MORE ON CHIAPAS

USS@SPACE-SOCIETY.UH.EDU
Mon, 13 Feb 1995 12:50:12 -0600

"In the name of investor confidence, a powerful U.S. bank is calling on
the Mexican government to crush the Zapatista insurgency in Chiapas."
Thus begins a striking article in Ken Silverstein and Alex Cockburn's
February 1, 1995 issue of COUNTERPUNCH.

Silverstein and Cockburn's article is based on an internal report
prepared by Riordan Roett, director of Latin American Studies at the
Johns Hopkins School of Advanced International Studies and now "on a
leave of absence while serving as a Chase advisor."

Studying the report and exploring Roett's other interventions
into the Mexico crisis, Silverstein and Cockburn discover a rabid desire
for war to protect Chase's investors. In the report Roett argues: "The
government will need to eliminate the Zapatistas to demonstrate their
effective control of the national territory and security policy". At a
January 11 seminar for hundreds of investors organized by the Center for
Strategic and International Studies, Roett "conceeded that his call for
war, if heeded by Zedillo, might provoke negative repercussions
internationally, but here were 'always political costs in bold actions.'"

Coming on top of other, more fragmentary but frequent, evidence of the role
of Wall Street in precipitating Zedillo's declaration of war, these
materials indicate even more strongly than ever that however much Zedillo
may wish to crush the Zapatistas for his own internal reasons, the
external pressures of international capital had become acute.
Unfortunately, the authors conclusion that "For now, Zedillo and a PRI
majority will likely reject Roett's final solution for Chiapas." has
proved to be all too optimistic.

==================================article================================

Ken Silverstein and Alexander Cockburn, "Major U.S. Bank Urges Zapatista
Wipe-Out: 'A litmus test for Mexico's stability'" COUNTERPUNCH, Vol. 2,
No. 3, February 1, 1995.

In the name of investor confidence, a powerful U.S. bank is calling on
the Mexican government to crush the Zapatista insurgency in Chiapas.
Heading up the larger Wall Street war party is Chase Bank, specifically
its Emerging Markets Group, which has billions at risk in Mexico. Chase's
Jan. 13 "Political Update on Mexico," passed to COUNTERPUNCH by a banking
insider, states bluntly: "The government will have to eliminate the
Zapatistas to demonstrate their effective control of the national
territory and security policy."

Chase is under no illusions that the December crash of the peso was
prompted by the Zapatistas. It is fully aware that the implosion of the
Mexican economy was caused by the overvaluation of the peso that enabled
U.S. investors such as itself to convert their killings on Mexican bonds
into the safety of the dollar.

U.S. financiers and political stragtegists now fear that a Mexican
government led by the novice Ernesto Zedillo --rather than by
Washington's trusted agent, ex. President Carlos Salinas-- will waver,
temporize with the Zapatistas and seek to placate domestic discontent.

But any appeasement of popular fury will come at the expense of foreign
investors, whose security in Mexico was the fundamental purpose of the
NAFTA agreement. Hence the need to finish off Subcommandante Marcos and
his comrades. As the Chase Update put it, "While Chiapas, in our
opinion, does not pose a fundamental threat to Mexican political
stability, it is perceived to be so by many in the investment community."

Chase plays down the possibility of a negotiated settlement to the
conflict in Chiapas, saying 'it is difficult to imagine that the current
environment will yield a peaceful solution." Zedillo may not be able to
gain the confidence of the Zapatistas and their supporters because "the
monetary crisis limits the resources available to the government for
social and economic reforms." In other words, foreign investors should
have first rights to the dwindling reserves at the Mexican treasury,
which will leave almost nothing left to implement anti-poverty programs
Zedillo has promised for Chiapas.

The author of the Emerging Market Group's memo is Riordan Roett, director
of Latin American Studies at the Johbns Hopkins School of Advanced
International Studies and now on a leave-of-absence while serving as a
Chase advisor. Known as a conservative but rational sort in academic
circles, Roett's views have hardened since he went to work full-time for
Wall Street, in the grand homicidal tradition of such academic
policymakers as Louis Adolphe Thiers, Walt Rostow, Henry Kissinger and
Hemran Cohen.

Roett is said to be particularly bitter over events south of the border
because, an informant tells us, he had assured Chase executives that
Zedillo --whom Roett has known and worked with for a decade-- could be
counted on to do the bidding of foreign investors. Comforted, Chase
increased its Mexican investments, only to take a beating when a huge
trade deficit forced Zedillo to devalue the peso.

Roett also calls on the Mexican government to take a hard-nosed approach
to other difficulties it is facing. The PRI, Mexico's ruling party, has
grim prospects for elections scheduled in five states this year. Roett
proposes that the PRI solve this problem by stealing the vote. "The
Zedillo administration willneed to consider carefully whether or not to
allow opposition victories if fairly won at the ballot box," he writes.
"To deny legitimate electoral victories by the opposition will be a
serious setback in the President's electoral strategy. But failure to
retain PRI control runs the risk of spliting the government party."

Roett has been lobbying fiercely in Washington to promote his scorched
earth policy for Mexico and to demand that Congress quickly approve
Clinton's $40 billion bail-out of Chase and other big investors --a
lproblem solved when the president, faced with sure defeat in Congress,
used emergency powers to authorize a new rescue package. Roett has
briefed Bob Dole, testified before the Senate Steering Committee, which
musters conservatives such as Trent Lott and Malcolm Wallop; advised
State Department officials; and addressed hundreds of political and
financial leaders at a Jan. 11 seminar organized by the Center for
Strategic and International Studies.

Roett bordered on hyusteria at the latter affair. Saying that clients
were always asking him why the Mexican government couldn't control the
Zapatistas, Roett argued that it was "essential, from the investor
point-of-view, to resolve the Chiapas issue as quickly as possible." He
conceded that his call for war, if heeded by Zedillo, might provoke
negative repercussions internationally, but there wre "always political
costs in bold action."

Roett's remarks were warmly received by his audience. Elliott Abrams
furiously scribbled notes during his presentation while nodding his head
in approval. Syndicated columnist Georgie Anne Geyer wrote an article a
few days later saying that no one at the seminar "explained [Mexico's
situation] better" than Roett, adding that scholars and financiers in
attendance "seemed to agree that while . . . [the Zapatistas] do not
threaten a wider rebellion in Mexico, they have become a litmus test for
Mexico's stability."

Dalal Baer, a Senior Fellow at the CSIS and moderator of the seminar,
thanked Roett for his comments and lamented the dilemma faced by Mexico,
pressured to open up its political system even though "financial markets
might not respond positively to increased democracy because it leads to
increased uncertainty." Like Roett and many other "academics", Baer is a
creature of Wall Street, serving as an advisor to Bear Sterns & Company.

David Malpass, a director at Bear Stearns, said that inexchange for a
U.S. organized bailout, Zedillo should appease foreign investors with a
"giant reestablishment of confidence." Malpass and others suggested new
privatizations, allowing 100% foreign ownership of the banking system,
and opening up Mexico's oil industry. Though not discussed at the
seminar, some House Republicans, acting at the behest of Jorge Mas
Canosa, head of Miami's Cuban American National Foundation, are also
demanding that Mexico cut off commercial credits to Cuba.

For now, Zedillo and a PRI majority will likely reject Roett's final
solution for Chiapas. An official from the Interior Ministry at the
seminar said the Chase man's call for war was "inadmissible".

But prominent forces in Mexico will be heartened by Roett's analysis.
Last Dec. 18 a group of Mexican businessmen reportedly met with Zedillo
to demand tha tthe new government go on the offensive in Chiapas. Some
high-ranking military officials have long been lobbying for war and,
according to reprots from Santiago and Buenos Aires, military advisors
from Chile and Argentina --two of the most brutal of Latin America's
armies, responsible for tens of thousands of deaths during the seventies
'dirty wars' --have been sent to train Mexican troops.

The parallel here is with the dispatch of Argentine officers to train the
Nicaraguan Contras at the start of the Eighties.

* * *

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Harry Cleaver
Department of Economics
University of Texas at Austin
Austin, Texas 78712-1173
USA

Phone Numbers: (hm) (512) 442-5036
(off) (512) 471-3211
Fax: (512) 471-3510
E-mail: hmcleave@mundo.eco.utexas.edu
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