Swap Mexican Debt for Tools of Learning

Crisis creates opportunity, according to an age-old saying, and necessity fosters invention. So it can be with Mexico’s external debt of more than $100 billion.

One constructive response might be a “debt-for-education” swap, analogous to the debt-for-equity swaps employed in recent years and favored once again by Treasury Secretary Nicholas Brady. The difference is that it would be used for the long-term benefit of both societies, not for the short-term gains of private investors.

A debt-for-education swap could provide financial resources for a new binational educational endowment. A total swap of $1 billion would permit the endowment to support programs at the rate of $60 million to $70 million per year.

There is great need for such a fund. According to the Bilateral Commission on the Future of U.S.-Mexican Relations, a blue-ribbon panel funded by the Ford Foundation, problems in the relationship are “needlessly complicated . . . by cultural stereotypes that cloud public understanding, by ignorance and misperception that affect policymakers and the media as well as ordinary citizens, by the failure to inform and educate, and by the dearth of scholars and researchers needed to produce new knowledge and expert analysis.”

In the United States, we need to review and revise inaccurate depictions of Mexico in our elementary and secondary schools; we need to alert the mass media about their often insensitive and sometimes irresponsible portrayals of Mexicans and Mexican-Americans; we need to strengthen teaching and research on Mexico and Mexico-related issues in our colleges and universities.

Mexico’s requirements are more pressing. The economic crisis of the 1980s has had a devastating impact on schools, universities and think-tanks. Salaries for elementary and secondary school teachers have plummeted to $50 per week, prompting a month-long strike by half a million educators earlier this year. University salaries have declined from about $300 per week to $100; a hard-cover book now might cost 20% of a professor’s weekly wage. Libraries and laboratories have fallen far behind in volumes, equipment and material.

There is an urgent need for Mexico to develop strong programs for the study of the United States, about which there is an astonishing amount of ignorance. There is an equally urgent need for training in science and technology, especially in view of Mexico’s drive toward economic liberalization.

Public Mexican funding for advanced training in U.S. universities has dwindled to practically zero. The number of Mexican students at U.S. universities in all fields declined by at least 40% during the 1980s.

One billion dollars might sound like a lot of money for an educational fund. It is not too much. It is less than 1% of the Mexican external debt. It represents about 4% of private U.S. bank holdings of Mexican debt. And it is much less than the individual endowments of several prominent universities in the United States.

An endowment of this magnitude could provide thousands of scholarships for Mexican students here; it could build and strengthen libraries and laboratories in Mexico; it could generate information networks, promote research and support regular exchanges--student exchanges, teacher exchanges, professional exchanges, people-to-people contacts of every kind.

The legal mechanism to enable a debt-for-education swap now exists. What is needed is an act of political will.

Specifically, the Bush Administration should propose to the Mexican government the creation of a bilateral educational endowment. This endowment should be governed by an independent, bilateral board that would have the kind of autonomy enjoyed by, for example, the National Science Foundation.

U.S. banks would donate holdings in Mexican debt to this nonprofit organization. For tax purposes the banks could write off their donations at the nominal value of the debt, not the market value. The Mexican government would then redeem the notes at full value, payable in pesos.

The Bush Administration would need to encourage American banks to subscribe to the plan, perhaps by enhanced material incentives. Implementation of the plan would require enthusiastic support by the Salinas Administration.

This plan would by no means solve the Mexican debt crisis. It would make only a minor contribution on that score. But it would make a major contribution to the improvement of general education and public understanding, and it would be a solid investment in the future. As the Bilateral Commission asserted in its report:

“We think it is of utmost importance to strengthen public understanding. This will require an improvement in education--not only through the formal learning that takes place in schools, but in the informal inculcation of attitudes through the mass media. Our children, and the children of our children, will face the challenge and the responsibility for conducting U.S.-Mexican relations in the century to come. The least we can do now is to give them the tools.”