(Most of this paper is based in research by RMALC, particularly by Bertha Lujan, Alberto Arroyo, Andres PeÃ±aloza, Mario Monrroy and Alejandro Villamar)
In 1991 the Mexican government started, without any major public democratic consultations, negotiations to sign a commercial agreement with the United States and Canada. Formally, this North American Free Trade Agreement (NAFTA from now on) was in force on January 1, 1994.
The RMALC and other civil organisations in USA and Canada invested a lot of energy to incorporate demands an issues on behalf or the main interests of our societies, but they were never heard. Once the agreement was signed, we’ve tried to evaluate its impact and have presented alternative renegotiations, all this with no results whatsoever.
For us, NAFTA represents the mechanism by means of which the neoliberal agenda has been enforced, in transition to other geographical sites. NAFTA has been a gigantic strategic step toward privatisation and monopolisation of markets and lives.
So, after NAFTA, the Mexican government, again listening to North American and Canadian counsellors, and under the same anti-democratic procedures, started in 1993 its participation in the Asia-Pacific Economical Cooperation Organisation, internationally known as APEC. One year later, in Miami, the project to expand the model to all Latin America has been approved. This year, 1996, the agenda to develop contacts and agreements in order to establish a commercial liberalisation agreement and the necessary political treaties with the member states of the European Union is on its way. The expectations of the elite are big, but for the Mexicans the results are bitter.
The promises of the benefits that were supposed to result from NAFTA, like those from APEC, can only be found in the speeches and the accounts of the biggest capitals, the majority of the population has received nothing and today the feeling that these policies might be more a threat than a help is growing. People suspect that the nation is drowning under the interests of just a few companies and capitals.
We would like to share this bitter experience with the social organisations of other countries, along with our experience on resistance and our proposals for fair trade.
News about NAFTA
In Mexico and other countries the government elite with its ideology and free trade policies has an astounding ability for social and economic destruction. With the monopoly of economic force and the media, helped by the political and cultural decay and an enormous complicity with external counsellors, the government elite sold all kind of myths about the convenience of structural adjustment and NAFTA’s formal free trade, just as with the recent intentions with APEC or the European Union. Nevertheless, the results are there for everyone to see, a shame to those that supported NAFTA.
Stories we were toldâ€¦
1. The Mexican economy will get better with NAFTA
Before NAFTA Mexico had many problems, but never as deep and hard to solve as nowadays. NAFTA has not helped at all, on the contrary it is the institutionalised culmination of the model that is responsible for a crisis, with deeper and sharper problems. During the first two years with NAFTA, more than twenty thousand micro and medium industries and approximately two million jobs disappeared, thanks to deregulation and free trade.
The Nafta Agenda is the same as the agenda for national and multinational corporations. The main objectives are to lower trade barriers to provide the easiest route for the movement of goods and services, to deregulate foreign investment, to secure the ownership of technology and, with it, to guarantee control of both domestic and global production.
So, our bitter experience is that NAFTA favoured speculative capital and made it impossible to establish the limits for the movements of what is known as hot investment, without strengthening the national productive processes.
Liberalisation of foreign investments
Certainly NAFTA helps to attract investment, though it does so through deregulation and freeing
up the flow of capital rather than by strengthening the country’s productive capacity. This factor,
along with the deliberate policy of high interest rates, attracted enormous quantities of foreign
During Carlos Salinas’ six year term, US$98.954 billion worth of total (direct and portfolio) investment entered the country. During the first year of NAFTA less foreign investment entered than in previous years and in 1995 there was a net outflow.
In 1989, 90 per cent of new foreign investment was direct. However by the middle of 1994 only 26.75 per cent was direct investment, as the country became increasingly dependent on foreign investment to finance the rapidly growing trade deficit and to secure the country’s macro-economic stability.
At first direct investment was attracted through privatisation. Then the purchase of shares on the stock exchange was opened up to foreign investment. When these measures no longer sufficed to cover the imbalances on the external account, investors were enticed by government bonds with very high interest rates, which had negative repercussions for our productive capacity. When this was still not enough, investors were offered bonds including guarantees against a devaluation of the peso.
By deregulating capital flows NAFTA facilitates the attraction of speculative capital and above all leaves the country totally disarmed when faced with the destabilising effects of hot money surges. Nevertheless the arrival of this speculative capital after 1990 was also deliberately encouraged by the government through the high interest rates it offered on its own bonds. The explanation was very simple. The model could not keep itself going without foreign resources and therefore tried to attract them at any cost.
The result was obvious. This fly-by-night capital fled, precipitating the crisis. Between June 1994 and December 1995 there was a withdrawal of US$28.42 billion worth of foreign portfolio investment. Over the same period US$6.75 billion worth of direct investment arrived ($3.7 billion in the second half of 1994 and $3 billion in 1995). Altogether there was a net loss of US$22 billion worth of foreign investment. Of course, this was compensated by new foreign debt through the international financial rescue package organised by the Clinton administration.
To say that the 1994-95 crisis and capital flight had nothing to do with NAFTA is to ignore the obvious. NAFTA requires the free flow of capital. NAFTA encourages the trade deficit which then has to be financed by attracting foreign investment at whatever cost. The Mexican government gives priority to meeting its foreign commitments. It will go deeper into debt (mortgaging the country’s petroleum resources and sovereignty) before it will stop paying holders and other international obligations of tesobonos. (Tesobonos are Mexican government bonds nominally denominated in pesos but effectively indexed to the US dollar exchange rate. This puts the risk of losses due to a devaluation of the peso on the Mexican government rather than the bondholder. )
The government’s first priority is to preserve the free flow of capital and make timely payments to foreigners even though this is causing one of the deepest recessions in the history of the country this century.
NAFTA favours the inflow of capital but this investment is generating almost no employment. Between 1989 and 1994, 44 per cent of investment went to purchase government debt but the government did not create any new jobs. Another 29 per cent involved purchases of shares in already existing Mexican firms and therefore had very little effect on employment. Part of the remaining 27 per cent which was direct investment went to buy out already existing companies which does not necessarily result in new employment either .
External debt and financial rescue package
The policy of unilateral and indiscriminate trade liberalisation created an imposing trade deficit of US$82.244 billion over the period 1989-1994. This sum far exceeded inflows of direct foreign investment over the period and amounted to almost as much as the gross foreign public debt of US$85.436 billion at the end of 1994. In 1994, the trade deficit along with outflows on the services account (fundamentally payments of interest on the external debt) were so heavy that the current account balance of payments registered a US$28.786 billion deficit in 1994, equivalent to 8 per cent of GDP. This deficit could not be financed through inflows of foreign capital, which had fallen by 64.6 per cent. Government debt, and to a lesser extent private corporate debt, grew while inflows of foreign capital diminished.
The Mexican government paid a high price to achieve an unstable equilibrium on its external accounts. The growing deficits on the current account of the balance of payments, caused by trade deficits and interest payments on the foreign debt were financed by inflows of foreign loans.
In 1994, when the crisis broke out, precipitated by an abrupt and chaotic devaluation, it became clear that the capital coming into the country was volatile and speculative, and that the Mexican neoliberal model was bankrupt. The stampede of speculative capital and numerous short -term bonds coming due amounted to US$81 billion, according US Treasury Secretary Robert Rubin.
Two years later, due to the scarcity of official information, it is still difficult to say exactly how much capital and interest had to be paid. Nevertheless, even a rough estimate yields impressive totals. For example, the public sector (not including the Bank of Mexico, our central bank) amortised US$25.3 billion and the private sector paid the equivalent of US$14.2 billion. To these sums one must add US$13 billion worth of interest payments. In other words, they paid out more than US$52 billion to service the foreign debt!
Mexico made use of US$28 billion from the financial rescue package, which was closely associated with NAFTA, in as much as the North American Financing Agreement signed in 1994 was expanded to approve financing for Mexico last year. The Mexican government also placed bonds worth US$6.5 billion on the international markets. These and other resources allowed the Zedillo government to disperse US$39.8 billion. Adding this to the private sector resources, Mexico met its financial obligations.
According to realistic estimates, as opposed to the conservative view of the government, this year Mexico will have to make capital payments worth US$30.245 billion. It is foreseen that the public sector (including the Bank of Mexico) will have US$12 billion worth of loans coming due, half of which are owed to the financial markets. Other reports only acknowledge US$8.9 billion worth of loans coming due, of which US$6 billion are bilateral which assures their automatic refinancing.
Despite the fact that fewer loans come due in 1996 than during the previous year, the amounts are sufficiently large to cause damage to exchange rate stability and other macro-economic variables and to add to the pressure for the maintenance of high interest rates.
The financial rescue package subjects the country to painful and unconstitutional commitments through the Letter of Intent with the IMF and the Framework Agreement signed with the US Treasury. The rescue package imposes conditions that grant privileges to four sources of financing for the structural adjustment program:
a. It obliges Mexico to turn to international money markets to find resources to pay the debt. It puts us into the old trap of having to seek loans to pay debts. This manoeuvre is causing the total amount of Mexico’s debt to grow. In 1995 the total foreign debt grew to US$176.1 billion or to US$200.6 billion if one adds foreign portfolio investment. This also increases financing costs (that is, payments of interest, commissions and diverse expenses, without including amortisation). In 1995 the public sector alone spent the equivalent of 4.4per cent of GDP and a similar amount will be required in 1996.
In short, we have been plunged into a phase of deeper indebtedness on the international markets, paying interest surcharges well above those paid by developed countries and handing over the management of economic policy and the disposition of the country’s financial resources to the dictates of the US government and of the IMF until at least the year 2000 or 2004.
b. It requires us to maintain the total deregulation of speculative capital and even to widen its scope through the privatisation of pension funds and of some State treasury functions in the payments system.
c. It requires a deepening of the deregulation process and the initiation of a third phase of privatisation, that is to say the sale of Mexico’s productive assets in strategic activities such as petrochemicals, natural gas, electrical energy, telecommunications, transportation (railroads, ports and aviation), the financial system, and so on.
Mexico is expected to receive some US$15 billion in foreign investment this year, of which about US$5.5 billion will be direct investment. In summary, the idea is to attract foreign investment at the cost of the accelerating the de-nationalisation and trans-nationalisation of the Mexican economy.
d. It requires the transfer of public resources to the private sector. The bankruptcy of the Mexican financial system is evident through the high incidence of overdue loans. If measured according to international accounting standards, non-performing loans as a proportion of total outstanding credits reached 23 per cent, that is, six percentage points higher than the indicator acknowledged by the Mexican banking system. Moreover if US accounting criteria were used, the incidence of non-performing loans would be 34 per cent.
In order to appreciate the seriousness of the situation, one need only recall the case of Spain, which, in the heat of a financial crisis a decade ago, declared a state of emergency when eight per cent of a bank’s outstanding credits were in arrears.
According to a survey of more than 18,000 accounts evaluated by stricter criteria than those employed by the Mexican banking system, at the end of December, 1995 nearly one in four debtors were more than 120 days in arrears and one out of seven had not made a single payment in 150 days. This latter group is considered to be at very high risk of default.
The Zedillo government has made 83.9 billion pesos (US$10.896 billion) available to support the financial system but not the debtors. This includes a loan of US$1.75 billion from the World Bank and the Inter-American Development Bank. Support for the bankers is equivalent to 5.1 per cent of GDP. It is currently thought that additional resources will be needed.
Recently the government has tested public response to the idea of a government program for large Mexican corporate debtors. Seventeen corporations with liabilities worth 95,003 billion pesos (US$12,338 billion) to Mexican banks have been explicitly mentioned. Of this amount 66.6 per cent are short term liabilities, that is due within one year, and 33.4 per cent are long term.
Another way of providing capital for the financial system has been to accelerate the liberalisation of the financial sector agreed to under NAFTA. In fact, the only remaining constraint to the opening of the financial sector is the discretionary power of the Department of Finance and Public Credit.
Foreign banks, taking advantage of the crisis have entered our market on very advantageous terms, not only buying shares at bargain prices but also benefiting from the prevailing monopolistic interest rates. Foreign banks are now receiving half the profits generated by the system. They are beginning to surpass the limits for individual and market shares agreed upon in NAFTA. Recently, the Bank of Nova Scotia took over a majority share of the Inverlat Bank after having held only 8.5 per cent. Meanwhile, Bancomer, the second largest credit institution in Mexico, has applied to sell 12 per cent of its shares to the Bank of Montreal, while Probursa sell 49 per cent of its shares to Spanish Bank Bilbao Vizcaya.
The Crisis and NAFTA
The Zedillo government recognises that the causes of the crisis developed over several years and that it is the result of a huge trade deficit financed by short term foreign capital. Nevertheless it consistently denies that this has anything to do with the economic model and NAFTA. Our analysis and other analysis show that the crisis due to structural distortions related to the Mexican neoliberal model of which NAFTA is the crowning achievement. At a minimum, one can say that NAFTA has not helped solve the structural problems related to the model and that it limits the possibility of dealing with the crisis. Moreover, we believe it is impossible to attack the fundamental causes of the crisis and establish the basis for a sustainable development plan within the confines of the present neoliberal model of NAFTA.
Today our country’s debt is one of the highest in the world and because of that our national resources are used to the payment of debt services, not mortgages, and we still need to borrow more in order to refinance our debt. Our lack of currency is evident, but the main thing is, every day the economy of our country is closer to foreign hands. Were did we leave our sovereignty? Were did we loose the economic development we were promised?
2. More exportations will bring an increase in employment
The Mexican experience is clear: exportations have increased and employment has plummeted. No jobs have been created in order to satisfy the youth that is, theoretically, part of the Economically Active Population (AEP). From the 36 million young AEP, 17 million are unemployed and if lucky have informal jobs.
In the last two and a half years in USA, export enterprises have generated most of the jobs. However, these jobs are relatively few because these businesses do not invest their profit in creating more jobs. On the contrary, they adopt a strategic speculative investment action of buying and merging corporations.
It is true: trade between countries involved in NAFTA grew approximately 20 per cent. For the Mexican experience, first year exports grew 20.5 per cent and in 1995 another 35.8 per cent. For the last three years, exports from USA to Mexico grew more than 30 per cent. (Official data of INEGI in El Financiero News, October 19,1996, and M. Kantor’s Statement in El Universal News, September 19, 1996)
Nevertheless, 80 per cent of that Mexican external trade is controlled by no more than 720 corporations, that is to say, 2.0 per cent of the total and it is concentrated in three branches: car and auto parts, electricity and electronics, and machinery and special equipment. (Official data and Statement of E. Vilatela Bancomext Director, and M. Cappi, in La Jornada News, July 2, 1996, and El Financiero News, October 23, 1996)
No surprise, than, that the great majority of those companies are transnationals, based in USA, Japan and Germany and some originally Mexican: Chrysler, Ford Motor Co., General Motors, Volkswagen, Nissan, BMW and Honda (whose production went up to 873 thousand units as of August 1996, while 60 per cent was exported). Electronics companies include Hewlett Packard, Sanyo, Sony, IBM, Motorola and Samsung.
Maquiladoras (assembly industries) grew approximately 17 per cent. There are now 3,200 such industries, exporting more and creating thousands of poorly paid jobs. These industries are mainly foreign investment, protected by the government in order to pay very low salaries and operate under inhuman conditions. Their exports are US$31 billion a year, but only 1.86 per cent of the total parts are national, the rest are imports.
Since 1987, the rate of imports has doubled, from 7.4 per cent it went up to 14.8per cent in 1995. This year, the manufactures branch exported merchandise worth US$36 billion, but imports were for US$42.729 billion, which meant a deficit of US$6.396 billion. (A research paper of the National Commerce Chamber, in La Jornada News, November 4, 1996.)
So we could say that when a country exports US$100 billion but imports US$90 billion, it’s only exporting US$10 billion. This situation is not good for productive chains… under these policies full of mistakes, from 1988 the trade opening came to be an end in itself, not a means towards development. This opening was exaggerated, without any defined industrial policies, and contributed to the devastation of small and middle sized industries along with the destruction of hundreds of productive chains said the Mexican former Under Secretary of Treasury F. Suarez Davila. (La Jornada News, October 15, 1996.)
This situation got worse under thepolicy of raising interest rates to attract speculative capital into the country, which finally ends up reducing real credit accessible to small productive enterprises, and which threatens to make them disappear.
So, since October 1994, the 510 credit unions cannot cope with the needs of more than 60 thousand micro and small industries that are almost dying due to lack of credit and overdue payment portfolio. The impact may probably be a massive close-down that would leave 600 thousand people unemployed. (Statement of the National Association of Credit Union and Business Credit Union J. Gallardo Lambarri and A. Gallardo y Lopez, in La Jornada News, October 23, 1996.)
So the worst macro-economic aspect of deregulation or trade liberalisation is not really the outflow of foreign exchange, which means a commercial deficit, but the structural harm done to the productive capacity of the country.
3. NAFTA will not only create new jobs, it will bring better employment conditions as well
According to the official figures, in the first two years of NAFTA we lost 1,422,000 jobs. Nevertheless, in 1995 and 1996, only 25 per cent of the EAP had a steady jobs and only 34 per cent had access to rudimentary national security.
In Canada, the unemployment rate is 10 per cent. Adult employment rates fell from 64 per cent in 1989 to 58.5 per cent in 1994 and stayed near those figures in 1995. Half time or temporary workers grew 13.9 per cent. Most of the jobs created were part-time. In these circumstances, women, youth and migrants are the first to be effected.
In USA, NAFTA’s Assistance Program for Transitory Adjustments registered 50,697 workers affected from January 1994 to December 1995 in 360 enterprises. Unemployment went up after the devaluation of the peso and again, women and immigrants were badly hurt.
4. With NAFTA and the Labour Agreement, workers will be able to get better salaries
Mexica’s low wages puts pressure on wages in USA and Canada. By means of handsaw negotiations North American and Canadian enterprises threaten to move unless workers and unions accept their low wage conditions.
This unprecedented fall of minimum wages in Mexico has been calculated: 85 per cent since 1976. As a result, consumer power went down 10 per cent compared to 1950. In 1996 estimates are it will still fall by 7.0 per cent and according to pro-government union organisations, in the last 20 years, each worker has, on average, lost US$258,000 in wages. (Statement of the pro-government Trade Union CTM, in La Jornada News, August 16, 1996.) This is more than twice the external public debt.
Today, wages in the Mexican manufacturing industry are US$1.23 per hour, while in Germany it is US$31.80, in Japan US$27, in USA US$17.60, in South Korea US$7.85 and in Chile US$3.05. (Morgan Stanley data, The Economist, November 12, 1996.) This big crack is being widened even further by competitive and efficient neoliberal policies .
5. NAFTA will create better conditions for the farmers (campesinos)
Under NAFTA, the expectations on a strictly commercial basis were:
a. Trade obstacles would be eliminated
b. Fair trade conditions to compete would be created
c. An increase in Mexico’s productivity of the country would increase our competitiveness.
The problem is the Mexican government didn’t want to consider at least three strategic political issues: security, food sovereignty and the existence of deep asymmetric differences in economic and social policies.
For many years, Mexican rural activities had been able to guarantee food, employment and development for the country, but not so since the structural adjustment programs were imposed in the 1980s by the World Bank, the IMF and the Mexican government. The change was initiated with these measures and NAFTA was there to make it institutional: production of only a few basic products, consumption of fewer goods and an ever increasing importation of food trying to keep a surplus in the commercial production of food products.
According to the specialists, ten years ago the production of rice went down 52 per cent, wheat 23, saffron 54, soy bean 44, cotton seed 68 and sorghum 54 per cent. Corn and beans registered ups and downs, but this year 42 per cent of the total needs of corn in the country will have to be imported, along with 10 per cent of the beans needs. An these are only examples of the many huge buys we’ll be making. (G. Knochenhauer, El Financiero News, May 10, 1996.)
NAFTA’s three years have left the country in a poor position to produce basic foods, pushing it to dangerous limits of imports (40 per cent in basic grains, 80per cent milk products and 360 per cent meat products). Those products, like tomato, tuna fish and avocado, with a very high competitive capacity, have had to deal with USA protectionist obstacles that show clearly the weakness of Mexico’s position in NAFTA.
When it comes to tomato, tuna fish and avocado, the application of tariff barriers disguised by ecological, anti-dumping or sanitary issues makes it clear that free trade is a fallacy in all sensible areas where strategic transnational interests are involved. On the other hand, we can all realise now that even in those highly competitive aspects of agriculture, fishing or agribusiness, development cannot be taken for granted.
Simultaneously, the USA is still taking unilateral measures that violate even NAFTA agreements, to modify, for instance, the tariff quotas of products such as sugar (from sugar cane). This, along with the freedom to import alternative products, like fructose from corn syrup, is threatening to thousands of jobs and tens of industries that could disappear. If something like this happened, rural unemployment would add to the already huge numbers and the migration to foreign countries would go up.
When we look at the transnationals or national producers who work as their partners, we observe that they are subsidised, use advanced technology, are highly productive and have generous tax concessions. (In the USA, corn productivity per hectare tends to be approximately 20 tons, while in Mexico it barely reaches eight. It is lowest in the states of Chiapas, Oaxaca and Guerrero where it is no more than 2 tons per hectare).
The commercial agriculture and cattle balance that already showed a deficit before NAFTA has become worse. In 1995, the balance shifted a little due to an increase in the prices of imports because of our devaluation and the compensation for tomato and coffee prices, but it had nothing to do with Mexican producers making use of so-called comparative advantages. As of 1996, the deficit in the balance has exceeded the US$600 million and will probably continue to increase.
The deficit in the agricultural balance of trade, where our weak position is so obvious, reached US$1,658 million in 1994, showed a slight surplus in 1995 (US$258 million) and fell dramatically in 1996 by 207 per cent due to the accelerated rhythm of imports of basic and forage grains: corn, sorghum, oats and barley. (USDA data in El Financiero News, September 18, 1996.)
These changes have a political meaning, showing Mexico’s ever-growing economic dependency on our partners and particularly on transnational agribusiness.
To sum up, the idea behind trade and investment liberalisation was to attract foreign direct investment to Mexico but the price to pay is high: accelerated de-nationalisation and trans-nationalisation of the Mexican economy.
Social and environmental costs, not included in NAFTA’s accounts
In June 1996, the World Bank estimated that 85 per cent of the Mexican population lives in poverty and half of them are trapped in extreme poverty. Obviously the World Bank never talked about its own responsibility for the creation of this kind of poverty. Also in 1996, the Mexican government told us that 9.6 per cent of the gross national product and 54 per cent of the total programmable expenses are dedicated to social programs. However, these figures are meaningless because they are taken out of context.
For instance, up until ten years ago the real growth of social expenses per capita was 3.2 per cent per annum average while in the last ten years it has fallen to only 0.4 per cent. The resources dedicated to alleviate poverty barely reached 0.5 per cent of the GNP. That is to say, if we consider the 22 million that live in extreme poverty, each would get 510 pesos a year (US$64), that is, 1.39 pesos a day (17 US cents) which, when we consider our total universe of 42 million poor, each would only get 40 pesos (5 US cents) a day.
Compared to this, the Mexican government paid, during the first six months of 1996, 41,839.5 million pesos (approximately US$6.111 billion) just on the interest and charges on the external debt. This amount equals the total expenses for 1996 for 18 social programs.
In the meantime, during the first nine months of 1996, the 36 most important companies that participate in the Mexican Stock Exchange Market registered utilities for more than 36.565 billion pesos, that is to say, US$4.966 billion at the exchange rate of 7.50 pesos per dollar.
Amongst the most important industries are Telefonos de Mexico (with a net utility of 10.858 billion pesos), Cementos Mexicanos (5.611 billion) and Grupo Mexico (1.935 billion). Amongst the financial groups, Banamex (2.848 billion pesos), Grupo Financiero Bancomer (355 million pesos), Grupo Financiero Norte (272.4 million), Grupo Bilvao Vizcaya Probursa (282.8 million)
Distribution of national wealth under the neoliberal policies.
Mexican workers have received no benefits from the neoliberal model whatsoever. In 1980 the contribution of wages to GNP was 36.04 per cent. This went down to 27.33 in 1992 and it is expected that in 1996 the figure will be 25 per cent.
According to a recent analysis of the distribution of wages in Mexico, in 1980 10 per cent of the wealthier population accumulated 32.77 per cent of the national wealth, by 1992 it had captured 38.16 per cent, and, according to World Bank reports, in 1995 had already reached 41 per cent, while 50.7 per cent of Mexico’s poor had only 16 per cent.
But a recent study by Universidad Obrera and the National University (UNAM) shows an even bleaker picture: 50 per cent gets only 7.3 per cent while one per cent of the wealthier families get 16.2 per cent.
External debt and daily work
Another issue related to neoliberal policies is the concrete impact of the ever-growing external debt, which in June 1996 reached US$158.7 billion, 53per cent of GNP, expressed in US$1,706.4 per Mexican, 12,789.4 pesos, which if we consider economically active population, means US$ 4,457.8.
To illustrate what this means to Mexico we need to know that 42 per cent of the workers in the EAP do not even get minimum wages. So, the workers that do receive minimum wages would need 4.6 years in order to pay their share of the debt.
Neoliberal economic policies have given us the worst and most unfair conditions, we have the lowest salaries, we have lost most of our consumer power due to low salaries and high inflation in basic goods which so far this year has risen to 45 per cent — last year it was 60 per cent. Malnutrition, poverty, hunger and violence have increased.
Officially, the rate of children between one and four years of age in rural areas suffering from severe malnutrition went up 7.7 per cent in the period 1987- 1995. In the poorer states, the numbers reach higher than 35 per cent. But according to independent investigations, malnutrition has reached dramatic levels. Nowadays 50 per cent of the total population suffers from malnutrition to a certain degree, being worse in thirteen critical areas. In those states where the indigenous population is higher, like Oaxaca, Guerrero and Chiapas, 80,per cent of the children suffer malnutrition and every year 158,000 die because of it.
Another face of neoliberal dogma in Mexico is that the government has dangerously decided to repress the impact of social disintegration, but without touching substantially either economic policies or the political system.
Recently, after a growing but nonetheless insufficient movement on behalf of human rights, neoliberalism’s structural violence has added to the already existing government violations and the militarisation of large areas of our territory.
â€¢ From 1994, government violations of human rights has spiralled to the point that international organisations have protested.
â€¢ According to Amnesty International Despite scores of appeals to the authorities, members of the security forces and paramilitary groups continue to carry out abuses with official tolerance, fuelling a growing feeling of terror among the Mexican population.
â€¢ It is only by bringing these perpetrators to justice that a clear message will be sent that these violations will not be tolerated.
Amnesty International is calling on the Mexican government to adopt urgent and effective measures, including implementing fully its obligations under the International Covenant on Civil and Political Rights and the United Nations Convention Against Torture, to halt the spiralling pattern of human rights violations in Mexico and the impunity benefiting the perpetrators.
Again in October 1996, Amnesty International called on the Mexican authorities to implement the recommendations included in its Report on Human Rights violations in Mexico: A challenge for the nineties published in November 1995 during a high-level visit to the country. (International Amnesty Press Release, October, 26, 1996).
This repressive strategy counts on the open support of the United States government which has provided technical assistance, intelligence services and specialist teams to participate directly along with the large Mexican army. This is unique in the history of our country.
According to a published report by the Federation of American Scientists, in the ten years between 1984 and 1993, Mexico obtained ten times more US armaments than it accumulated in thirty four years between 1950 and 1983. During that period more than 400 million dollars were spent on military equipment, weapons and ammunitions. (M. Concha Report on Militarisation in Mexico, October, 1996.)
Between 1989 and 1994, the modernisation of the Mexican Armed Forces has included the purchase of 48 helicopters by the Mexican Air Force, including 18 Bell 212 and two Bell 206L3 helicopters, six Blackhawk transports, 222 MD-530 observation, and 23 small planes. The Mexican government also, for the first time, is allowing US public security agencies to fly over Mexican territory (La Jornada News, June 15, 1996.)
In 1994, US President Clinton authorised a new arms export package for Mexico, including over US$64 million of sophisticated electronic equipment and satellite guided UH-60 Blackhawk helicopters, US Huey and Bell 212 helicopters along with C-130 Hercules troop transport planes which were used against the Zapatistas in 1994. In 1993 the US military assistance to Mexico was more than $250 million. (National Catholic Reporter, February, 1994.)
The government of President Zedillo has requested the purchase of airplanes, armament, radar and communication systems worth a total of US$27 million to reinforce the capacities of the Armed Forces and Federal Attorney General.
Former US Secretary of Defence William Perry maintained that his country will collaborate in the improvement of Mexico’s defence capacity in air and maritime space, in the modernisation of military hardware and in the improvement of personnel for combating the drug trade. He insisted that the bilateral relationship, aided before on two bases â€”the political and commercial — now will also be founded on one more, that is, on the question of security. After pointing out commercial and economic collaboration â€” such as the NAFTA and the recent aid Mexico received due to the economic crisis of last December â€” the chief of the US Armed Force maintained, when it comes to stability and security, our destinies are also indissolubly linked. US sources claimed that Mexico bought a radar worth seven million dollars as well as 12 Huey-H1 helicopters to fight drug trafficking (La Jornada News, October 24, 1995).
Donald E. Schulz, an associate professor of National Security with the US Army’s War College stated that a hostile government could put the US investments in danger (in Mexico), jeopardise access to oil, produce a flood of political refugees and economic migrants to the north. And under such circumstances, the United States would feel obligated to militarise its southern border (La Jornada News, December 6, 1995).
A declassified pentagon paper, written in 1994, stated that it was conceivable that a deployment of US troops to Mexico would be received favourably if the Mexican government were to confront the threat of being overthrown as a result of widespread economic and social chaos. In such a scenario, the intelligence and security services would probably co-operate with the US intelligence forces with the identification of threats to Mexico’s internal stability. (La Jornada News, August 31, 1996)
US Ambassador James Jones said that after Clinton’s re-election there are conditions to review and add some NAFTA’s Chapters, including regional security against narco-traffic and drugs (La Jornada News, November 6, 1996). The last gift to the Mexican people is The Next War, a computer simulation about US army invasion into Mexico, its objective is to overthrow the Mexican president and save the US national security. This book, written by Caspar Weinberg, former US Defence Secretary during Ronald ReaganÂ´s administration is another example of traditional US imperialism, but exacerbated by the ever increasing dependency of our economy and policies to US Washington-Wall Street block.
Democracy and human development index under neoliberalism
In the 1994 United Nations Development Program Report, Mexico was rated at 53, in 1995 48 and in 1996 it looks like it’ll go down again especially due to the officially registered 1994-95 crisis. It is clear for us, we are 50 points away from our commercial partners and neoliberalism doesn’t seem to be the right way to get closer.
NAFTA has exacerbated environmental problems: it has become more difficult to invest in effective infrastructure, new processes and clean technologies and at the same time try to adapt environmental policies to the needs of the market.
High polluter companies classified by the Environmental Protection Agency of USA (EPA), have established in Mexico. The huge electronic and electrical maquiladoras have no environmental control whatsoever, and are responsible for serious environmental and health problems along the northern frontier with USA, and still they are expanding along most of the Mexican territory.
Public and private investment for environmental infrastructure is practically non-existent compared to the challenges that have to be met and the urgent problems we face: massive pollution, toxic waste, polluted waterways, erosion and deforestation.
Under neoliberal policies, the need to attract foreign investment and the pressure on natural resources means that regulations are developed a la carte. The new investments and mineral exploitation are still polluting with no legal framework or standards, huge forest plantations receive special support from public resources, and loans to buy environmental technology disguise mercantilism and government corruption.
Recently reforms to the Environmental Law were endorsed, which included certain NGO proposals. However, the government managed to retain most of its rights and so continue the logic of the neoliberal model.
While NAFTA’s Parallel Agreements Environmental Cooperation Commission is still an important public arena to pronounce and propose, it does not have the legal strength to enforce the law. The Development Bank (DanBank), created to finance infrastructure projects along the frontier with USA, is not working at all.
Lessons for any other countries?
The bitter Mexican neoliberal experience might well be a good example for other countries in order not to let the same happen to them.
The relative success of some Asian countries, as noted a recent UNCTAD report, is due to the consolidation of an internal market before embarking on open trade policies or even before entering the global market — precisely the opposite of the path neoliberals have taken in Mexico and other countries.
Before NAFTA, modifications in the Constitution were made in order to allow the privatisation of the nation’s resources, along with the special structural adjustment policies suggested by the World Bank and the International Monetary Fund. The Mexican government accepted all this in order to install neoliberalism in the country. The results have lead us to a main question: are we a nation or a supermarket? and even if we are a supermarket, it’s one from which most of us are excluded.
For most of the citizens, the challenge is to reconstruct our nation, taking into account the economic, social, cultural and political contradictions we face, but nonetheless doing it our way. Or, we can let the transformation of our country into a gigantic â€˜super mall’ destroy us.
The issue not only concerns the Mexican economic model, as some reductionist technocrats have tried to suggest. It concerns the whole model which is being implanted in most countries. And the problem is mainly political because there are no economic models without a philosophy or without political action. That is the reason why we have to differentiate between the results and the methods to get there. We have to stop the media from diffusing its global propaganda. We have to recuperate the position that the economy is nothing but a way to benefit society as a whole, not the other way around.
In Mexico, the failure of an economy based on government capitalism, corruption, and protecting the interests of external actors and internal elites has been replaced by free-trade capitalism. The neoliberal agenda has been presented as a false dilemma: everything to the State or everything to the market; protection or privatisation; state regulation or total deregulation; production for the domestic market or international export.
These constructed dichotomies have created a false ideological and political polarisation which can create terrible choices: society or barbarism, governability or chaos, peace or war.
And Yet It Moves!
For most Mexicans it’s clear now that NAFTA has eroded our economy, our lives and our future as well. But it’s also clear that the support of the media has been crucial to sell us the illusion to reach paradise. Nevertheless, as soon as NAFTA started, social movements appeared, and every day more and more voices can be heard looking for a different solution.
The whole world knows that on January 1, 1994 the indigenous Zapatistas of Chiapas raised an army against the government policies that structurally condemned them to death. Some say the Zapatistas movement is the first to speak out internationally against neoliberal policies, and maybe they are right. Zapatistas put it this way: It is simply the right of the people to fight for dignity and justice. The right of all for all.
Thirty five months have passed in the fight, with hope, dignity and the solidarity of many other people who sympathise with humanity, who still remember the values that the market and neoliberalism have forgotten.
The National Dialogue Zapatista Movement’s petition is a democratic outlet for the crisis of our country. Zapatistas raised arms not to take away the power of the powerful but in order to make the silent be heard by the government.
Our governments said: We commit ourselves to the goal of eradicating poverty in the world, through decisive national actions and international co-operation, as an ethical, social, political and economic imperative of humankind.
With respect to the participation of the people in national economic and social decision-making, our governments pledged through the Copenhagen Declaration of the World Summit for Social Development (1995) to:
Reinforce, as appropriate, the means and capacities for people to participate in the formulation and implementation of social and economic policies and programmes through decentralisation, open management of public institutions and strengthening the abilities and opportunities of civil society and local communities to develop their own organisations, resources and activities.
Nevertheless, due to world solidarity, political creativity and pacifist resistance combined with social activism, the Zapatista movement has been able to resist the powerful low intensity war that the Mexican government and its neoliberal partners have undertaken against them… against all Mexicans. But, the Zapatista movement has wakened and organised many indigenous communities all over the country, they have stimulated discussion on democracy issues and fundamental reforms.
On the way there’s been many citizen proposals on various issues such as the Freedom Referendum, the National Campaign against Economical Policies, the Campaign for Peace and Human Rights and the National Campaign of Debtors against Banks and Government Complicity.
Mexican social organisations have worked on important alternative proposals on social policies and the economy. The Referendum for Freedom is only one example where more than 500,000 citizens participated. The alternative program considers three principal issues: reactiviating the national economy reorienting the public budget, strengthening the domestic market and renegotiating external debt, including NAFTA.
Nevertheless, the fight for a change towards an alternative model goes further than social policies and the economy because the neoliberal model works and profits from the absence of democracy in the political system. The challenge is complex and we must consider all parts of the national and international reality. The fight goes on, resistance grows and hopes give fruit.
Various world and regional summits have taken place, the governments have signed co-operation agreements but most of them without questioning the heart of the neoliberal model, whose agenda has nothing to do with the priorities of our people.
Our challenge is to show that the grassroots, the civil society, has and is able to foster and drive a cooperation agenda between our peoples, centred on the values that the neoliberalism has forgotten. Today in front of individualism and the new global monopoly, we stress our deep solidarity with grassroots people, our people and the people we belong to. We take up the challenge and our signature will be the creativity of our actions.
* Alejandro Villamar is the head of the RMALC, a group critical of the unhampered liberalisation of the Mexican economy