MEXICO CITY (AP) -- In an unusual public disagreement over economic
                  policy, Mexico's top businessmen and President Ernesto Zedillo are clashing
                  over the feasibility of using dollars, rather than pesos, to conduct business.

                  The idea of "dollarizing" the economy has drawn heated arguments in recent
                  months. After a quarter-century of recurrent devaluations, many Mexicans
                  are torn between loyalty to their national currency, and prospects of
                  economic stability and lower interest rates with the dollar.

                  Total dollarization -- effectively a monetary union agreed to with the United
                  States -- would eliminate pesos and replace them with dollars, preventing
                  violent changes in currency value.

                  Sen. Arturo Nava of the pro-business National Action Party said Friday the
                  Mexican economy has already been largely dollarized, pointing to the
                  frequent use of the U.S. currency in business transactions.

                  "It's already happening, and the worst of it is that it's being done under the
                  table," he was quoted as saying by the government's Notimex news agency.

                  "There are many companies that already conduct business and issue invoices
                  in dollars, particularly those that export," he said. But while larger firms can
                  get dollar financing, most consumers and small businesses must get along
                  with scarce, high-cost peso loans -- when they can get them.

                  The dollar is already in frequent use in Mexico, especially in the northern
                  border states. Sales of luxury cars, computer equipment, office furniture,
                  heavy trucks and other capital investments are in dollars, as is the rental of
                  corporate offices and many residential homes.

                  Formally changing to dollars has a political side as well as its economic
                  effects. It would surrender much of Mexico's control over monetary policy,
                  putting it into the hands of the United States and the Federal Reserve.

                  The debate came to a head at a Thursday ceremony, when the influential
                  Mexican Businessmen's Council asked Zedillo to consider allowing Mexican
                  companies to conduct their operations in dollars, saying it would spur
                  growth, reduce inflation, and lower interest rates on government expenses.

                  Eugenio Clariond, the council's president, said this could be a first step
                  toward eventually establishing a common currency that would bring together
                  Mexico and its NAFTA partners, the United States and Canada. The
                  Businessmen's Council includes two dozen of Mexico's top companies.

                  Zedillo, visibly upset, responded by defending Mexico's free-floating
                  exchange rate system, in which supply and demand determine the peso's
                  value.

                  "The free-floating exchange regime has allowed us to buffer the effects of
                  international financial volatility even in the most critical moments, and has
                  allowed us to protect our international reserves," Zedillo said.

                  A similar debate is taking place in Argentina, where President Carlos
                  Menem has suggested replacing his country's peso with the dollar. Argentine
                  officials are discussing dollarization with the United States, which would have
                  to be involved in any such move.

                  In Mexico, the dollarization proposal has gained new support as the country
                  gears up for its 2000 presidential election. The economy has followed a
                  six-year cycle tied closely to the presidential term, with a devaluation
                  accompanying each change of government since 1976.

                  The idea is also supported by the nation's largest industrial chamber and the
                  Mexican Bankers' Association.

                  Copyright 1999 The Associated Press.