THERE was a sudden silence on the Stock Exchange floor. The dealers stopped shouting, portable phones went unanswered and a woman who had been clattering away at a computer terminal stopped, her fingers poised over the keys. She, like everyone else, was looking up at the figures on the electronic board. The US dollar was in the process of crossing an unthinkable boundary against the Mexican peso. Until December there had been parity, a dollar for a peso. Now the green electronic figures clicked up 7.106 pesos to the dollar, and there would be worse to come. Soon the moment passed, and the arm-waving continued and the portable phones were answered once again; but watching from the glassed-in balcony I could detect a sense of real gloom. A little more than a year ago, many of the brokers and dealers below me had genuinely believed that Mexico was on the point of joining the First World. Now, as they watched, that illusion was being destroyed in the cruellest fashion possible. Beside me, the elegant Cambridge-educated economist whom I had been interviewing sighed. 'Professionally, of course, I find all this fascinating,' he said, 'but as a Mexican I find it a disaster, pure and simple. 'Do you realise,' he went on, 'our currency has now collapsed four times since the mid-1970s? That means the total accumulated depreciation in the peso since then is . . . [he made the necessary mental calculations] around 45,000 per cent.' To have failed to make the grade as a First World economy is just a matter of self-image; by some calculations Mexico still rates 14th in the world in terms of productivity. Yet the belt-tightening package which the Mexican Government rushed out last Friday means that ordinary people will have to pay the price for the exaggerated and sometimes corrupt policies of their rulers - and that is a serious problem. Mexico isn't just going through an economic crisis: it is suffering a political crisis as great as anything since the 1930s, and the political one is worse than the economic one. 'How long do you think the pain will last?' I asked the economist. 'Eighteen months, maybe,' he answered. 'That's if the Government can sort itself out. 'But the Government isn't going to sort itself out, surely?' There was another unhappy pause. 'No,' the economist answered. 'We're quite close to catastrophe now.' You can sense this fear even in government ministers. One I spoke to put up the case as best he could for being optimistic, but he wouldn't meet my eyes as he talked. Nothing has gone right for the unfortunate President Ernesto Zedillo and his administration. A quiet, decent, rather naive figure, he came to power only because the presidential candidate, Luis Donaldo Colosio, was murdered last year. Colosio's death is rumoured to have been ordered either by a rival group within the ruling PRI (Party of the Institutional Revolution), or by big drugs interests, or both. Zedillo has pledged to find the mastermind but the PRI is unlikely to benefit if he does. Raul Salinas, the brother of previous president Carlos Salinas, has been arrested for being the 'intellectual author' of the other big assassination which has convulsed political life in Mexico: that of Jose Francisco Ruiz Massieu, one of the most powerful men in the PRI. Ruiz Massieu was shot dead in Mexico City last September. So it isn't just the Mexican economy which is in a downward spiral. The PRI, which has stayed in power for 66 years by a mixture of populist appeal and crude gerrymandering, is demonstrably on its last legs. Zedillo himself is pitied rather than despised, but the current joke in Mexico City credits him with only a matter of weeks in power now: 'Why is Zedillo like Easter?' 'Because no-one knows if it'll fall in April or in May.' He'll no doubt survive longer than that, but he cannot now save the PRI from a disastrous break-up. The PRI gave Mexico stability after the savage wars of the first part of the century but it has lost any reason for existence except the desire to stay in power. Mexico is, in its way, as much of a one-party state as the Soviet Union once was, and like the Soviet Union in its final stages it is attempting to reform both its political and its economic lives at the same time. The result is depressingly predictable: as Mikhail Gorbachev found, you cannot cope with an economic crisis if you have no political credibility. The PRI's moral crisis is profound. A leading official in the attorney-general's department, who has fled to the United States, claims that people at the top of the last PRI government were in the pay of the big drugs interests. A few weeks ago, a senior investigator assigned to uncover links between top politicians and the drugs cartels received a near-fatal dose of poison gas, allegedly administered by his chief body guard. He is now completely paralysed, and is unlikely to recover. Anyone else who tries to find out what has been going on at the higher levels of the PRI has been warned. A collapsing economy, a discredited government, political violence of a kind which Mexico has been spared for decades: surely, you might think, that is enough for any country to have to beat. Yet there is a fourth horseman in the current apocalypse: the guerilla campaign being waged, not so much with weapons as with clever public relations, by the Zapatista movement in Chiapas state in the far southeast of Mexico. Sub-commandante Marcos, the movement's leader, has been running rings around the Mexican army, and the evidence of human rights abuses by the military in Chiapas merely adds to his support. By right, then, Mexico should be in a state of advanced collapse. It isn't. It remains richer than any of its Latin American neighbours, the North American Free Trade Agreement which it has (probably mistakenly) joined with Canada and the United States remains in force, and no one is starving. As I stood in the gallery of the Mexico City stock exchange with the economist I had been interviewing, a rumpled, witty, rather cynical man came up and introduced himself. He turned out to be an investment analyst for a big British company. Surely, I asked, he wasn't planning to invest in Mexico at a time like this? 'Absolutely,' he said. 'It won't last for ever, you know. And directly everyone else starts panicking and running for cover, you always know that's the time to move in.'