NAFTA: Poverty and Free Trade in Mexico

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    NAFTAPoverty and

    Free Trade in Mexico

    Belinda Coote

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    A l b I I /A

    and Free Tradein Mexico

    Belinda Coote

    Oxfam Publications

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    Oxfam (UK and Ireland) 1995A catalogue record for this book is available from the British Library

    ISBN 085598 302 7

    Published by Oxfam (UK and Ireland)274 Banbury Road, Oxford OX2 7DZ, UK(registered as a charity, no. 202918)Available in Ireland from Oxfam in Ireland, 19 Clanwilliam Terrace,Dublin 2; tel. 01 661 8544.Available in Canada and the USA from Westview P ress, 5500 CentralAv enue, Boulder, Colorado 80301, USA; tel . (303) 444 3541; fax (303) 4493356.Co-published in Australia by Community Aid Abroad, and availablefrom them at 156 George Street, Fitzroy, Victoria 3065, Australia; tel. +613 289 9444; fax +61 3 419 5318/5895.

    Designed and typeset by Oxfam Design Dep artment OX 1550/PK/94Printed by Oxfam Print Uniton environment-friendly pap erSet in 10/12.5 point Pa latino w ith Franklin Gothic Book and Demi

    This book converted to digital file in 2010

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    ContentsIntroduction 1The Chiapas uprising 2Opening up the Mexican economy 4The North American Free Trade Agreement 8Opposition to the NAFTA 10The democratic deficit 15Rural poverty and the NAFTA 17Urban poverty and unemployment 23Labour and labour rights 25NAFTA and the environment 3 1Free trade increased protectionism 35Impact on the economy 39NAFTA and global economic integration 40Towards sustainable economic development 44Notes 47Further reading 50

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    NAFTA: Poverty an d Free Trade in Me xico

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    Introduction

    In January 1994 the North American Free Trade Agreement(NAFTA) came into effect, linking Mexico, the United States, andCanada in a pact to increase trade and investment. Theagreement is of special significance, because it is the first of itskind to link countries from the 'developed' and 'developing'worlds.For Mexico the NAFTA represents another step do w n the road ofeconomic liberalisation which its governm ent has been pursuin gfor more than a decade. For the United States, it is the first stage inits wider policy objective of creating a hemispheric free-tradezone stretching from the Port of Anchorage in the far north toTierra del Fuego in the extreme south. There is no shortage ofcandidates for mem bership, with governments from all over theregion qu euing up to join. The NAFTA thus has implications forcountries far beyond its three initial signatories.The purpose of this report is to look at the impact of the Mexicangovernment's economic liberalisation policies, and the NAFTA,on the peop le of Mexico. It is hoped that the lessons learned fromtheir experiences will inform those in other countries wheresimilar policies are being pursued, and help to achieve policychanges in favour of the poor.

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    The Chiapas uprising

    On 1 January 1994 guerrilla forces in Mexico's southern state ofCh iapas declared w ar on the Mexican governm ent. The guerrillaarmy , consisting of indigenous peasan ts, announced themselvesas the Zapatista National Liberation Army, after EmilianoZapata, the Indian leader of the 1910 Mexican revolution. Ondeclaring war, they delivered a statement to news media,threatening to march on Mexico City unless the governmen t mettheir demands for equal treatment for peasants. The statementdeclared:For [the government] it does not matter that we possess nothing,absolutely nothing, not a home, not land, not work, not education. We willnot halt our combat until the needs of our people are satisfied. The dictatorshave been leading a war ofgenocide against native peoples for years.1Few people in Mexico were surprised by this development, forChiapas is one of Mexico's poorest and most troubled states,desp ite its rich oil reserves. The 3.2 million peop le who live there(approximately 4 per cent of Mexico's total population 2) aremainly indigenous Indians of Mayan descent. But Chiapas is alsohome to many thousands of Guatemalan refugees. To escapefrom war, poverty, and m altreatmen t in their own coun try, theyhave been living in camps along the state's border withGuatemala since the late 1970s.The basic services provided in Chiapas are insufficient to meetthe needs of its own po pulation , let alone those of the refugees,and infrastructural developm ent is minim al. The state has one ofthe highest rates of illiteracy in Mexico, reflecting both theinadequate provision of schools in the region and thegovernment's failure to provide an education systemappropriate to the needs of a multi-ethnic and multi-lingualsociety. Health-care facilities are lim ited, there are few roads, andcomm unications are poor.

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    The Chiapas uprisingMexico's sweeping land-reform programmes of the 1930s hadlittle impac t on Chiapas. The best land in the region has remainedconcentrated in the han ds of a few w ealthy landow ners, m ostlyengaged in large-scale coffee production and raising cattle forexport. Most of the population scratch a living from tiny plots ofmarginal land, growing basic food and cash crops such as coffee,maize, and beans. Disputes over land between the landlords andpeasants have been num erous and often violent. The status quo isma intained by the region's corrup t political and judicial systems,which a re fashioned to protect the interests of the landowners. Asa result, the peasants have no recourse to social or economicjustice through dem ocratic means. Poverty in the region has beenintensified by the collapse in international com modity prices inthe 1980s, which hit peasant producers of coffee and basic foodstaples hard. Such conditions made fertile breeding ground forthe discontent w hich led to the up rising in January 1994.The Zapatista National Liberation Army timed their declarationof war on the Mexican government to coincide with the officiallaunching of the North American Free Trade Agreement, theNAFTA. It was a symbolic gesture to protest against the lateststep down the road of an economic development strategy fromwhich the vast majority of Mexico's population , but in particularits indigenous comm unities, are excluded. The Zapatista rebels,with their eloquently articulated demands for justice,democracy, and measures to alleviate acute poverty aspreconditions for peace, have frustrated the governm ent's effortsto project an image of Mexico as a peaceful, democratic countrywhich recently joined the 'First World' club of the Organisationfor Economic Co-operation and Development (OECD).

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    Opening up the Mexican economyThe NAFTA, which came into effect on 1 January 1994, is anagreement between the governments of Mexico, the UnitedStates, and Can ada to phase out restrictions on the m ovem ent ofgoods, services, and capital between the three countries over aperiod of ten to fifteen years. For Mexico it locks into place thefree-market reforms that its gov ernm ent has been pu rsu ing since1982 policies which won it praise from the US InternationalTrade Commission in 1990 for having made the transition from'one of the wo rld's most protected economies into one of the m ostope n system s in just a few years'.3

    The protectionist yearsUntil 1982, successive Mexican governments pursued policiesof state-led industrialisation through import substitution.Manufacturing industry was built up with the help of statesubsidies and protective tariffs. Similar policies were used toprom ote self-sufficiency in food th rou gh gov ernm ent sup po rt tosmall-scale producers, and through agrarian reform. Moneysaved on imports was pumped back into the economy to createnew industries, and thus a new class of waged workers able tofoster a n expansion of the domestic market. In only a few decad esMexico had evolved from a mainly rural, agricultural nation to anindustrialising a nd increasingly urba n society. Between 1940 and1970 it enjoyed annual economic growth of more than six percent, which earned it praise as a model for state-ledindustrialisation in the developin g world.4These are often referred to as the 'miracle years' of Mexico'seconomic development, even though, by the mid-1960s, crackswere beginning to appear in its economic armou ry. Decades ofdependence on government su pport had m ade Mexican industryinefficient and uncompetitive, and increasingly reliant onimports. At the same time there was a decline in the country's

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    Opening up the Mexican economyability to feed itself. W hile, in the past, governm ent su ppo rt hadsuccessfully promoted small-scale production of basic grains,even more government resources had been pumped into theexport-oriented capitalist sector, which benefited from state-financed irrigation projects and technical assistance. Vegetableand fruit exports to the USA boomed, and the extension of thecountry's livestock industry displaced crops for homeconsumption. As per capita food production fell, agriculturalimp orts began to rise, contributing to a widening bu dge t deficit.These developm ents coincided w ith a dw indling in Mexico's oilreserves. No longer sufficient to meet requirements, these had tobe