3-12-09, 9:58 am
Like every other country on the planet, Mexico is being hit hard by the world financial, banking and economic crisis. As in other relatively poor countries, the impact is shaping up to be especially hard on those who have already lost the most from the neo-liberal policy package of free trade, privatization and austerity.
From the 1930s through the early 1980s, Mexico followed policies of protectionism and import substitution. Thus, for example, tax law greatly favored the purchase of automobiles manufactured in Mexico by putting high import taxes on imported cars. But by 1982 Mexico found itself unable to pay its international debts, and, under pressure from international lending institutions, the government of President Miguel de la Madrid (of the Revolutionary Institutional Party, or PRI), made a sharp turn away from protectionism toward opening the country to penetration by multinational corporations, especially those based in the United States. The opening to “free” trade was accompanied by privatization of state owned enterprises, including the banks which had been nationalized by de la Madrid’s predecessor, President Jose Lopez Portillo. In the early 1990s, Mexico entered into the North American Free Trade Agreement (NAFTA) with the United States, Canada and Mexico. The Mexican government did not have much choice, as it had to trade with the US and NAFTA was the only deal on offer, but the ideology of the Mexican ruling class also coincided with the move. Mexican Secretary of International Trade, Jaime Serra Puche, predicted that NAFTA would drive at least 13 million Mexican grain farmers off the land due to their inability to compete with government subsidized US maize and wheat imports.
But Serra and his boss, President Carlos Salinas de Gortari, promised the Mexican people that the displaced workforce of grain farmers would be absorbed by new foreign-owned factories (attracted by low labor costs due to millions of ex-farmers looking for work in the cities) and by increased cultivation of specialty fruits and vegetables, which under NAFTA were supposed to have access to US and Canadian markets that they did not have before. The theory behind this trade-off was based on the ideas of the classical British economist David Ricardo, who taught that under free trade, each country would end up prospering by producing the commodities most suited for it by climate and geography. Ricardo had suggested that it was better for Portugal and not England to produce wine, since grapes grow better in the former country and that cloth manufacturing was more appropriate in Britain than in Portugal, because you could turn less productive agricultural land in Britain into sheep pasturage. A century of trying that experiment, of course, left Portugal in abject poverty while the United Kingdom became a powerful and opulent empire. NAFTA has not turned out much different for Mexico.
NAFTA came into force on January 1, 1994. Its initiation was followed in quick succession by the rebellion of the Zapatista indigenous farmers in the southernmost Mexican state, Chiapas, by the assassination of the ruling party’s presidential candidate, Luis Donaldo Colosio, and by the “December Mistake” in which the new president, Ernesto Zedillo Ponce de Leon, also of the PRI, “accidentally” tipped off key business tycoons that he was going to devalue the Mexican peso, which led to the wild flight of capital from the country. The “mistake” was “corrected” by US President Bill Clinton and his Treasury Secretary Robert Rubin, who, seeing that major Wall Street firms were going to lose billions if the Mexican economy collapsed, came up with an emergency “bailout” loan for Mexico to the tune of $50 million dollars. But the “mistake” was corrected on the backs of Mexican workers, farmers, professionals and small businesspeople: As a condition for the loan, the free trade, austerity and privatization dimensions of NAFTA were speeded up and the social safety net was shredded, while Mexican banks, credit card companies and other businesses, whether owned by Mexican private capital or the government, were taken over en masse by Wall Street.
So indeed millions of Mexicans were driven out of agriculture under NAFTA, but there was now no safety net to help them transition to other ways of, and the jobs in industry and fruit and vegetable cultivation did not materialize in nearly the quantity that would have compensated them. There was a brief boom in foreign-owned industrial production, but it has been followed by the movement of factories out of Mexico and into other countries with even lower wage levels. US farmers have managed to keep Mexican fruits and vegetables from entering US markets at a level that would allow that field of activity to expand and absorb the distressed grain farmers. The inevitable result was a doubling of the number of Mexicans who sought their living by crossing the border into the United States (without papers, since the US government does not give visas to displaced grain farmers).
In 2000, the right wing National Action Party (PAN) candidate, Vicente Fox, won the presidency and intensified the move to free trade, privatization and elimination of the social safety net. He left office in disgrace in 2006, but after a very dubious election was succeeded by another PAN president, Felipe Calderon, who kept up the same policies while popular protest began to grow, especially as the US takeover of Mexican grain production and distribution led to sharp increases in food prices instead of the promised opposite.
As the US mortgage, financial and stock exchange crisis began to develop over the last couple of years, Mexico found itself in an incredibly vulnerable position:
*80% of Mexican trade, both exports and imports, was now with the USA. That meant that Mexicans lucky enough to find work in factory production depended on the ability of their employers to sell their products to US consumers.
*Mexico was no longer self-sufficient in food. US and international agribusiness giants such as Cargill had taken over the supply of grain, while Wal Mart, with 700 stores in Mexico, had displaced Mexican merchants in grain distribution. The one major Mexican corporation that is heavily invested in food production, GRUMA, is 27% owned by US agribusiness giant Archer Daniels Midland.
*Many Mexican banks and other financial institutions were now owned by US-based multinational firms. For example, the very important bank BANAMEX was taken over by Citibank. US-based financial firms were allowed to charge usurious rates for extending credit.
*Mexico had become dependent on the money that its citizens who work overseas (mostly in the United States) send back to their relatives at home. In 2007, this figure reached nearly $25 billion per year. Along with petroleum and tourism, these remittances are among the three main sources of foreign exchange for Mexico.
*Even petroleum has not been doing well. Previous Mexican governments have not invested enough in the national petroleum company, PEMEX, to keep it in the technical condition necessary to continue producing, in spite of the high price of oil until recently. Calderon’s government has attempted to “solve” this problem by stealth privatization, for now blocked by opposition action.
Now that the crisis has hit, the supine dependency of Mexico on the US economy has been shown to be a disastrous and tragic mistake. Calderon’s government is in denial, but wider and wider sections of the general population are opening their eyes to the danger that looms:
*In the last two years, according to statistics published by Professor Luis Lozano, a researcher at the National Autonomous University of Mexico, and publicized by the Mexican Electrical Workers Union (SME), the purchasing power of Mexican workers has been cut by a third. The price of the basic food basket has increased up to 67.1% in two years, with the price of avocados going up 230.85%, vegetable oil by 125.2%, beans 219.4%, and potatoes by 200%. The price of imported maize, wheat, rice, chicken and sugar has also been rising stratospherically.
*Mexico’s income from petroleum production has been cut in half, but especially diesel fuel prices within Mexico have been rising sharply, leading to huge protests by truckers.
*Foreign and domestic capital is fleeing Mexico. Just in 2008, $50 billion (net) in foreign capital left Mexico, a dynamic which may now be accelerating, leading to angry accusations in the press about corrupt and treacherous “sacadolares” (“dollar removers”) with government connections. According to the Banco de Mexico, the amount of investments in Mexico held by foreigners has fallen 45.8% in just seven months.
*The value of the Mexican peso vis-à-vis the US dollar has been halved, now being at almost 16 pesos per dollar, in comparison with eight pesos per dollar a year ago. The fact that so much food and other necessities are imported from the United States has created extreme hardship for Mexicans who now have to pay double for them.
*But the opposite phenomenon, that Mexican industrial products, for example, should become more attractive to US buyers, is not happening, due to the fact that US credit for automobile purchases has dried up. Indeed, over the past year the Mexican automobile industry has been in deep trouble, with unions making wage and benefit concessions even greater than those the UAW has made to keep the US auto industry afloat. It is not clear what impact the US bailout of GM and Chrysler will have on jobs in these companies’ auto plants in Mexico.
*Mexican immigrants, especially those working in home construction in the US, are losing their jobs by the thousands. In some cases they are no longer able to send money back to their relatives in Mexico, producing a sharp reduction in the remittance total. In other cases they are crossing back into Mexico, only to find a job situation even worse than the one they originally fled from.
*Unemployment is rising sharply in Mexico. Mexico lost 750,000 jobs in 2008, and currently tens of thousands of jobs are being lost every month.
The US-initiated crisis is going to have many more unanticipated impacts on Mexico. For example, the decision by the Obama administration to take over 36% or more of Citicorp has collided with the law in Mexico, where Citicorp owns one of the major banks, BANAMEX. Mexican law forbids such foreign government ownership of banks, so either the Mexican government would have to nationalize the Citicorp operations there, or find a private Mexican buyer. This has raised alarm in certain quarters because of the very real possibility that money connected with the rampaging drug gangs that have been terrorizing vast reaches of the country may come into play, and thus the former Citicorp operations could become a major factor in money-laundering and the financing of the activities of the drug cartels.
Another wild card is the current uproar about these drug cartels. Although the ultra-right in the United States is eager to use the drug warfare that has traumatized major cities such as Ciudad Juarez, on the opposite side of the Rio Grande from El Paso, Texas, for its own ideological purposes, the problem is very real. President Calderon has been employing the army against the cartels, but as yet no encouraging signs have appeared, and the army itself causes problems of violations of citizens’ rights; nor is it free from corruption. One of the worst drug gangs, called “Los Zetas” (“the Z’s”) was started by former Mexican army officers, some said to have been trained at the US Army School of the Americas in Georgia. With income from petroleum and remittances from emigrants sharply down, tourism is an increasingly important source of foreign exchange, but may now be threatened by a combination of the recession in the US and perceived security threats to vacationers in places like Cancun, where the drug cartels have been sinking their claws.
Yet another looming question is what the impact will be on Mexico and other poor countries of the massive borrowing that the United States and other wealthy countries have to undertake in order to rescue their banks and factories and jump start their economies. Will countries like Mexico find it harder than ever to get international loans, even as they find that the IMF and World Bank continue to insist on neo-liberal “reforms” in exchange for any emergency credit that is extended – “reforms” which will make the situation even worse for Mexican workers and farmers?
How have various political sectors in Mexico reacted?
At first President Calderon and his Treasury Secretary Augustin Carstens, a former “enforcer” for the International Monetary Fund, were in denial about the crisis, but now seem determined to solve the problems on the backs of Mexican workers, by means of a labor law “reform” that reduces the rights of workers.
Organized labor has been in a transitional period in Mexico. Under the old PRI governments, most unions were brought into the ruling party in a corporativist arrangement similar to that used by Mussolini and the fascists in Italy. Unions joined the PRI as unions and all their members had to become members of the PRI. So did peasant organizations, organizations of professionals and others. Wage increases were allowed or blocked according to decisions made in the ministries of the PRI government. When the PRI lost power in 2000, this arrangement became nonsensical, but many of the union leaders have not yet broken loose from the old mind set and seem to be trying to ingratiate themselves with the ultra-right PAN government. Thus there has been not a peep out of the main petroleum workers union in spite of efforts by Calderon to privatize PEMEX.
However, independent unions who either were never part of the PRI corporativist setup or who, like the Mine and Metal Workers Union, used to be but have broken away from it, have joined hands with farmers’ organizations angry about NAFTA, and together they are organizing increasingly large and militant protests to which other sectors of the society are being attracted. It is expected that these demonstrations will grow as the crisis deepens.
The electoral left consists of the large Revolutionary Democratic Party (PRD), which was formed in 1989 by former members of the dissolved Mexican Communist Party, other leftists, the left wing of the PRI, and two smaller parties, the Labor Party (PT) and the Convergence. The PRD presidential candidate, Andres Manuel Lopez Obrador, came within a few votes of winning the presidency in 2006, and many people think the election was in fact stolen from him. Since then, the PRD has been wracked by ferocious internal left-right factional disputes which have shaken its parliamentary alliance with the PT and Convergence and also, it would seem, the public’s confidence in its ability to pull the country out of its difficulties. There are elections to the Chamber of Deputies (the Mexican House of Representatives) on July 5, and the PRD is trailing far behind the PRI and the PAN in public opinion polls, at only 17 percent. It remains to be seen if that can be reversed in the next three and a half months.
The extra-parliamentary and Marxist left in Mexico consists of the Party of the Mexican Communists, the Popular Socialist Party, and the Popular Socialist Party of Mexico. Although these parties have produced valuable analyses and initiatives, their small scale and exclusion from the electoral and legislative arenas are very limiting. There are also mass non-party entities with a left ideology, such as the Zapatista Army of National Liberation and others, who have raised important questions, but who have been kept from challenging power at the national level for one reason or another.
Just about all the forces on the Mexican left, and some in the center, are disgusted with NAFTA and are voicing their own calls for the treaty to be renegotiated, a thing which Calderon absolutely refuses to countenance. Representatives of the PRD and the Canadian New Democratic Party have been meeting with US Democratic Party people, principally US Representative Marcy Kaptur (D-Ohio) on an approach to NAFTA renegotiation. But this is not going to be easy to coordinate, since there is a feeling in the United States that somehow Mexico takes advantage of the United States under the treaty, whereas the reality is more nearly the opposite. There is a need for a strong and closely coordinated working-class voice on the NAFTA issue in all three member nations.
Mexico, Colombia and Peru are the only major countries in Latin America that still have right wing, anticommunist governments that are wedded to the “Washington Consensus” model of free trade and neo-liberalism. For the workers and farmers of Mexico to be saved from impending disaster, it will be necessary for political forces to come together within the country to pull Mexico out of this backward- looking alignment with a totally discredited ideology and economic system, and into a closer alignment with the Bolivarian project of Venezuela, Bolivia, and Ecuador. Given the close relationship between Mexico and the United States, and given that free trade true-believer Calderon’s presidential term runs until 2012 (coincidentally, also the end of Obama’s first term), moving this country of 108 million people out of the present rut is going to be very difficult, and very traumatic.
We on the North side of the Rio Grande have challenging responsibilities toward Mexico, especially given the fact that up to now the United States government has played a predatory role in our bilateral relations. We must make sure that solutions fought for on our side of the border do not worsen the situation of Mexican workers, farmers, and other mass segments. We must not allow the rise in unemployment in the US, caused by our own corporations and pre-Obama governments, to be “solved” by increased persecution of Mexican (and other) immigrants, thereby shifting even more of the burden onto the Mexican side. We must find ways to coordinate strategy more closely among Mexican, US and other unions and the left, so that the justifiable desire of US workers to take another look at NAFTA leads to a coordinated, working- class-led restructuring of international trade, and that the bill is sent to international monopoly capital and not to workers of any nationality.
Only through this kind of working class internationalism can we invalidate the famous saying of the old Mexican dictator Porfirio Diaz: “Poor Mexico: So far from God and so close to the United States.”
