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Still other firms are restraining price increases to boost their share of the domestic market. One of the country's largest producers of polyester cloth plans to limit price increases to no more than 25%. ``I'm working at 100% of capacity,'' says the firm's manager. ``We don't want to leave the market unattended.''
Despite such success stories, the widespread Mexican hardship puts enormous pressure on Zedillo, a Yale-trained economist who took office Dec. 1, to ease his austerity campaign. But that would almost certainly destroy foreign confidence in Mexico's ability to regain its footing and would thus send the peso slipping again. ``This time there's no free lunch,'' says Mauricio Gonzalez, managing partner of a Mexico City consulting firm.
That was the lesson for Wall Street investors as well. What many Americans discovered last week was that for all the Beltway rhetoric pitting Wall Street against Main Street, Wall Street long ago intersected with Main Street. At risk in the region were not only U.S. banks and giant investment firms but mutual funds held by tens of millions of little-guy investors who bet their savings on double-digit yields in emerging markets like Mexico. ``This wasn't about bailing out Wall Street,'' a congressional staff member said of last week's Executive Order, ``but about mutual funds and pension funds, and that means average Americans.'' People, for instance, like Anna Stathas, 76, and Angeliki Palassopoulos, 72, who on Dec. 27 sued the La Jolla, California, office of Merrill Lynch for putting them into a Mexican fund. Their suit charged that they lost nearly half the $73,000 they invested after Merrill Lynch failed to warn them of the risks. (The firm says the fund's prospectus clearly stated the risks.)
In making his case, however, Clinton was not helped by the fact that he entrusted the job of winning votes in Congress to ex-Wall Street whiz and newly appointed Treasury Secretary Robert Rubin. The former co-chairman of Goldman Sachs knew many of Mexico's leading industrialists (his business contacts included Telefonos de Mexico; cement giant Cemex; and Banco National de Mexico, the country's largest bank). But after two years as head of Clinton's National Economic Council, Rubin knew little about lobbying Capitol Hill. Although Treasury had prepared a state-by-state analysis of how a Mexican meltdown would affect U.S. employment, for example, most members of Congress never learned of its existence. Moreover, Clinton and top aides like White House chief of staff Leon Panetta were focused on the President's Jan. 24 State of the Union message and failed to give Rubin much support.
Congress, meanwhile, managed to achieve its own paralysis. ``The reality is members of Congress didn't want to do this,'' an Administration official says. ``And the reality is also, if you question them closely, they didn't want it to fail. And so we had this conundrum of, How do you pass something that can't pass, which everyone wants to succeed?''