Perhaps no country in the world is more dependent on the U.S. economy than
                 Mexico: nearly 90 percent of manufactured goods are exported to the United States
                 and 60 percent of the country's foreign investment pours in from north of the
                 border.

                 The United States is not technically in a recession, though a drop in industrial
                 production, increasing layoffs and falling consumer spending were pounding the
                 economy even before the Sept. 11 attacks.

                 But with Americans struggling to cope with the attacks on the World Trade Center
                 and the Pentagon, and with a war against terrorism looming, optimism that
                 America's economy will recover soon has vanished.

                 "The trend in the U.S. was already menacing," said Lawrence Krohn, a New
                 York-based economist who specializes in Latin America. "Now there will be more
                 bad news."

                 President Vicente Fox insists his country's economy is basically strong. By
                 Mexican standards, the country avoided a recession by posting zero growth last
                 quarter.

                 But according to standards used by analysts in the United States, Mexico is already
                 in a recession, and has been for a year. In recent months, manufacturing has
                 declined nearly 1 percent and retail sales have slipped 2.7 percent.

                 Fox, who pledged to create 1.4 million jobs in the first year of his administration,
                 has instead seen at least 250,000 Mexicans lose their jobs since January.

                 "We're hopeful that the U.S. economy can get through this," said Michael Hissam
                 of Delphi Automotive Systems, which scaled back the work force at its Mexican
                 plants by 11,000 even before the attacks. "In the meantime, we must maintain a
                 balance between the needs of our customers and the output of our factories."

                 New security is causing hours-long backups at the border, hurting many factories
                 by slowing the shipment of Mexican exports. And the peso, Mexico's currency,
                 slipped sharply after the attacks and has yet to fully recover.

                 "Before September 11 it looked like we could touch bottom in the coming months
                 and begin a recovery," said Mexico City economist Jonathan Heath. "Now with
                 everything that's happened ... Mexico is going to be dragged down further, then
                 touch bottom and stay there."

                 As some businesses tighten their belts by leaving jobs vacant, laying off workers or
                 slashing production, others have criticized Mexico's government for being too
                 reliant on the United States.

                 Mexico's has reached free trade agreements with countries ranging from the
                 European Union to Ecuador in recent years, but Heath said such pacts cannot
                 shelter Mexico from a U.S. slowdown.

                 "When you have the world's biggest market right next door and you have a free
                 trade agreement with that country, of course you are going to become very reliant
                 on what goes on economically there," he said.

                 Analysts say Mexico's economy could get a boost if the war on terrorism sharply
                 increases America's need for oil. Mexico is already America's fourth-biggest
                 supplier of oil and state-r un Pemex generates a third of this country's public
                 revenue.

                 Tourism -- one of Mexico's top industries -- is another potential trouble spot.

                 Glenda Juzon said the economic pinch had hurt business at the travel agency where
                 she works. Now she's afraid she might lose her job.

                 "We knew the economic situation would have many Mexicans saying 'I can't afford
                 to go on vacation to Cuba,"' said Juzon. "Now the people might not want to get on
                 a plane and go anywhere at all."

                  Copyright 2001 The Associated Press.