The Mexican Float -- Many Unanswered Questions
by Robert Hormats, National Security Council,
September 14, 1976

21 March 1995

History does repeat itself, but regular patterns of tragedy or farce are rarely to be found. Rather, as William Faulkner observed, "The past is never dead. It's not even past." Today, with headlines blaring the news of a Mexican financial crisis and consequent rumblings on Capitol Hill and Wall Street, history has something to tell us about current policy dilemmas. The background: In December 1994, the Mexican government abandoned efforts to prop up its currency, and let the peso take a dramatic plunge against the dollar. In the wake of President Zedillo's action, domestic and international investors alike have stumbled over themselves trying to pull their money out of the troubled country.

But the crisis was hardly unprecedented, as the attached document makes clear This 1976 memorandum is an analysis produced by President Gerald Ford's National Security Council staff for National Security Adviser Brent Scowcroft, focusing on then- Mexican President Luis Echeverrķa's decision to devalue the peso during his final weeks in office. Just as the circumstances of today's crisis echo the 1976 devaluation, the observations made in this brief analysis contain some hauntingly familiar refrains. Two weeks after the devaluation, wrote NSC staffer Robert Hormats, "there are signs that the experiment may be turning sour." Mr. Hormats worried about Mexican labor unrest, the government's plans for austerity measures, and "immediate implications for U.S. investors" of the peso's fall.

Mr. Hormats' subsequent career adds another interesting element to this document. He had come to the NSC from the Fletcher School at Tufts University, and moved to the State Department in 1977, became Deputy U.S. Trade Representative in 1979-81, and Assistant Secretary of State for Economic and Business Affairs in 1981-82. Since 1982, Mr. Hormats has worked at Goldman Sachs, currently as vice chairman of Goldman Sachs International, where he must be watching the peso crisis with great interest.

But what strikes us the most about this document is its final paragraph, which warns of the imminent threat of a surge in Mexican "illegals" across the border and into the United States. "This will result in additional calls to end the displacement of U.S. workers by cracking down on immigration laws, already a delicate element in U.S.-Mexican relations," wrote Mr. Hormats. Almost 20 years later, public debate rages over measures like Proposition 187, the California referendum denying government benefits to illegal immigrants and their children.

National Security Archive analyst Kate Doyle located this document in the NSC files at the Gerald R. Ford Presidential Library in Ann Arbor, Michigan, which had generously provided her a research grant (awarded competitively) for her work there. We anticipate that this is only the first of a veritable flood of documentation Kate will unearth over the next three years of her current project on Mexico and the U.S. since 1968, involving leading scholars and journalists in both countries. Enjoy your reading.

An independent non-governmental research institute and library located at the George Washington University the Archive collects and publishes declassified documents obtained through the Freedom of Information Act. Publication royalties and tax-deductible contributions through The Fund for Peace underwrite the Archive's budget.

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