Market Frailty Isn't Mexican, Official Says

          By JULIA PRESTON

                MEXICO CITY -- Finance Minister Jose Angel Gurria runs an
                economy that is growing vigorously, with most exports surging
          and thousands of new jobs opening every day. But ask him whether the
          Mexican stock market will rise or plunge tomorrow and he shakes his
          head in bewilderment.

          "Ask the Duma; ask Mr. Chernomyrdin," Gurria said in an interview
          Tuesday, referring to President Boris Yeltsin's embattled choice for prime
          minister and the house of the Russian parliament that has so far refused to
          approve him.

          "It has nothing to do with Mexico," he said. "That is what is very dramatic.
          Sometimes there is this feeling that there's not very much you can do.
          Basically, you are in the presence of forces you can't control."

          Gurria vented frustration felt by leaders of several Latin American
          countries -- including Brazil, Chile and Argentina -- that took tough, often
          unpopular measures in recent years to stabilize their economies but have
          been dragged into the global market turmoil nonetheless.

          "There is a lack of differentiation," Gurria said, lamenting that international
          investors had sold Latin securities in response to worries generated by
          Russia and Japan, without bothering to examine conditions in individual
          nations of the region.

          Wednesday, Latin American markets again showed that they are tied to
          trading in the United States as several of them rose or held steady, a day
          after Tuesday's rebound in the Dow Jones industrial average. (The Dow
          fell 45 points Wednesday after rising 288 on Tuesday.)

          In Mexico, where there was no trading Tuesday because of President
          Ernesto Zedillo's State of the Union address, the stock market rose
          Wednesday by 186.63 points, or 6.24 percent. Mexican stocks had
          dropped 5.14 percent Monday.

          The Latin market performance came in spite of a controlled devaluation
          overnight Tuesday in Colombia. The authorities there widened the daily
          exchange rate band for the Colombian peso by 9 percent, saying they
          would allow it to depreciate 23 percent annually against the U.S. dollar,
          compared with 14 percent before.

          Colombia had spent about $1 billion of its foreign reserves this year to
          shore up its currency, which was weakened by a budget deficit equivalent
          to about 6 percent of the gross domestic product. A new president,
          Andres Pastrana, took office there Aug. 7.

          Analysts said Colombia devalued anticipating a similar move in
          neighboring Venezuela, where economists say the bolivar is overvalued by
          as much as 40 percent. But Venezuela weathered the storm Wednesday,
          with its stock market closing up 3.82 percent. The bolivar was barely
          lower.

          Gurria, who spoke in English, said that beneath wavering Mexican
          markets lay a sound economy that expanded 5.4 percent in the first half of
          this year. Despite a big drop in petroleum prices, the Mexican
          government, which relies on oil for a third of its revenue, posted a small
          surplus for the first half of the year.

          Mexico's foreign debt, the finance minister said, would remain well under
          control even if international markets were unsteady into next year. Mexico
          easily refinanced $4.5 billion in capital payments it owed this year, and
          those due in 1999 are smaller, at $1.4 billion.

          Gurria said he was concerned that prolonged high interest rates could deal
          new blows to the Mexican banking system. Earlier this week, annual rates
          on overnight Treasury bills went to 38 percent. But so far, no bank
          collapses are looming, he said.

          And he declared that threats to financial stability from outside the country
          were giving fractious lawmakers reasons to settle their differences over a
          proposed multibillion-dollar bank bailout.

          "There is a growing awareness by all parties that we can't play games
          here, that if you stretch the rubber band a bit too far, it could snap,"
          Gurria said. The bank bailout debate, in which the opposition has accused
          the government of rescuing wealthy friends and colleagues at the expense
          of Mexican taxpayers, has dragged on since March.

          Returning to the global economy and finances, Gurria said: "What worries
          me is who is running this show. There is an enormous vacuum of
          leadership worldwide. Where are the consensus-building and
          decision-making mechanisms to face situations like Russia and Japan?
          And how do you reward countries that perform well, like ours?"

          He defended the $50 billion international rescue effort that saved Mexico
          from financial collapse in 1995. At a meeting of Latin finance ministers
          called for Friday by the International Monetary Fund, he plans to urge the
          IMF and the advanced economies to once again come to the aid of
          Russia.

          "There is a problem of contagion to the rest of the world's economy,"
          Gurria said. "You're talking about a country which may qualify as too big
          to fail."