(FORTUNE Magazine) – EMBLEMATIC of the new Mexico that is rebuilding on the ashes of the 1982 debt crisis is a bridge rising from the mud just east of Juarez and spanning the Rio Grande to El Paso. It is one of the first major road projects in the country financed entirely by the private sector, in this case Grupo Gutsa, one of Mexico's largest construction companies. The bridge is also the first step in President Carlos Salinas de Gortari's plan to build at least 2,500 miles of roads, mostly by letting contracts to private developers. Finally, after seven years of stagnation, Mexico's economy is growing again. Factories are running flat out, wages and employment are going up, non-oil exports are crossing the U.S. border in record amounts. So strong is the expansion that Salinas warns that the economy appears to be overheating. At an annual rate of just over 4% based on growth in the third quarter, the expansion isn't high by historical standards. But it is enough to strain the nation's aging infrastructure, which has been starved for capital since the international debt crisis erupted. Even in the age of perestroika, what is happening south of the Rio Grande is extraordinary, especially in light of the chaos in other Latin American countries. Says Ernesto Martens, chief executive of Vitro SA, a glass company and one of Mexico's largest publicly held corporations: ''The changes that have occurred in the past few years were undreamed of seven or eight years ago.'' Starting under the administration of President Miguel de la Madrid Hurtado and continuing under Salinas, 41, a Harvard University Ph.D. in political economy and government who took office a year ago, Mexico has opened its economy to private domestic and foreign investment, sheared the government deficit, and attacked the corruption and drug trafficking for which the nation was infamous. Douglas Campbell, an investment banker in Santa Monica, California, who specializes in Mexican dealmaking, calls Salinas the ''Margaret Thatcher of Latin America.'' The budget deficit has shrunk from 16% of gross domestic product in 1986 to an estimated 6.3% in 1989. The decline in government spending and wage and price controls have reduced inflation from a throw-up-your-hands 160% in 1987 to an estimated 20% in 1989, and a projected and bearable 15% this year, the lowest annual rate in a decade. The government is denationalizing about 800 businesses, including the telephone company and parts of the country's monolithic agricultural operation. And Mexico's foreign bank creditors have agreed in principle to lop $3.7 billion a year off the annual payments due on the nation's $94.5 billion debt. The recovery remains fragile. Real interest rates are running at a crushing 20%, which could throttle investment. Wage and price controls will have to come off eventually, and inflation may be reignited. Steeply rising prices might force yet another devaluation of the peso and send more money scuttling out of the country to join the $40 billion to $80 billion that is thought to be socked away offshore. Though some of the flight capital is beginning to trickle back, without more -- either from foreign investment or the return of flight money -- Mexico won't have the resources to pay its external debt and rebuild the infrastructure. Alas, prospective investors remember that eight years ago, the government took over most of the country's banks and forced all dollar- denominated deposits to be paid in devalued pesos. The Salinas program is causing pain for businessmen, union members, and those who benefited most from corruption. Should he stumble, there will be pressure on the government to return to its past economic policies. That said, there is reason to be bullish about Mexico because a profound shift is under way. Having cut spending, the government is forcing the private sector to take a more active part in stimulating the economy. Says Jonathan Heath of Macro Asesoria Economica, an economic consulting firm in Mexico City: ''Salinas has < handed the private sector a platter, saying, 'You're in charge,' and the private sector is responding.'' THE GOVERNMENT has shut down or sold government-owned companies in sectors as varied as airlines and petrochemicals. Salinas has also encouraged foreign private investment by dramatically opening up the economy. The result is that for the first time in decades the corporate sector is priming the economy. In 1988 private investing rose 10.1% while federal spending shrank 2.7%, and last year private investing was up another 8.3% while government outlays rose 7.2%. Repairing the nation's derelict infrastructure is a Salinas administration priority. The government is experimenting with projects such as privately operated toll bridges and roads that allow private companies to earn a competitive rate of return while putting the nation's house in order. In exchange for Grupo Gutsa's spending $20 million to build the new bridge from Juarez to El Paso, for example, the government has granted the company and its partner, Banco Serfin, a 5 1/2-year concession to collect the tolls. Over that period, Gutsa hopes to recoup its investment and earn at least a 25% annual return in order to cover the high cost of borrowing that all Mexican businesses face. Gutsa's bridge, which will be completed by November 1990, is urgently needed to relieve the congestion caused by trucks and semis plying the existing main span between Juarez and El Paso, carrying goods from the maquiladora plants strung along the border. The maquiladoras, factories that assemble parts into finished products for export to the U.S., are a bright spot in the Mexican economy. Their revenues have been growing at 20% a year for the past five years. Since the award of the bridge, the government has approved the construction of about 625 miles of roads, including a toll road between Acapulco and Mexico City and one from the industrial center of Monterrey to the border town of Nuevo Laredo. If these projects are completed successfully, the government is likely to let contracts in other areas, including dam and power plant construction. Private companies would build the projects and then operate them for profit for a number of years before they would revert to the government. The Salinas administration is also enlisting private enterprise in support of tourism. Because it generates $2.6 billion of hard currency earnings annually, tourism is a favored industry. In the next five years, Salinas hopes to double the number of foreign visitors to about ten million a year, and he is asking the private sector to develop vacation destinations on both coasts. The government is offering developers low-interest loans and is permitting foreigners for the first time to buy beach-front properties through 30-year trusts, which can be extended for a second 30-year term. FEW COMPANIES are responding more enthusiastically to the new opportunities in tourism than Grupo Sidek, a conglomerate in Guadalajara with $300 million in revenues that grew from a single steel mill in the 1960s. The man behind Sidek is Jorge Martinez, 55, one of the founders, whose spacious office still overlooks the mill that started it all. He is building megadevelopments such as a 1,250-acre behemoth at Puerto Vallarta on the Pacific that will cost $1.1 billion and will triple the size of the town. As the general contractor, Sidek will put up $125 million, create the master plan, dredge a large swamp, build the harbor and other amenities, and then sell most of the land. Sidek will retain about 20% of the property it has improved to develop its own hotels and condominiums. Martinez is simultaneously developing two smaller projects, one on Cozumel in the Caribbean and the other at Ixtapa on Mexico's west coast, and is planning to build hotels on several other sites, from Caboland at the southern tip of Baja California to Playacar on the Caribbean. He admits: ''We may be going too far,'' but the returns -- running at least 30% a year -- justify the risks. An earlier phase of Sidek's Puerto Vallarta project started in 1986, for example, sold out in about three years, instead of the eight the company had expected. Like a Rust Belt manufacturer in the midst of restructuring, Mexico is shedding -- or, more tactfully, privatizing -- some 770 companies, from Mexicana and Aeromexico, the national airlines, to steel mills, and fostering competition in industries once dominated by inefficient subsidized concerns. This year its schedule is growing even more ambitious. The national basic commodities company, Conasupo, a huge government-owned entity, will auction off to private bidders 3,000 supermarkets, nine food-processing plants, and other properties. Also on the 1990 agenda is the privatization of Telefonos de Mexico, or Telmex, which provides the nation with its antiquated, infuriating phone service. Telmex has a book value of $3.6 billion, and the government is looking for buyers who can afford to pump enough money and technology into the system to double the lines installed in the country in the first five years of a ten-year program. The cost at a roundhouse guess: $9 billion. Says Salinas's adviser on foreign investment, businessman Claudio X. Gonzalez: ''We've got to end up with a modern phone system. No nation can be an active and successful participant in the world economy without good telecommunications.'' There is no Mexican company rich enough to tackle this assignment by itself. The likeliest candidate, in partnership with foreign investors, is DESC Sociedad de Fomento Industrial, a Mexico City firm controlled by the Senderos family, one of the country's wealthiest clans. With just over $1 billion in annual sales, DESC is active in chemicals, auto parts, and pharmaceuticals and has joint ventures with Monsanto, Dana, and Merck, among others. CEO Fernando Senderos, 39, scion of the founding family, has talked with British and French telephone companies and U.S. operating companies, including BellSouth and Southwestern Bell, about joining forces to buy Telmex. But nothing final has so far come of the discussions. To encourage more foreign investment, Salinas has issued detailed regulations permitting auslanders to invest up to $100 million in most areas without first seeking government approval and to own up to 100% of businesses in which they were formerly allowed to have only a minority interest. Though outside capital isn't exactly flooding into the country, foreign companies agreed to put up about $3.5 billion in 1989, vs. $3 billion a year earlier. Two of them are AT&T, which has committed $20 million for a plant in Guadalajara that will assemble answering machines, and Nissan, which will contribute $1 billion to build cars over the next five to six years. EVEN FOREIGN companies that aren't ready to open plants in Mexico are taking advantage of the new openness and putting competitive pressure on local firms. Last year Haggar, a Dallas-based clothing manufacturer, signed its first agreement to sell slacks in department stores in downtown Mexico City. And Chili's, a Dallas restaurant chain, plans to open its first restaurants in Mexico City, Cancun, and Acapulco in two to five years. Among those lured to Mexico is Itel Corp., the Chicago electrical equipment distributor and railcar-leasing company run by maverick entrepreneur Samuel Zell. Six months ago Itel bought a 46% stake in Quadrum Corp., a Mexico City ( company with annual sales of more than $100 million from factoring, leasing railcars, and manufacturing telecommunications equipment. Through Quadrum, Itel landed an agreement to lease railcars to the Mexican national railroad, whose rolling stock is 36 years old on average. Itel's has an average life of 13 years, so Zell expects to retire some of Itel's older hoppers and boxcars to Mexico, where they can put in additional service and still upgrade the rail operation. MEXICAN BUSINESSES are being forced to modernize and restructure in order to compete in the new environment. Grupo Sidek, for example, plans to spend $30 million over three years to double its steelmaking capacity. Cementos Mexicanos, the world's fourth-largest cement company, bought control of its biggest Mexican competitor last year, a move that gives it 66% of the domestic cement market. CEO Lorenzo Zambrano says the acquisition was ''95% defensive.'' Cemex didn't want to give one of its large foreign rivals a chance to gain a foothold in the Mexican market. Any decision to invest in Mexico must still be based on faith more than on fact. The country has chosen to open its economy with vigor, but a full return of confidence in a nation where both inflation and economic policy gyrate wildly lies ahead. Salinas's adviser Claudio Gonzalez understands this: ''The biggest challenge we've got is to stay the course, to persevere. I have no doubt that we will do that. But Mexico is trying to catch up with a world that is changing as rapidly as we are.''

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: DEFICIT SHRINKS, INVESTMENT GROWS Budget deficits as % of GDP Investment growth rate in Mexico