As the peso continues its downward spiral and inflation creeps ever higher, Mexicans are blaming their economic woes on NAFTA. Economists, however, insist that the roots of the crisis are political and argue that the leadership didn't go far enough in pursuing market reforms. PNS correspondent Sam Quinones reports from Mexico City.

MEXICO CITY -- When President Carlos Salinas began his crusade for a North American Free Trade Agreement a few years back, Manuel Hernandez believed what he heard.

At the time, Hernandez was an architect in charge of the buildings at Serfin Bank -- just the kind of person Salinas was talking to.

"We believed that Mexico was really going to enter the First World economically. When they opened the borders there would be more opportunities for us," Hernandez says.

Less than two years into NAFTA, Hernandez, 45, has been unemployed for seven months. He lost his job in April, after 15 years with the now-shrunken bank and had to sell his car to support his family. Nowhere does he see benefits from free trade.

"This was a total con," he says. "We were manipulated."

Hernandez isn't alone. A growing number of Mexicans are feeling that with free trade the country got snookered into a game it couldn't win. "It's as if I climbed in the ring with Mike Tyson for 15 rounds," says Javier Higuera, an unemployed accountant. "The impact (of the border opening) has been brutal."

Vicente Fox is a shoe manufacturer, governor of Guanajuato and a member of the right-of-center National Action Party which has long advocated liberalizing the economy. Now Fox wants to re-negotiate NAFTA. He's a leading contender for the party's presidential nomination in the year 2000.

In November 1993 the firm Market and Opinion Research International found that 48 percent of respondents felt Mexico would benefit from NAFTA versus 30 percent who thought it would hurt the country. Today the approval rating would be much lower, says Juan Baldera, a company spokesman.

No one questions that Mexico has lost big in the post-GATT, post-NAFTA era. Unemployment is at record levels and only the maquiladora sector is hiring. Bankers are up to their necks in defaults. Manufacturers of toys, shoes, textiles, candy and other consumer goods are crying the cheap-import blues. Thousands of tortilla shops have gone bankrupt.

"We're living the worst crisis in terms of growth in fifty years," says Roberto Salinas de Leon, director of the Center for Free Enterprise Studies in Mexico City.

But many economists, Salinas included, blame the crisis not on the opening of borders but on politics -- specifically the political tumult of 1994 and President Carlos Salinas' failure to devalue the peso during his last year of office.

"The current recession would have been much worse without (the free trade) policies in place" that are now convincing investors to return to Mexico, argues Andres Velasco, an economist at New York University who co-wrote a study of the events leading up to the December peso devaluation. "None of this (recession) had to do with trade policy."

That's not how the average Mexican sees it.

Even staunch free-trade supporters admit things should have been done differently. "If we'd taken it a little slower, industry would have been able to adapt," says Carlos Sandoval, president of CONIECO, the association of environmental-technology firms.

Instead, Mexico went from protectionism to free trade in less than a decade -- years distinguished by an utter lack of growth. Few companies could modernize before the doors were flung open and the world rushed in.

"With NAFTA the U.S. won, not Mexico," says Salvador Garcia Linan, a small business consultant. "Small and medium-sized businesses weren't prepared for it."

Beyond economic woes, Mexicans' discontent over NAFTA also reflects their deeply held nationalism. Years of protectionism bequeathed decrepit factories and shoddy products but also a feeling of ownership -- Mexicans had something the U.S. couldn't buy.

Moreover, Mexicans never really debated the treaty which leaves them more outraged now. "We never knew what this would provoke," complains Sergio Kennedy, an unemployed banker.

Yet Salinas de Leon argues that the ex-president's biggest blunder was that he didn't instill enough market reforms -- changes to make doing business easier. Thus in a country with rampant unemployment and an aging industrial plant, businesses still pay a two percent tax on every worker and on every piece of machinery.

Furthermore, Mexico was psychologically unready for the opening. The overvalued peso and open borders allowed Mexicans for the first time to buy foreign products relatively cheap -- and they laid into them like a junkie out of jail. Now they're going cold turkey and seeing demons everywhere.

Government officials are telling everyone that the worst is over. There's not much most Mexicans can do but hope they're right. But no one's betting on it.