Mexico moves toward free trade deal

Wednesday, October 23, 1991 - 10:00

By Martin Mulligan

After digging very deep into its voluminous bag of dirty tricks to secure the presidency in the 1988 elections, Mexico's ruling Institutional Revolutionary Party (PRI) managed to reassert its dominance with a sweeping victory in the August 18 poll for the Congress and half the Senate.

With around 65% of the vote, the PRI secured a big enough majority in both houses to force through any constitutional changes it might have in mind.

The left-wing coalition Party of Democratic Revolution (PRD), led by the star performer in the 1988 presidential election, Cuauhtemoc Cardenas, managed only 8% of the vote to trail both PRI and the right-wing National Action Party (18%). A number of small parties, including the Revolutionary Workers Party (PRT) and the Mexican Ecology Party, failed to secure the 1.5% needed to maintain their legal status.

Of course, Mexican politics does not exactly offer a level playing field. More than 50 PRD activists have been killed and over 500 injured in election-related violence since the party's formation in May 1989. And it was estimated that PRI spent around $US1 million a night for a slick TV campaign in the lead-up to the elections. But the change in sentiment since 1988 is too obvious to ignore.

Since 1988 there has been an easing of "la crisis" in Mexico's economy. At the time of the 1988 election, inflation was running at 160% a year. This year the figure is down to 30%, and the gross national product has shown some improvement. On the basis of this, the PRI fought the election on the slogan: "Vote PRI: So that change may continue".

The easing of the economic crisis is largely the result of a deal, known as the "Brady Plan", under which Mexico's foreign debt repayments were substantially eased in return for a commitment to remove restrictions on further foreign investment. By early 1991, laws regulating foreign investment had been repealed, 70% of the public sector had been privatised, and tariffs had been drastically reduced (in some cases from 100% to 9.5%).

The Brady Plan has been preparing the way for the North American Free Trade Agreement (NAFTA) — a proposal to extend the agreement between the US and Canada to incorporate Mexico.

Impact of NAFTA

For many Mexicans, the promise of NAFTA is more jobs. Already the changes implemented by Salinas have encouraged investment. For example, car manufacturers Ford, Chrysler, Nissan and Volkswagen have all set up large plants in Mexico, and some high-tech industries and food production plants have also moved to exploit the plentiful reserves of cheap labour. The maquiladora industries (a free trade zone along the border with the US) have tripled their output in the past 10 years and have set the scene for the new industries now spreading throughout the country.

Not all Mexicans are welcoming the changes. Small manufacturers know that they face extinction without tariff protection, and peasant farmers know they cannot hope to compete with the output of highly mechanised farms north of the border.

There is widespread anxiety about the possible privatisation of PEMEX, Mexico's nationalised oil company, which has been a major factor in preventing deeper economic crises in the past. Until now Mexico has insisted that privatisation of PEMEX is not on the agenda, but many Mexicans feel that it is only a matter of time before US pressure will change this.

Representatives of the PRD have also argued that a virtual surrendering of economic sovereignty is a high price to pay for the extension of maquiladora industries. Although wages in these industries have been slightly higher than in Mexican-owned manufacturing, they are still no more than $US3-5 per day, and the point of the exercise will be to keep them at such low levels.

US opposition

The US Congress voted on July 1 to give President Bush "fast track" authority for the next two years to negotiate the details of NAFTA with Canada and Mexico. This means the Congress approve or reject any proposal Bush may submit, but cannot amend it.

The congressional vote demonstrated the power of the pro-NAFTA lobby, which has a particularly strong base in Texas (because of its proximity to Mexico) and has been well financed by a wide range of large corporations. Chief executive officer of Kodak Kay Whitmore and American Express chief James Robinson have emerged from normal obscurity to campaign personally for the deal.

The anti-NAFTA lobby in the US includes the bulk of the trade union movement, which fears the impact of the shift south of the border on both jobs and wage levels of US workers; some industry groups (such as textile and garment makers and citrus and sugar growers) who fear the arrival of cheaper products from Mexico on the market; and environmentalists who point to severe air and water pollution already associated with the maquiladora industries along the border.

Environmentalists have argued that US corporations will relocate operations south of the border both to exploit cheap labour and to avoid environmental regulations in force in the US.

By seeking "fast-track" authority for the NAFTA negotiations Bush appears to be keen on suppressing public debate of the issue. While the issue is already dominating the front pages of Mexican newspapers, and has now determined the outcome of the August rly not received the attention it deserves within the US.

From GLW issue 32