Mexico: The Wages of Trade
Grinspun, Ricardo & Cameron, Maxwell
UNTIL ITS RECENT EMBRACE OF FREE TRADE and market-oriented reform, Mexico was a paragon of nationalism and inward-oriented development. The Mexican state created a framework for capitalist develop-...
...Mexico, with its new export constant competition with other cheap-labor havens...
...153-4...
...Under L6pez Portillo state-owned enterprises grew, the ministries of Finance and Treasury (traditional mainstays of financial orthodoxy) were weak, and the alliance between the PRI and the private sector broke down...
...See our"The Political Economy Of NorthAmerican Integration: Diverse Perspectives, Converging Criticisms,"ch...
...1. The figure is taken from Gary Gereffi, "Paths of Industrialization: An Overview," in Gary Gereffi and Donald L. Wyman, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia (Princeton: Princeton University Press, 1990), p. 10...
...3 8 The possibility that Mexico could face another loss of faith by foreign investors, a round of capital flight, and a large devaluation that would discredit the government is currently a matter for nervous speculation in Mexico...
...Congress, U.S.-Mexico Trade: Pulling Together or Pulling Apart...
...South Korea, for example, never adopted indiscriminate economic liberalization, but rather a mix of active export promotion and efficient import substitution...
...2 0 The 80% growth of the informal economy during the 1980s is the best indicator of the inability of the current economic program to provide enough jobs...
...Mexico must find a way to raise productivity...
...When he took office, Salinas posed a twopronged modernization program for his six-year term: deep economic reforms and a more open political system...
...Secretariat ofCommerce andIndustrial Development (SECOFI), The Mexican Program for the Modernization of Industry and Foreign Trade, 1990-1994 (Mexico City: Government of Mexico, circa 1989), pp...
...Noteworthy was the wildcat work stoppage and police-enforced lockout at Volkswagen de M6xico...
...Agustin Escobar Latapf and Mercedes Gonzales de la Rocha, "Introduction," in M. GonzAles de la Rocha and A. Escobar Latapf, eds., Social Responses to Mexico's Economic Crisis of the 1980s (La Jolla: Center for U.S.-Mexican Studies, University of California at San Diego, 1991), p. 9 . 22...
...We just wanted to remove the barriers to competition.'" 8 The prospects for shared benefits in the future are dim...
...Of 1050 state enterprises in 1983, only 285 were left in 1990.9 By the end of Salinas' term in 1994, Mexico is not likely to have a significant state-enterprise sector...
...The main question confronting Mexican companies is whether these [foreign] investors are willing to become long-term investors in Mexico, or whether they will flee atthe firstsignof trouble...
...2. Thus the term "inclusionary corporatism" is sometimes used to characterize the PRI model of governance...
...Integration will continue and should be seen as an opportunity for transnational alliances...
...We are suggesting that NAFTA creates similar-although permanent, not temporary-constraints on domestic policies on Canada and Mexico...
...Unemploy- A strawberry pE ment has been exacerbated by Mexico's industries, is in picking plant in Jalisco state...
...0 Along these lines, the fight against inflation has benefited from price and salary controls agreed to in the Economic Solidarity Pacts (PSEs) with particiVOLUME XXVI, NUMBER 4 (FEBRUARY 1993) 33A Market Solution...
...The small size of the domestic market severely limited industrial growth...
...3 2 Mexico must now import a larger share of the food it requires to feed its growing population...
...Economist Ren6 Villareal, for example, has recently argued that "the most viable Mexican industrialization strategy involves (1) an expansion of manufacturing exports and (2) endogenous industrial growth centering on basic goods and inputs...
...1 in Grinspun and Cameron, The Political Economy of North American Free Trade...
...The new industrialization strategy does not adequately address these requirements...
...Oil revenue allowed Mexico to overborrow because the international banks did not believe that an oil exporter could become an insolvent debtor...
...Government Printing Office, October, 1992), p. 69...
...r apiu pupuatiuon grouwtL uring e 1980s-over 3.5% of the economically active population annually...
...the foundation for an expanding domestic market, so that growth was both outward- and inward-oriented...
...Oligopolies Rule," El Financiero International, October 19, 1992, p. 1. 31...
...Martin's Press...
...27...
...8 NAFTA is intended, in part, to make the neoliberal transformation irreversible and create the stable eco- nomic framework required for long-term foreign investment...
...At the same time Salinas has continThe National Solidarity Program (PRONASOL) has ued the Mexican government's long-standing practice of become the centerpiece of that political response...
...Under strikes in the country...
...The resulting competition over scarce capital resources with other low-wage countries is unhealthy, producing more pressure to lower costs of production at the expense of workers and the environment...
...2 4 Since the maquiladora sector has never employed more than half a million people, the net effect has been a loss of jobs in the industrial economy...
...Funding for this project was provided by the government of Ontario, the Centre for Research on Latin America and the Caribbean (CERLAC) at York University, and research grants for Max Cameron from the Social Sciences and Humanities Research Council of Canada and Carleton University, and for Ricardo Grinspun from York University...
...and blanda means soft...
...An inevitable devaluation of the peso was postponed, and capital flight ensued as investors sought safe-havens for their capital...
...Government Printing Office, October 1992), p. 68...
...p. 36], we can imagine a trade and development pact that would make human development the top public-policy priority...
...Union chief approves change to labor law," El Financiero International, June 29, 1992, p. 4. Opponents argue the objectives of the proposed changes were "to eliminate fixed wage scales, give preferences to non-union employment, and restrict the right to strike...
...1. Ren6 Villareal, "The Latin American Strategy of Import Substitution: Failure or Paradigm For the Region...
...High rates of population growth and unlimited supplies of labor in the countryside create continuous downward pressure on wages...
...foreign-debt service...
...Trade liberalization has promoted a huge increase in imports into Mexico, and the country has recently reached record levels of current-account deficit...
...3. The PRI regime has often been called a "dictablanda," instead of a "dictadura...
...Corporations, domestic and foreign, may own up to 2,500 hectares (about 6,200 acres...
...Small farmers are linking themselves to this exportoriented drive, which has economic, social and environmental perils...
...and monetary policies, he adopted a package backed by The program serves Salinas' economic agenda by diffus- the International Monetary Fund (IMF) and the U.S...
...1. Rosa Albina Garavito and Augusto Bolivar, Mixico en la dicada de los ochenta: la modernizacidn en cifras (Mexico: UAM-Azcapotzalco, 1990), p. 117, and Judith A. Teichman, Policymaking in Mexico: From Boom to Crisis (Boston: Allen & Unwin, 1988), pp...
...3 6 The new policies have attracted foreign capital but, perversely, a large part of it has gone into financial speculation through the Mexican stock market...
...19, No...
...Under the two administrations, the role of the state has been redefined to create a framework in which large corporations and transnational capital are the engines of growth...
...The important question of food self-sufficiency and rural development is analyzed in David Barkin in "About Face," Report On The Americas Vol...
...3. Robert Kaufman, "Economic Orthodoxy and Political Change in Mexico: The Stabilization and Adjustment Policies of the De la Madrid Administration," in Barbara Stallings and Robert Kaufman, eds., Debt and Democracy in Latin America (Boulder: Westview Press, 1989), p. 114...
...In Spanish, dictadura means dictatorship...
...Salinas put economic reforms on a fast-track, but sponse...
...Parastatals are Mexican state enterprises...
...See Gary Hufbauer and Jeffrey Schott, North American Free Trade: Issues and Recommendations (Washington: Institute for International Economics, 1992), p. 282...
...8. This conclusion is warranted by the Canadian experience...
...The official statistics of unemployment in Mexico are useless, among other reasons because they count anyone who works an hour or more per week among the employed...
...An overvalued peso cheapened imports of capital goods for manufacturing, and consumer goods for affluent groups, and hurt agricultural exports...
...The strategy of ISI, which was widely pursued in Latin America at that time, created a significant manufacturing sector, but one that was inefficient and protected, dependent on imported capital goods and technical assistance, capital-intensive, and heavily subsidized by the public sector...
...y produced women's clothing at a Mexico City market...
...Sustained growth ensured political stability under the moderately authoritarian rule of the Institutional Revolutionary Party (PRI...
...2 8 P RIVATIZATION WAS SUPPOSED TO INcrease the competitiveness of Mexican exports in the global marketplace...
...Our purpose has been to make a case against the Mexican neoliberal transformation on social, political and economic grounds...
...The Federal Labor Arbitration Board granted the firm's petition to cancel its union contract and fire its nearly 15,000 union members...
...David Barkin, "State control of the environment: Politics and degradation in Mexico...
...Robert Kaufman, "Economic Orthodoxy and Political Change in Mexico: The Stabilization and Adjustment Policies of the De la Madrid Government" in Barbara Stallings and Robert Kaufman, eds., Debt and Democracy in Latin America (Boulder: Westview, 1989), p. 117...
...Along with restrictive fiscal accounted for 35% of non-debt government spending...
...6. Denise Dresser, Neopopulist Solutions to Neoliberal Problems (La Jolla: Center for U.S.-Mexican Studies, University of California at San Diego, 1991), pp...
...cimated the garment and other domestic industries PEOPLE IN THE NORTH OFTEN DISMISS CRITI- cism of NAFTA as protectionism and nationalism at best, and veiled racism or indifference to less-developed countries in the South at worst...
...Increased foreign ownership will probably result in a greater outflow of profits, interest payments, and royalties...
...Indeed, some lessons can be learned from these tigers since every facet of the new Mexican industrialization strategy differs markedly from their export-led success...
...Mexico must first free itself from such external constraints before it can engage in a different type of developmental policy...
...The authors are grateful to Kathy Kopinak, Louis Lefeber, Maureen A. Molot, Viviana Patroni, Fred Rosen, Judith Teichman, Carol Wise, and in particular Tom Legler, for helpful comments on an earlier draft of this article...
...Manufacturing employment in Mexico fell from 2.51 million jobs in 1982 to 2.36 million in 1991...
...This is a far cry from the Mexican reality, though...
...As reducing state welfare spending, Salinas has increased the a result, 1992 saw a growing number of unauthorized discretionary spending power of the president...
...As a result, the Mexican foreign debt more than doubled between 1978 and 1983, while the current-account deficit reached a record $12.5 billion in 1981.' However, these funds were not used HE NEW ECONOMIC STRATEGY HAS NOT been able to resolve the contradictions of the old inward-oriented and state-led strategy...
...They are the co-editors ofThe Political Economy of North American Free Trade, which will be published this year by St...
...Integration can, in principle, be managed in a way that promotes shared and equitable economic growth, preserves and improves the social contract, is based on participatory and accountable democracy, defends the achievements of trade unions, and protects the environment...
...4 That priority was present in the administration of Salinas' predecessor, Miguel De la Madrid...
...Alejandro Alvarez B6jar, "Economic Crisis and the Labor Movement in Mexico," in Kevin J. Middlebrook, ed., Unions, Workers, and the State in Mexico (La Jolla: Center for U.S.-Mexican Studies, University of California at San Diego, 1991), p. 33...
...Martin's Press, forthcoming...
...C. Cirdenas, "The Continental Development and Trade Initiative," in John Cavanagh, et al., eds., Trading Freedom: How Free Trade Affects our Lives, Work and Environment (San Francisco: Institute for Food and Development Policy, 1992), pp...
...Estimates for the decade as a whole range up to $80 billion...
...The "nullification and impairment" clauses in NAFTA effectively require compensation if the Mexican government takes action that reduces current or potential benefits to corporations from the other country...
...The tone of the article has been critical since we do not believe the Mexican people are well-served by this transformation...
...An overvalued peso serves U. S. economic interests-at least during the NAFTA negotiations and ratification-because it lowers the trade deficit with Mexico and reassures Congress of the benefits of NAFTA...
...Jorge Calder6n S., cited in Kathryn Kopinak, "The maquiladorization ofthe Mexican economy," in Grinspun and Cameron, The Political Economy of North American Free Trade...
...It's a matter of the two reforms going at different rhythms, but the priority is economics...
...24, No...
...Faced with the failure of oil-led develop- shrinking government...
...nor has it promoted democracy in any meaningful way...
...El Financiero International, September 7, 1992, p. 12...
...2 As the international environment became increasingly adverse-with the decline in the price of oil and other exports, global recession, high real interest rates, and protectionism in the developed countries, Mexico announced in August, 1982 that it was unable to service the interest on its international debt obligations...
...trade litigation...
...Clearly, many and more productive jobs can address inequality only if wages are linked to productivity and provide for a decent living standard...
...Schomberg and Bardacke inform us that the 25 largest companies in Mexico account for a 47.1% share of the nation's GDP...
...NAFTA explicitly prohibits direct export promotion, following GATT...
...Alejandro Alvarez Brjar, "Economic Crisis and the Labor Movement in Mexico," p. 39...
...11...
...In the United States, the top 25 produce just 4.3% of GDP...
...See Jestis Sanchez, "1992 Current Account Deficit to Hit $13 Billion: Banxico," El Financiero International, March 2, 1992, p. 4. 39...
...2 2 This allows large firms to avoid unionization and to pass on to small- and medium-sized businesses the risks associated with fluctuating demand...
...Such a strategy draws upon the experience of the Southeast Asian "tigers": South Korea, Taiwan, Singapore and Hong Kong...
...86-108...
...Diana Alarc6n and Terry McKinley, "Beyond Import Substitution: The Restructuring Projects Of Brazil And Mexico," Latin American Perspectives Vol...
...During the 1980s fiscal support for rural development shrunk from 12% of total public expenditure in 1980 to 7.5% in 1988.31 During the 1980s the gap between the production and consumption of basic grains widened...
...3 3 The government has promoted agribusiness ventures in the northern states, with active support or participation of foreign capital, especially giant U.S...
...Neoliberal policies have had an onerous social and economic cost...
...9. Judith Teichman, "The Dismantling of the Mexican State and the Role of the Private Sector," in Grinspun and Cameron, The Political Economy of North American Integration...
...The old strategy, with its reliance on cheap food pricing policies, was biased against the development of the rural sector [see "The Old Strategy," p. 34...
...food conglomerates...
...Thus, capital flight and loss of reserves occurred simultaneously...
...Under President Luis Echeverria (1970-1976) these problems showed up as growing public deficits, high inflation, inequality in the distribution of income and balance-ofpayments disequilibria...
...ITE-545 (Washington, D.C.: U.S...
...Central-Bank loans to the private sector caused the money supply to grow and the currency to weaken...
...According to this data, grain consumption grew atan average annual rate of 1.8% during the 1980s...
...Salinas has aggressively pursued deregulation of markets, promoted foreign-capital inflows, sold state enterprises, further liberalized trade, and fought inflation through high real interestrates and fiscal contraction...
...See "Taking stock of the companies," El Financiero International, April, 1992, p. 14...
...These external actors were mainly concerned with guaranteeing continuous service of the foreign debt, both private and public...
...Office of Technology Assessment, U.S.-Mexico Trade, p. 201...
...These industries employed 2.5 million workers in the past...
...Expansionary policies resulted in inflation and social unrest as the economy overheated and struggles over income distribution intensified...
...2, No.1 (February 1991), pp...
...While Mexico City and othercities grew, and the urban middle class aspired to European lifestyles, the shantytowns and rural areas remained poor and underdeveloped...
...PRONASOL, ostensibly a program of assistance to the When Salinas' predecessor and mentor, Miguel de la Mexican popular sectors, selected communities are given Madrid, took office in 1982, his first priority was to build supplies and equipment for locally initiated development investor confidence and patch up relations between the projects...
...The choice is between managing economic, social and political integration in the collective interest of a broadly defined political community (as some Europeans are trying to do) or managing it in the interest of a small set of powerful economic forces (as NAFTA does...
...NAFTA's reliance on unaccountable panels of "experts" to make eco- nomic decisions that elected representatives should make, as well as the shift of power to large transnational capital embedded in the agreement, do not contribute to a more democratic and participatory society...
...2.These issues are discussed at length in different chapters of Gereffi and Wyman, Manufacturing Miracles...
...7 It will restrict Mexican government policies in areas such as regional and sectoral development, export subsidies, redistributive policies, social welfare, research and development, foreign investment, and energy...
...trade law, legitimized by NAFTA but not by GATT, sees many government interventions as "unfair trade actions," thus triggering U.S...
...This requires investment in human capital-education, health and occupational safety, job training, occupational rights-as well as in technology, research and development, and plant, equipment and materials...
...2 The number of jobs in the rural sector will also diminish as a result of land-holding (ejidal) reform, the dismantling of support for agriculture, and freer trade in basic grains-which should deepen under NAFTA...
...Mexican policy- makers have consistently claimed that the best way to address inequality is by creating many and more productive jobs through the outward-reorientation of the economy...
...Abouthalf the foreign investment that came in 1991 wentinto the Bolsa (stock market...
...The shift of assets to the private sector, however, has promoted concentration rather than competition...
...Recently Salinas has completed the reprivatization of the banks nationalized in 1982...
...wages to Mexican wages was 4:1, in 1985 it was 10:l...
...1 4 Whereas in 1975 the ratio of U.S...
...While thwarting the formation of independent trade unions...
...In some cases A LESSON FROM SOUTHEAST ASIA...
...REPORT ON THE AMERICAS 36At the economic level, more capital-intensive agribusiness enterprises may require less labor and eliminate jobs...
...See chapters by Bruce Campbell, Mel Watkins and Ricardo Grinspun, in Grinspun and Cameron, The Political Economy of North American Free Trade...
...In turn, this external orientation should be supported by (3) a process of selective import-substitution industrialization in which links in the productive chain are created that promote intra-industrial and inter-sectoral articulation, and competitive and efficient production...
...Judith Teichman, "The Dismantling of the Mexican State and the Role of the Private Sector...
...These policies resulted in rural and urban unemployment, accelerated migration to the cities, a large informal economy, and the persistence of income inequality...
...Mexico: The Wages of Trade This article draws on an edited volume by Ricardo Grinspun and Maxwell A. Cameron, entitled The Political Economy of North American Free Trade (New York: St...
...Moreover, the chemical-intensive nat f ki ; ;ill damae th envronmnt...
...Foreign and domestic private investment was directed and controlled to avoid the creation of "enclave" economies...
...De la Madrid's government embodied "a strong political resurgence of the technocratic factions associated with the Treasury and the Central Bank, a sharply diminished role for politicos connected with the PRI and the labor movement, and the virtual elimination of structuralist and neo-Keynesian economists from top levels of government...
...Office of Technology Assessment, U.S...
...Quoted in William Schomberg and Ted Bardacke, "Doing Business With the Big Boys," El Financiero International, October 19, 1992, p. 14...
...Where 25 holding companies produce 47% of the GNP (in the formal economy), free competition is an ideal, not a reality...
...Finally, it is unclear whether the current economic program will create sustained and broad productivity growth...
...On the contrary, inequality and human suffering have intensified...
...Trade liberalization was required to boost export-led growth, as well as to reduce inflation by introducing import competition to control prices...
...A major component of De la Madrid's strategy was to promote the in-bond assembly plants, or maquiladoras, along the U.S.-Mexico border and in Mexico City...
...He avoided making the necessary adjustment of the economy after the discovery of huge deposits of petroleum coincided fortuitously with oil price hikes caused by the formation of the OPEC cartel...
...By 1991, this new brand of "liberal populism" private sector and the PRI...
...Mexico produced about 17.6-million metric tons of grains in 1980, and consumed 22.4...
...The promotion of agribusiness-a centerpiece of current policies-only increases dependency on external factors and threatens food security if another balance-of-payments crisis hits the country...
...This is achieved mainly by regressive competition with other "cheap-labor havens," which results in lowered wages, coerced trade unions and lax enforcement of labor and environmental regulations...
...In 1976 Mexico had been forced to approach the International Monetary Fund (IMF) for a stand-by agreement to stabilize the economy...
...6 (May 1991...
...Congress, Office of Technology Assessment, U.S.-Mexico Trade: Pulling Together or Pulling Apart...
...REPORT ON THE AMERICAS 34between 1980 and 1984.16 According to one estimate, currently half of the Mexican labor force lives below the official poverty line.' 7 The distribution of wealth became more skewed as a result of an economic model that favors economic concentration...
...These reforms increased employment and reduced poverty in the countryside, slowing emigration to the cities...
...3 4 Trade liberalization in basic grains such as corn and beans, embedded in NAFTA, will further threaten the livelihood of at least two million peasants who still grow the traditional staples...
...Between 1978 and 1981 Mexico's annual growth rate was over 8...
...6 ment and the need for other sources of foreign-exchange If PRONASOL is the political response, the North earnings, Mexico began to mend fences with the United American Free Trade Agreement (NAFTA) has PRD supporters protest fraud in the 1992 gubernatorial election become the centerpiece of the economic re- in Michoacdn...
...High levels of informal employment and disguised unemployment therefore remain despite the aggressive industrialization drive...
...Recent constitutional changes affecting ejido holdings will mean that many small-holding peasants will lose their lands, and that a class of landless rural workers will grow, feeding migration to the cities...
...Maxwell Cameron teaches in the School of International Affairs at Carleton University in Ottawa...
...We will "respond to the call of Mexicans for improved well-being," he said...
...A woman sells domestically Trade liberalization has dec Thir mara;irp nrprc nf commercialization will upset the natural balance of Mexico's delicate eco-systems...
...From the mid- 1950s through 1970, Mexico's development strategy of import-substituting industrialization (ISI) resulted in a robust 9% average annual growth rate, giving rise to the so-called "Mexican miracle...
...2 Unfortunately, NAFTA conditionality precludes Mexico from engaging in these types of policies...
...Moreover, the outward orientation creates tremendous urgency to maintain "international competitiveness...
...Skewed income distribution meant only the middle and upper classes had significant purchasing power...
...Even the more productive new industrial sectors, such as automobile, pay appalling wages...
...It is far from certain that real wages will rise significantly even if the new economic strategy is able to create enough jobs...
...4 0 We know what such a pact would entail...
...Ejidatarios will get title to their lands...
...7. The term "conditionality" has been widely applied to IMF"policy packages" that dictate domestic policy...
...L6pez Portillo paid off the IMF and returned to expansionary policies...
...The transformation, boasted an undersecretary of financial affairs a few months ago, "took 10 years of adjustment, 10 years of political corrections, and 10 years of political guts...
...Quoted from Kathryn Kopinak, "The Maquiladorization of the Mexican Economy...
...At (CTM...
...Dan La Botz, Mask ofDemocracy: Labor Suppression in Mexico Today (Boston: South End Press, 1992), p. 19...
...THE OLD STRATEGY T HE DE LA MADRID-SALINAS REFORMS CAN BE seen as a response to problems created by the Mexican model of import-substitution industrialization (ISI) that governed policymaking during the post-war period...
...ing potential social discontent, centralizing power, and Treasury to control inflation and set a more realistic adapting the state's traditional social role to an era of exchange rate...
...The next month, L6pez Portillo nationalized the Mexican banks...
...backward by encouraging the use of intermediate inputs made by domestic industry...
...3 Salinas' promise that economic liberalization would promote political opening rings hollow...
...Capitalism Nature Socialism Vol...
...Our world is shrinking, national borders are becoming ever more porous, and the boundaries between international and domestic arenas are becoming blurred...
...The oil boom made the international financial markets optimistic about Mexico's future growth...
...Neoliberal reforms have, if anything, worsened conditions...
...The number is taken from Office of Technology Assessment, U.S.-Mexico Trade, p. 67...
...Mexico, it is argued, must maintain low wages and a flexible workforce if the country is to remain attractive for transnational capital...
...2 7 Foreign capital flowing into the maquiladora sector adds new physical plants and equipment, creates jobs, and introduces some technological know-how into the country...
...That does not mean we oppose economic integration per se...
...ITE-545 (Washington, DC: U.S...
...Mexico also sought a bilateral agreement with the United States on subsidies and countervailing duties in 1985...
...95-100...
...3 " Also, the privatization process has been marred by accusations of a lack of transparency and irregularities in pricing...
...Only a few months ago, the projections were much lower, implying that the external imbalance is getting out of control...
...Debt servicing required a real transfer to the North of an average 4.8% of GDP each year between 1983 and 1988.12 Labor's share of national income declined from 43 to 35% between 1980 and 1987.'3 In 1987 real wages had declined to 56% of their 1980 value...
...Artificially low prices for food staples impoverished the rural sector and subsidized urban wages...
...Final responsibility for ideas in this paper rests exclusively with the authors...
...Another way of looking at inequality is mentioned by Alarc6n and McKinley: In 1987 the top 10% of Mexican families earned almost 37% of total income, whereas the bottom 80% accounted for only 46...
...The concentration of wealth and market power in the hands of grupos econ6micos closely linked to foreign capital, on the one hand, and large parts of the population suffering from deprivation and economic insecurity, on the other, do not contribute to democracy either...
...Export-processing zones quickly became a source of forward and backward linkages-forward through rising real wages that created demand for other industrial and agricultural goods...
...Building on the proposals of Cuauht6moc Ckrdenas, and the expeience of others [see, for example, "A Lesson From Southeast Asia...
...and in more detail in his Distorted Development: Mexico in the World Economy (Boulder: Westview, 1990...
...For the moment, incoming capital is contributing to an appreciation of the peso, a fact that plays against Mexican exporters and into the hands of the United States...
...However, current Mexican policy is gradually eliminating this type of support to agriculture...
...2 The state restrained societal demands on the political system within limits compatible with the overall growth of the economy...
...Moreover, industrialization was preceded by a massive redistribution of wealth and income through land reform...
...The pressures on all levels of government for fiscal austerity (that is, to spend less on social programs, health, and education) will only worsen the straits of the Mexican worker...
...Moreover, there is little evidence of a shift in the maquiladora sectortoward high-skill, high-wagejobs...
...In 1988, in a process marred by blatant and widespread fraud, PRI candidate Carlos Salinas de Gortari won-with a slim majority of 50.36% of the official vote-the most competitive presidential election in recent memory...
...Merilee S. Grindle, "The Response to Austerity: Political and Economic Strategies of Mexico's Rural Poor," in M. Gonzales de la Rocha and A. Escobar Latapi, Social Responses to Mexico's Economic Crisis, p. 132...
...However, U.S...
...4. Salinas, interviewed by Tim Padgett, "Reform at Two Different Rhythms," Newsweek, December 3, 1990, p. 39...
...Further, maquiladora plants are mobile, and can shift to other countries with relative ease...
...The NAFTA initiative culminates and consolidates the last decade's deep and accelerated restructuring of the Mexican economy...
...Canadian opponents of free trade argue that the free-trade agreement with the United States restricts the Canadian government's ability to intervene in the marketplace, through, for example, industrial or trade policies...
...The deficit may reach $20 billion in 1992--the largest ever...
...Rosa Albina Garavito and Augusto Bolivar, Mdxico en la decada de los ochenta (Mexico: UAM-Azcapotzalco, 1990), p. 301...
...As has happened in Canada, NAFTA will restrict the Mexican government's ability to apply domestic policies that contribute to these objectives...
...dura means hard...
...The anonymous government official does not see an inconsistency between concentration and competition...
...Talli Nauman, "Is labor law losing teeth in face of free trade...
...El Financiero International, June 8, 1992, p. 1 2 . 26...
...It appears that rent-seeking (the quest for windfall gain) has persisted--and in fact become more sophisticated-under economic liberalization...
...President Jos6 L6pez Portillo (1976-1982) ignored the signs of impending crisis...
...in Gary Gereffi and Donald L. Wyman, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia (Princeton: Princeton University Press, 1990), p. 316...
...TELMEX is the state telephone monopoly...
...2 ' Through industrial parks, credit, and administrative facilities, the government encourages marginal businesses and informal entrepreneurs to integrate their activities with large transnational corporations, especially through the maquiladora program...
...A judicious blend of cooptation, Ricardo Grinspun teaches economics at York University in Toronto...
...The challenge is to create the transnational popular alliances that will place such a pact at the center of the political agenda...
...2 9 The outcome is an economy controlled by a select few...
...occasional harsh repression, carefully cultivated elite consensus, interlocking pacts and alliances, and a low level of popular mobilization guaranteed the survival of a regime that Mario Vargas Llosa once called "the perfect dictatorship...
...he has in mind a leaner more increasingly feisty, Confederation of Mexican Workers efficient and technocratic form of authoritarian rule...
...2 (Spring 1992), p. 78...
...The PRI maintained an equilibrium among competing classes and economic sectors by distributing the rewards of economic expansion among a heterogeneous coalition base...
...5. Angel Gurria, undersecretary of International Financial Affairs in the Finance Secretariat (Hacienda), quoted in Claudia Fernhndez, "Successful Privatization Plan Provides Model," El Financiero International, December 7, 1992, p. 14...
...An efficient state bureaucracy had the institutional capacity and independence to run such a strategy...
...MEXICO HAS THE POTENTIAL FOR A MORE equitable and beneficial type of economic growth...
...Recently, the "perfect dictatorship" has shown signs of imperfection...
...NAFTA, if ratified, will create strong "conditionality" for Mexican economic and social policies...
...A more equitable distribution of income created the degree of economic concentration is startling: Jorge Larrea, a principal shareholder in nine of Mexico's industrial conglomerates, including two major banks, now controls over 90% of Mexico's copper production through his company, Minera Mexico...
...The decisive policy shift took place when Miguel De la Madrid took office...
...Office of Technology Assessment, U.S.-Mexico Trade, p. 69...
...Privatization, initiated in 1983 by De la Madrid, has acceler- ated under Salinas...
...The Mexican state created a framework for capitalist develop- ment in which the demands of the working class were coopted and controlled, national capital was protected and encouraged, and foreign capital was extensively regulated...
...As Mexico scholar Judith Teichman explains: "The purchasers of Mexico's most important parastatals have been Mexico's most powerful economic groups in association with foreign consortia, in the cases of the biggest purchases, such as TELMEX...
...However, the promise of full employment seems elusive, as unemployment hovers around 20%, and underemployment is at least twice as high...
...2. More than $11 billion left the country in 1981, and perhaps $40 billion during the period 1980-84...
...He insisted, however, that economic change must come before democratization...
...States, and became less able to withstand pressures from the IMF, the World Bank and the private commercial banks...
...2 6 VOLUME XXVI, NUMBER 4 (FEBRUARY 1993) 35A Market Solution A Market Solution...
...Strong state intervention in South Korea had a key role in turning private-sector activities into a coherent industrialization strategy...
...These and other provisions have far-reaching implications since they effectively restrict many types of government intervention...
...Population grew during the same period at 2.0% per year, so there was a fall in per capita consumption during the period...
...While individuals are still limited to 100 hectares, foreigners can purchase land on much the same basis as Mexican citizens...
...38-39...
...5 Central government spending on welfare declined from 17 to 13% of the federal budget productively, creating the basis for the crisis in the early 1980s...
...See the chapters by K. Kopinak and E. Velasco Arregui in Grinspunand Cameron, The Political Economy ofNorth American Free Trade...
...Janet Duncan, "Foreign investment to slow in 1992," El Financiero International January 27, 1992, p. 3. 38...
...12 John Sheahan, Conflict and Change in Mexican Economic Strategy (La Jolla: Center for U.S-Mexican Studies, University of California, San Diego, 1990), p. 9. 13...
...However, it seems unlikely that money will be invested in the worker, given the sector's track record in terms of wages, benefits, living conditions, labor turnover, occupational safety, social disruption, and environmental degradation...
...Recently the government announced plans to change labor laws, with the intent of "rewriting" collec- tive agreements in this direction...
...5 REPORT ON THE AMERICAS 32Salinas is seeking to build a political system compatible pation of the state-sponsored and controlled, although with the neoliberal agenda...
...As one government official put it, "we haven't really sought to stop concentration of wealth...
...The PSEs, renewed periodically under different the same time, he is trying to respond to the political crisis names, have restrained real wages-making workers the of support and legitimation for the PRI manifested in the main victims of anti-inflationary policies and continued 1988 elections...
...2 3 Despitejob gains in the export-oriented sector, and in particular in the maquiladora industry, liberalization of the Mexican market is hurting domestic industries located in the triangle between Mexico City, Monterrey and Guadalajara...
...An important aspect is agricultural productivity, which depends on government assistance for new infrastructure (such as irrigation and draining projects) as well as technical and financial support to small farmers...
...The 1992 reforms substantially changed the rules for land ownership and use...
...The following year, it joined the General Agreement on Tariffs and Trade (GATT...
...By 1990 Mexico produced 20.4 and consumed 27 million, so the gap widened...
Vol. 26 • February 1993 • No. 4
