SELLING THE PUBLIC SECTOR: LATIN AMERICA REACTS Mexico: Lights out for Electric Company Sale?
Bacon, David
In the 1930s and 40s, General Ldzaro Cdrdenas made nationalization of economic resources and land reform symbols of Mexican national sovereignty. Independence from the colossus of the...
...These are the same companies that robbed and defrauded people in the United States," he told the daily La Jornada...
...Popular opposition prevented the inclusion of the electrical and oil industries in negotiations over the North American Free Trade Agreement...
...Presidents Dfaz and Cdrdenas, who nationalized electricity and oil, were PRI stalwarts...
...To defeat Fox, an alliance of the SME, the UNT, the leftist PRD and nationalist elements in the PRI have all vowed to cooperate in mass protest...
...But in 1999, splits began to develop in SUTERM, and last May, 3000 SUTERM members defied their national leaders and marched in the capitol, openly allying themselves with the SME...
...That was always the root of California's deregulation problems...
...Two-thirds of the power will be sold in Mexico, and a third exported to California...
...Nevertheless, Fox's arguments swayed not only his own party, the conservative National Action Party (PAN), but also the leaders of the PRI, which governed Mexico for 71 years before Fox's election...
...California Public Utilities Commission's Wood says, "It's crazy for Mexico to be doing this...
...side of the border agrees...
...At the same time, the slow disintegration of the old union structure, which refused to mount any defense against neoliberal government policies, created a political opening for currents of resistance...
...Filner was especially critical of the Sempra and InterGen border plants, which are expected to produce 3000 tons of air pollution annually...
...companies behind the proposal "the same old gang of thieves...
...to set up a company, Intergen Aztec Energy, to build a plant near Mexicali, generating 750 megawatts...
...We don't just look at this as workers, but as Mexicans," Ramon Pacheco, secretary for external relations of the Mexican Electrical Workers Union, says about the privatization plan...
...It is an impressive transnational constellation of political power...
...The CFE runs in the black, and is widely considered both honest and efficient...
...companies involved in a o s e r p al California's calamitous power deregulation planhave been granted licenses for plant construction...
...losses in 2001, other Enron executives found time to hobnob with Mexican politicians and design projects in cooperation with that country's industrial elite...
...The company already operates water systems in Quintana Roo state, and its executives advised Fox on energy policy during his transition to the presidency...
...Meanwhile, private plant construction surged ahead...
...Soldiers had to occupy the port of Veracruz at gunpoint in order to privatize it and fire its workforce...
...In 1960, the foreign owners of Mexico's then-private power system wanted a big rate hike...
...Adding fuel to the fire, Fox proposed to provide incentives to private companies to build generating plants, financing them by using the NACILA REPORT ON THE AMERICASPRIVATIZATION IN THE AMERICAS national pension fund, Mexico's equivalent to Social Security...
...Enron created 64 subsidiaries to operate in the Mexican power market, headquartering most of them in Caribbean tax havens...
...As in California, Mexico's small users would have to shoulder all of the expenses of maintaining the transmission grid and the distribution system, while the existing power companies would lose most of their revenue...
...In 1992, however, President Carlos Salinas announced that private companies, including foreign ones, could build and operate plants in Mexico so long as they consumed or exported all the energy they produced, or sold it to CFE...
...And if the proposals for privatizing Mexico's electrical system bear an eerie resemblance to California's disastrous experiment in deregulation, it should come as no surprise...
...Some of the PRI's most conservative but nationalist leaders, including its former chair Manuel Bartlett, have organized vocal opposition...
...Although U.S...
...He called the U.S...
...energy partners...
...Mexico is blessed with lots of energy resources...
...Most observers believe it's only a matter of time before PEMEX is itself sold off...
...The industry could be self-financing if it weren't for the government's policy of disinvestment," says Jos6 Luis Herndndez of the SME...
...The leftist Party of the Democratic Revolution (PRD) predicted the CFE would lose 60 billion of its current 100-billion-peso income...
...The SME also accuses the government of draining its resources by forcing it to buy power from CFE, whose prices have increased 298 percent over the last decade...
...As an alternative, a new union federation, the National Union of Workers (UNT), was formed in 1998, and declared open opposition to the economic reforms...
...The union formed the National Front of Resistance to the Privatization of the Electrical Industry, collected 2.3 million signatures on petitions in three weeks, and brought a million angry capitalinos into the streets...
...On April 4, 2002, Enron Energfa Industrial de M6xico received a license from Mexico's Electricity Regulatory Commission to build a 245 megawatt plant in partnership with Vidreria Monterrey and Vidriera Guadalajara (two big glassmakers), Grupo IMSA (a steel and autoparts giant), Industrias Whirlpool and other big Mexican companies...
...One of the most important structural and political changes implemented by the new federation was scrapping the old requirement that workers belong to the governing party in order to hold their jobs and maintain their union membership...
...Other familiar players in the California debacle are also building plants...
...owners from the main levers of the country's economic life...
...While the electrical workers' SME, which never had such a rule, didn't join this new federation, the formation of the UNT helped to create an atmosphere in which opposition gained strength and legitimacy...
...One of Fox's principal arguments for his privatization plan is that the constitution needs to be changed to legalize what already exists on the ground...
...The aboutface by the party's present leaders not only stood that history on its head, but also defied positions it defended earlier this year...
...The union vowed to distribute 10 million leaflets nationwide urging opposition...
...Fox's direction has the blessing of the World Bank and the IMF and is supported by President George Bush...
...In May, the Mexican congress passed a resolution opposing any changes in the constitution to make privatization possible, and the PRI itself took a similar position in its own national meeting...
...Do they want to sell the American failure to us...
...It wasn't the first confrontation between the union and the forces of neoliberal reform...
...later supported the idea...
...Look at the energy chaos in California," he declared...
...Carl Wood, a member of the California Public Utilities Commission, warned of another danger: the swings of the market could bring about manipulated shortages and periods of extremely high prices, as they did in California...
...The heart of those changes has been privatization of Mexican state enterprises...
...Energy Secretary Luis Tellez says Mexico needs to add 22,000 megawatts to its present 35,000 watt capacity, and that only foreign investors will come up with the necessary $50 billion...
...Bechtel Enterprises, the multinational engineering giant based in San Francisco, partnered with Shell Generating Ltd...
...At the end of September, the union and its allies brought 50,000 people into Mexico City's main square, the Zocalo, in protest over Fox's privatization plans...
...Its 600 megawatts will all be sent to the United States and the gas for its boilers will come from the United States in a Sempra-built pipeline, making the plant the first true energy maquiladora...
...Bartlett introduced an alternative bill to Fox's that would ban any increase in the 10 percent of current generation that is presently done by private companies...
...In Mexico, two state-owned power companies provide electricity...
...The Federal Electrical Commission (CFE) brings power to all of the country except Mexico City and part of central Mexico, which is supplied by the Power and Light Company...
...While these resistance efforts were defeated, one of the government's most important privatization schemes has so far been held at bay-the selloff of the electrical system...
...If Madrazo and Gordillo can hold their members, Fox's scheme has more than the required two-thirds majority...
...But that's a big if...
...A knowledgeable authority on the U.S...
...Mexico, however, has something the first time that the United States doesn't, something that so far has been rivatization able to stop these proposals in failed, their tracks-the Mexican Electrical Workers Union, the SME, which represents workers at the Power and Light Company and is one of the country's oldest and most democratic labor organizations...
...Those put on the auction block include the airlines, ports, railroads, banks, phone system and whole sections of formerly state-owned industries...
...Whether Mexicans find the political strength to reject the proposal is a question bound up with the changes in the country's labor movement...
...New owners would increase profits by raising rates for small customers, while cutting wages, laying off workers, tearing up union contracts and holding down expenses on maintenance...
...The political temperature will get very hot before the vote is taken in 2003, since it has become a referendum on the direction for Mexico's economic development...
...But after Fox invited PRI leaders Roberto Madrazo and Elba Esther Gordillo to the presidential residence of Los Pinos for a late night snack and talk, they were only too happy to announce they'd give his proposal serious consideration...
...They threatened to stop investing in bringing lines into rural areas and in building new generating capacity to pressure the government...
...The government seized control of SUTERM, however, and its latest leader now also heads the main government-affiliated labor federation, the Congreso de Trabajo...
...The question, therefore, is why should Mexicans trust them not to do the same here...
...The most predictable result of privatization, opponents claim, is that both national companies would be sold off once they went broke, or would be replaced in the market by foreign-owned ones...
...Sempra Energy Resources, a San Diego generator that figured in the state's power meltdown last year, is building another power station near Mexicali...
...Just a few decades after the cataclysmic revolution of 1910-20, public ownership of oil was written into the constitution, and then, two decades later the electrical system was nationalized...
...A former Coca-Cola executive, Fox is allied with the industrialists of Monterrey and their U.S...
...We have seen the consequences of deregulation in the electrical sector in the state of California which has been detrimental to the interests of the electrical workers and of the population," says a statement signed by leaders of both Mexican electrical unions...
...Dfaz' action was very popular, and in line with the earlier nationalization of oil...
...Meanwhile, the SME set up its National Front of Resistance...
...The Power and Light Company, which has to contend with Mexico City's old infrastructure, is more strapped for cash...
...It will be published by University of California Press this fall...
...What they really want to do is enrich some of their favorites by selling it off at deflated prices...
...Independence from the colossus of the North, Cdrdenas said, meant prying the hands of U.S...
...They share some of the same authors...
...air quality controls won't apply to them, residents of California's Imperial Valley a few miles north will wind up breathing the plants' effluents...
...Almost all new construction of power plants by CFE and the Power and Light Company was halted after 1992...
...Following the election, the The Mexican Electrical Workers Union (SME) protests privatization in Mexico City power axis connecting the big industrialists of Monterrey, some of Mexico's most powerful private businessmen, with their counterparts across the Rio Grande in Texas, paid off for the Texans...
...But this is about more than that-it's about the direction our country is taking...
...And further down that road is the other crown jewel, heretofore untouchable because nationalist feelings remain high...
...Twenty-six foreign companies-including Enron and other U.S...
...In cooperation with Dow Chemical President John Connally, they envisioned a "North American Energy Project" that would connect the electrical grids of Mexico, the United States and Canada...
...The first crack at the nationalization of electricity came in 1979, when the technocrats, bent on bringing market reforms to the Mexican economy, began to become the dominant force in the federal government...
...California's experience prompted San Diego Congressman Bob Filner to travel to Mexico City last July to denounce the Mexican plans...
...But President Gustavo Diaz Ordaz nationalized them instead...
...The SME warned that the Fox plan would bring about the immediate bankruptcy of both companiesa hauntingly familiar prediction to Californians, where in the wake of deregulation, Pacific Gas & Electric declared bankruptcy in April 2001...
...The PRI has 40 percent of the votes in the Chamber of Deputies and the Senate, and Fox's PAN another 40 percent...
...The battle over privatization was internationalized when it hosted a conference in Mexico City which featured delegations from many Latin American countries...
...Another demonstration in August brought out 5,000, and a national coordinating committee was set up, representing 15,000 workers...
...In fact, as Jeffrey Skilling and Ken Lay were setting up shadow corporations to hide Enron's huge U.S...
...Vol XXXVI, No 4 JANUARY/FEBRUARY 2003 29PRIVATIZATION IN THE AMERICAS decades Mexico has become a neoliberal proving ground, as the International Monetary Fund and World Bank used the leverage of foreign debt to require massive changes in economic priorities designed to encourage foreign investment...
...Mexican industry might not be able to absorb those price increases, nor raise prices on its own products in the world market," he explained...
...In Mexico, the people rightly think that the electrical industry and the petroleum industry should be public property and that such public property is the fundamental basis for their nation's existence and of their national sovereignty...
...Fox's predecessor, Ernesto Zedillo, had also proposed privatizing electricity in 1999...
...Mexico City's bus drivers The Mexic fought the selloff of the Route- Workers Uni 100 company for three years, including one in which their huge protest union leaders were imprisoned...
...The other electrical workers' union, SUTERM, led the movement to democratize the country's unions two decades ago...
...Controversy over the rapid growth of private power generation in Mexico boiled over last year, as President Vicente Fox introduced legislation to privatize the electrical system...
...These are not just doomsday predictions-they describe the bitter experience at Mexico's railroads, copper mines, airlines and other state-owned businesses...
...Price spikes in electricity might therefore cause industrial activity to stall...
...In the United States, in state after i Electrical state, similar corporate forces n organized have steamrolled over ratepay- ers, unions and regulators, in a against plans successful effort to open power lectricity in generation to the free market...
...Resistance to privatization has often been fierce...
...His forthcoming book The Children of NAFTA examines the last decade of cross-border organizing...
...Yes, we'd lose our contract and jobs, and the company would go bankrupt...
...But the SME argues that the government subsidizes large users, while cuts in the Power and Light Company's budget have undermined modernization of equipment...
...George Bush Sr...
...But Jesis Navarrete, head of the moveNACIA REPORT ON THE AMERICAS 32PRIVATIZATION IN THE AMERICAS ment opposing privatization in SUTERM, the CFE union, is among those who point out that cogeneration between the CFE and the government oil monopoly PEMEX alone could generate 9,000 new megawatts...
...For Mexicans, national ownership of electricity is not just a matter of rates and jobs, but a symbol of Mexico's independence from the United States, especially economic independence...
...Nationalist economic development, however, was overthrown as the bedrock of the country's economic strategy in the 1970s, when technocrats took power in the Party of the Institutionalized Revolution (PRI) and imposed neoliberal economic reforms...
...t Wildcat strikes hit the railroads to privatize when they were sold to Grupo 1999-and fo M6xico, and copper miners fought a valiant battle against job in Mexico a reductions when the Cananea propos mine was bought by the same owners in the late 1990s...
...The labor landscape began to change when former President Ernesto Zedillo announced plans to put the electrical system up for sale after his election eight years ago...
...But this proposal accomodates the needs of the large consumers without meeting those of the public, and sticks the cost of old technology with consumers...
...Zedillo was defeated, the first time a privatization initiative in Mexico had not succeeded...
...In the last two Vol XXXVI, No 4 JANUARYIFEBRuARY 200329 David Bacon, <www.igc.org/dbacon>, is a West Coast-based writer and photojournalist...
Vol. 36 • January 2003 • No. 4
