Mexico - The revolution "institutionalized" and... rubbed out

Feb/Mar 2001

Up until July 2000, when Vicente Fox of the right-wing PAN (National Action Party) won the presidential election in Mexico, the PRI (Institutional Revolutionary Party) and its predecessors had held power for 71 years. Formally, Mexico is a democracy with all of the accoutrements, like regular elections, competing political parties, the right to organize. But the reality is that the president, who serves for a single six-year term, is all-powerful. And up until last year, each president nominated his successor from the ranks of the cabinet, that is, from among the highest officials of the PRI. The election that followed was little more than a show, a demonstration election.

Although the PRI has always continued to claim to represent the revolutionary and nationalist origins of the Mexican state, after 1940 it never again relied on the masses to confront imperialism and therefore was unable to prevent imperialism from quickly reimposing its domination over Mexico or the growing impoverishment of the masses. That meant that the PRI had to increasingly resort to repression, fraud and corruption, and its regime became increasingly bankrupt, rotten and worm-eaten.

The Mexican "miracle"

Starting in the early 1940s, the predecessor of the PRI, the PRM (Party of the Mexican Revolution), held out the hope that Mexico could develop into a modern industrialized capitalist country.

For almost a quarter of a century, from the early 1940s to the mid 1970s, the state tried to guide and direct this development. The Mexican state tried to control the flow of capital and goods in and out of the country. The economy was developed behind a wall of high tariffs and quotas that was supposed to help protect industrial development, while imports that were necessary for industrial development were allowed in.

The state itself also used a big part of its resources to subsidize industry's growth. It formed a development bank to extend loans to industries and directed private banks to do the same thing. It used Petroleos De Mexico (PEMEX), the most important state- owned enterprise, as a base for industrial development. The expansion of the petroleum industry was an important source of business for the private companies that produced for it. PEMEX also kept prices low for the energy that it provided industry.

At the same time, the government carried out a similar policy to foster agricultural production by financing irrigation programs and providing cheap credit.

As a result, between 1960 and 1980 both industrial and agricultural production grew at a rapid rate, with the manufacturing sector averaging 7.6 per cent per year.

The government aid was designed to foster capitalist development. Thus, under the guise of aiding agricultural development, most government aid went to the largest estates and commercial agriculture for their own profit. And since greater profits were to be made by growing agricultural products for export and, in particular, fruit, tomatoes and strawberries for the U.S. market, production for export grew at the expense of production for domestic consumption. The government supported the production of feed grains and legumes to feed cattle for export to the U.S.

The vast majority of farmers who raised maize and beans did not benefit from government aid, and most of them fell below the official poverty line and often were forced to emigrate to the cities. The percentage of people living in the cities rose from 43 per cent in 1950 to 60 per cent in 1970.

While the growing industry and a new service sector created many jobs in the cities, this job creation did not keep up with the increase in population and the urbanization of the labour force. The ranks of the informal economy increased and millions more were forced to look for work in the U.S. Although workers who were in state-owned or large private industry received somewhat higher wages and some fringe benefits and social security protection, most of the working class did not receive that kind of compensation.

Of course, from the point of view of the capitalists, this development was a success. Their profits rose dramatically, going from 21 per cent of the gross domestic product in 1950 to 30 per cent in 1970. This meant that a big part of their profits did not come from the development of industry and agriculture, but from increasing the rate of exploitation of the working class in industry and agriculture.

Often the capitalists did not even put their profits back into production. The "bankers' alliance," that is the few big capitalist groups that controlled conglomerates that dominated finance and industry, were less interested in risking their capital on actual investments in production and construction. They preferred to collect high interest payments on government bonds, letting the government take all the risks in investment. Thus, they constituted a parasitical brake on investment and industrial growth even in the period when industry was expanding.

At the same time, despite the quotas and controls on foreign trade and investment, foreign, especially U.S., capital continued to increase its presence and domination.

"Mexicanisation" legislation, a series of laws passed in the 1960s and 1970s, was supposed to preserve Mexican control over industry. But foreign investors were still able to dominate "Mexicanised" enterprises. And many companies remained 100 per cent U.S.-owned: GM, Ford, Chrysler, GE, Kodak, Sears, Anderson-Clayton (cotton), Dow Chemical, and several other U.S. firms from the top ranks of the Fortune 500. As early as the 1970s, U.S.-based companies had at least 47 per cent and usually more control of such key sectors as mining and metallurgy, copper and aluminum, petroleum products and coke, industrial chemicals, electrical and non-electrical machinery, transportation equipment, automotive, rubber, food and beverages and commerce. They controlled tobacco 100 per cent, computers and office equipment 88 per cent, and chemicals and pharmaceuticals 86 per cent. U.S. firms dominated television programming, tourist hotels and related services. The areas of most rapid growth in U.S. investment were petroleum, petrochemicals, transport equipment and machinery.

To attract more foreign capital, in 1965 Mexico opened up a free trade zone along its northern border for foreign companies to build factories for manufacturing of goods for export. This zone, which would develop later on as the "maquiladoras," was one more means by which foreign, especially U.S., capital profited from Mexican labour and infrastructure.

Economists, politicians and representatives of international organizations proclaimed this period of development Mexico's "economic miracle." Indeed, between 1950 and 1974, Mexico's real growth averaged 6.4 per cent per year, a rate twice as fast as the increase in population. But the vast majority of Mexicans simply did not have enough income to buy most consumer goods. The need was there, but the "effective demand" of the domestic economy was greatly limited. This could only hinder the national capitalist development of Mexico, even at the time of international economic expansion and the so- called Mexico miracle; so did imperialism's continuing plunder of the country even before the international economic crisis struck.

Throughout this period there were strikes, upsurges and movements against the conditions that the regime tried to impose, and the regime became increasingly repressive. In 1968, a large student movement sprang up to protest against government and police repression. In response, on October 2, 1968, on the eve of the Summer Olympics in Mexico City, plain-clothes police and soldiers massacred almost a thousand people who had gathered at a meeting at Tlateloco, or the Plaza of Three Cultures, in Mexico City. The exact number of those killed is not known, because the police picked up the bodies and disposed of them in secret. As the Olympic Games were about to get under way, the Mexican government was literally hosing the blood from the streets.

1970s-80s: oil, debt and social disaster

The world economic crisis that broke out in the imperialist countries in the 1970s ended the Mexican "miracle," while imperialism took advantage of the crisis to greatly increase its domination of the Mexican economy.

When the first recession of 1973-74 began to grip the imperialist countries, the big capitalists in those countries began to search for ways to stimulate exports both of goods and of surplus capital to the underdeveloped countries. The big international banks began to lend billions to the underdeveloped countries under the condition that the governments and private companies would use it to buy goods produced in the imperialist countries.

Mexico became an especially attractive market for these loans. One important reason was PEMEX's 1972 discovery of vast new oil reserves in the Gulf of Campeche. This discovery coincided with the quadrupling of crude oil prices a year later. Oil prices would double again in 1979.

PEMEX alone took out tens of billions of dollars in loans to buy expensive capital equipment and to pay for contracts with a host of U.S. firms to develop the oil industry. Besides that, the government used more loans for big infrastructure projects to encourage the development of export industries. The assumption was that with the oil boom, Mexico would have no trouble to continue to pay back the banks.

With the flood of loan money paying for the importation of consumer and capital goods, especially from the U.S., the Mexican economy jolted forward, making it appear that Mexico had escaped the crisis. But by the early 1980s, oil accounted for 75 per cent of all Mexican exports, and Mexico had become, like so many other underdeveloped countries, dependent on the export of one commodity.

The Mexican economy soon faced a double squeeze. In 1979, banks in the industrialized countries began to raise their interest rates to levels that eventually would peak at 20 per cent. Since the interest rates on the bank loans to Mexico fluctuated with interest rates in the industrialized countries, Mexico was forced to make much larger payments. At the same time, the world economy began to plunge even further. In 1981 crude oil prices collapsed, reducing Mexico's income and ability to make those usurious payments.

The first response of the banks was to continue to loan Mexico money... to cover the interest payments on previous loans. Of course, these loans just added to the principal that Mexico already owed. In 1982 the international debt had mounted to 82 billion dollars, or 60 per cent of Mexico's entire GDP. Between February and August 1982, the peso lost 80 per cent of its value on international currency markets. The rate of inflation shot up to 100 per cent per year. Plants shut down and unemployment rose. The Mexican economy spiralled into crisis.

The Mexican government made repaying the international debt its first priority. In August 1982, then-president Lopez Portillo sent his Minister of Finance to Washington where a consortium of international finance, headed by U.S. Federal Reserve Chairman Paul Volker, dictated measures that the Mexican government should take to guarantee that the loans from the big international banks be repaid.

The entire Mexican economy was geared to paying back those loans. Interest payments alone on that debt were averaging 10 billion dollars per year. The Lopez Portillo government nationalized the 18 largest Mexican banks, forestalling any bankruptcies in the private sector that could have made it more difficult for the international banks to be repaid. To increase its foreign exchange to make the interest payments, Mexico increased its exports. To encourage more exports, the country was opened up to new foreign investment under the most favourable terms, including extremely low wages, deregulation and low taxes. The Mexican government also devoted great sums of money to develop the maquiladoras. The government provided the land, infrastructure and facilities, and the corporations paid no taxes.

Someone had to pay for all this, and it was the Mexican working population. Lopez Portillo and then Miguel de la Madrid, who became president in December 1982, multiplied the harsh austerity measures to squeeze money out of the population to make some interest payments. The Mexican government cut government spending, particularly on state enterprises and social programs. The government implemented wage controls, beginning with freezing the minimum wage. It raised prices for government goods and services. It also cut back subsidies on basic foods like tortillas and bread, thus boosting their prices.

The impact of all these measures on the mass of the Mexican people was dramatic. In just two years, the standard of living of the workers and peasants was slashed in half. The impact of these "reforms" was no less dramatic for the Mexican capitalist class. Between 1982 and 1988, according to the Centre for Information and National Studies, net profits of the top 72 companies in Mexico increased tremendously.

The second wave of "reforms"

Despite all these measures, the Mexican government was still unable to pay the international debts, which piled up even faster than before. So the international lending organizations representing the big financial interests demanded that Mexico transfer part of the debt into shares of companies which had been state-owned up until then.

In 1985, the de la Madrid government agreed to sell 743 government-owned companies at a low price. The de la Madrid government justified this by claiming that these companies were "inefficient and very costly." For example, it said that the Copper Processing Company had ceased to be "strategic" and it sold the company for next to nothing to a mining conglomerate, Industrial Mines of Mexico. It is now considered to be the most profitable copper company in the world! In fact, the riches of the country were sold for the profit of a few families.

The wave of privatisation continued under the presidency of Carlos Salinas, who took office in December 1988. In 1992 he privatized the 18 banks that had been nationalized 10 years before.

Among the more significant measures that Salinas took was the reform of Article 27 of the 1917 constitution; it formally ended the land reform that had been put in place by the revolution. This new reform opened up the "ejidos," the peasant communal lands, to be sold, even to foreign companies. Of course, up to this time, less and less land had been redistributed, and the land that was given to the peasants was more often of poor quality. But by ending land reform completely, the Mexican government ended all hopes of the peasants to ever recover any land.

The economic restructuring continued to take its toll. Between 1982 and 1990, 50 per cent of the textile industry shut down. The production of domestic appliances was hit hard. Around 25,000 jobs in the steel industry were cut. There were 400,000 layoffs from government-owned companies that had been privatized. PEMEX cut its payroll by 100,000. Through government budget cuts, tens of thousands of government employees were laid off, including 35,000 primary school teachers and 20,000 nurses.

Unemployment and underemployment continued to mount, swelling the informal sector. According to the 1970 census, 747,000 Mexicans were in the informal economy, representing about five per cent of the workforce. According to the 1990 census, this had grown to 7.8 million, or 30 per cent of the workforce. And the share of wages as a percentage of GDP fell from 37 per cent in 1980 to 24 per cent in 1991.

Major cutbacks in government social spending magnified the difficulties for the majority of Mexicans even more. Between 1982 and 1991, public expenditures on education, health and welfare declined from 8.4 per cent to 7.4 per cent of GDP. The total budget for all social programs was 20 per cent less than similar expenditures ten years before.

But international finance was more than satisfied. Mexico was a good patient. It followed the prescriptions of the IMF, the big international banks and the big industrial countries. It religiously made its payments of interest and principal on its debt. It opened its markets for trade and investment. It sold off its assets at very "reasonable" terms and allowed international finance to plunder the country. As a reward, Mexico was allowed into the OECD, the international organization of the industrially developed countries, and it was held up as an example for all the underdeveloped countries facing similar difficulties.

Growth of political opposition

Of course, given that it was the PRI which was responsible for imposing these policies on the population, discontent and opposition focused against it. Up until that time, the PRI had completely dominated the political system. The president was regularly elected by margins of 70 and 80 per cent. The PRI had undisputed control of both houses of the Chamber of Deputies and the state and municipal governments. Over the years, the PRI had been careful to allow several small parties to exist and even to grant them the possibility of holding a few seats in the Chamber of Deputies. But this served only as window dressing for the PRI's brand of democracy.

With the advent of the crisis that began in 1982, opposition parties began to attract much bigger votes. In 1983, the PAN won municipal elections for several important cities. While the PRI leadership decided not to challenge the PAN victories, it dealt with this problem by simply stealing every election over the next few years.

Nonetheless in late 1987, a political crisis erupted from inside the PRI's own ranks. Cuauhtemoc Cardenas, the son of Lazaro Cardenas and a former PRI governor of Michoacan, split out of the PRI along with some other PRI officials. He put together a vaguely social-democratic and nationalist coalition and ran for president in 1988 against the PRI's candidate, Carlos Salinas de Gortari. Cardenas's candidacy elicited a huge upsurge of electoral support as a way to demonstrate against the economic austerity, the official corruption and the repression of the PRI. Early vote totals showed that Cardenas had gained a big lead over Salinas. But then the computers that tallied the vote mysteriously went down. One week later when the computers came back up, they showed that Salinas had won. But the openly growing opposition was reflected in a much larger opposition in the Chamber of Deputies.

Salinas moved to isolate Cardenas by buying off most of his allies, keeping them from joining Cardenas's new party, the PRD (Party of the Democratic Revolution) and carrying out assassination and intimidation against others. The PRI also carried out some electoral reforms under the pretext of ensuring fair elections. But this did not prevent the PRI from continuing to organize electoral fraud, especially against the PRD.

But the 1988 election was a wake-up call that the PRI was no longer the political steamroller that it once had been, and that new measures had to be taken. In the coming years, the PRI gradually ceded more local and state offices to both the PAN and PRD.

With a weakened centre-left opposition party, the PAN became the main pole for opposition to the PRI on the electoral level. It is said that the PAN's presidential candidate in the 1994 election would have won had he not suddenly given up his campaign because he felt that his life was in danger.

The PRI was not yet about to give up the most important position of power.

The 1994-95 crisis

In 1994, the PRI made all kinds of promises about how prosperity was just around the corner, that after almost an entire decade of misery and suffering, the reforms had made Mexico more competitive and therefore more attractive to foreign investment, that the pick-up in business meant more jobs, more money etc.

Indeed, between 1988 and 1994, 100 billion dollars poured into Mexico. Suddenly, Mexico ranked third behind the U.S. and Japan as a centre for "international investment." The only problem was that this flow of money was almost purely speculative, that is, "hot money" from international finance that had been placed in Mexico to profit from a rising stock market, real estate market and very high interest rates. None of this money was used to increase production, create any jobs or improve the well-being of the population. But it did lead to the build-up of real imbalances in financial markets. In 1994, in anticipation of a possible downturn in Mexico's financial markets, some speculators began to quietly withdraw their "investments" from Mexico. With the help of the U.S. government, the Salinas government was able to cover over this impending crisis until after Salinas left office on December 1, 1994. But only two weeks later, Salinas's successor, Ernesto Zedillo, was forced to drastically devalue the peso. This set in motion a financial panic, the collapse of the private banking sector, and a new economic depression. Thousands of companies went bankrupt and over one million jobs disappeared practically overnight, a sharper job loss than in the wake of the debt crisis in 1982-83.

Once again, the capitalists used the crisis to cut real wages. According to U.N. statistics, in 1997, real wages were more than 30 per cent lower than they had been in 1994, before the crisis. With the fall of the peso, the prices of imports, in particular food imports like corn, went up. For the population, this price increase was magnified by the government's complete elimination of the subsidy on corn meal, which is used in the production of the tortilla, the main staple of the Mexican poor. Thus more than two- thirds of the population is unemployed or underemployed, 40 million live below the poverty line, with less than two dollars per day.

President Ernesto Zedillo, who came to office in December 1994, simply continued where Salinas had left off. He continued to use the government to boost the fortunes of a small minority, about ten big families inside Mexico that now control big chunks of the country's banks, industries, trade, the stock market, telecommunications. He engineered a government bailout of the banks, at a cost of 100 billion dollars, a sum equal to one-quarter of the annual GDP. And he continued to sell what could be sold of the assets still held by the government basically to those families. Today, only 100 companies are still state-owned, among them PEMEX and the electric utilities - out of the 1155 companies that had been owned by the government in the early 1980s. And Mexico has almost as many billionaires as Germany and Japan.

The political opposition and political stability

The longer the PRI has clung to power, the more it has been discredited. But given how connected the PRI has been to the state machinery, and how much it had become an important source of corruption and enrichment, it has not at all been simple to ease the PRI out of power. There has been tremendous in- fighting between rival factions inside the PRI or mafias that have led to several prominent assassinations, including the 1994 assassination of the PRI's presidential candidate, Luis Donaldo Colosio, and the PRI's Secretary General, Jose Francisco Ruiz Massieu.

These murders were one indication of the advanced state of rot that permeated the PRI through and through, and its hold on important government positions continued to be eroded. In 1997, the PRI finally lost control of the lower house of Congress. It also lost the very important post, mayor of Mexico City, to Cardenas.

This left the way open for the presidential campaign of the PAN's Vicente Fox last year. His right-wing populist campaign mixed religious symbolism with wild promises about how he will transform the economy, bring greater equality and root out crime, corruption and violence from the state apparatus. In fact, most people were ready to vote for almost anyone who was not the PRI.

But it still looked like the PRI was poised to steal the 2000 presidential election before a representative of the U.S. government stepped in on election night to announce that Fox was the winner. The fact that Fox took an early lead in the vote, despite the enormous resources still at the PRI's disposal, its money and the mass organizations that it still controlled, was enough to convince the U.S. that if the PRI continued to try to cling to power, the public outcry would be so strong that it could lead to instability.

Of course, after Fox won the election, he promised to break with the policies of the PRI. But then he staffed his most important cabinet posts with representatives from business and former high officials in the government. His finance minister and economics minister both come from the World Bank. The communications and transport minister is an executive from the telecommunications giant, Telmex. The energy ministry will be headed by the former head of the Mexican airline monopoly. PEMEX will be run by the longtime head of DuPont in Mexico, etc.

As for his promises to the mass of ordinary people, they are not nearly being fulfilled. Just as all his predecessors who campaigned against corruption, he will prove to be impotent against the rampant corruption and gangsterism from inside the ranks of the police, army, secret police, or PRI-dominated administration, including their ties to the big gangs of drug traffickers.

Also during his campaign, Fox promised that the struggle against poverty would be an important priority for his new administration. But once in office he announced that he was going to postpone that fight for... three years. Instead he said that the government must begin by "assuring the economic framework," that is to say, satisfy all the demands of the bosses. As for the poor, this is how he summarizes his program: "We want each family to be able to overcome their poverty by their own efforts." Beyond that kind of cynical statement, one of his first acts as president has been immediately to lay off one per cent of the government workforce and to begin a new tax on food and medicine, supposedly in order to cut the government deficit. On the other hand, Fox did propose to open up the nationally owned electric utility industry to private, especially foreign, investments, supposedly to stimulate the economy. In other words, his administration began by presenting new opportunities for the capitalists and new demands for sacrifices from the working class and poor.

It remains to be seen how the mass of the workers will react to these new attacks. But for the Mexican bourgeoisie, the fact that the PRI has been substantially weakened could bring problems if the workers begin to move. For the PRI was more than just a governmental party. It controlled mass organizations, trade unions, peasant associations and community associations that reached into the population of the poor and oppressed. These organizations were used to control the masses through patronage and jobs, as well as beatings, torture, assassination. In other words, they constituted an important bulwark of the status quo that supplemented the state apparatus.

What could take their place, if the PRI continues to decline? Fox has already made it clear that he wants to build up the Catholic Church. For the 20 years following the Mexican Revolution, the Mexican government had stripped the church of most of its vast property holdings, banned priests from voting, and also banned religious symbols from political campaigns. Most importantly, the Constitution required that education be secular. But after that period, the PRI began a slow rapprochement with the church. In 1992 under Salinas, the Constitution was changed. The clergy were given the right to vote and churches the right to own property and run their own schools without state interference.

Obviously, Fox intends on taking these reforms farther, most likely starting by giving the church the right to play a greater role in education. And in the process, Fox may also attempt to alter Mexico's laws on abortion. As it is in Mexico, women have a right to an abortion only in the case of rape or incest. But in Guanajuato, Fox's home state, the PAN recently enacted a law to ban abortion outright and to imprison any woman convicted of the offence for three years.

Fox's supposed "first revolution of the 21st century" would have looked more like a counte-revolution had not the PRI already completed it.

3rd March 2001