NEWS ANALYSIS : Technocrats Lead Mexico From Crisis--to Where? : Politics: Economic panic was averted after Colosio’s assassination. Social problems still demand attention.

MEXICO CITY —  Much to the consternation of many old-line politicians here, another technocrat, Ernesto Zedillo, is now in line to be this nation’s president.

But it is the technocrats once again who have earned their stripes in the wake of Mexico’s most stunning political assassination in more than half a century.

In the hours after the murder last week in Tijuana of Luis Donaldo Colosio--Zedillo’s predecessor as presidential candidate of the Institutional Revolutionary Party that has ruled Mexico for 65 years--the technocrats quickly called on market savvy and international contacts to prevent the political crisis from becoming an economic crisis as well.

“They were absolutely brilliant,” said Rogelio Ramirez de la O, an economist often critical of government policy.

The performance showed why a cadre of calculator-carrying egg-heads continues to dominate Mexico’s government more effectively than a military junta could.

The government acted Wednesday to remove one of the most obvious stumbling blocks to Zedillo’s campaign for president. President Carlos Salinas de Gortari’s chief of staff, Jose Cordoba, is being made Mexico’s representative to the Interamerican Development Bank, according to wire service reports.

The French-born Cordoba is widely believed to be the power behind the throne, and many critics feared that he would have enormous influence over Zedillo.

But the new candidate presents the ruling party with other disadvantages, according to a representative of a leading opposition party.

For example, replacing Colosio with such an obvious economic technocrat as Zedillo makes the ruling party more vulnerable on what is probably its weakest issue in the Aug. 21 election: the free-market policies of the past decade that have made the poorest Mexicans poorer.

Nor will the southern Mexico rebels who rose up in arms Jan. 1, demanding democracy and better living conditions, allow those issues to be forgotten.

The legal representatives of the Zapatista National Liberation Army on Wednesday filed a complaint with the National Human Rights Commission protesting what they say is an army economic blockade around rebel-held territory.

Further, Colosio’s assassination and the speculation of conspiracy surrounding it have forced foreign investors to confront aspects of Mexican society that they had largely ignored. And that makes them uncomfortable. “It all keeps coming back to the government,” said a manager of a major institutional fund. “It really gnaws at me.”

But for the moment, the technocrats could breathe a sigh of relief as the Mexican Stock Exchange and banks closed Wednesday for four days of Easter vacation. The market had not crashed. The peso had not plunged.

Mexicans might question their country’s security measures, investigation procedures, even political machinations. But there was nothing but praise around the world for the performance of the technocrats.

Less than six hours after Colosio was pronounced dead, Salinas declared a national day of mourning. The Treasury Ministry immediately announced that banks, the stock market and currency exchange houses would all be closed the next day.

That forestalled a panic, forcing investors and other citizens to reflect before they sold their stock or changed their pesos for dollars. It also gave small investors a chance to see the reaction of big insurance companies and pension funds that trade Mexican stocks in the United States under special rules.

To ensure that reaction was calm, the technocrats started working the phones.

Jose Angel Gurria used his high profile and the wrangling skills he learned in his days as Mexico’s top government debt negotiator in his new job as director of the national development bank, which serves as a market-maker, buying stocks to keep up prices. Investment managers who started selling off Mexican stocks last Thursday got chiding calls from Gurria.

Then, the Treasury Ministry quelled fears of a peso devaluation by going public about a 4-month-old agreement with the American government. The U.S. Treasury, officials made clear, would buy up to $6 billion worth of pesos to sustain the currency in an emergency.

“One of the smartest moves the Mexican government made was to enlist the support of the U.S. government and other international agencies,” said Timothy C. Davis of the Emerging Markets Group at Lazard Freres & Co. brokerage in New York. “It was smart to get (President) Clinton on tape saying that Mexico had the wherewithal to stay the economic course.”

To provide further reassurance, the day after Colosio’s assassination, Mexico became the first Latin American nation accepted into the Organization for Economic Cooperation and Development, the so-called rich countries’ club. Combining such image-raising announcements with government buys of stock to sustain prices assured that the Mexican Stock Exchange index fell only 4.38% this week, despite an overall drop in international markets.

On Wednesday, the technocrats capped their efforts by releasing the Bank of Mexico annual report, which showed that the country had $24.5 billion in international reserves as of Dec. 1, 1993--plenty of money to defend the peso.

Despite their effectiveness in a crisis, running a technocrat as a candidate has its problems, said Ricardo Pascoe, coordinator of international affairs for the campaign of Cuauhtemoc Cardenas of the leftist National Democratic Front, who many Mexicans believe was cheated out of the presidency by fraud in the 1988 election.

Compared with Colosio, who was a congenial, friendly man, Pascoe said, “Zedillo is a cold technocrat.” While Colosio was most identified with the government’s social development program, Zedillo is clearly one of the architects of the free-market economic policies.

Salinas has admitted that those policies have not yet benefited all Mexicans.

The Cardenas campaign plans to point out to voters Zedillo’s role in making those policies, said Pascoe. In facing Colosio, Cardenas emphasized the issues of democratic reform, he said.

“With Zedillo, the whole argument of continuing the economic policies is reborn,” he said. “Colosio had mitigated that somewhat.”

The other major opposition candidate, Diego Fernandez de Cevallos of the rightist National Action Party, will continue focusing on the issue of democratic reform, said campaign strategist Jesus Ramon Rojo. “We are confronting not a man, but the entire PRI-government apparatus,” he said.

In addition, he predicted, the ruling party will now try to present Colosio’s assassination as an attack on the country and use it to attract a sympathy vote. “They are going to stand on the body of the victim and take advantage of this tragic loss for a widow and two small orphans to benefit the corrupt, rotting institution that is the PRI,” said Rojo.

But Colosio’s murder could still present more problems for the Mexican government. Foreign investors who did not panic about the assassination are becoming uneasy as the investigation progresses.

“I am nervous about the PRI’s likely involvement in this thing,” said one investor, who asked not to be identified. “Maybe they have done lots of rotten things in their lives and this is just another, but it blows the whole institutional (framework) of the country apart.”