Mexican Chief Says Painful Economic Policies Are
       Farsighted

          By SAM DILLON

                MEXICO CITY -- President Ernesto Zedillo on Tuesday night
                made his first major statement about the effects of the world
          financial crisis on Mexico. Zedillo acknowledged that plunging oil prices
          had forced painful budget cuts and urging Mexicans to be patient and
          work hard to help the country continue to grow.

          "I must be the first to warn that the circumstances in which our economy
          will operate in the near future will be difficult," Zedillo said in his annual
          state of the union address. But Mexico can expect to average 4 percent
          growth for the two years that remain in his six-year term, he said, "as long
          as we keep our spirits high and work hard."

          In an hourlong speech that defended his government's efforts to solve
          everything from surging crime to illiteracy, Zedillo devoted the most time
          to explaining his often-painful economic policies, arguing that they had so
          far helped Mexico to bend, but not break, with the global financial
          pressures.

          The extraordinary recent losses in the Mexican financial markets after
          Russia's de facto devaluation of the ruble surrounded Zedillo's report to
          Congress with an air of crisis.

          Politicians and analysts of all stripes delivered their own assorted report
          cards on the president's performance in his four years in office.

          "A quick look at the economic indicators reveal that our country is
          sustaining itself on the pillars of deceit and the people's poverty," Sen.
          Gabriel Jimenez Remus of the opposition National Action Party told the
          Congress hours before Zedillo's address. "Falling per capita income, rising
          inflation, the devaluation of our currency, ever rising unemployment -- all
          are shoving our country toward the third world."

          "Fifth Year Begins in Financial Crisis" was the headline Tuesday in the
          newspaper Reforma. The paper featured a poll that showed that 51
          percent of Mexicans approved Zedillo's presidency, down from 60
          percent in December.

          "Zedillo's approval ratings have begun to decline," the newspaper
          reported, "and the president's fall has been caused by the poor pace of
          the economy."

          Even so, Zedillo is more popular than the opposition mayor of Mexico
          City, Cuauhtemoc Cardenas, and about half the 31 state governors.

          The 1994 peso devaluation, during Zedillo's first month in office,
          provoked a worldwide financial crisis and plunged Mexico into recession.
          But the tight-money policies and fiscal discipline that he imposed after that
          brought the broad economic indicators back to healthy growth in two
          years.

          The new economic turbulence, originating in Asia, has been washing over
          Mexico since July, when plunging world oil prices forced Zedillo to
          preside over the third severe budget cut this year. Soon the peso, which
          opened the year worth 12.4 U.S. cents, began to slide. At the close of
          trading Monday the peso was worth 10.03 cents.

          Interest rates have climbed, to 38 percent in the secondary markets.

          Mexican markets were closed Tuesday for a national holiday, the Day of
          the presidential Report.

          "People are saying that the president is weakened," Sergio Sarmiento,
          news director of the TV Azteca network, wrote in a newspaper column.

          "They say, with a certain degree of truth, that the international financial
          crisis is eroding the only point about which Zedillo could claim success,
          his handling of the macroeconomy. Everything else seems to be in
          disaster. But this isn't the first time Mr. Zedillo has been portrayed
          erroneously as defeated."