was a clear sign that Mexico is evolving into a genuinely competitive, multi- party democracy.

The headline of the Jalisco vote was "Major opposition victory in important state." The headline could also have been "Elections occur without protest or charges of fraud." This is the result of Mexico's on-going reform process and of President Zedillo's well-publicized insistence that elections be clean.

Mexico faces a number of other highly contested state and local races over the coming months. We are encouraged by events in Jalisco that these other elections will be as noteworthy for the fairness of the process.

President Zedillo has committed himself to creating in Mexico a government wherein all citizens benefit from the just and equal application of the law. He has called for a profound reorganization of the judicial system and, in the first few weeks in office, succeeded in having enacted Constitutional amendments aimed at improving the performance and accountability of the Supreme Court and the Office of the Attorney General. These are the first steps in fulfilling his goal of establishing a responsive justice system in Mexico.

CHIAPAS, ASSASSINATIONS

As Mexico has worked to implement reform, it has grappled with political turmoil over the past year. Assassinations of a presidential candidate and the leader of the ruling political party shocked the Mexican public which has clamored for answers to the motives behind these heinous crimes.

President Zedillo summed up the frustration that the Mexican people feel over these assassinations when he said that the investigations into the murders had not fully satisfied the public demand for the full truth. He instructed his Attorney General to intensify the investigations.

On January 1, 1994, the take over of several towns in the southern state of Chiapas by a previously unknown rebel organization was a reminder that underdevelopment, poverty, and social injustice still existed in Mexico.

After several days of fighting, the Mexican Government abandoned a military strategy, announced a unilateral cease- fire and called for peace talks. The Government's decision to seek resolution through dialogue was a remarkable change to the way it had dealt with previous rebellion.

President Zedillo made that policy his own. He instructed his Interior Minister to reopen avenues of dialogue with the rebels, but the rebels consistently balked at government entreaties to renew talks. That, and attempts by the rebels to broaden their movement elsewhere in Mexico, led to President Zedillo's decision to order the military to regain authority over territory in Chiapas.

President Zedillo underscored his commitment to seeking a peaceful resolution in Chiapas by ordering a halt to the military offensive once governmental authority was re- established. He called for a special session of the Congress to approve an amnesty for rebels who lay down their arms and to work toward a new political order in Chiapas which seeks to redress the inequities and underdevelopment suffered by the indigenous population. In these efforts, Zedillo has the support of the multi-party congressional peace commission which is playing a key role in attempts to restart the peace process.

Despite irresponsible rumors to the contrary, the U.S. did not pressure the Mexican Government to take these actions or a harder line in Chiapas as part of the financial assistance package recently proposed for Mexico. Our position has been very clear. Governments have the right and responsibility to protect their citizens against violence, while, at the same time, respecting their human rights.

We continue to urge restraint, respect for human rights and full compliance with the legal process. The United States believes that, as President Zedillo said: "a solution to this conflict should come through full respect for the law, through political channels and through conciliation."

SUMMIT OF THE AMERICAS

Let me move for a moment beyond Mexico and talk about a positive and hopeful trend taking hold throughout this hemisphere. Economic reforms have turned around the economies in nation after nation. Political reforms have brought forth democratic governments in all the nations of the Western Hemisphere, save Cuba. At last December's Summit of the Americas, the 34 heads of state and government made an historic hemispheric commitment to democracy, human rights, open markets and decent standards of living for all.

Effective governance is at the heart of these new reform measures. These include making governments responsible and responsive to citizen concerns, increasing the efficiency of governmental institutions and curbing the dishonesty and corruption which sap resources and undermine citizen trust and faith in their systems.

But these gains are not firmly entrenched. Mexico's successes and difficulties illustrate in a very vivid manner the promises and the perils which lie ahead for the entire hemisphere. President Zedillo has shown us his firm commitment to bring about the sort of transformation in Mexico which makes the promise of the Summit a reality. We must now work -- with Mexico and with the rest of the region -- to consolidate gains and to push to implement new reforms to enrich governmental action. These reforms are perhaps more challenging and difficult to achieve than the market reforms already in place or underway.

CLOSING

I don't want to leave the impression that there are not areas of disagreement between the U.S. and Mexico. There are.

One issue which has received a considerable amount of attention lately is Cuba. While both our nations agree with the goal of restoring Cuba to the Western Hemispheric partnership of democratically elected governments, we do not agree on the means by which to reach that goal.

The message here, though, is that in the atmosphere which prevails today in the U.S.-Mexico bilateral relationship, we are able to approach our differences in a mature, reasoned fashion. Our exchanges are frank, but not tinged with recriminations. Nor do we allow our differences to impact negatively on other issues important to both our countries.

In closing, I would like to pull an idea from the 1970's -- the interdependence of the world -- and put it into a 1990's perspective with regard to Mexico.

Our two nations and our two peoples have become intertwined. Our relationship is now as rich as it is complex. Whether we as individuals like it or not, events in Mexico impact on our lives in the United States just as events here resonate in Mexico. Such an existence is not without occasional tension.

But ultimately, we all benefit from this closeness with Mexico -- working together to resolve mutual problems, striving to increase trade between our nations, united in seeking to improve the lives of all our citizens. Prosperity and stability in a country with which we share so much is in California's and the nation's security and economic interests. We have faith that Mexico is on the path to financial recovery, to a more secure expression and implementation of democratic ideals and to economic well- being for its people.

The principles of the Summit of the Americas serve to bind us even more closely with Mexico and the rest of this hemisphere. President Clinton, in his address to the Summit participants, called it the dawn of a new partnership, of enduring friendship and of trust. That partnership of trust and friendship is alive in our relationship with Mexico. We must work to enrich it and ensure that the benefits of our efforts are enjoyed by the citizens of both of our great nations.

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