RECENTLY IN THE BORDER town of Piedras Negras, 4,000 infuriated Mexicans rang in the New Year by burning down City Hall. They charged that government fraud had deprived the opposition National Action Party (PAN) of its latest in an unprecedented string of local election victories. After the rioters had set fire to the jail and attacked the offices of the local newspaper, the police "began firing directly into the crowd," according to The New York Times. Piedras Negras is only the most dramatic manifestation of Mexico's smoldering crisis. The national leader of the PAN has warned that violence could follow next July's congressional elections if the government again resorts to fraud.

Alan Riding did not file the Times story. He repaired to Brazil last year after more than 12 years on the Mexican/Central American beat where his magisterial Times reports contravened the conventional American practice of rotating correspondents every two or three years. Riding, born in Brazil of British parents, resembles European journalists like Le Monde's Mideast correspondent Eric Rouleau, renowned for his nuanced familiarity, access and savvy. We expected something special from Riding, and he has not disappointed us. His book at long last provides general reader and policymaker alike with the necessary background for understanding Mexico and its current predicament.

This is the first lively and comprehensive account of the celebrated Mexican "system" which yielded a half a century of sustained growth and political stability. That system is preeminently a product of the Mexican Revolution of 1910- 1917 but is rooted in Mexico's Aztec and colonial past. At its center is the PRI (the Institutional Revolutionary Party) which a decade after the Revolution united dozens of local parties, reducing regional warlords and political bosses to the central government in Mexico City. The development of the PRI was also the development of Mexican national unity -- beset not only by centrifugal regional forces but also the ever deeply felt menace of U.S. intervention.

Modern Mexico was forged by a feudal and even pre-feudal clientage system. Even today each incipient politician collects a retinue "starting with a chauffeur and a personal secretary, then gathering around him those friends and acolytes whom he employs or can place in jobs." Should he reach the presidency he will name some 700 top officials, each in turn naming hundreds of subordinates. "Myriad pyramids of power are thus superimposed on the larger hierarchical pyramid: everyone except the President is both boss and servant."

These cliques are not restricted to politics, they permeate al aspects of Mexican life. Drawing on the resources of a half century's sustained growth, the system has guaranteed a controlled labor movement, a loyal opposition, and a quiescent peasantry. The PRI is a kind of employment agency for the government, and for decades politicos have been rewarded with jobs in the expanding public sector. Their revenue derives in good part from bribes paid by citizens wishing government permission for business activities, to obtain passports or driver's licenses, to evade traffic fines, etc. Opposition leaders are bribed, seduced. The caf,e and bookstore left is vituperative but isolated from the masses. One minister complained to a group of leftist economists: "You can't agitate with your left hand and earn with your right." Those who do try to organize the masses are harrassed or brutally repressed.

Yet, as Riding shows, by the 1970s the system was misfiring:

"Power came increasingly from above rather than below . . . the fruits of corruption began to move upward rather than downward. With top officials taking more for themselves . . . and sharing less with their political supporters . . . wealth was . . . concentrated in fewer hands. Corruption was . . . working less as a system than as a racket and many of the traditional beneficiaries began to object."

Traditionally the president relied on the experienced party and local bosses, but since the mid-1970s Mexican presidents have been surrounded by (often U.S.-educated) technocrats. These "tecnicos"are less adept at political management. "The ruling class can no longer hear the grass grow," as one worried politico told Riding.

Distant Neighbors' especial merit is to capture Mexico at this moment when its system has begun to fail; Riding's portrait is not a still photograph of a static Mexico but a moving picture of a system in slow but apparently inexorable decomposition.

GOVERNMENT and party are run from Mexico City, headquarters of "the system" but also the emblem of its entropy. By the mid-1970s the hitherto picturesque colonial capital was the world's most populous city, a teeming, polluted, grid-locked sprawl, bordered on one side by walled-in suburban mansions and on others by "casas de carton" (cardboard shacks) of the proliferating shanty towns. Residents who rely on public transportation to get to work now routinely spend "four or five hour of standing in line or hanging perilously to the sides of buses or being crushed in the subway."

Urban crowding is the emission of a rural crisis. On any day in Mexico City one encounters "groups of men in straw hats and huarache sandals . . . walking in single file along the streets as they might along a narrow mountain path or standing in horror as they ponder how to cross a busy downtown avenue." Mexico's rural sector suffers from "chronic depression" and per capita food production has declined continuously since the early 1960s. Tortillas are now often made with imported corn and wheat. Mexicans migrate to the United States in increasing numbers (a topic which the American reader may wish Riding had treated more fully). Health care is abysmal, undernourishment affects 60 percent of the population, average schooling is five years and "housing conditions for two-thirds of the population are blatantly unsatisfactory." Seventy years after the Revolution, "Mexico's social profile is barely distinguishable from countries of the region that have had no revolution."

The hardships of Mexico's poor are hardly eased by the practices of their rulers. At a time when drought had cut off all water to the shanty towns, Mexico City's mayor mandated ornate fountains for his suburban mansion. Garbage collection in the capital is less a service than a privilege. Garbage collectors belong to a powerful organization which rewards them with a percentage of the resale value of anything thrown away. Once they have picked it over, the grbage is left in the city dump where another Brechtian organization takes over:

"Under the control of a tough and wealthy boss and his 'corporals,' an army of pepenadores, as the professional scavengers are known, again sifts through the garbage, separating out everything of minimal worth. Thousands of people earn their living from -- and build their shacks inside -- the dumps, while some of the bosses become powerful enough to be chosen as federal deputies by the ruling PRI."

Riding is surely correct in seeing Mexico's crisis as systemic, not merely financial or economic. Indeed the system's inability to cope became apparent in the boom years of the late '70s and early '80s. President Jos,e L,opez Portillo squandered oil-fueled opportunities for rejuvenation in an orgy of corruption, nepotism and rhetoric. He privately enriched himself and his close friends, raised the expectations of the Mexican people and then smashed them in an unprecedented financial collapse. L,opez Portillo's policies "shattered the confidence of foreign bankers, Mexican businessmen and the broad middle classes in the state's ability to run the country. Most dangerous of all, he had allowed the economic model to weaken the political system."

Unlike previous crises, that which incoming President Miguel de la Madrid inherited in 1982 "could not be alleviated by an inspired inaugural address or even the discovery of new oil fields." De la Madrid attempted to puncture the inflated client system. But, once the glue that held the system together, corruption had become a drug. De la Madrid learned that ending corruption would "saw off one leg of the system." Similarly de la Madrid sought to remove government payoffs to the press. He soon found that this reform too was unworkable. "The tensions between a changing society and an antiquated system were once again apparent. The press retained its traditional role in the system." Riding's most disturbing message is the apparent lack of alternatives to relentless decay.

Washington assumes that instability in Mexico would favor the left, that Mexico will be "the last domino" to topple in the revolutionary wind from the south. Riding's book suggests however, that the source of Mexico's instability is internal, that the threat comes from the north not the south, and that it is the right not the left which would benefit. The cracks in the system are appearing at the top not the bottom.

The most evident threat to PRI supremacy comes not from the isolated, factionalized and bureaucratic official left (generally in de facto alliance with the PRI anyway) but from the PAN, a middle-class party funded by northern businessmen. To the PRI government the prospect of losing more border cities to the conservative pro-American PAN seems "like a threat to the country's sovereignty."

The right's new activism has beset Mexico's traditionally left-leaning foreign policy establishment. President L,opez Portillo sought to appease the leftish intelligentsia by actively opposing Reagan's Central American policy. This was not just a question of domestic symbolism. Mexico has long feared and resisted U.S. direct intervention in the region. In the 1920s the Mexican government sent weapons to General Augusto C,esar Sandino's rebels fighting U.S. Marines in Nicaragua. After the Marines were withdrawn, "Mexico lost interest in Central America" until the recent crisis.

Riding, a judicious oberver of Central America, acknowledges that Mexico in its eagerness to oppose U.S. dominance can swing to the other extreme. President L,opez Portillo "chose to ignore the polarizing impact of the Nicaraguan Revolution on the rest of Central America and placed a protective arm over Cuba." That policy provoked the right and led to the disintegration of "the domestic consensus that had long supported forign policy . . ." De la Madrid was obliged to repair to a "more middle-of-the-road policy that, while consistent with Mexico's border interests, pleased neither Left or Right." Foreign policy too had become an element in the spreading Mexican malaise.

RIDING is a grand chronicler of the Mexican distemper, but his diagnosis and prescription range from banal to retrograde. His explanation for the Mexican crisis is almost as mechanical as the domino theory. He does not see the crisis developing out of the system itself; Riding's external devils are the United States, Mexico's "middle and upper classes" (who "broke away" from "traditional society built around accepted cultural and political values") and "the caprices of recent Presidents" who disrupted "the natural rhythms of society." But what Riding shows is a society that has generated its own conflicts and contradictions. The PRI system secured Mexican national unity, political independence and material growth: but growth has generated an aggressive, educated and now increasingly disatisfied middle class alongside a multitude of urban and rural poor; Mexico is up to its ears in foreign debt, and the polity is increasingly polarized.

Riding believes that Mexico in becoming "more superficially democratic, more Western" has "become less truly democratic because . . . less representative of real Mexicans." Riding's "real Mexicans" are a composite of surprisingly conservative cultural stereotypes: "ordinary Mexicans" whose "material expectations remain secondary to their spiritual aspirations." These "real" Mexicans, are unconcerned with "the trappings of Western democracy" ("their future has little to do with governments and political systems") because "their expectations are limited" and "their lives have a rythmn of their own." This is not Buckley or Gilder or Kirkpatrick but a "progressive" British journalist.

It is now commonplace for "anti-imperialist" West European intellectuals to warn Latinmericans against the pitfalls of "Western" democracy and modernization, usually in the name of a spurious equity rather than, as here, "traditional society." But Mexico's challenge is not to preserve an idyllic, illusory past -- which for most "ordinary Mexicans" meant grinding poverty and the brutal reign of privilege -- but to combine equity and excellence. For that Mexicans must continue to broaden and nationalize democracy. They will also need the understanding and cooperation of their "distant neighbors." To gain the former, reading Mr. Riding's book is the best place I know to begin.