MEXICO CITY (Reuters) -- Mexican President Ernesto Zedillo said on
                  Sunday the country had finally left the 1994-95 peso crisis behind and would
                  strive to strengthen the foundations of democracy ahead of July presidential
                  elections.

                  Addressing the nation in a New Year's speech, Zedillo said Mexico still had
                  some distance to go to shore up its economy and vanquish poverty but was
                  on the right track, five years after the December 1994 peso devaluation
                  plunged it into a deep, prolonged recession.

                  "Together we have managed to overcome the serious economic situation we
                  were confronted with at the start of the sexenio (six-year presidential term)
                  and together we have built a healthy and strong economy," the Mexican
                  leader said.

                  Zedillo, whose Institutional Revolutionary Party (PRI), in power since 1929,
                  faces one of its toughest contests ever in July, urged citizens to vote in this
                  year's presidential polls. "We Mexicans are living in full democracy and this
                  year we will strengthen it through our participation (in the ballot)," he said.

                  He reiterated his assurance that his government would not tamper with the
                  results and would treat opposition parties with respect, and called on the
                  candidates to formulate honest and precise electoral proposals.

                  "The government will take care that a climate of liberty, observance of the
                  law, security and tolerance prevails (and) ... will practice and promote civility
                  and ensure public resources are not used for electoral purposes," he said.

                  "Popular will shall be the only thing that decides the outcome of the elections
                  in 2000."

                  Opposition parties have denounced massive vote-buying in state
                  gubernatorial elections during the past two years and election experts say
                  they face a tough task overcoming the PRI's powerful vote-harvesting
                  machinery.

                  Nevertheless, the PRI now faces growing challenges, in particular from the
                  left-leaning Party of the Democratic Revolution (PRD), which since 1997
                  has run Mexico City, and the conservative National Action Party (PAN),
                  which holds several governorships. Together, the two opposition parties
                  have had a majority in the lower house of Congress since 1997.

                  The July elections are widely regarded as the toughest challenge faced by the
                  PRI in its 70-year reign, although PRI candidate Francisco Labastida is
                  viewed as the front-runner.

                  Zedillo, whose term ends in December, began his presidency with an
                  overvalued peso and a mountain of dollar-linked debt.

                  Shortly after taking power, he was forced to devalue, sending interest rates
                  into the stratosphere and plunging Mexico into its worse economic recession
                  since the Depression.

                  The economy rebounded last year and grew at just under 4.0 percent, one
                  of Latin America's fastest rates of expansion. Inflation also came down to
                  levels before the 1994-95 peso crisis, registering 12.32 percent.

                  One engine of economic growth was the United States, with which Mexico
                  has been umbilically linked through the North American Free Trade
                  Agreement since 1994.

                  However, official figures show a third of Mexico's 98 million people still live
                  mired deep poverty. "Certainly we still have some way to go, but we are
                  moving in the right direction and have already advanced a lot," Zedillo said.

                     Copyright 2000 Reuters.