Jan/Feb 2002 - VOLUME 23 - NUMBER 1 & 2
P r i v a t i z a t i o n : R i p - O f f s a n d R e s i s t a n c e
Off the Grid
By David Bacon
Mexicos Free Market Extremism,
and Lahors Challenge to Privatization
Mexico City In the 1930s and 1940s, General Lazaro Cardenas made
nationalization of economic resources and land reform symbols of Mexican
national sovereignty. Independence from the colossus of the north, Cardenas
said, meant prying the hands of U.S. owners from the main levers of the
countrys economic life. Just a few decades after the cataclysmic
revolution of 1910-20, Mexico wrote public ownership of the two keys to
its economic future oil and electricity into the constitution
itself. Today, however, that bedrock commitment to public ownership is
Nationalist economic development was overthrown as the basis of the countrys
economic strategy when technocrats took power in the former ruling Party
of the Institutionalized Revolution in the 1970s. Today the Mexican economy
looks nothing like it did 20 years ago. Well before passage of the North
American Free Trade Agreement, the disparity between U.S. and Mexican
wages was growing. Mexican salaries were a third of those in the United
States up to the 1970s. They are now less than an eighth, according to
Mexican economist and former Senator Rosa Albina Garabito. In some industries
theyve dropped to a twelfth or fifteenth even during a period
of relative decline in U.S. wages.
In two decades, the income of Mexican workers lost 76 percent of its
purchasing power, while the Mexican government ended subsidies on the
prices of basic necessities, including gasoline, bus fares, tortillas
and milk. The government estimates that 40 million people live in poverty
and 25 million in extreme poverty.
These results are the product of the imposition of neoliberal
economic reforms. In the last two decades, Mexico has become their proving
ground, as the International Monetary Fund and World Bank used the leverage
of foreign debt to require massive changes in economic priorities designed
to encourage foreign investment. The heart of those changes has been privatization
of Mexican state enterprises. Those put on the auction block include the
airlines, ports, railroads, banks, phone system and whole sections of
other formerly state-owned industries [see Mexicos Privatization
Pinata, Multinational Monitor, October 1996].
The impact on workers has been devastating. A majority of Mexican industrial
workers worked for the government, and the organized labor movement had
its greatest strength in the state sector until the transformations started
in the 1970s. While three-quarters of the workforce in Mexico belonged
to unions three decades ago, less than 30 percent do so today. In the
state-owned oil company, PEMEX, union membership still hovers at 72 percent.
But when the collateral petrochemical industry was privatized over the
last decade, the unionization rate fell to 7 percent. New private owners
reduced the membership of the railway workers union from 90,000 workers
to 36,000 in the same period.
Workers have fiercely resisted privatization. Soldiers had to occupy
the port of Veracruz at gunpoint in order to privatize it and fire its
workforce. Mexico Citys bus drivers fought the selloff of the Route-100
company for three years, including one in which their union leaders were
imprisoned. Wildcat strikes hit the railroads when they were sold to Grupo
Mexico, and copper miners fought a valiant battle against job reductions
when the Cananea mine was bought by the same owners in the late 1990s.
While the government and privatizers defeated these resistance efforts,
workers have consistently held at bay one of the governments most
important privatization schemes the selloff of the electrical system.
A Thunderbolt From Below
The labor landscape began to change, however, when, seven years ago,
former President Ernesto Zedillo announced plans to put the electrical
system up for sale. Those plans have outlived his administration. Current
President Vicente Fox, a former Coca-Cola executive who became the first
candidate to defeat the ruling PRI in 70 years, announced during his campaign
that he would continue the privatization plan.
The government argues that it has no money to invest in modernizing the
apparatus, especially the generating stations that would be the first
object of privatization. In addition, it argues that private owners could
provide service at cheaper prices defying the experience
of previous Mexican privatization schemes.
George Bushs assumption of the U.S. presidency has given those
plans further impetus. His energy plan also envisions much more regional
integration, tying Mexican generation to the power grid and market in
the U.S. Southwest. Deregulation of U.S. utilities the political
direction of the U.S. Federal Energy Regulatory Commission even under
former President Bill Clinton has acquired yet greater emphasis
under Bush. Integrating the electrical systems of the United States and
Mexico is not only a technical goal, but a political one, designed to
create greater profit-making opportunities for the newly deregulated subsidiaries
of U.S. utilities.
In 1998, however, Zedillos privatization scheme was met with a
wave of popular resistance led by the SME. Under the banner of stopping
the selloff of both electricity and oil, more than a million people demonstrated
in Mexico Citys central plaza, the Zocalo, on the traditional May
In 1999, splits began to develop in the other electrical union, SUTERM.
On May 22, 3,000 of its members defied their national leaders and marched
in the capital, openly allying themselves with the SME. Another demonstration
on August 28 brought out 5,000, and a national coordinating committee
was set up, representing 15,000 workers.
Meanwhile, the SME established the National Front of Resistance Against
the Privatization of the Electrical Industry (FNRCPIE), and collected
over a million signatures on petitions in just three weeks. The battle
over privatization was internationalized when the SME hosted a conference
in Mexico City, which featured delegations from Brazil, Argentina and
other Latin American countries. Further conferences also brought together
the Workers University of Mexico, the National Association of Democratic
Lawyers, the left-of-center Party of the Democratic Revolution, along
with union representatives, academics, nongovernmental organizations and
other political parties.
The union argues that the government subsidizes large users, even though
Mexican power prices are already very low. In addition, government budget
cuts continue to undermine any modernization of equipment or facilities.
The SME accuses the government of draining the resources of the Power
and Light Company by forcing it to buy power from the Federal Electricity
Commission, whose prices have increased 298 percent, while the companys
rates to consumers have only gone up by 176 percent.
The World Bank Intrusion
The recommendations were so extreme that even a leading employers
association condemned it. Claudio X. Gonzales, head of the Managerial
Coordinating Council, called the report over the top, arguing
the Bank does not make such proposals in developed countries. Why
are they then being recommended for the emerging countries? he asked.
But Fox embraced the report, calling it very much in line with what
we have contemplated, and necessary to really enter into a
process of sustainable development.
Among those who disagreed was Jesus Campos Linas, the new PRD-appointed
head of the labor board. He saw the World Bank proposal as a stalking
horse for Mexicos largest employers and their allies among foreign
corporations and financial institutions. The proposals were too drastic
for the government to make itself, he said, but they provided an extreme
pole against which its own proposals might seem more acceptable.
Campos Linas rejected Foxs argument that gutting legal protections
would make the economy more competitive, attract greater investment and
create more jobs. Mexico already has one of the lowest wage levels
in the world, he said, yet theres still this cry for
more flexibility. The minimum wage in Mexico City is 40.35 pesos a day
no one can live on this. And now weve lost 400,000 jobs since
According to Harley Shaiken, director of the Center for Latin American
Studies at the University of California, Berkeley, The Mexican government
has created an investment climate which depends on a vast number of low-wage
earners. This climate gets all the governments attention, while
the consumer climate the ability of people to buy what they produce
Rosendo Flores, SME secretary general, emphasizes that privatization
cannot be defeated without seeing its integral connection with the rest
of the neoliberal economic development program and without proposing an
alternative. Industrialized countries developed through strong internal
markets, he points out, with well-paid workers capable of consuming the
goods they produce.
We have seen the consequences of deregulation in the electrical sector in the state of California, which has been detrimental to the interests of the electrical workers and of the population, says a statement signed by leaders of both Mexican electrical unions. In Mexico, the people rightly think that the electrical industry and the petroleum industry should be public property and that such public property is the fundamental basis for their nations existence and of their national sovereignty.