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March 2000, Volume 7, Number 2

Mexico: NAFTA, Corn

Francisco Labastida, the presidential candidate of Mexico's governing party, the PRI, said in a January 30, 2000 interview that if elected, he would like a new, expanded Bracero program so that Mexican workers can be employed legally in the US: "We could enhance NAFTA to include, perhaps, an agreement on temporary workers."

Labastida said that only faster job growth will reduce illegal immigration: "The real solution will come when Mexico's economy grows at a faster pace and creates more jobs with better wages in Mexico... If the economy grows at a six percent annual rate, and we can create 1.25 million jobs a year, and these jobs pay about five points above inflation, then we could see a significant reduction in the immigration of Mexicans to the U.S. That would benefit not only the U.S., but Mexico, because, right now, we are losing our greatest asset, the Mexican people."

Domestically, Labastida said that creating jobs, reforming education— lengthening the school day and providing lunch at school— and reducing crime are top priorities. Labastida was selected in the PRI's first ever primary in November 1999, with five of nine million votes cast. If elected, Labastida will be the only one of the last four Mexican presidents who did not study in the US; he studied in Chile.

On the basis of a law prohibiting foreigners from participating in Mexican politics, the Mexican government in January 2000 sought to deport 43 foreigners, including 34 Americans, who joined New Year's celebrations to mark the sixth anniversary of the Zapatista rebellion in Chiapas; most will be barred from seeking visas to re-enter Mexico for several years.

Oil prices approached $30 a barrel in January 2000, benefiting Mexico, which gets about 30 percent of government revenue from oil; $18 billion in 1998. Each $1 a barrel change in the price of oil raises or lowers Mexican government revenue by $800 million a year.

NAFTA. When NAFTA was under consideration by Mexico and the US, there were many predictions about its potential and consequences. US Attorney General Janet Reno in 1993 said: "If NAFTA passes, my job guarding the border will be easier. If NAFTA fails, my job stopping the flow of illegal immigrants will become even more difficult." Mexican President Carlos Salinas similarly asserted that "We want NAFTA because we want to export goods, not people."

NAFTA has accelerated the expansion of maquiladoras, creating jobs for Mexicans, chiefly in the US-Mexican border area. In August 1999 there were 3,333 maquiladoras with 1.1 million employees, an average of 320 a firm. Maquiladora employment is expected to increase at a rate of 125,000 jobs a year. About 78 percent of maquiladoras are in the Mexican states bordering the US--25 percent of maquiladora employment is in Chihuahua (Juarez) and 20 percent is in Baja California (Tijuana).

Maquiladora exports were $53 billion in 1998. About 42 percent of maquiladoras are owned by Mexican citizens; 41 percent by Americans; 12 percent have joint ownership; and five percent are owned by Asians. Maquiladoras are not well integrated into the Mexican economy— border-area plants get only two percent of their parts from Mexican suppliers and interior plants about only 10 percent.

Maquiladora wages in real terms fell about 11 percent between 1994 and 1998, and have not yet recovered— workers received an average of 702 pesos ($75) a month in 1999. Maquiladoras currently pay taxes equivalent to five percent of the value of assets used in production; that rate will rise in 2000 to seven percent, and the base expanded. Maquiladoras paid about two billion pesos in taxes in 1998 and are expected to pay 3.2 billion in 2000.

The US Environmental Protection Agency provided $600,000 to study lead levels in the blood of the 344,000 children in Tijuana. About 11 percent were found to have elevated levels. Researchers concluded that lead levels could be reduced by replacing ceramic cookware whose lead glaze was not thoroughly fired in kilns. The EPA funded the study because of the assumption that about 30 percent of Tijuana children will eventually migrate to the US.

Independent unions continue to have a hard time representing Mexican workers. Their difficulties at US-owned plants often lead to complaints that Mexico does not enforce its labor laws. At Congeladora del Rio, a U.S.-owned fruit and strawberry packing plant in Irapuato, Guanajuato, about 200 women were not rehired when the strawberry season began in November 1999 after they tried to organize an independent union affiliated with the Frente Autentico del Trabajo (FAT). The company says the workers are already represented by a union.

NAFTA provided that trucks driven by Mexican drivers, which move 90 percent of goods across the border, could move freely in US border states beginning in January 1995, and move throughout the 50 states beginning January 1, 2000. However, the Teamsters fear competition from lower-wage Mexican drivers, and they persuaded the Clinton administration to delay free-truck movement, on the grounds that Mexican trucks and drivers would endanger motorists on US highways. Mexican drivers average $2 an hour; US drivers average $18.

A senior US official said that "There's no question in our minds that we are subverting NAFTA, and we are doing it purely because we don't want to upset the Teamsters." Canada and the US have had a free-truck movement agreement 1982.

The heart of the avocado industry is in the Mexican state of Michoacan. A subsidiary of J.R. Simplot Co, a $2.7 billion revenue food processor with 12,000 employees processes avocados into guacamole for US restaurant chains. The Mexican women in Simplot's plant earn about $48 a week, which makes it far cheaper to make guacamole in Mexico than in US restaurants.

Mexican plants are increasingly becoming the back kitchens for US restaurants. There are about 80 Mexican plants employing 12,000 workers that prepare food for US restaurants, airlines and other food service firms. Mexican exports of processed fruits and vegetables were about $400 million in 1998.

About 1.4 million cars were produced in Mexico in 1998 and one million were exported. Auto makers, with 500,000 employees, are Mexico's largest private employers. Labor costs are about one-seventh US levels, but productivity is also lower; overall production costs are about 20 percent lower in Mexico.

Corn. About 23 percent of Mexico's 100 million residents depend on corn farming. There are between three and four million corn farmers in Mexico trying to support families that include four or five children on milpas, or small corn farms.

NAFTA gave US farmers the right to export 2.5 million tons of corn a year to Mexico until 2008, when there will be no limits on US corn exports. Mexico has voluntarily permitted more US corn to enter to make up for shortfalls—some 5.6 million tons in 1999, or 25 percent of the 22 million tons of corn consumed in Mexico. Corn prices have fallen sharply: from an average of $5 a bushel in 1995 to $1.80 in 2000.

Many Mexican leaders say that imports of US corn must be slowed. Guanajuato's state agriculture development undersecretary says that 20 percent of the 250,000 farm families in the state left the land between 1990 and 1999. El Barzon, a group protesting debts and poverty in agriculture, agrees. On November 28, 1999, the group completed the 1,000-mile December 1914 march of Pancho Villa from Ciudad Juarez to Mexico City.

The San Quintin Valley, about 200 miles south of the Mexico-US border, grows tomatoes for the US market during the winter and spring months. About 40,000 people live in the area, with critics arguing that underground aquifers are being used up to produce tomatoes that could also be grown in Sinaloa or Florida. Most of the tomatoes are picked by migrants from Oaxaca and Chiapas, more of whom are settling in the area despite the availability of only seasonal farm work. Investors have proposed a $700-million resort that would include eight hotels and create, according to developers, 5,400 jobs directly and 15,000 indirectly.

Vanilla, a vining orchid, was first cultivated in present-day Veracruz state, but was taken to Indonesia and Madagascar in the 19th century. Vanilla is a labor-intensive crop— the beans come from an orchid flower that must be artificially pollinated—and Mexican economic development has raised wages. Madagascar in 1998 supplied two-thirds of 2,200 metric tons exported; Mexico supplied six tons.

Mexico City. In the 1970s, the United Nations projected that Mexico City's population would be 30 million by the year 2000; it is actually 18 million. Why didn't Mexico City grow as fast as projected? There are three major reasons: sharply lower fertility in Mexico; the shift of Mexican migrants from Mexico City to the northern border area of Mexico and the US; and more Mexicans have moved to the outer suburbs of Mexico City—neighboring states that are booming because they are near but not in the federal district or the surrounding state of Mexico.

Mexico hosted a meeting of the finance ministers of the Americas in early February 2000 that tackled the issue of how to spread the benefits of globalization. The World Bank said that 36 percent of the Latin American population--175 million people—live in poverty, and 15 percent live in extreme poverty. U.S. Treasury Secretary Lawrence Summers said that it was important to foster “economic growth but of making that growth more inclusive [by]... improving the allocation of resources in the education and health sectors.”

Sergio Munoz, "Francisco Labastida. Mexico's Mystery: A Patrician and His Party Lobby for the Poor," Los Angeles Times, January 30, 2000. Chris Kraul, "Growing Troubles in Mexico: Globalization has soured a legacy of corn farming, practiced by nearly 25% of populace," Los Angeles Times, January 17, 2000. Steven Greenhouse, "U.S. Delays Opening Border to Trucks From Mexico," New York Times, January 8, 2000.