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Rude Awakening in Mexico

US businesses invested $120 billion in Mexico between 1994 and 2006. Only 80,000 jobs were created per year while 730,000 Mexicans pressed on the labor market every year. While migration climbed 95% from 1980 to 1994, it soared an incredible 452% from 1994 to 2006.
RUDE AWAKENING IN MEXICO

The great expectations in the free trade agreement Nafta are not fulfilled. Concessions of the government damage agriculture

By Anne Vigna

[This article published in: Le Monde diplomatique, 3/14/2008 is translated from the German on the World Wide Web  http://www.monde-diplomatique.de/pm/2008/03/14.mondeText.artikel,a0057.idx,20]


January 1, 2008 after midnight. A human chain of Mexican farmers is seen on a giant billboard with the slogan "Sin maiz no hay pais" (Without corn there is no homeland). We are in Ciuard Juarez, a border city to the US. It is the community of the North American Free Trade Agreement (Nafta) between Canada, the US and Mexico that took effect on January 1, 1994. In the future there will be no tariffs any more on corn, beans, sugar and milk powder - staple Mexican foods.

In many cities, the population demands the renegotiation of the Nafta agreement. For agricultural associations, the result of the agreement is clear: "Two million jobs in agriculture were destroyed, two million hectares of arable land lie fallow and eight million Mexican farmers are forced to emigrate to the US," summarized Victor Suarez, director of the organization of agricultural enterprises. The American scholar expressed this with other figures: "Every hour Mexico imports $1.5 million of food. In the same time, 30 Mexican farmers emigrate to the US." [1] The abolition of trade barriers for agricultural products has intensified the inequality between the participating states. Carlos Salazar explains the situation of the Mexican corn producers: "We have 27 million hectares of arable land and the US has 179 million." [2] A Mexican farmer receives $700 and a US farmer $21,000. The yield per hectare in the US is 8.4 tons, in Canada 7.2 tons and in Mexico 2.5 tons. Up to 1.5 million small Mexican farmers could be affected by the total liberalization of the agricultural market.

The re-regulation of the agricultural part of Nafta that is legally possible is still not on today's agenda. In 2007, Mexico even refused to support Canada when the government in Ottawa lodged a complaint against US corn subsidies at the WTO. Mexico's agricultural minister Alberto Cardenas declared: "Jan 1, 2008 will not change very much. 90 percent of corn can now come into the country duty-free. The international grain market experiences a continuing boom on account of the demand for ethanol. We will raise our corn production in the next years because production is rewarding again." [3]

CORN BECAME A SPECULATION OBJECT

The words of the minister should calm producers and consumers. It is a year since the "tortilla crisis" rekindled the debate about the dependence of the country on US corn. Because of the 14-percent increase in the price of tortillas in 2006, the basic food of Mexicans, housewives took to the streets at that time.

Corn is a speculation object. By agreement, big companies drive up the price. Profiteering leads to more and more corn grown for ethanol production with correspondingly less corn available as a food. Since Nafta took effect in 1994, subsidized corn from the US has repressed the indigenous corn in Mexico. The extensive imports drove the farmers to ruin. The high tortilla price threatens millions of Mexicans with hunger. The protests of housewives forced the government to import another 600,000 tons of US corn, establish an emergency fund and fix upper price limits. [4]

Since 1994, Mexico has tripled its grain imports. Today 40 percent of its food needs are covered by imports, 60 percent for rice, 50 percent for wheat, 23 percent for corn and nearly 100 percent for soy. According to the estimate of Armando Bartra, director of the Institute for Rural Development, Mexico is dependent on imports "however high the market price may be." For these imports, the country spends more than a third of the revenue gained through crude oil exports. [5] But the land is flooded with precooked food products from the US. One of the consequences is the increase of obesity under which 30 percent of adults or 44 million Mexicans suffer. This devours 21 percent of the health budget. [6] President Felipe Calderon denied this fact in his New Year's address on January 1, 2008. "For US consumers, Nafta was beneficial. We have more choice, more quality and at more reasonable prices."

The World Bank also names the crisis of Mexican agriculture. Scholars point out that the provisions of the agreement referring to agriculture were not observed on any side.

On the Mexican side, the government "sacrificed" agriculture in the course of the negotiations. That was a truly criminal decision. In 1994 more than a third of the population still lived on the land. In addition, protective measures that should have been in effect for fifteen years for essential products like corn were never applied by Mexico. In 1996 Mexico unilaterally allowed the duty-free import of US corn far above the fixed quotas. In 2001 President Vicente Fox approved the import of fructose from the US even though the indigenous sugar cane industry was mired in crisis.

On the US side, the legislature and executive tried with all their means to impose a series of import prohibitions against Mexican products that violated the agreement and its own laws. The family growers from Sinaloa had to fight four years for permission to export their products to the US because Washington sponsored tomato farmers from Florida. Today the avocado producers from Michoacro who had to grapple with "hygienic regulations" are the only ones allowed in order to control the competition from the South.

In contrast, the Mexican government has stopped most relief programs for rural regions. As the Organization for Economic Cooperation (OECD) recognized, the support for growers (measured by the gross revenue for agricultural products from 1991-1993 to 2004-2006 fell from 28 percent to 14 percent. These subsidies flowed mainly to the largest enterprises. [7] In the same time-span, the US doubled its subsidies, above all for export products. The Institute for Agriculture and Trade Policy (IATP), an international research center, analyzed the price dumping of the US between 1990 and 2001 with five products. Wheat was offered 43 percent below the production costs, 29 percent for soy, 31 percent for corn, 22 percent for rice and 59 percent for cotton. [8]

In 2002 Mexican farmer organizations protested vehemently against the so-called US Farm Bill, that crucial law renewed every five years since 1996. They protested because the US subsidies for corn were ten times higher than the whole budget of Mexican agriculture. In Washington, it is known very well that the higher corn exports of the United States demand a heavy price from the environment as the agricultural expert Timothy Wise from Tufts University emphasizes. "The production of corn intensely burdens the environment and consumes a vast amount of water. This production occurs in states with limited rainfall so that an unsustainably high water consumption is necessary." [9]

As a reaction to critics, the Mexican agricultural minister pointed out that the corn production of the country between 1994 and 2007 rose from 18.2 million to 23.7 million tons. Moreover Nafta opened up to Mexicans a sales market of 430 million consumers where they become "the most important supplier of fruits and vegetables for the United States." [10]

There are "Nafta winners." They are the big farm operations in the north of the country often owned by US corporations where their farm workers labor under the worst conditions. The riches of Mexican agriculture are concentrated in the hands of 3 percent of the growers. The ministry hides the fact that Mexico's agricultural gross domestic product only increased 1.9 percent a year between 1995 and 2004. This is clearly below the growth of other Latin American countries: Argentina 2.6 percent, Bolivia 3 percent, Brazil 3 percent, Peru 5.3 percent and Chile 4.5 percent. It is also less than its Ventral American neighbors: Costa Rica 4.1 percent, Guatemala 2.8 percent and Honduras 2.1 percent. [11]

The economic minister smoothes over difficulties in his opinion. The economic relations between the US and Mexico should not only be judged with regard to agriculture. "We have more to gain when we become more integrated in North America. Other sectors are much more important today than agriculture. Seen as a whole, the balance of Nafta is very positive," says James Salazar Salinas from the ministry's economic negotiations division. Nafta exponents insist the exchange of goods between the partners has clearly intensified thanks to the agreement.

Bilateral trade between Mexico and the US has increased more than 10 percent a year on average. Mexico has become the third most important trading partner of the US and the second largest market for US products. Exchange with Canada has more than doubled but is still rather modest. The agreement has also given a push to direct foreign investments. US businesses invested $120 billion in Mexico between 1994 and 2006, representing more than 60 percent of the investments in the country. The stimulation of economic relations has not created the desired jobs. On average only 80,000 jobs were created per year while 730,000 Mexicans press on the labor market every year. [12] Furthermore most new jobs arose in the so-called maquiladores where parts imported from the US are assembled for re-export. Sandra Polaski from the Carnegie Endowment for International Peace doubts the benefits of such assembly plants for the labor market: "The classical liberal theory according to which an economic opening increases the number of jobs in countries with agricultural workers was completely refuted." [13]

Nafta accelerated the upswing of these maquiladores that existed since the 1960s.However the duty-free import of materials insures that there are hardly possible effects for the national economy and especially for employment, Polaski argues. "The maquiladores import 97 percent of their parts today that were manufactured by Mexican workers before 1994."

This system has weakened Mexican state finances, forced cutting state spending and led to the country's oil revenues being used increasingly to balance the state budget. Enrique Peter Dussel, economist at the University of Mexico, pointed to another effect: "The intensified import of products with high profitability leads to the balance of trade with the US being a deficit and remaining a deficit in 2008 according to the assessment of the International Monetary Fund - despite a spectacular rise in the volume of imports."

Since 2001 the maquiladores have been losing their dynamism. Proponents of Nafta hastily ascribe this to the "September 11 effect." However the World Bank assumes that "the benefit Mexico could draw from the free trade agreement has been exhausted and that the decline of employment in the maquiladores will intensify." In other words, other threshold countries in the meantime prove to be more profitable production sites.

CHINESE WORK MORE CHEAPLY THAN MEXICANS

According to the data of the World Bank, the wage level of Mexicans is four times as high as the Chinese. Mexico was the first "low-wage country" that signed a free trade agreement with the US. But after Washington concluded agreements with other countries and new countries were accepted in the WTO, the advantages of this agreement have become threadbare. Therefore Mexico needed a long time to accept the conditions for China's entrance in the WTO. China's admission has led to a wild competition in the key sectors of Mexican export industries. In the auto-, textile- and electronics branches, China surpassed Mexico in 2003 and is today the second-largest exporter to the US.

To stay competitive, Mexican businesses had to increase their productivity. However this did not lead to higher wages or to the adjustment of the Mexican wage level to that of the United States as liberal economic theoreticians and Nafta-proponents promised. The income-inequalitie4s intensified within the US, Canada and especially in Mexico since the signing of Nafta. Compared to the time period 1984 to 1994, income has only risen for a tenth of households while stagnating or falling for the remaining 90 percent. The elevation of the minimum wage resolved by the government in January 2008 only raised the daily wage 2 pesos (0.12 euro) to 51 pesos (3.16 euro). This corresponds to half of the costs of living of 100 pesos (6.20 euro) per day.

How do Mexicans live from that? Half of the active population receives an additional income from the underground economy. A third of the population depends on financial gifts from relations in foreign countries, on the famous remesas. In 1995 these transfers amounted to $3.6 billion. In 2006 the transfers came to $23 billion. [14]

Moreover Nafta would slow down emigration according to its defenders. In 1993 the US Attorney General Janet Reno said: "We will first control the stream of migrants when the immigrants find decent jobs in Mexico. The agreement will create employment." Reality has put the lie to this hope. While migration climbed 95 percent from 1980 to 1994, it soared an incredible 452 percent from 1994 to 2006. [15]

Finally, Nafta should also improve the respect of human rights in Mexico - so the country in this area will be the "defender of democracy in the world," that is for the US - and help protection of the atmosphere. The great neighbor in the North would generously promote the transfer of appropriate technology. These promises are not heard any more today. In both areas, the situation has clearly deteriorated. Since the agricultural revolution at the beginning of the 20th century, the Mexican constitution strictly limited or even prohibited foreign investors from acquiring land or property. Under the conditions of Nafta, a foreign enterprise can even acquire 100 percent of Mexican infrastructure assets today like airports, harbors, highways, railroads or gas networks. The agreement has radically changed the Mexican landscape. The re-negotiated "Nafta plus" as the press describes it could hardly be more radical.

At the summit in Waco, Texas on March 23, 2005, George Bush (US), Vincente Fox (Mexico) and Paul Martin (Canada) launched an initiative called "Security and Prosperity Partnership" (SPI). The three heads of state implemented the recommendations of a commission "The Independent Task Force on the Future of North America." This project group was composed of the Canadian Council of Chief Executives [16], the Council of Foreign Relations in Washington and the Consejo Mexicano de Asuntos Internacionades. All three "boards" are nothing but labels behind which are big businesses. [17] Their report titled "Building a North American Community" contains 39 recommendations to reach the goal "creating a uniform and stable economic zone."

At the second summit in March 2006 in Cancun (Mexico), the North American Competitiveness Council (NACC) was founded in which ten entrepreneurs represent each of the three countries. Another council in which 200 businesses are joined whose task according to the press release is "to realize the interests of the SPP and advance the process of cooperation" supports this council.

THE PARLIAMENTS MAY NOT INFLUENCE NAFTA-PLUS

Neither national parliaments nor associations were invited to the founding of the NACC. According to David Chapdelaine, professor of international relations at the University of Montreal, the corporate leaders in the NCAA enjoyed a privileged access to all planes of the SPP. "Competences were delegated to subordinate organs whose exact competition was hardly made public like the place and time of their meeting. Thus democratic legitimacy is clearly lacking." [18]

In its last report, the NACC made great promises reminiscent of the promises of 1994. "The SPP is at once strategic and realistic. Its basic task consists in contributing to better functioning of the economies of the tree countries and improving the security and quality of life in all North America." [19] How did the businesses intend to improve quality of life? The two most important means for the NACC are "secure and transparent borders in North America and secure access to profitable sources of energy."

Free traffic refers only to commodities and natural resources (that is, water pipes, oil- and gas pipelines and international transport routes for water transportation). For the energy sector, the NACC pleads for opening the gas- and oil-market. Partial privatization of the state oil company Pemex and separating the natural gas sector from the company are suggested to Mexicans. NACC has even found a name for the new enterprise: Gasmex.

The Mexican government adopted this proposal. In presenting the 2008-2012 national infrastructure programs in July 2007, Mexico's president Calderon declared: Mexico will become one of the most important turntables of the world utilizing our geographic and economic advantages. In 2008 Mexico's parliament will be occupied with a constitutional change to open Pemex for private capital partnerships. In addition, Mexican farmers could help improve the quality of life in all North America.

FOOTNOTES

(1) Laura Carlsen, "NAFTA. Free Trade Myths Lead to Farm Failure in Mexico. Americas Program Policy Report", Washington, DC, Dezember 2007.
(2) An der globalen Maisproduktion haben die USA mit 44 Prozent den Löwenanteil.
(3) Interview mit dem Minister im Privatsender W Radio, 1. Januar 2008.
(4) Von den 49 Millionen Armen leben 12,4 Millionen in extremer Armut. "Estadísticas de la pobreza en México", Instituto Nacional Mexicano de Estadísticas, Geografía e Informática (Inegi), Mexiko, 2007.
(5) José Romero und Alicia Puyana, "Evaluación integral de los impactos e instrumentacíon del capítulo agropecuario del Tlcan", Secrataria de Economía, Mexiko 2006.
(6) Statistik des Mexikanischen Instituts für Soziale Sicherheit (Instituto Méxicano del Seguro Social, IMSS), September 2007.
(7) Les politiques agricoles des pays de l'OCDE: suivi et évaluation, OECD, Paris 2007.
(8) Siehe den Report: "United States Dumping on World Agricultural Markets. The Institute for Agriculture and Trade Policy (IATP)", Cancún 2004, S. 10.
(9) Timothy A. Wise, "NAFTA: A Cautionary Tale, The Americas Program at the Interhemispheric Resource Center (IRC)", Interhemispheric Resource Center, Silver City 2002.
(10) Pressemitteilung des Landwirtschaftsministeriums, Mexiko, Dezember 2007.
(11) "Indicateurs de l'alimentation et de l'agriculture, Amerique Latine", FAO, Rom, November 2004.
(12) Instituto Nacional de Estadísticas, Geografía e Informática de México (Inegi); Secretaria de Trabajo y Previsión Social (STPS), Encuesta Industrial Mensua, Servicio de Información y Estadística, Mexico.
(13) "Lecons de l'Alena pour l'hémisphère", Studie im Auftrag der Vereinten Nationen für die Konferenz über Handel und Entwicklung, São Paulo, Brasilien, Juni 2004.
(14) "Las remesas familiares en México, inversión de los recursos de migrantes". Banco central de México, Februar 2007.
(15) Darío López Villar, "Migración de Mexicanos desde y hacia Estados Unidos: estadísticas, problemáticas y retos", Dirección de Análisis y Estudios Demográficos del Instituto Nacional de Estadística, Geografía e Informática, Mexiko 2006.
(16) Dazu Dorval Brunelle, "L'interaméricanité jetée aux oubliettes", Supplément Québec, "Le Monde diplomatique, Februar 2008.
(17) Unter anderen: Campbell, Chevron, Ford, FedEx, General Electric, General Motors, Kansas City Southern Industries, Lockheed Martin, Merck, Mittal Steel, New York Life, UPS, Wal-Mart, Whirlpool, Scotiabank, Suncor etc.
(18) David Chapdelaine, "Le PSP: un processus d'intégration continentale en déficit démocratique", La Chronique des Amériques, Observatoire des Amériques, Montreal, August 2007.
(19) "Recommandations initiales du Conseil nord-américain de la compétitivité (CNAC). Renforcer la compétitivité au Canada, au Mexique et aux Etats-Unis", Bericht 2007 an die Staatschefs, CNAC, Ottawa, Februar 2007.
Aus dem Französischen von Manuela Lenzen
Anne Vigna ist Journalistin in Mexiko.
Le Monde diplomatique Nr. 8530 vom 14.3.2008, 631 Zeilen, Anne Vigna

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