SOUTH OF THE BORDER

U.S.-MEXICAN RELATIONS, badly frayed only two months ago, now appear to be on the mend. Both President Reagan and Mexican President Miguel de la Madrid said all the right things on the south lawn of the White House last Wednesday.

The two leaders pledged intensified efforts to stop drug trafficking, a move one U.S. official termed a joint declaration of war against the production and consumption of narcotic drugs. The tone of these remarks was much different from the accusations of complicity and corruption that senior administration aides have been hurling at Mexico recently.The Reagan administration now seems to recognize that renewed efforts at cooperation - not public invective - are the best way to try to resolve the

drug, migration, economic and other problems besetting U.S.-Mexican relations.

How the two governments will follow up the Reagan-de la Madrid meeting bears close watching. For starters, the United States will intensify its Mexican border controls to combat illegal immigration, drug and arms traffic. And the two countries may negotiate a mutual legal assistance treaty, for the exchange of financial data, which could aid in prosecuting drug dealers. The two governments also may strengthen their bilateral commission as a way to improve policy coordination on an array of issues, from border crossings to the environment to trade and investment.

State and local officials from both countries may be included in these consultations, an idea whose time surely has come.

The most pressing - and overriding - problem for now, however, concerns the Mexican economy, and in particular the new rescue package the Reagan administration has done so much to assemble. President Reagan touched only briefly on this matter in his remarks Wednesday. He said he hoped Mexico's creditor banks will move quickly to commit new money for Mexico - a more restrained statement than might have been expected.

The banks, of course, are the key to the package. Without their providing substantial new loans, the Mexican economy likely will deteriorate further, heightening the chances of political turmoil.

With that sort of threat, the banks must cooperate, first by contributing to a proposed $1.5 billion short-term loan to Mexico and then by providing the $6 billion or so in new credits outlined in the Mexican rescue package. The commercial banks, in cooperating with this plan, still will be collecting much more funds from Mexico this year and next than they will provide to Mexico.

As Richard Feinberg of the Overseas Development Council recently noted, Mexico's creditor banks (which are mostly U.S.) are due to receive $12 billion to $13 billion in Mexican interest payments in 1986-87 - roughly twice the amount of new loans called for in the aid package.

Once the aid program is working, in conjunction with the International Monetary Fund, the World Bank, the United States and other governments, it will be up to Mexico to carry out the economic reforms it has promised. These include a paring of the public budget deficit, realistic exchange and interest rate policies and a liberalization of trade and investment.

The proposed U.S.-Mexican agreement setting forth each country's trade and investment rules could help buttress such initiatives.