By choosing his minister of interior, Gustavo Díaz Ordaz, to succeed him, López Mateos yielded to growing concerns within the PRI about maintaining internal order and spurring economic growth. As government minister, Díaz Ordaz had been responsible for some very controversial policy decisions, including the arrest of Siqueiros, the violent suppression of several strikes, and the annulment of local elections in Baja California Sur, in which the PAN had received most of the votes.

Business interests once again received priority, and students and labor were kept under control so as not to disrupt economic growth. Antigovernment protests reached unprecedented proportions, however, in the demonstrations of the summer of 1968, just prior to the Summer Olympic Games that were to be held in Mexico City in October. From July through October, academic life in the city and throughout Mexico was halted as students rioted. The antigovernment demonstrations were ignited by student grievances, but many discontented sectors of society joined the students.

As the Olympic Games approached, the PRI and Díaz Ordaz were preparing the country to show foreign visitors that Mexico was politically stable and economically sound. Student unrest grew louder and more violent, however. Student demands included freedom for all political prisoners, dismissal of the police chief, disbanding of the antiriot police, guarantees of university autonomy, and the repeal of the "law of social dissolution" (regulating the punishment of acts of subversion, treason, and disorder). Luis Echeverría Álvarez, the new interior minister, agreed to discuss the issues with the students but changed his mind when they demanded that the meeting be televised. The students, their demands unmet, escalated the scale and frequency of their protests. In late August, they convened the largest antigovernment demonstration to date, rallying an estimated 500,000 protesters in the main plaza of the capital. Seeking to bring a halt to the demonstrations, Díaz Ordaz ordered the army to take control of UNAM and to arrest the student movement leaders.

To show that they had not been silenced, the students called for another rally at the Plaza of the Three Cultures in Mexico City's Tlatelolco district. On October 2, 1968, a crowd of about 5,000 convened on the plaza in defiance of the government crackdown. Armed military units and tanks arrived on the scene and surrounded the demonstrators, while military helicopters hovered menacingly overhead. The helicopters began to agitate the crowd by dropping flares into the densely packed gathering. Shortly thereafter, shots rang out (according to some accounts, the shooting was started by the military, while others claim the first shots were fired at soldiers by antigovernment snipers in the surrounding buildings). The panicked crowd suddenly surged toward the military cordon, which reacted by shooting and bayoneting indiscriminately into the crowd. Estimates of the number of people killed ranged from several dozen to more than 400. Despite the violence, the Olympic Games proceeded on schedule. However, the Tlatelolco massacre had a profound and lasting negative effect on the PRI's public image. The authoritarian aspects of the political system had been starkly brought to the surface.

Reconciliation and Redistribution, 1970-76

Despite the groundswell of urban protest unleashed against the government, the PRI candidate easily won the 1970 presidential election. The new president, Echeverría, was expected to continue his predecessor's policies. Contrary to expectations, however, once in office Echeverría swung the ideological pendulum of the regime back to the left. The government embarked on an ambitious public relations campaign to regain the loyalty of leftist intellectuals and the young. To solidify the support of its core labor and agrarian constituencies, the PRI also launched a barrage of social welfare programs.

Echeverría was determined to coopt the dissatisfied elements of the middle class that had become radicalized during the 1960s. Government patronage became an important mechanism of rapprochement. Thousands of intellectuals and young leftists were given posts in the government's bloated bureaucracy, and prominent student leaders were brought into the president's cabinet. To attract support from the young--who now represented a majority of the population--Echeverría lowered the voting age to eighteen, and the ages for election to the Senate and Chamber of Deputies to thirty and twenty-one, respectively. In addition, he freed most of the demonstrators arrested during the raid on UNAM and the Tlatelolco massacre.

Despite his aversion to domestic communist movements, Echeverría became a champion of leftist causes in Latin America. He was a strong advocate of the proposed "new international economic order" to redistribute power and wealth more equitably between the industrialized countries and the developing world. Demonstrating his independence from the United States, Echeverría became only the second Latin American head of state to visit Castro's Cuba. In 1974 he warmly received Hortensia Allende, widow of leftist Chilean president Salvador Allende Gossens, as a political refugee from Chile's right-wing military dictatorship.

In domestic economic affairs, the Echeverría administration ended the policies of stabilizing development that had been pursued since the early 1950s. Echeverría abandoned Mexico's commitment to growth with low inflation and undertook instead to stimulate the economy and redistribute wealth through massive public-spending programs. The new policy of "shared development" was premised on heavy state investment in the economy and the promotion of consumption and social welfare for the middle and lower classes.

The focus of Echeverría's social welfare policies was the Mexican countryside. Despite ample evidence that the ejidos were less efficient than private farming, Echeverría resumed the redistribution of land to ejidos and expanded credit subsidies to cooperative agriculture. The government also pursued an extensive program of rural development that increased the number of schools and health clinics in rural communities. By refusing to defend rural property owners from squatters, the Echeverría government encouraged a wave of land invasions that reduced land pressure in the countryside but seriously undermined investor confidence.

In addition to providing broad subsidies for agriculture, the government embarked on several costly infrastructure projects, such as the US$1 billion Lázaro Cárdenas-Las Truchas Steel Plant (Sicartsa) steel complex in Michoacán state. State subsidies to stimulate private and parastatal (see Glossary) investment grew from 16 billion pesos (US$1.2 billion) in 1970 to 428 billion pesos (US$18.6 billion) by 1980. Although this type of spending generated high economic growth throughout the 1970s, much of the money was either wasted in unnecessary and inefficient projects or lost to corruption. The government relied heavily on deficit spending to finance its domestic programs, incurring heavy debt obligations with foreign creditors to make up the shortfall in public revenues.

Under Echeverría, the historically uneasy relationship between the PRI and the national business community took a sharp turn for the worse. Echeverría's antibusiness rhetoric and the government's interference in the economy deterred new foreign and domestic investment. Although the government avoided full-scale expropriations, it increased the state's role in the economy by buying out private shareholders and assuming control of hundreds of domestic enterprises. By the end of Echeverría's term, the government owned significant shares in more than 1,000 corporations nationwide.

Despite warning signs of a looming financial crisis, deficit spending continued unabated throughout Echeverría's sexenio . The public sector's foreign debt rose by 450 percent to US$19.6 billion in six years, while the peso was allowed to become overvalued. By the end of his sexenio , Echeverría was facing the consequences of his administration's unrestrained spending. In August 1976, mounting currency speculation, large-scale capital flight, and lack of confidence in Mexico's ability to meet its debt repayment schedule forced the government to devalue the peso for the first time since 1954. The outgoing president bequeathed to his successor, José López Portillo y Pacheco, an economy in recession and burdened by severe structural imbalances. The only bright spot in an otherwise bleak economic picture was the discovery in the mid-1970s of vast reserves of oil under the Bahía de Campeche and in the states of Chiapas and Tabasco.

Data as of June 1996