José López Portillo, President When Mexico's Default Set Off Debt Crisis, Dies at 83
By JONATHAN KANDELL
osé López Portillo, who as president of Mexico from 1976 to 1982 brought his nation to the brink of economic collapse, died yesterday. He was 83 years old.
Medical officials said Mr. López Portillo died at Angeles del Pedregal Hospital in Mexico City, where he was being treated for pneumonia.
Mr. López Portillo came to office amid hopes that he would steer Mexico back to prosperity and tranquility after the grave economic and political miscues by his predecessor and mentor, Luís Echeverría Alvarez.
At first, a combination of his engaging personality and the discovery of vast new oil deposits seemed to augur success. But soon his government overspent its oil revenues and overborrowed to cover deficits. Defaulting on its debt, Mexico set off a worldwide debt crisis.
By the time he left office, Mr. López Portillo was considered one of the most incompetent leaders of Mexico's modern era and his government among the most corrupt.
Still, this dark era forced the PRI, the party that ruled Mexico throughout most of the 20th century, finally to undertake painful reforms to modernize the economy and the political system.
But for several years after finishing his term in office, Mr. López Portillo was so immensely unpopular that he had to live abroad. Even when he returned to Mexico, he often had to face insults when he appeared in public. Nonetheless, he remained unrepentant about his conduct.
"I would do everything over again exactly the same," he said in an interview with The New York Times.
José López Portillo was born in Mexico City on June 16, 1920, to a solidly upper-middle-class family. He took pride in tracing his family's roots back 400 years to Spain. He attended public schools, where one of his classmates was Mr. Echeverría. They both studied law at the National Autonomous University of Mexico, strengthening a friendship that would prove crucial to Mr. López Portillo.
He decided late on a political career. After a dozen years practicing law and teaching university courses, he entered government in 1959 and accepted a succession of posts before President Echeverría appointed him secretary of finance in 1973.
When Mr. Echeverría tapped him as successor, the move caused surprise and consternation. Mr. López Portillo did not have a solid following in the ruling PRI. As finance secretary, he oversaw Mr. Echeverría's fumbling economic policy, which led to inflation, rising unemployment, the flight of capital abroad and the devaluation of the once sturdy peso. As president, Mr. López Portillo was thought to be a puppet of the strong-willed Mr. Echeverría, who did not hide his intention to exercize power behind the scenes.
But the new president used his inauguration, on Dec. 1, 1976, to assert his independence. With Mr. Echeverría seated nearby, Mr. López Portillo pointedly announced that he would not share the powers of his office.
Instead of confrontation and radical change, he stressed the need for cooperation and patience to cope with the economic crisis. He was conciliatory toward a business community that had reacted to Mr. Echeverría's left-wing populism by sending billions of dollars abroad.
Mr. López Portillo's voluble personality contrasted favorably with the sullenness of his predecessor. Tall and handsome, he was affable and quick to smile. He cultivated the image of a scholar-athlete who spent early mornings practicing javelin throws and late evenings poring over literary tracts in his library.
Business executives who met with the president spoke of a revival of confidence in the private sector. Foreign creditors applauded his apparent commitment to damp inflation. Union officials agreed to endure a period of belt-tightening.
With this large reservoir of goodwill, Mr. López Portillo was able to navigate successfully through his first year in office.
The nation's willingness to tolerate a drop in living standards seemed to be rewarded when enormous petroleum deposits were discovered in the Gulf of Mexico in 1978, and between 1978 and 1981, the gross domestic product grew 8 percent a year. With companies reporting record profits and investments, the business community did not seem to mind that government spending far exceeded the profligate levels of the Echeverría years.
Intoxicated by soaring oil prices, the government borrowed abroad against future revenues, and encouraged the private sector to follow suit. Despite a mounting balance-of-payments deficit and inflation, the peso held steady.
But the economic reverie ended suddenly. World oil prices collapsed in 1981. Interest rates abroad rose sharply, and a world recession reduced demand for oil. Anticipating a peso devaluation, Mexican capital flowed into the United States by the tens of billions of dollars.
By August 1982, the government was unable to pay even the interest on its foreign debt, which had grown to more than $60 billion. The greatest economic surge in modern Mexican history had turned into the worst economic crisis in six decades.
The turnabout also endangered the finances of many of the world's leading banks.
Attempting to salvage his reputation, President López Portillo announced a "revolutionary" takeover of Mexico's banks in his last state of the union address, on Sept. 1, 1982. The move, he asserted, was intended to punish the private banks for permitting the hemorrhage of capital to foreign havens.
Mr. López Portillo finished his presidency in even greater disgrace than his predecessor. He took up residence in several European countries for a few years to escape withering criticism.
The anger over the economic debacle was heightened by evidence of enormous graft. Mexicans had long tolerated the practice of illicit enrichment in public office. Many, rich and poor, accepted the inevitability of paying bribes to the police, government inspectors and minor bureaucrats to obtain permits, ease business transactions or avoid traffic summonses.
What made any accusation of corruption credible was the brazen display of wealth and nepotism by politicians. As his term drew to a close, Mr. López Portillo built a five-mansion retreat near Mexico City. The lavish estate was viewed as evidence that the president's fortune could be measured in billions of dollars.
President López Portillo appointed a half dozen members of his
family to senior posts, but it was his well publicized generosity toward
his mistress, Rosa Luz Alegría, that became a symbol of the era's
political decadence. The president named Ms. Alegría as secretary
for tourism. He also bought her a $2 million mansion in Acapulco; when
his wife, in a fit of pique, appropriated the house, Mr. López Portillo
purchased another villa for Ms. Alegría.