i n v e s t i g a t i v e   r e p o r t

Development in Mexico: As Established Policies are Nurtured, the Hopes of Many Mexicans Wither on the Vine
by Talli Nauman | October 2001

Experts on both sides of the U.S.-Mexico border agree that an essential ingredient in any recipe aimed at stemming Mexican migration to the United States is creating more hometown opportunities south of the border. But while the two countries’ shared migration dilemma sits front and center on the U.S.-Mexico agenda, the majority of development projects that have emerged for Mexico under the Fox and Bush administrations do not reflect that assessment. Rather, the development envisioned is more of the same kind that has failed to alleviate migration in the past: maquiladoras, megaprojects, and greater trade liberalization.

Mexican President Vicente Fox has promised that his administration will make a special effort to revitalize local economies and create conditions that allow community members to improve their quality of life. “Good government and society are taking new steps on the road of sustainable development. For our part, we are working with our eyes firmly set on growth that combines economic expansion, poverty reduction, and environmental protection,” Fox said in a July speech.

Fox’s first state-of-the-nation speech, delivered to Congress on September 1, reiterated this posture. His policy “seeks economic growth, but also an equitable distribution of the benefits of that growth. It promotes the development of every inhabitant of Mexico, but it also is concerned with those who have had to emigrate,” he said.

Despite an economic downturn that recently led to several federal budget cuts, Fox contends that his government hasn’t left Mexico’s poor behind, pointing to the fact that his administration is mustering $200 million—including $150 million in loans from development banks—to stabilize prices and subsidize coffee harvests that begin in October. The effort also includes a $2 million government advertising campaign to encourage domestic consumption of Mexican coffee.

Despite budgetary limitations, “spending on the fight against poverty rose 16.2% in real terms, compared to the figure for 2000,” Fox claimed in his state-of-the-nation report. Welfare allocations subsidizing food, housing, health, and education and targeting aid to rural people have accounted for the increase. Meanwhile, Fox says, “we have set ourselves a goal to fully and quickly include all those left behind by development so that their standard of living does not depend on welfare programs.”

Toward this end Fox has launched a new scheme dubbed “Adopt a Micro-Region” aimed at stopping migration at its roots. His office has identified 90 poor communities around the country that are exporters of migrant labor, and it is trying to pair them with Mexican entrepreneurs in the United States willing to invest in job creation back home. The government is also providing an incentive to the prospective private investors: three-for-one matching funds. Every investor dollar would secure one federal, one state, and one municipal dollar for manufacturing or construction projects in Mexico. The adoption program puts a new twist on an old practice. It seeks to institutionalize at the federal level Mexican emigrants’ custom of civic-club fundraising in the United States for community needs in their hometowns. Several Mexican governors began state matching fund programs like this in the early 1990s.

Touted as an “unprecedented national effort” and “an ambitious program” in the mainstream international press, so far the scheme is barely off the ground. Its first participant, announced in late July, is a New York City-based investor who is financing women’s garment maquiladoras in the destitute town of El Seco in the southern Mexican state of Puebla. The effort was presented as one of the two achievements of the fledgling administration in meeting its commitments to migrants when Fox submitted a semester report at the end of his first half-year in office. The other was a 30% reduction in Western Union money-wire rates to benefit Mexican residents in the United States who send earnings to their families in Mexico.

Other Fox initiatives directed toward securing a decent living for the 40-50 million poor people who constitute about half of Mexico’s population include a microcredit program to launch family businesses, which he promised in his presidential campaign, and another loan program for small- and mid-size enterprises. Despite these measures, however, in Fox’s semester report, the column labeled “Progress” in the section designated “Promote Models of Local Development” was empty.

More of the Same

On the other hand, the report showed quite a bit of activity in the “Progress” column regarding areas of free trade and megaprojects. Assessing Fox’s commitment to “take full advantage of the globalization process,” the report highlighted the free trade agreements with the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland), which commenced on July 1, and with the European Union, the first trade deal to take effect under this administration.

Beach megaprojects represented the most tangible achievements noted in the report’s tourism development section. For example, the report highlighted the inauguration of Mahahual Pier in the Caribbean state of Quintana Roo as the beginning of a new megaproject named Maya Coast, expected to generate 30,000 permanent job positions and $950 million a year in wages.

The report also highlighted the signing of a covenant between the federal government, four states, and 13 municipalities regarding the Escalera Nautica development program in the Gulf of California area. The megaproject is a six-year, $221 million, public-private investment catering to an anticipated market of nearly 1.7 million pleasure boats, mostly from the United States.

Meanwhile, the flagship of Fox’s development scheme is his Plan Puebla-Panama (PPP), a combination of megaproject, maquiladora, and free trade promotion. The plan envisions using foreign loans and private investment to create infrastructure that will attract maquiladoras to provide jobs in southern Mexico by assembling products for export to an ever-expanding portfolio of free trade partners.

The PPP is supposed to help the poor peasants and indigenous people concentrated in Mexico’s southern states of Puebla, Veracruz, Guerrero, Oaxaca, Chiapas, Tabasco, Campeche, Yucatan, and Quintana Roo as well as those in the Central American countries of Belize, Guatemala, El Salvador, Nicaragua, Honduras, Costa Rica, and Panama. Toward that end, the Mexican government plans to spend $440 million on the endeavor this year.

NAFTA-plus?

To a significant extent, Mexico is pinning its future on the global economy. Over the past nine months, Fox and Economy Secretary Luís Ernesto Derbéz have traveled around the world to drum up private investment and establish more trade accords, visiting Japan, China, Singapore, Europe, Argentina, Chile, Central America, and the United States.

In the Americas, especially, Mexico’s president is pushing for deepened North American commercial and development relations—what he has called NAFTA-plus. Preparing for the Americas Summit in Quebec City this past April, he declared: “If the United States and Canada want [trade deals] simply to win trade and room for investment, it seems to me that’s a very meager vision.”[1] Although Fox has toned down his message of late, he is still arguing for the creation of a development fund to narrow the disparity between Mexico and its partners in the North American Free Trade Agreement (NAFTA).

Such a mechanism could also be built into the proposed Free Trade Area of the Americas, he says. It would look something like the European Union’s structural adjustment funds, in which the better-off countries have contributed billions of dollars to the poorer ones to buffer the blows from market openings.

As part of this thrust, in ongoing high-level binational discussions on migration, Mexican negotiators have proposed expanding the mandate of the North American Development Bank (NADB), to transform it into a promoter of economic development projects designed to reduce pressures leading to emigration. Fox first embraced the idea at the end of a summit with U.S. President George W. Bush in February. The expansion would direct some of the NADB’s efforts away from its current emphasis on border infrastructure financing; such a shift is likely to be a continuing topic for the two governments.

However, U.S. officials recently threw cold water on expectations that Washington might engage in a wider effort to foster development in Mexico. On September 1, the Los Angeles Times reported sources in the Bush administration as saying that although the United States is willing to tinker with the NADB role, Mexico’s proposal that the bank take on a larger development mission faces resistance. “We’ve come back to them and said: ‘This dog won’t hunt. It can’t even do what it was supposed to do. It cannot and it will not become a huge development channel to all of Mexico,’” the Times reported.[2]

The source added that Washington is also resisting suggestions that the United States and Canada might funnel development funds to Mexico. “This is not an administration that is in the realistic position of providing massive support to Mexico. We’re no longer in the business of Marshall Plans in the United States, [and] the political realities on the ground are just not in favor of this.”[3]

Meanwhile, foreign direct investment (FDI) in Mexico amounted to nearly $6.8 billion in the first half of this year, a historic high. Much of that money is coming from the United States. During the 1995-7 period, U.S. direct investment in Mexico grew by 27%, and in 2000 nearly $9 billion of the approximately $13.2 billion of foreign investment that entered Mexico came from U.S. corporations—making them by far the leaders in FDI in Mexico. Revenue from foreign tourism arrivals has also reached unprecedented levels, with tourists contributing some $4.7 billion to the economy, 8.6% more than in the same period last year.

Feeding off Mexico’s strong nationalist sentiments, the FDI trend has fostered uneasiness over Mexico’s role in the global economy and has even sparked violence. After Mexico’s second largest bank, Banamex, was acquired by the U.S. giant Citigroup, a small guerrilla group called the Revolutionary Armed Forces of the People detonated bombs at three Banamex branches. The blasts were read as a protest against the takeover by a foreign company, the biggest corporate deal in Mexican history. Anger was fueled by the fact that Citigroup made the acquisition on the Mexican stock exchange, thus evading capital gains tax on its purchase of Banamex. Mexico’s top three banks are now foreign-owned.

Unsustainable Development

Even though trade between NAFTA countries has grown from $297 billion in 1993 to $676 billion in 2000, real wages in Mexico have dropped. Seven years after NAFTA’s institution in 1994, some 10 million more Mexicans have joined the ranks of the poor, according to studies by the Economic Research Institute of the National Autonomous University of Mexico. Other sources say the number of poor has doubled in the last seven years. Penury is worst in rural Mexico, where at least 82% of people are living below the poverty level, according to the World Bank.

Since Fox’s approach intensifies the social and economic policies employed by previous administrations—which have been blamed for increased poverty and emigration—he has come under fire from Mexican intellectuals, politicians, administrators, activists, and nongovernmental organizations. They argue that strategies like the Plan Puebla-Panama will just repeat the mistakes of the past.

“The Plan Puebla-Panama is the most recent example of projects that seek the authoritarian, discriminatory insertion of Mexico in the globalization process,” observes Gilberto López y Rivas, former rector of the National Anthropology and History School and now a federal deputy for the Democratic Revolutionary Party (PRD). “In the context of the Plan Puebla-Panama, indigenous people and communities are considered merely a labor force, susceptible to being exploited and taken advantage of by the big national and transnational capital consortiums that have their interests pegged on the bonanzas of future investment in the region,” he adds.

Indeed, despite foreign investors’ contribution to job creation, a number of analysts express serious concerns about the wages, working conditions, training opportunities, and environmental compliance in the maquiladora sector—as well as with its lack of participation in Mexico’s national economy. In 1999, only 3% of the components used in maquiladoras were manufactured in Mexico. Maquiladora assembly line workers, meanwhile, earned only an average of $426 a month last year.

A study jointly released in June by the San Antonio, Texas-based Coalition for Justice in the Maquiladoras, the New York City-based Interfaith Center on Corporate Responsibility, and the Hartford, Connecticut-based Center for Reflection, Education and Action (CREA) found that border-zone maquiladoras, many of which produce for Fortune 500 companies, pay a mere 20-30% of what an average family needs to live on. Even highly skilled workers in Mexico’s more sophisticated “third-generation maquilas” aren’t earning above average wages, according to studies conducted by the Colegio de la Frontera Norte.

Observers cite the fact that maquiladoras pay only minimal taxes as another reason why the sector can’t aspire to be the mainstay of Mexico’s economy. In areas with high maquila development, public services such as schools, hospitals, garbage collection, and sewage systems are in bad shape for want of a tax base. But the Fox administration’s fiscal reform initiative, rather than seeking tax support from maquiladora investors who find Mexico so lucrative, proposes to tax the poor at the same rate as the rich, beginning with a new 15% levy on food and medicine—a measure that has drawn heavy criticism.

Others raise serious questions about the environmental impacts of Mexico’s approach to industrialization, pointing to widespread pollution and environmental health problems on the border as an example. “The importance of modifying production and consumption models has not penetrated collectively; up to now, only isolated actions exist,” notes Mexico’s Environment and Natural Resources Secretariat (SEMARNAT) in a draft national progress report being prepared for next year’s second UN Earth Summit, Rio+10.

Fox’s response to environmental degradation and unsustainable land use in Mexico’s countryside, where the ecological consequences of inappropriate farming techniques promoted in recent years have forced many campesinos off the land, is also drawing fire. This year Mexico created a National Forestry Commission (CONAFOR) under SEMARNAT to promote reforestation that provides rural sustainable development. But according to Greenpeace Mexico Director Raúl Benet, the administration’s intentions in that regard are mainly to increase GDP by attracting investment in plantations where local people will have no participation other than to rent land and work as peons.

Mexico’s tendency, like that of the rest of the world, said Benet in a recent La Jornada interview, is to favor industrial and tourist development, spawning environmental degradation and rural neglect. Sustainable development, as conceived by the UN, is not being put into practice, just into speeches, he complains. “The term sustainable development is being used to define any kind of investment that has a minimal coat of conservation,” he says, adding, “Ninety-nine percent of investments are oriented in a nonsustainable direction.”[4]

Dependence on U.S., Economic Slump Provoke Citizen Responses

Few things have brought home the lack of sustainability of Mexico’s maquiladora-based, free trade development model like the negative impact on Mexico of the current U.S. recession. With more than 80% of Mexico’s export manufacture products destined for the United States, the slowdown in the northern neighbor’s economy has had a heavy impact south of the border. Some 100,000 maquiladora jobs have been lost this year, according to official figures from the national statistics institute; that’s half of the total employment reduction experienced so far in Mexico during 2001 but perhaps only one-seventh of what may occur if the recession lasts through December. Moreover, researchers at think tanks such as the Instituto Tecnológico Autónomo de México (ITAM) and the Centro de Investigación y Docencia Económica (CIDE) say actual job losses in the first half of the year may be double what the government admits.

Mexico’s agricultural sector has been hard hit as well. Over the past three years, the selling price of corn has fallen by nearly half, severely affecting corn farmers in Mexico. For its part, Mexico’s sugar industry is imploding in the face of imports of cheap U.S. corn syrup. Similarly, a record low in world coffee prices has drastically reduced revenues for Mexico’s coffee farmers. The result: increased emigration and, more recently, mounting discontent with Mexico’s participation in the global economy.

In July, nearly 5,000 sugar workers protested in Mexico City, blocking government offices and demanding more than $400 million in crop payments from bankrupt private mills. Recently, corn farmers in northern Sinaloa and rice producers in Campeche have mounted similar demonstrations. In late July, farmers in Chihuahua attempted to blockade a border customs port to stop U.S. produce from entering Mexico. And on August 8, the birthday of Emiliano Zapata, thousands of farmers descended on Mexico City as part of a nationwide protest against the deepening agricultural crises. Among their demands were a return to subsidies and the revision of NAFTA.

“They are desperate. They have seen their communities disintegrate as the young leave to find profitable work in the cities or the United States,” Max Correa, national head of the Central Campesina Cardenista (CCC), a farmers advocacy group, told the online English-language daily The News Mexico.

For the most part, Fox’s response has only fueled farmer unrest. In one of the first acts of his administration, he vetoed a rural development bill that producers’ organizations had pushed through Congress. In June, while pursuing his free trade agenda in China and other Asian countries, Fox signed a decree reducing Mexico’s import tariffs on NAFTA corn to 1-3%, infuriating small growers in the Asociación Nacional de Empresas Comercializadoras de Productores del Campo, A.C. (ANEC). They filed an appeal of the action on the grounds that the administration failed to meet its legal obligation to consult with producers. Many of them are demanding a minimum 30% tariff on imports of the commodity, which has been their traditional mainstay for decades. More recently, during a trip to Baja California, the president responded to a request for aid from area farmers by suggesting they use new technologies to grow their crops and then posing a question of his own: “What are you doing to help yourselves?”[5]

Eleventh-hour efforts to address Mexico’s agricultural crisis—such as the government’s $200 million coffee-bailout program and the recent expropriation of bankrupt sugar mills—have been welcomed to a certain extent by farmers, but have also been criticized as a sign that Fox’s vision for the Mexican campo is anything but coherent.

Several disenfranchised and disenchanted factions of the public are responding to the challenges facing Mexico’s economy. Transcending the prevailing fad of questioning Fox’s popularity and his ability to keep campaign promises or rout corruption from the political system, these critics are focusing on the message that the new administration is continuing the unsuccessful, old-line development policies of recent decades. Many are organizing to push for changes in Mexico’s development strategy or are pioneering alternative approaches to community development via fair trade based on environmentally friendly techniques and grassroots decisionmaking. Many others have already joined together to create alternative economic networks based on local initiatives, slowly building a movement of fair trade in green goods and services. Their approach’s potential—and the government’s willingness to lend it serious attention—has yet to be evaluated.

BIOS editor-at-large Talli Nauman has worked on both sides of the border and is currently based in Mexico. She has an MA in International Journalism from the University of Southern California, a BA in Visual and Environmental Studies from Harvard, and is a cofounder of the nonprofit media project Journalism to Raise Environmental Awareness.

Notes: [1] Paul Knox, “Mexican President Fox Says America’s Pact Pointless Unless It Includes Help for Poor,” Toronto Globe & Mail, April 12, 2001; [2] Esther Schrader, “Mexican Development Aid Not in the Offing, U.S. Says,” Los Angeles Times, September 1, 2001; [3] Ibid: [4] Angélica Enciso, “Pervirtieron Países Compromiso de Desarrollo Sustentable: Greenpeace,” La Jornada, July 29, 2001; [5] “Mexican Farmers Resist NAFTA,” The Desert News, July 28, 2001.

Published by the Interhemispheric Resource Center's Americas Program. All rights reserved.

Recommended citation: "Development in Mexico: As Established Policies are Nurtured, the Hopes of Many Mexicans Wither on the Vine," Americas Program Investigative Report (Silver City, NM: Interhemispheric Resource Center, October 2001).

Web location: http://www.americaspolicy.org/reports/2001/bl82.html