FREE TRADE WITHOUT FREEDOM
Prepared for the 41st
Annual Business Forecast Conference
UCLA
December 16, 1992
By Christopher Whalen
Mexico
is widely recognized as one of the great economic success stories of the 1990s.
Under the leadership of President Carlos
Salinas de Gortari, the country has moved from a decade of crisis and
internal political turmoil following the 1982 debt default to rank among the
world's most attractive emerging markets. Billions of dollars in new foreign
money has been attracted as hundreds of formally state-owned companies have
been sold-off; tariffs have been dramatically reduced or eliminated entirely;
and the economy has been opened to foreign investment, reversing decades of
protection for what was once a largely socialized economy.
And
yet despite the superficial appearance of "success" in material
terms, in many respects Mexico in 1992 remains remarkably unchanged. Even with
the economic opening engineered by Salinas, Mexico still boasts one of the most
skewed distributions of income and wealth in the world, according to the World
Bank. Economic opportunity remains limited to the politically powerful, so that
fewer than thirty industrial groups account for more than half of annual
domestic product.
Not
surprisingly, Mexico also ranks among the few societies in the Western
hemisphere that refuses to move toward multi-party democracy. The reluctance of
Mexico to renovate its social system as it attempts to modernize economically
is attributable to the longevity and flexibility of one of this century's
oldest single-party political systems. Peruvian author Mario Vargas Llosa said on Mexican TV early in the Salinas term:
"The
perfect dictatorship is not communism, not the Soviet Union, not Cuba, but
Mexico, because it is a camouflaged dictatorship. It may not seem to be a
dictatorship, but has all the characteristics of dictatorship: the
perpetuation, not of one person, but of an irremovable party, a party that
allows sufficient space for criticism, provided such criticism serves to
maintain the appearance of a democratic party, but which suppresses by all
means, including the worst, whatever criticism may threaten its perpetuation in
power." He hurriedly left the country immediately after making the
statement.1
Despite
the positive image conveyed abroad by official propaganda, Mexico today is a
Mafia state; a poor, developing nation ruled by a corrupt and technically
sophisticated political elite that denies its citizens the most basic rights
and that has saddled the nation with tens of billions of dollars in foreign
debt. Mexicans lack civil liberties that Americans take for granted: freedom to
speak without fear, freedom to select political representatives and labor
leaders, due process and redress of grievances, enforceable property rights,
and most important, freedom to live or build a private business without threat
of extortion, intimidation or even murder by police and other government
officials.
The
process of economic reform without political opening in Mexico today stands as
a direct challenge to the classical liberal notion which holds that moral and
personal liberty are necessary conditions for economic freedom. Supporters of
the Salinas government in particular and the North American Free Trade
Agreement generally argue that economic opening will lead to greater political
freedom and civil liberties, a uniquely post-modern perspective that embraces
the concept of a free market as a scientific certainty independent of moral
constraints.
And
yet centuries of human history, not to mention the specific example of the
United States in the modern age, argue with seemingly inexorable force that
civil liberties and the rule of law are prerequisites for "free
trade."2 It is no
coincidence that the rule of Carlos Salinas has been characterized as neo-Porfirismo, a direct allusion to the
31 year dictatorship of Pofirio Diaz,
whose rule, which likewise featured economic revival without political abertura or opening, preceded the bloody
1910-1917 revolution and civil war in Mexico. "Democracy is a good
principal, but its practice is only possible for those countries that have progressed
[economically]," Diaz told a reporter on one occasion. In a similar vein,
Salinas sold Newsweek in 1990:
"Reforms [economic and political] progress at different rates, but
economic reform is the priority."3
Writers
and political organizers in Mexico grimly refer to murder as "the ultimate
form of censorship." Over the last three years, 28 journalists and
literally hundreds of other citizens have been killed, injured or wrongly
jailed. Generally these deaths have occurred because of a conflict with the
country's ruling party, the PRI, an organization that holds elections, but
controls the result with officially sanctioned fraud and pervasive dominance
over the media. It is important to mention, however, that not all journalists
murdered in Mexico have been killed due to political machinations. Many operate
as both victims of official intimidation and victimizers, using powerful positions and the weakness of
Mexican legal structures to obtain payments and special favors. 4
But in general, government influence over the media is pervasive and is an
actively used as a means of social governance, a situation entirely at odds
with the liberal traditions of freedom of speech and the press that currently
prevail in Canada and the U.S.
Money
is also an instrument of authoritarian control. The PRI-dominated public works
program known as "Solidarity" will spend almost $3 billion this year
distributing "grass roots" social spending in areas of opposition
strength, according to documents filed with the SEC. Overall, the ruling party
will expend an estimated $800 million in the 1994 presidential election,
compared with a little over $100 million for all U.S. presidential campaigns
this year. Buying votes through public works spending while government economic
policies force real wages to decline further beyond the 50 percent loss
experienced between 1982 and 1989 is hardly a democratic formulation.
And
yet like the peoples of Eastern Europe, Mexicans take promises of economic
improvement to imply political opening as well. Despite government controls on
political expression and the media, citizens at all levels of the society
increasingly have access to American television and other information mediums;
they see that their cousins North of the Rio Grande live in relative freedom.
But when they turn off their television sets, Mexicans still live in the most
oppressive, regimented society in the hemisphere outside of Fidel Castro's
island prison.
The
resignation late in 1992 of the fraudulently "elected" governor of
the state of Michoacan, Eduardo
Villaseņor, is but the latest indication that profound changes already are
underway. His removal came after months of spontaneous protests and marks the
third time in 12 months that the PRI was forced to admit that a race was
tainted. And yet while Mexico's people are on the move, the government
apparently remains unwilling to move toward pluralism, raising the very real
possibility of nationwide protests in 1994 if the choice of Mexico's next
president is made through fraud.
Americans
are mostly unaware of the blooming civic awareness movement in Mexico, yet this
quiet struggle for democracy involves no less a confrontation than has occurred
in East Germany or Poland. Mexicans vie against a regime that enjoys the
support of foreign bankers and business leaders, and the U.S. government, and
that is ruled one man -- the president. "He is the master of all bosses.
No bosses exist in Mexico without the consent and power of the President,"
Adolfo Aguilar Zinser said.
"This is a pyramidal system by which labor union leaders, governors, and
local bosses are all the administrators of a landed power which ultimately
belongs to the President." 5
Because
Mexico's judiciary and legislature are dominated by the president and regional
governors, due process of law is generally beyond reach of most citizens.
Political opponents frequently find themselves accused falsely of involvement
in drug trafficking or subject to arbitrary confiscation of property for
alleged "tax evasion." An extreme example of how the PRI uses legal
mechanisms to punish political opponents is the case of Joaquin Hernandez "La Quina"
Galicia, the former head of the Mexican Petroleum Workers union who was
arrested as part of an "anti-corruption" effort shortly after Salinas
took power.
The
fact that the Petroleum Workers union chieftain was corrupt is indisputable,
but La Quina's arrest in 1989 for
murder and weapons possession actually was a sham manufactured by Mexican
police. His subsequent conviction was an act of political revenge ordered by
Salinas, not the bold stroke to fight corruption described in credulous foreign
press reports. The true goal was to restore discipline among the recalcitrant
oil workers, which bankrolled Cuauhtemoc Cardenas' successful but stolen
presidential race a year before. 6
In
reality, Mexican police transported the frozen body of the man La Quina allegedly killed by airplane to
stage the phoney photographs necessary to create "evidence" for the prosecution. But such techniques are
hardly new. Following the torture murder of American DEA agent Enrique Camarena in 1985, police from
Jalisco state allied with the PRI took the dead U.S. drug agent's body to
then-governor Cardenas' home state of Michoacan in an attempt to blame the
killing on the ambitious and popular left-wing leader.
Yet
true acts of corruption routinely go unpunished. Senior officials of Petroleos Mexicanos, the oil monopoly,
recently were removed because of allegations of "massive fraud," but
no prosecutions resulted. Jorge Ruiz
Ascencio, Executive Coordinator of Primary Production, was reportedly
purged following an investigation that uncovered a bribery scheme totaling
several hundred million dollars. The Mexican attorney general's office
reportedly has sufficient evidence to prosecute Ascencio, but Pemex chief Francisco Rojas is blocking legal
action to avoid further negative publicity following the tragic Guadalajara gas
explosion. Thus La Quina sits in
prison for political crimes, but Ascencio and other senior Pemex officials
enrich themselves with impunity.
Pemex
officials may not fear the law, but poor Mexicans hurt or injured by the
Guadalajara disaster are prevented from seeking compensation by the country's
Byzantine legal system. Indeed, if America exemplifies the libertarian
traditions of Jefferson and Burke, Mexico is a statist nightmare, where foreign
companies use the government to forcibly break lawful strikes and average
citizens have neither recourse to the courts nor any protection against acts of
intimidation by the police.
In
a recent paper, attorney Alicia
Ely-Yamin follows the career paths of several prominent police officials
involved in acts of torture, murder and violence. "What emerges is a
pattern in which prominent offenders -- most of them high-ranking [police]
commanders -- are quietly reassigned to different states after their crimes are
exposed. Once in new posts, the officers continue to torture and kill until
adverse publicity leads to a further 'suspension' and transfer," she
writes. 7
A
case involving labor leader Agapito
Gonzalez Cavazos, leader of the Union of Journeymen and Industrial Workers
in Matamoros shows how foreign companies use the PRI government/police
apparatus to keep Mexican workers under control. "In negotiations in 1992,
Gonzalez sought an increase of wages for his membership to bring them up to
$1.74 an hour," Jerome Levinson
of the Washington firm of Arnold & Porter reports. "The companies,
unhappy with his aggressive negotiating style, sent their Mexican lawyer to
complain to President Salinas that Gonzalez was ruining the investment climate
in Matamoros. Within days of the meeting with Salinas, Gonzalez was arrested
and taken to Mexico City, where he was held incommunicado and grilled by two
magistrates about alleged tax evasion in 1988. Without a lawyer present and
isolated from his family and union colleagues, the 76-year-old man began to
hyperventilate. He was transferred to a hotel, then removed to a hospital,
remaining under arrest the entire time."
While
the PRI under Salinas has used very tough measures against political opponents,
it has followed a different strategy with the Catholic Church. Instead of
confronting priests and bishops who advocate greater democratic opening and
legal accountability for public officials, Salinas has seized the tactical
offensive by moving to restore full diplomatic relations with Rome. Political
restrictions on the church have been relaxed and the papal envoy In Mexico City
has lavished praise on the Salinas regime, which in turn has given its tacit
approval for efforts to push back the advances made by other Christian sects
operating in Mexico. Troublesome bishops, meanwhile, are gradually being
retired or circumvented by more politically reliable members of the clergy.
In
many respects, the Catholic Church in Mexico is moving toward a de facto
political alliance with the PRI. In March 1992, for example, envoy Jeronimo Prigione bragged publicly that
other Christian sects would be "exterminated" through a vigorous
effort to bring Mexicans back to Catholicism. 8 In response, Alberto
Montalbo, head of the National Forum for Evangelical Churches, denounced
the Vatican for attempting to reap political benefits from its rapprochement
with the PRI.9 The efforts by Salinas
to find new allies such as the Catholic Church should be seen as part of a
broader effort to maintain single-party rule under the PRI, an effort that has
included sophisticated efforts to either destroy or neutralize potential
sources of political opposition.
The
Reagan and Bush Administrations deliberately ignored the grotesque political
situation in Mexico, a short-sighted policy consistent with Washington's
pandering approach to thuggish regimes in communist China and Haiti. In an
interview with El Financiero, former Treasury Secretary Donald T. Regan said that in August
1982, the Reagan Administration authorized a $1.2 billion bridge loan because
they feared that the Mexican debt crisis would trigger a coup against President
Jose Lopez Portillo. "If Mexico had collapsed," Regan said, "no
one knows what the political consequences would have been..."
Since
the fraud-tainted election that brought President Salinas to power in 1988, the
Bush Administration likewise has provided massive financial assistance to
Mexico and naturally made a conscious decision not to broach sensitive subjects
like electoral fraud, drugs or human rights abuses. Starting with billions of
dollars in bridge loans from the Treasury in 1989, and the Brady Plan a year
later, free trade is the third leg of a broad support effort engineered by two
Republican administrations in Washington and financed by the World Bank and
private investors.
To help sell the free trade agreement to wary members of
Congress, the U.S. embassy in Mexico City during the Bush Administration
virtually shut down the flow of information critical of the Salinas regime.
Sources close to the DEA say that U.S. Ambassador John Negroponte, who oversaw the covert American military effort in
Honduras during the Reagan Administration and is considered unusually close to
the CIA, personally oversaw the management of Mexico's image. Almost
immediately upon taking over as Ambassador, Negroponte allegedly forced DEA and
the U.S. Customs Service to end independent intelligence gathering and drug
interdiction activities in Mexico.
Negroponte also reportedly pressured DEA to coordinate
anti-drug efforts with the U.S. Embassy and, incredibly, with the corrupt
Mexican Justice Ministry, which is suspected to be directly involved in
coordinating drug smuggling operations.10 Last year's brutal
murder of dozens of DEA-trained Mexican drug agents by regular army troops, who
were refueling a plane carrying known narcotics smugglers, illustrates the
depths of the problem the State Department tries to hide behind a wall of silence.
Most
recently, relations between Washington and Mexico City took a turn for the
worse during the trial in Los Angeles of several Mexicans accused of
involvement in the 1985 torture-murder of DEA agent Enrique Camarena. Two witnesses for the prosecution explicitly
implicated three former cabinet officials, including former Interior Minister Manuel Bartlett Diaz, in planning the
grisly killing in Guadalajara and, by implication, cast the shadow of guilt
over the entire government of former Mexican President Miguel de la Madrid.
While
the American press has virtually ignored the complex case, Proceso and other publications have featured extensive coverage,
leaving Mexican officials frantically engaged in damage control. Bartlett, who
fixed the 1988 election for Salinas and served as Education Minister in until
this year, denies the allegations, as does the U.S. Embassy in Mexico City, but
there are strong rumors that the district attorney in Los Angeles is holding a
sealed indictment against Bartlett, who is currently governor-elect of the
state of Puebla for the ruling party. Sources say, however, that there is no
indictment -- at least not yet -- and that the witnesses in the case should be
treated with great caution, again illustrating how difficult it is in Mexico to
separate fact from fiction.
Mexico's
rosy public image is not just a function of concealment, however. Former U.S.
secretaries of state, and scores of economists, lawyers, lobbyists and
Washington think-tank gnomes are paid, directly or indirectly, by the Salinas
government to promote free trade and attract investment to finance the
"Mexican miracle." Investment bankers sell new Mexican debt and equity
securities to unsuspecting investors in the U.S. and elsewhere, while craven
foreign journalists, almost without exception, ignore bogus elections, trade
deficits, and corruption within the much lauded privatization process.
And
yet there are signs that the Salinas juggernaut is running out of steam -- and
foreign money. The abrupt trade opening by Salinas has hurt Mexican companies
unprepared for foreign competition, causing unemployment to surge and pushing
Mexico's trade balance into the red to the tune of $10 billion as of the first
half of 1992 -- more than 100 percent above the same period a year before.
Mexico's public and private foreign debt now totals over $120 billion, up from
roughly $90 billion following the abortive 1989 Brady debt reduction plan.
A
strong historical correlation exists between swings in the trade deficit and
currency devaluations in Mexico. Past governments, as with the Salinas regime,
have tried to peg the peso to the dollar to attract investment, while at the
same time expanding at astronomical rates the domestic supply of pesos. The
most traumatic currency devaluation in Mexico occurred in 1982, beginning the
debt crisis and provoking a decade of inflation and financial chaos that
culminated in the victory of Cardenas in 1988.
ANNUAL
TRADE BALANCE
(billions
of dollars)
Source: Banco de Mexico
1992 projection of $22
billion by The Whalen Co.
Observers
say privately that Mexico is headed for another devaluation when hard currency
reserves are exhausted, by most estimates sometime in 1993. But while there are
numerous similarities between the 1982 debt default and the rapidly approaching
peso crisis, in political terms the situation is closer to the conditions
prevailing before the 1910-1917 Mexican civil war and more recently in 1968,
when, as today, significant economic changes were not accompanied by political
reform.
Few
Americans remember 1968, when Mexican police brutally murdered hundreds, some
say thousands of students in the great plaza known as Tlatelolco. "The
student movement began as a street brawl between rival groups of
adolescents," Mexican Nobel laureate Octavio
Paz wrote at the time. "Later, as the repression became more severe...
the movement strengthened, expanded and became aware of itself. In the course
of a few weeks it became clear that the young students, without having
expressly intended it, were the spokesmen of the people... of the collective
conscience." 11
Following
the 1968 riots, many observers believed Mexico was again on the brink of civil
strife. But the crisis passed and the country's supremely patient, hospitable
people again acquiesced in PRI rule. Yet today, despite the tens of millions of
dollars spent annually in the U.S. on propaganda touting the "revolutionary"
changes being made in Mexico, the country again stands on the edge of a knife.
As
Mexicans become increasingly aware of their rights as individuals, the
time-worn palliatives of nationalism and blind obedience to those in authority
are less and less effective. Author and economist Luis Pazos wrote recently: "My position is that human beings
are not part of a larger whole because each person is, in fact a whole,
indivisible person and the State is at their service."12
The
immediate threat to Mexican stability is financial. When Salinas is forced to
adjust the value of the peso downward, prices for imports will soar and
Mexico's ability to service its burgeoning public and private dollar debt --
and buy American goods -- will be considerably diminished. Another round of
debt negotiations will inevitably ensue. But more important, the fragile
covenant between the government and Mexico's inflation-weary people will be
shattered -- and with it the now strong support for President Salinas.
The
second and more ominous threat is political, however, and comes from the fact
that the people of Mexico independently are building a new civic culture based
on legal frameworks rather than the personalities and patronage that have
characterized PRI rule. Whereas the martyrs of Tlateloco in 1968 by and large
were the children of intellectuals, today's democratic activists represent a
broader cross section of the Mexican populace that increasingly includes women
and, most significantly, Mexicans of Indian and mixed blood, who most often
have been excluded from real economic and social power.
The
question of democracy in Mexico must be brought into the larger discussion
about "free trade" if the inexorable process of social and economic
integration that already is underway between Mexico and the U.S. is going to
progress without violent upheavals.13 The prospect of a
brighter economic future has held political tensions in check in Mexico since
the 1988 election, although massive riots and civil protests following
fraudulent state and local races last year and in 1990 demonstrate the
Mexicans, like the people of Eastern Europe, are losing patience with the PRI's
political and economic monopoly.
Fortunately, members of the U.S.
Congress are at last discovering that our southern neighbor may not yet be
ready to join a "free" association of nations. Senator Daniel Patrick Moynihan, true to his
usual form, grasps the essence of the question: "We are still being asked
to approve a free trade agreement with a country that isn't free. This is not a
marginal concern. We have a free trade treaty with only two nations, Canada and
Israel, both free nations... Due process under law is not assured in Mexico. To
think this is not relevant to a free trade agreement denies an elemental
problem."
Should
concern about human rights and basic civil liberties remain on the sidelines in
the free trade process, then mounting dissatisfaction with single party rule in
Mexico will eventually explode, particularly if the government is forced to
make a sudden change in the value of the peso. In the event, the folly of those
in government and the policy community in Washington who have supported the
miserable political status quo in Mexico since 1982 will be laid bare. And as
Mexico's people discard patience and take to the streets in search of basic
civil and political liberty, the murdered children of Tlatelolco and countless
thousands of others who have suffered and died during 60 years of PRI rule will
be with them.
Christopher
Whalen, a Washington political and financial consultant, is the editor of The
Mexico Report.
The Whalen Co., Inc
1717 K Street, N.W
Suite 600
Washington, D.C.
20006-1504
U.S.A.
Tel: 202 293- 5540
Fax: 202 -293- 1627