The Democratic Opposition: Challenging Mexico's New Corporate Clan

An Interview with Carlos Heredia

Carlos Heredia is the director general of special urban development projects in the cabinet of the governor of Mexico City, Andres Manuel Lopez Obrador, who was sworn in on December 5, 2000. Heredia was previously a member of the Mexican Congress for 3 years, serving on the finance, budget and foreign affairs committees. He has also been affiliated with Equipo PUEBLO, a development NGO working for 20 years on issues concerning trade and development, the impacts of multinational banks on the poor and local productive capacity. He is an economist trained at both ITAM in Mexico City and McGill University in Montreal.

Multinational Monitor: What is the political coalition that got Vicente Fox elected president of Mexico?

Carlos Heredia: There were three elements of the coalition. One was the Amigos, or Friends, of Fox. Not necessarily affiliated with the PAN, the Amigos are people from the business and corporate sector who believed they would benefit from a change at the top of the Mexican political system. Second was the PAN itself, with which Fox is only loosely affiliated. Third was a group of citizens from a wide spectrum of Mexican politics who supported Fox in spite of the fact that they are affiliated with other parties, or not affiliated with any party at all, but believed that Fox was the only one in the opposition that had a chance to beat the PRI. They were proven right on July 2, 2000.

The question is which of these groups will prevail. Given recent developments, it is quite obvious that the corporate interests that supported Fox have the upper hand in the confirmation of the cabinet and the implementation of economic policy. Fox sent a very concrete signal by appointing Francisco Gil Diaz, a very conservative economist trained at the University of Chicago, as Secretary of Finance. That signaled a continuity with the policies that have been implemented in Mexico over the last 19 years, since 1982 - through the administrations of Miguel de la Madrid (who started in 1982), Carlos Salinas (who started in 1988), and Ernesto Zedillo (who started in 1994).

MM: The corporate faction is the Amigos of Fox?

Heredia: Yes. These are the largest Mexican conglomerates, most of them based in Monterrey, who see Fox as an opportunity to continue with the same economic model, a model that benefits them. A lot of them are exporters. Many of them are monopolists and believe that under Fox a continuity of economic policies is a guarantee for their interests and, to a good extent, the interests of Wall Street.

That is not to say that there is total homogeneity in the Fox cabinet on these issues, but this sector has the upper hand, and it is quite obvious that economic policy is not under discussion at all. Social policy and the rest can be debated, but economic policy has been determined from the top down. This is a continuity with the policies that have been pushed by the U.S. Treasury and the international financial institutions over the last three administrations.

MM: Do you see any differences on the margin between Fox's policies and the PRI policies of the last two decades?

Heredia: Fox is saying that now he will take care of the domestic market and small businesses. His problem is that with NAFTA in place, and with all the commitments that Mexico has made to the Organization of Economic Cooperation and Development (OECD), to the World Bank, the International Monetary Fund (IMF) and the U.S. Treasury over the last few years, it is hardly possible to defend our domestic market.

That poses quite a challenge, especially for the Secretary of the Economy, Luis Ernesto Derbez, (equivalent to the U.S. Secretary of Commerce). He is in charge of promoting small business and revitalizing the domestic market. I don't see how he will be able to do this, with total liberalization of the economy, total deregulation, elimination of tariffs and the privatization of whatever is left to privatize. I'm not talking about protectionism, but I don't see how we will even be able to maintain an economic policy that aims not at giving unlimited privileges to investors from abroad, but rather putting them on an equivalent basis with Mexican businesses.

I'll give you an example: the very fact that the Mexican economy continues to bet on foreign investment as its driving force is a problem because it has an immediate consequence on fiscal revenues. Most multinationals that operate in Mexico do not pay taxes in Mexico. They pay taxes in their home countries - mostly the United States.

At the end of each year they come to our equivalent of the Internal Revenue Service, and they tell the authorities they can't pay taxes in Mexico because it so happens that they had to wire transfer their money to Detroit, Chicago, Stuttgart, Tokyo or wherever and thus, there's no money left to pay taxes in Mexico.

There's talk of fiscal reform, but this fiscal reform will put the burden of reform on the middle class. The poor have no money to pay taxes and the very rich have found a way to dodge taxes, so most of the weight falls upon the middle class.

Most Mexicans are wondering what change means, because Fox campaigned on change and in terms of economic policy there's not much change yet. There are changes on the margins, but that's mostly when it comes to social policy and democratic changes in the political system.

Are we better off under Fox than under the PRI? Yes, definitely. But there are no major economic changes to be seen yet, and they won't materialize should Fox follow the path of the last three administrations.

Those who financed Fox's campaign have been very generously rewarded. The composition of the cabinet on the economic side has been tailored after the needs of the corporations, so I don't see much of a change.

MM: What is it that Fox has in mind in talking about a new kind of partnership with the United States?

Heredia: He is looking for some kind of agreement in terms of migrant workers. He's also thinking that Mexico should bargain in a stronger way when it comes to drug control policy, and not only be a passive follower of whatever the U.S. decides.

I think that his biggest bet is migration. He believes that ultimately the United States will have to accept some kind of long-range agreement that includes migrant workers within the framework of NAFTA. Interestingly enough, he has been pushing for proposals that have come out of the left and progressive NGOs.

Fox is pushing those proposals knowing that they won't fly right now. But that will help him save face inside Mexico and, at the same time, have some kind of bargaining chip with the U.S. government.

MM: What's the content of the migration proposal and how would it benefit Mexicans?

Heredia: It says that Mexico should push for migration within the core of NAFTA because our biggest export is manpower. It doesn't make sense to leave our biggest export out of the trade agreement. So far, NAFTA has been tailored to benefit the kind of exports that the United States exports. We would hope that it would not only bring attention to migration, but also to labor rights, and make that part of the core of NAFTA. We are aware that under a Republican administration that will not fly, but at the same time we have statements by Alan Greenspan and the AFL-CIO (made before the U.S. economy started to slow down, of course) which point to the need to at least analyze in depth the current immigration legislation in the United States.

It is quite evident that in the long run the United States economy will need more foreign workers. Mexico can supply those foreign workers and Fox knows that and wants to use that as a bargaining chip.

MM: How do you think Fox's social policies will differ from the PRI's?

Heredia: The differences in social policies are tied to the fact that social policy under the PRI was intimately linked to a vote for the PRI. Social policy under Fox is not necessarily linked to a vote for the PAN.

That's the main difference, but the PAN pushes for an even more conservative social policy than the PRI. Issues such as abortion, women's rights and gay and lesbian rights have and will become very controversial under Fox because the religious right and staunchly conservative groups - the right wing in general - feel that they have the power now, so they can dictate the social agenda.

Furthermore, in the mind of a lot of people in the Fox cabinet, social policy is still seen as a means to compensate for the inequalities generated by economic policy.

So they don't go beyond the approach promoted by the World Bank and international financial institutions in general of compensating social investment funds rather than enhancing the rights of citizens.

We are moving towards the privatization and individualization of access to education, access to medication, access to social rights in general. So housing is not treated as a right, but rather as something you can obtain if you work hard.

MM: What will be Mexico's posture towards the negotiations over the Free Trade Agreement for the Americas?

Heredia: The Fox administration hasn't spelled out their position. There are at least two positions within the cabinet, and I don't know which one will prevail.

Under Zedillo, the policy for the FTAA was whatever Washington wanted. The Minister of Finance favors continuing to follow the U.S. approach.

On the other hand, there are others, including the Secretary of Foreign Affairs, who believe Mexico should play a more active role within Latin America and we should push our own proposal.

But that debate has not yet taken place. The Fox administration is more concentrated on the push to become a member of the Security Council of the United Nations. The FTAA is not at the top of the agenda of the Fox administration.

MM: How do you see the administration handling the issue of petroleum? Will they open it up further to foreign investors?

Heredia: They have said they will not push for an amendment of the Mexican constitution. Article 27 keeps oil under the control of the federal government.

But the fact of the matter is that they will let the government keep the old facilities and slowly push for new private investment with modern technology in the refining and sales sectors. They will do the same with the electricity sector.

So when they say they will not privatize, they're probably telling the truth.

What they're not saying, though, is that all new investment will be channeled in such a way that it can be controlled by private concerns and by multinational investors, while they let the Mexican government keep the old investments.

MM: Within this broad framework of national policy, what kind of room do you see for innovation with the PRD's control of Mexico City?

Heredia: There's not much room because economic policy is controlled by the federal government.

The Mexico City government has followed a very active social policy, but to a significant extent many of the positions taken by the Mexico City government depend on federal funds, even though the government of Mexico City is more self-sufficient than the rest of the state governments in terms of revenue. The Mexico City government generates about 50 percent of its total budget, which is about $7 billion per year, whereas the majority of Mexican states generate at most 10 to 25 percent of their budget. The rest comes from federal funds. So in Mexico City there's a little more room for maneuver, but not to the extent that it can change overall policy.

The federal and Mexico City approaches are totally different. The Fox administration believes that their economic strategy will translate into economic prosperity for everyone - they believe in trickle-down economics. The Mexico City government believes in giving tangible benefits to the citizens of Mexico City rather than counting on the benefits of prosperity being distributed in a way that the poor will eventually benefit. The administration of Andres Manuel Lopez Obrador has been forcefully pushing for tangible benefits for people in terms of building schools, medicare and medicaid, housing, and even in terms of giving direct subsidies to low-income families.

MM: Within the PRI, how do you see the conflict between the modernizers and the old guard playing out?

Heredia: I see a conflict that has many faces and doesn't really involve one faction wanting to modernize the party and another faction resisting change.

The PRI is undergoing a very severe crisis for two reasons. One is that the party always revolved around the authority of the president. Everybody knew that the president called the shots and made all the main decisions regarding the party, including nomination of candidates.

The second reason is that the PRI doesn't have the unlimited and illegal access to government funds they used to because they don't have the federal budget in their hands now. Some of the PRI-istas have money because the PRI still controls 18 out of 32 state governments. The PRI doesn't know how to become a real political party. They are not used to getting involved in national politics without illegal access to the public coffers. So they have to now become a real political party without that kind of money. That is the challenge they face.

In the past few days, the PAN and the PRD have started to discuss a political alliance in the southeast - mainly in Tabasco and the Yucatan. The alliance would be aimed at wiping out the caciques, the party bosses used to controlling party politics and politics in general with money - by buying votes and buying elections. The PAN and the PRD have decided to work together to finish the old regime, especially in the southeast where it has become entrenched.

I'm not saying the PRI will fade out. It will not, because even when the crisis is most serious the PRI gets 40 percent of the vote in any election, except for Mexico City, the only one of the 32 states where it trails both the PRD and the PAN. For any political party that would be a good percentage. But the PRI will have to reform itself and learn how to participate in politics outside the president's office and without illegal access to federal funds.

MM: How do the people in the PRD look at the reform faction in the Fox government?

Heredia: I hope they will succeed. The Secretary of Foreign Affairs Jorge Castaneda and the national security adviser, Adolfo Aguilar Zinser bring a progressive perspective into the Fox cabinet. I hope they will succeed in that regard, although I am afraid that when it comes to economic policy they will either be ignored or won't want to get into a fray because they know it will be a losing battle.

Are we better off with Jorge Castaneda as Foreign Affairs Secretary than with Rosario Green in the Zedillo administration? Yes, of course. Jorge has refreshed the Foreign Affairs ministry, has brought back to life the idea of a very active foreign policy. Adolfo has given the concept of national security a new meaning; defining it as the need of Mexicans to have a decent job, a decent life. He is looking at problems such as water supply as a question of national security.

I see their participation in the Fox cabinet as very important to the push for progressive objectives. What remains to be seen is to what extent those ideas will take shape in middle- and long-range programs and how long they will stay in the cabinet. I hope they will last the entire six years because we need people like them pushing for a progressive perspective inside the Fox cabinet.

At the same time we cannot fool ourselves, because we know that the decisive voices that take care of economic policy will follow the interests that they are there to defend. Very clearly these are the interests of the corporations.

MM: What is your assessment as to why Cardenas did not do better in the election and what do you see as the outlook for the PRD?

Heredia: Cardenas did not grab the imagination of young Mexicans and Fox managed to present himself exactly like Cardenas did in 1988 - as the man who could beat the PRI. Cardenas did beat the PRI in 1988, but never became president.

To do justice to Cardenas, what Fox has achieved would have been impossible, even unthinkable, without the very persistent work Cardenas did to undermine the PRI since 1987. In a way, Fox owes to Cardenas the room he had to maneuver in 2000 and the willingness of Mexicans to vote for the opposition.

As for the future, the PRD has to cast itself as a modern political party that champions the cause of the majority of Mexicans that will be left out by Fox's economic policy. The PRD should be ready to push for small and medium businesses that inevitably, in spite of Fox's speeches, will be left aside with the continuity of the current economic policies. The PRD also has to push for the peace process in Chiapas, which has become a key issue for the Fox administration. The PRD will also have to push to fight the monopolies, to fight for a thorough fiscal reform, to fight for the elimination of privileges that have been built over many years to use the power of the government to create personal fortunes.

The make or break issue for the Fox administration will be whether people will be better off; whether or not the little people benefit from Fox's policies. I'm afraid that in spite of his speeches, at the end of the day the continuity in economic policy will translate into a further polarization of Mexican society.

That's where the PRD comes in. The PRD should play the role of defender of social rights, defender of our local, regional and national productive capacity.

The party will elect a new leadership in December of 2001, and I believe it's likely that the former mayor of Mexico City, Rosario Robles, will eventually become the new party president. She's a very charismatic, forward-looking leader and I think the PRD has a good chance to rejuvenate itself and become the party that champions the causes of the majority of Mexicans.

MM: How do you see progressive, non-partisan, civil society evolving and interacting with the Fox administration in the next six years?

Heredia: Those that are not working for Fox or Lopez Obrador will have to reinvent the notion of civil society. Until now, civil society was mostly the equivalent of being against the PRI. People outside of Mexico might have trouble understanding what life under a president who is not with the PRI means, because the vast majority of Mexicans have not experienced that during their lifetimes.

So civil society will have to give itself a new meaning, a new set of goals that I believe will have to do a lot more with social justice. We have to some extent attained political democracy at the federal level. At the national level that's still a goal, taking into account that in many states - like Tabasco and Yucatan as I mentioned before - we still have strongmen that control state politics.

The real challenge for civil society is to push for social justice in a country that has become increasingly polarized in economic, political and social terms. When even the World Bank tells you that 82 percent of Mexican families have a monthly household income of under $500, you have to wonder what kind of justice can be attained under this system. Civil society will have to become critical of both the Fox administration at the national level and the Lopez Obrador administration in Mexico City.

I also think the media will have to open up and be democratized. Access to information will be a very critical issue. And the ability of Mexicans to know what the government knows about them is a right that also still has to be conquered.

So access to information and social justice will be at the top of the list of the challenges that civil society will have to undertake.