Word: peso
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MEXICO: The Peso Heads South...
NAFTA: Does the peso's crash mean Perot was right...
Loose translation: "See? I was right." Like other NAFTA critics, Perot sees Mexico's turmoil as proof at last of the trade pact's perils. And he sees more proof in the offing: after the peso's plunge, with Mexican labor even cheaper, American jobs will head south en masse. The poorly concealed glee of NAFTA's foes gives the Clinton Administration yet another thing to get defensive about. If NAFTA was a blunder, then doubts arise about the centerpiece of Clintonomics: free trade, as in NAFTA, GATT and plans for Pacific Rim and Pan-American trade zones...
Oddly, the peso's devaluation actually accents the emptiness of Perot's dire warnings. The "giant sucking sound" was supposed to come largely from an unequal trade flow. Dollars, chasing cheap Mexican goods, would head south faster than pesos headed north, and jobs would follow the prevailing current...
...this imbalance would also have had a second effect: making pesos precious, thus lessening pressure to devalue. Alas for the peso, Perot's nightmare failed to materialize. U.S. imports from Mexico did grow sharply ; -- by $7 billion, to reach $40 billion, within 10 months; but, as free traders had predicted, so did exports to Mexico -- by $8 billion, reaching $42 billion. Thus Mexico's worldwide trade gap -- now around $30 billion -- never got the relief implied by Perot's fears. Its currency finally crumpled under the pressure...