It is a step that goes against the spirit of the times, but for Mexico's sugar industry it may be the only path ahead. Politically, legally and financially it will not be an easy path for the government.

The backdrop to the government's move is grim. The sugar industry is in deep trouble. The mills are running up debts to their suppliers, the sugar cane farmers, and this spreads hardship into the poor and discontented countryside where the sugar crop employs more than a quarter of a million people. In August farmers brought their protest to the streets of Mexico City. Fox had few words of consolation. Farmers must move with the times, he argued.

But the government's intervention Monday shows that it was neither deaf to the crisis in the countryside nor unwilling to turn to the past for a solution.

What has gone wrong?

Mexico's private sugar industry has a short and sour history. At the end of the 1980s President Carlos Salinas, now disgraced but then very much in tune with his time and with the West, privatized the state-run mills. These privatizations have much in common with those in Russia. State assets were handed to individuals who enjoyed good connections with the government. It is not impossible that some money passed the other way, under the table. The government also granted subsidies to the new owners to help them increase exports. These fortunate individuals then went on to mismanage the industry which had been presented to them.

Regrettably, the North American Free Trade Agreement made matters worse rather than better. Mexico's sugar industry was represented in the NAFTA negotiations by Juan Gallardo Thurlow, a favorite of the Salinas administration now under investigation for fraud by the Federal Comptroller's Office. The terms negotiated by the Mexican side in the NAFTA are now widely viewed as being damaging to the Mexican sugar industry. Mexico agreed to almost unlimited imports of high fructose corn syrup, a sugar substitute, from the United States and to the establishment of corn syrup plants in Mexico by U.S. companies. And, in a provision of the NAFTA now disputed by Mexico, Mexico's exports of sugar to the Untied States were capped at 116,000 tons per year. Mexico produces some 600,000 tons of sugar each year that are beyond its own requirements.

It is not only on the Mexican side that there are calls for the sugar provisions in NAFTA to be amended. In August, James Terrill, executive vice-president of U.S. Sugar Corp., said that the treaty needed to be revised. The U.S. and Mexican governments are already engaged in discussions.

Sugar may prove one area in which President Fox can benefit from his excellent relations with U.S. President George W. Bush. But that will still leave Fox with many problems to resolve.

First, the takeover of some of the sugar mills seems set to be challenged legally. The government justified its takeover on the grounds that the mills were insolvent. Grupo Azucarero Mexico, which lost 6 mills to the government, and Grupo Machado, which lost 4, seem willing to accept the government's move. But Grupo Santos, which lost six mills, says it is considering a legal challenge.

The government's case may not be easy to win.

Secondly, the takeover will impose costs on the government. The government took over 27 mills, accounting for more than half national sugar output, and has said that it is willing to spend as much as $327 million to prepare them for sale. This is already a high cost for a government that is trying to cut back spending. But given the industry's debts to farmers, the risk that the bill will overrun must be high.

Thirdly, the industry's shadowy past may mean the rescue attempt involves the government in political complications it might prefer to avoid. Politicians are asking what happened to the subsidies given to the privatized mills. There is more than a small possibility that corruption occurred. Fox the campaigner of last year might have wanted such corruption investigated. But in his state of the nation address Sept. 1, Fox appeared to suggest that he would be willing to omit investigating the past in exchange for political cooperation in the present. For him, this is not the time for another political scandal, even if it unearths the dirty ways of his opponents. But others, less concerned than the president by the need to obtain the PRI's support, may not see it that way. Sugar could easily sour the political atmosphere.

Fox has stepped into dangerous territory. But he has been called indecisive in recent months and his intervention in sugar was certainly not that. The president has been too passive. He needed to make a bold move. This is one.