Foreign Relations of the United States, 1969–1976, Volume E–11, Part 1, Documents on Mexico; Central America; and the Caribbean, 1973–1976

106. National Intelligence Estimate 81–1–76¹

Washington, December 1976.

[Omitted here is a title page, map of Mexico, and a table of contents.]

MEXICO UNDER JOSE LOPEZ-PORTILLO: PROBLEMS AND PROSPECTS FOR U.S.-MEXICAN RELATIONS²

Principal Findings

Jose Lopez-Portillo, when he assumed the presidency of Mexico on December 1, 1976, inherited an economy in the grip of a psychological crisis. Successive attempts at a managed float of the peso in the last days of the Echeverria administration, while bringing about an undervaluation of the currency, failed to check capital flight and, in fact, further reduced business confidence, already undermined by the antibusiness acts and attitudes of the outgoing government. The extensive last-minute land redistribution of the outgoing President added to the air of tension and uncertainty.

Fortunately for Lopez-Portillo, the Mexican Presidency is a powerful decision-making center that operates under remarkably few institutional constraints. If he has the will, a new President could move quickly on the troublesome issues that confront him. Lopez-Portillo has given every indication that he has both the will and a program to arrest and reverse the current downward spiral. This is not to say that the road will be easy. He is faced with such basic problems as rapid population growth, high unemployment and underemployment, and low productivity in agriculture. Echeverria’s populism has some momentum, and various interest groups, particularly organized labor, will at times cause problems. Some compromises are likely. However, the Mexican President has unique tools with which to cope with his problems and insure the success of his programs.

The new President, generally considered to be pro-business and economically conservative, is expected to: (a) hold public and private talks to persuade businessmen that his administration understands their problems; (b) affirm the objective of maintaining exchange rate stability; (c) reemphasize that the government has no intention of establishing exchange controls; (d) take special measures to aid individual industries; (e) make use of wage and price controls to reduce the inflationary effects of devaluation; (f) announce specific programs to reduce the public sector deficit; and (g) emphasize agricultural productivity over land distribution. This program should begin to show results in 1977 and achieve substantial success by the end of 1978.

As the emphasis of Lopez-Portillo’s economic policy shifts from stabilization to growth, oil will become increasingly important. While there are strong forces within the Mexican Government that will resist all-out development of the country’s oil reserves—which may be as much as 60 billion barrels and nearly as large as those of Kuwait—the President would clearly like to produce and export oil at something near the maximum prudent rate. We believe that the President will win most but not all of his battles with the bureaucracy and that by 1980 production and export levels will be on the order of 2.3 million barrels per day and 1.2 million barrels per day, respectively. Such rates would allow Mexico to achieve a substantial current account surplus. By the end of Lopez-Portillo’s term in 1982 Mexico could be well on the way to becoming one of the world’s major oil exporters.

On the political side, we believe that Lopez-Portillo can prevent Mexico’s admittedly serious social problems from becoming unmanageable, but land redistribution and labor problems will be particularly difficult. The government should be able to maintain its authority and to stifle and deflect pressures through the traditional methods of cooptation, coercion, and limited reform.

With regard to the United States, Lopez-Portillo promises to be a much more cooperative neighbor than was Echeverria. It is clear, however, that the new President sees improved relations with the United States as a two-way street and hopes to maximize the economic, financial, and commercial benefits of the new relationship. At the same time, he must avoid any appearance of acting at the behest of the U.S. Thus, while the President’s cooperative stance will extend to those areas of most concern to the United States—such as illegal immigration, narcotics, trade relations, and oil—both institutional and political factors will prevent rapid breakthroughs in most of these areas.

Illegal immigration to the United States will continue to be a problem until Mexico can offer potential emigrants a viable alternative. In narcotics matters we can expect the Lopez-Portillo government to continue cooperative enforcement efforts, but, in spite of U.S. assistance, inefficiency, corruption, and the profit potential will continue to limit the effectiveness of enforcement programs. In trade relations Lopez-Portillo can be expected to press for special trade advantages for Mexican products in the U.S. market. Oil developments will be of primary importance to the United States. Imaginative and discreet assistance from the U.S. Government and the private sector may find receptivity as long as the fact and appearance of Mexican sovereignty are protected.

[Omitted here is the discussion section of the NIE.]

1. Summary: Analysts assessed the challenges facing Jose López Portillo as he took office as President of Mexico, concluding that he would be a more cooperative neighbor than his predecessor had been.

   Source: Central Intelligence Agency, National Intelligence Council Files, Job 91R00884R, Box 6, Folder 5. Secret; [handling restriction not declassified]. All brackets are in the original except those indicating text omitted by the editors. The Central Intelligence Agency; the intelligence organizations of the Departments of State, Defense, and Treasury; and the National Security Agency participated in the preparation of this estimate. The Director of Central Intelligence submitted this estimate with the concurrence of all members of the USIB with the exception of the Deputy Assistant Administrator for National Security, Energy Research and Development, who abstained.

2. This Estimate was written during a period of transition in the Mexican government. A follow-up Estimate is planned for mid-1977, when the policies of the Lopez-Portillo administration will have become more fully known. [Footnote in the original.]