After a two-year bout with recession, things are looking up for Mexico's economy. But a variety of risks could cloud an otherwise bright outlook.

First the good news. The recovery of the Mexican economy, which was well under way in 1996, will continue to be led by exports and investment.Consumption, however, will play a stronger supporting role in the year ahead.

Private consumption should increase 3.4 percent in 1997. The increase in consumption spending will be driven principally by job creation.

However, because the contribution of net exports (exports minus imports) to growth will be virtually nil in 1997, the economy's overall rate of growth in 1997 (4.1 percent) will be slower than in 1996 (4.5 percent).

By the end of this year, gross domestic product measured in pesos will have recovered its pre-crisis levels. But per-capita output will not reattain its 1994 levels until the new century.

But on the potentially negative side of the ledger, Mexico's economy faces eight major risks this year.

The first is the exchange rate. The likely pattern of inflation and the supply and demand for dollars raise the likelihood of the peso's becoming overvalued in the first quarter of 1997.

With elections coming up in the summer, the stage could be set in the spring for an abrupt adjustment of the parity, along with the accompanying risk of a panic.

A second risk is presented by the elections. While the transition to a more democratic political system is positive, it does increase uncertainty.

Whether President Ernesto Zedillo will retain control of the Congress and what impact the election will have on his ability to push through his economic program will be questions in 1997. They weren't in the past.

A third risk is posed by the banking system. While the danger of a systemic meltdown is past, the cost of overhauling the domestic banking system is high.

One aspect of that cost is the foregone investment in human and physical capital, as investment funds become harder to find through the banking system. Another cost, difficult to quantify, is the impact on the small and medium-sized companies that found themselves flooded with credit and then virtually barred from access to their only source of finance.

The fourth risk is the rapid growth of Mexico's current-account trade deficit.

The deficit will more than triple as a percentage of national output next year. It will rise from 0.5 percent of GDP in 1996 to 1.8 percent in 1997.

A sharp drop in the growth rate of manufactured-goods exports, say to levels of 12 percent to 14 percent of all exports, would be cause for concern. Another would be an increase in the share of consumer-goods imports to 10 percent to 12 percent of total imports.

The fifth risk is the price of oil. Oil is no longer the decisive factor in Mexico's balance of payments that it was 10 years ago but it remains important on the margin.

Should oil prices or export volumes drop in 1997, the percentage of GDP represented by the current account deficit could reach uncomfortable levels.

A sixth risk is Mexico's continued reliance on foreign investment to generate its capital-account surplus. In the first three-quarters of 1996, Mexico's capital account showed a surplus of $1.55 billion. This was the product of $7.36 billion in foreign investment, more than a third of which was foreign portfolio investment.

A seventh risk is the opposition to structural reform. Mexico's long-term growth depends on making progress toward reforms that reduce the many rules, dispositions, permits and reporting requirements that govern businesses' operation.

Finally, and perhaps most important, are Mexico's lingering social problems.

High poverty rates and concentration of wealth, and the need for more job creation and better education, are issues that must be addressed with more success than they have been in the past.

The government's primary goal should be to improve the well-being of the vast majority of Mexicans.

Mexico faces all these risks with a few aces in hand.

Its macroeconomic policy is sound. In spite of the high political price, the Zedillo government did not back away from the necessary policies for successfully surmounting the peso crisis.

A second strength is the president's commitment to openness, on both the economic and political fronts.

In fact, the crisis resulted in the government's opening the financial sector to foreign competition more rapidly than the North American Free Trade Agreement requires.

This year should be a better one for the economy. The large array of risks facing Mexico suggests that the 5 percent to 6 percent annual growth rates the country needs are not assured and that volatility will continue to be significant.

But the list of ''positives'' in Mexico's economy leaves no doubt that the country is on the right path.

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