Downward Mobility: Mexican Workers After NAFTA

The Mexican government doesn’t really care
about us,” says Jesds Herndndez, a Mexican
migrant worker in Tijuana. “We are routine-
ly ripped off by Mexican police and beaten by the U.S.
Border Patrol, and our government just makes state-
ments without doing much to protect our rights….With
NAFTA, their concerns are somewhere else, like the
number of Corona beer cases exported to the United
States…”‘
In the first two years of NAFTA over two million jobs
(one sixth of all jobs in the “modern” sector) were lost
in Mexico, as the country’s productive apparatus col-
lapsed following the quick liberalization of trade.
Mexico’s productive capacity was devastated, as the
BY CARLOS A. HEREDIA
nation’s small and medium-sized businesses could not
endure tough competition from large foreign corpora-
tions. Trade liberalization has meant the deepening of
the dual economy: while large subsidiaries of transna-
tional companies that cater to foreign markets have
flourished, many Mexican firms that sell to domestic
consumers have gone under. In fact, manufacturing
wages in Mexico are now below the levels of 1981,
prior to the economic liberalization drive.
After two and a half years of free trade, domestic
consumer debt is at an all-time high in Mexico. Over
seven million Mexicans are in arrears in their home
mortgages, car loans and/or direct credits. The financial
system is in virtual collapse, as the banks cannot collect
the money they lent in the midst of the borrowing and
spending spree that followed the passage of NAFTA.
The government has pumped over 12% of its GDP into
the private banks, but the Mexican banking system is
NACIA REPORT ON THE AMERICAS
Carlos A. Heredia is an economist with Equipo PUEBLO, a
Mexican nongovernmental organization. He is the director of
PUEBLO’s regional development project in the state of
Tamaulipas.
34REPORT ON LATINO LABOR
still in trouble. It is
caught in a vicious
cycle in which it
can’t lend more The growing money until it gets
paid on old debts.
polarization in both But it can’t get paid on old debts without
countries lends lending more money because the private
sector is broke.
weight to the thesis In the United
States, the economy
that NAFTA was may be “booming,” but the gap between
rich and poor is the basically designed to greatest in over a
generation. As for
facilitate investment family income, U.S.
Latino workers have
and capital flows in been working longer hours for lower real
wages. They have the region, and to experienced a gener-
al downward shift
maintain a pool of out of better-paying
jobs into low-wage
cheap and available employment, with
an increasing per-
centage of people labor, working for less
than poverty-level
wages. 2 They have
been affected by
downsizing, flexible
production and mi-
gration. To make things even worse, social programs
have been cut, while health care budgets are also being
slashed.
The failure of the Mexican and U.S. governments to
deliver on the glowing promises of NAFTA has con-
firmed the warning often raised in the NAFTA debates
that the trade pact would further polarize both societies.
It has also lent weight to the thesis that the agreement
was basically designed to facilitate investment and cap-
ital flows in the region, and to maintain a pool of cheap
and available labor in both countries.
NAFTA benefits have been reaped by companies able
to concentrate production and marketing in an integrat-
ed way in both the United States and Mexico. A small
number of U.S. companies have increased their invest-
ments in the Mexican economy, most dramatically in
the automobile industry and, increasingly, in the finan-
cial sector. In the first two years of operation under the
new rules of NAFTA, Mexico’s 15 foreign banks made
a profit of $1.3 billion. This represented 41% of
Mexican bank profits in 1995. These banks cater to a
select group of fewer than 500 of Mexico’s largest com-
panies, which together control most foreign trade. Just
three of these fifteen banks-Citibank, JP Morgan and
the Spanish bank, Santander-accounted for 81% of
those profits.
Among Mexicans, the trade pact’s obvious winners
have been the owners of recently privatized compa-
nies-the billionaires who heeded the call of former
president Carlos Salinas de Gortari and campaigned for
the trade agreement. Many of them have since made it
to Forbes magazine’s list of conspicuous billionaires. In
1995, the combined wealth of Mexico’s 15 richest indi-
viduals was $25.6 billion dollars-the equivalent of
10% of the country’s estimated GDP.
Practically all of the companies owned by these bil-
lionaires have partners in, export to or render services in
the United States. They control key industries, such as
telephone and telecommunications, banking, mining
and air transportation. Most have been close business
associates of the family of former president Carlos
Salinas. The most affluent of them, Carlos Slim-the
owner of Tel6fonos de M6xico–increased his net worth
from $3.7 billion in 1994 to $6.1 billion in 1995. He was
granted a protected monopoly by the Salinas govern-
ment for six years after the phone company was priva-
tized in 1991.
When we get out of the privileged big business circle,
however, things change significantly. According to a
study jointly released by the Mexican Confederation of
National Chambers of Commerce and the government
statistics agency, NAFTA had negative repercussions for
60% of commercial establishments in Mexico. 3 These
businesses reported problems with “unfair competition”
(small local and regional retailers being displaced by
large U.S. firms, such as Wal-Mart), import and export
licenses (discretionary nontariff barriers imposed by the
U.S. customs service to prevent Mexican goods from
entering the United States), and the low quality of for-
eign merchandise (cheap Southeast Asian imports that
enter Mexico through the United States).
NAFTA, and the economic globalization of which it
is a part, has reshaped the U.S. Latino and Mexican
workforce. In Mexico, two thirds of the economically
active population-25 million out of a total of 36 mil-
lion workers-survive on informal activities, without
access to social security and with little possibility of
advancement. Only 9.37 million Mexicans have regular
paid jobs in the private sector, and just under 2 million
are employed by the government or public agencies.
According to the government, 6.7 million Mexicans
joined the labor force between 1988 and 1995, but only
VOL XXX. No 3 Nov/DEC 1996 35REPORT ON LATINO LABOR
750,000 paid positions were created, most of them in
the export -mainly maquiladora-sector. 4
There is a growing gap between prices and salaries in
Mexico. According to a study by the Labor Congress
(CT) during 1995, the cost of the basic basket of goods
deemed necessary for a family of five rose 60%, while
the minimum wage only increased 31%. Furthermore,
government surveys indicate that the number of people
unemployed and underemployed (those who work less
than 35 hours per week) rose from 7.7 million at the
time of the December 1994 peso devaluation to 10.2
million in December, 1995. This represents an increase
from 20.8% to 26.4% of the workforce. 5
In the aftermath of the peso devaluation, it has
become an article of ruling-circle faith that Mexico will
export its way out of the economic crisis, and that
NAFTA will ensure that this happens. In fact, in the last
18 months, bilateral trade between the United States
and Mexico has resulted in a substantial Mexican sur-
plus. In 1996, it is expected that Mexico’s total exports
will top $100 billion of which over 80% will be exports
to the United States. This represents a 20% increase per
year over the last two years. The trade surplus is expect-
ed to be about $9 billion.
The truth, however, is that exports have surged only
because there is a dramatically reduced domestic market
in Mexico. Practically none of the companies that
increased exports have augmented their level of output;
they are simply selling abroad what they cannot sell at
home. This trend, together with the steep fall of the
peso, has generated this trade surplus.
During 1995, exports concentrated sharply as only
2.7% of all exporting companies (750 of a total of
27,000) were responsible for four fifths of all Mexican
exports. 6 Three sectors of the economy-electronics,
automobiles/parts, and machinery/precision instru-
ments-account for 67% of all exports. Well over half
of the trade surplus comes from the maquiladora sector.
The Mexican government strongly suggested that the
maquiladora model was going to be phased out once
NAFTA was in place, but the opposite has taken place.
The maquila plants continue to represent an enclave
along the northern border, where over two thirds of the
plants are located. Only 2.1% of their inputs are bought
inside Mexico. As of August 1996, there were 3,188
maquiladoras, which employed over 800,000 workers,
as opposed to less than half that number in 1988.7
In Mexico, the free-trade deal was promoted by an
alliance of corporate chieftains, government officials
and politicians of both the party in power, the
Institutional Revolutionary Party (PRI) and the opposi-
tion National Action Party (PAN). The official unions,
which represent 90% of unionized workers and are tight-
ly tied to the government and the ruling party, offered
unconditional support for
the agreement. By contrast,
the center-left Party of the
Democratic Revolution
(PRD), the country’s third-
largest party, criticized
NAFTA, arguing for a dif-
ferent type of economic
integration, as did the inde-
pendent unions and the so-
called “democratic cur-
rents”-groups inside
official unions who oppose
the leadership but are large-
ly powerless.
In the United States,
U.S. Latino labor leaders
faced a difficult dilemma
during the NAFTA debate.
On the one hand, they
wanted to establish or rein-
force links with their
Mexican colleagues south
of the border. On the other
hand, they wanted to be on
good terms with the
Mexican government. The
Mexican Trade Ministry
often invited U.S. Latino
Many U.S.
Latino labor
leaders
supported the
trade pact,
insisting that
working
through the
side
agreements
and the NAFTA
institutions
would
compensate for
a less-than-
perfect pact.
labor leaders on tours to
Mexico, where they were pampered by their hosts. The
understanding was that they could not organize with
their Mexican counterparts.
Regarding their relations with the U.S. Government,
the issue for Latino labor leaders has always been to
weigh the benefits that accrue from supporting the pre-
sent Administration. Apart from the majority of the
Cuban-exile community in Florida, most Latino com-
munities (including Cuban-Americans in New Jersey)
have favored the Democratic Party and its policies. In
this context, many of them supported the trade pact,
insisting that working through the side agreements and
the NAFTA institutions would compensate for a less-
than-perfect pact.
Although in the aftermath of its passage, some anti-
NAFTA groups on both sides of the border continued to
campaign for the trade pact’s abrogation, two and a half
years into NAFTA, outright opposition to it no longer
seems feasible. Groups from a variety of ideological
positions have come to accept that, like it or not, we
have to live with NAFTA. There are, however, in the
words of political analyst Jorge G. Castafieda, ways to
“amend, improve or postpone numerous chapters in the
agreement.” 8 Castafieda suggests the reopening of
negotiations on such issues as compensatory financing
and development funds, dispute settlement, the phasing
NACILA REPORT ON THE AMERICAS 36REPORT ON LATINO LABOR
Immigrant Mexican fish-packing workers in California explode in applause as the results are announced
r of the union representation .
out of tariffs on agricultural imports, and most impor-
tant for the purposes of this essay, migration, which
from the outset was left out of the agreement.
The recent new U.S. legislation on undocumented
workers has certainly hurt the bilateral relationship,
although it remains highly unlikely it will seriously
hamper the northward flow of Mexican migrant work-
ers. Mexican workers are continuing their migration to
the United States, regardless of the ever-tougher immi-
gration stance north of the border. The relevant variable
for migrants is the wage disparity between the two
countries-a disparity that has substantially increased
after the most recent peso devaluation. As of October
1996, for example, the minimum wage was almost 12
times higher in the United States ($4.75 an hour) than
in Mexico ($0.41 an hour).
It is an open secret that the labor of undocumented
Mexicans subsidizes the economy of the U.S.
Southwest, as well as the service sectors of Chicago
and New York City. The importance of these subsidies
is underscored by the refusal of U.S. policymakers to
normalize the flow of migrant workers. An agreement
signed in 1974 between the governments of Canada and
Mexico, for example, allows Mexican agricultural
workers to go to Canada temporarily to work on the
harvests each year. During the first year of the accord,
203 Mexican workers took advantage of the agreement.
Today, the annual average
is 5,000 workers. The
U.S. government has
refused to sign a similar
accord with Mexico,
because it would raise the
cost of farm labor, since
the flow of undocumented
workers saves U.S. com-
panies billions of dollars
per year. But this is totally
de-linked from NAFTA.
Although there is a bipar-
tisan consensus in the
United States that the cur-
rent hysteria against
Mexican migrant workers
will recede once the
November 1996 presiden-
tial election is behind us,
many in the labor move-
ment-on both sides of
the border-feel the U.S.
government will never
accept the inclusion of
migration and labor rights
in an expanded trade
agreement. There seems
to be no chance for a European Union-style compact,
which would facilitate evolution toward a common mar-
ket-and a common labor market.
There remains, however, a strong possibility of
strengthening and enforcing the labor-protection side
agreement of NAFTA. Here, there is a great need which
is illustrated by a recent report from the Women’s
Rights Project of Human Rights Watch. 9 The report
denounces violations of human and labor rights against
women who look for jobs or who work in the
maquiladora industry along the Mexico-U.S. border.
According to the report, in the plants of companies such
as General Motors, General Electric, Zenith, Panasonic,
Sanyo and AT&T, women are routinely subjected to
questions on the use of contraceptives and their sexual
habits. They are forced to resign when they get preg-
nant.
“When we start working at a factory, we go through
a physical medical examination, as the company wants
to make sure we are fit to work,” says a woman work-
ing for a maquiladora in the border state of Coahuila.
“However, they don’t do health check-ups as we leave
a factory to see how we are. I have an ear infection.
Working postures are uncomfortable. You’re either sit-
ting or standing for the full eight hours. We’re now
working with plenty of chemicals that are not allowed
in the United States because of their effects, and
VOL XXX, No 3 Nov/DEC 1996 37REPORT ON LATINO LABOR
because the instructions on handling them are written
in English, the women do not know what they’re work-
ing with. People are never given severance pay when
fired. We have no safety whatsoever. The law states we
should get compensated for work-related illnesses, but
hospitals will never admit we get sick because of our
work.”10
eyond NAFTA, a greater priority of the U.S.
government is to insure that the economic liber-
alization policies remain in place. That is why it
will not pressure the
Mexican government to
enforce its labor laws
even though Mexican
workers are routinely
fired-by domestic and
transnational companies
alike-for engaging in
“unauthorized union
activity.” The narrow
focus on trade liberaliza-
tion also explains why
both Michel Camdessus,
Managing Director of the
International Monetary
Fund (IMF), and U.S.
Treasury Secretary Robert
Rubin routinely say that
Mexico is doing “surpris-
ingly well,” and empha-
size the need to continue
the fiscal policies put
into place since the crisis
erupted.
Wall Street investment
bankers also seem to be
content with the relative
Cesar Chavez addresses the press at a United Farm Workers
demonstration in Bakersfield,
California in 1991. The demon-
stration called for enhanced reg-
ulation of pesticides used in the
fields.
stability of the peso/dollar exchange rate, the gains in
the Mexican Stock Exchange and the hefty profits
reaped by foreign capital in Mexico. None of them dis-
cuss how the Mexican people are doing, nor why under
NAFTA the Mexican economy is not growing when it
is supposed to be booming.
To a large degree, there is a consensus among eco-
nomic and political elites on the kind of economic
policies to be implemented in the region. And this
consensus has led to an increasing subordination of
Mexican policymaking to the dictates of the
Washington. Since the Clinton Administration’s
February 1995 bailout package was approved, the
number-one priority of economic policy in Mexico
has been the servicing of Mexico’s debt to the U.S.
Government and the IMF.
Of course not everyone concurs that the Mexican
economy is doing surprisingly well. “It is obvious
NAFTA has brought neither the economic prosperity
nor the flowering of human rights and workers’ rights that was promised,” says Pharis Harvey, Executive
Director of the Washington, D.C. based International
Labor Rights Education and Research Fund (ILRERF).
Harvey has been an advisor on several petitions to the
National Administrative Office (NAO)-the agency
established by the U.S. Labor Department under one of
the NAFTA side agreements to hear labor complaints
related to the trade agreement. On one such petition, in
October 1994, the NAO ruled that there was no evi-
dence the Mexican government had failed to enforce its
labor laws in the dis-
iLssadl somllle 40 pro- union workers at Mexican There has
plants of the U.S. corpo-
rations General Electric steady-thoug and Honeywell.
So while the side agree- growth of cr
ments have given workers labor sol on both sides of the bor-
der a forum, they have not There have be been an effective tool for
improved labor-law en- Of exchanges bet
forcement. In practice and U.S. Lati they have proven to be
unenforceable when the who work in the
political wills of the gov- ernments involved have and, incre
been lacking. None- for the same ( theless, they are frequent-
ly appealed to.
Claudia Luengas, of the
National Association of Democratic Lawyers in
Mexico City, believes that the lack of an independent
judiciary and the blatant disrespect of the rule of law by
labor tribunals in Mexico move Mexican workers to
look for other means of redress outside of the country.
In this context, some groups have deemed it preferable
to go beyond Mexican courts and address dispute reso-
lution through multinational panels established by the
side agreements. The Mexican government has fre-
quently expressed displeasure at these procedures, and
the paradox has emerged that a government which
favors economic liberalization and the free flow of
investment capital disapproves of the internationaliza-
tion of conflicts derived from economic liberalization.
“Sometimes it is our own Mexican bosses who are
the worst exploiters, and we have to take our case to the
United States (or in the case of Sony, to Japan) to make
the Mexican government listen to us,” says Martha
Ojeda, who was fired from a Sony maquiladora in the
border city Nuevo Laredo because of her organizing
work. “If we only demonstrate in Mexico, they will
suppress the movement, and it will become inconse-
quential; but if we spread the information abroad, the
government will have to pay dearly for the deterioration
of the [false] law-abiding image it has been trying to
give itself through an expensive public relations cam-
paign.””
And beyond the seeking of redress through interna-
tional appeals, there has been a steady-though cau-
tious-growth of cross-border labor solidarity. There
have been a number of exchanges between Mexican
and U.S. Latino workers who work in the same indus-
try and, increasingly, for the same corporation. U.S.
Latino trade union leaders have ventured south to get
been a
h cautious–
“oss-border
idarity.
en a number
:ween Mexican
no workers
same industry
asingly,
:orporation.
acquainted with the experi-
ences of their fellow Mexican
workers in the telephone and
telecommunications, textile
and garment, automobile, and
public service industries. The
best known individual case of
cross-border cooperation
between U.S. residents and
Mexicans who work for the
same corporation is that of
Ford Motor Company. On
several occasions, Ford
workers from the United
States have supported free
union elections in the
Cuautitlin plant of the giant
auto maker.
At this point, three condi-
tions will have to be met
before higher levels of
understanding between Mexican and U.S. Latino
workers can be attained: democratization of the labor
unions, political alliances between unions and other
organized sectors of the population and a leadership
that looks beyond geographical borders. The more
representative the unions become at home, the better
equipped they will be for cross-border initiatives and
for joint endeavors in this era of globalization.
Although recent changes in the top leadership of the
AFL-CIO seem to favor a closer relationship between
U.S. (particularly Latino) and Mexican workers, until
the Mexican “Berlin Wall” of government control over
unions falls, it will be difficult to establish solid cross-
border links between unions. 1 2 The “unionism without
borders” will have to wait until free unions become a
reality in Mexico. And north of the border, only when
Latinos in the U.S. become able to exert an electoral
force that is at least comparable to their demographic
weight will their initiatives on labor and other issues
gain relevance.
Downward Mobility: Mexican Workers After NAFTA
1. Jesus Hernandez (name has been changed), a Mexican migrant
worker in Tijuana, to El Financiero, (Mexico City), April 15, 1996.
2. Richard J. Barnet and John Cavanagh, “The Planetary Workplace:
New Challenges for Working People of Color,” Civil Rights
Journal, 1996.
3. Mexico Update, Equipo PUEBLO (Mexico City), April 16,1996.
4. La Jornada (Mexico City), July 12, 1996.
5. Figures are from La Jornada (Mexico City), March 4, 1996.
6. Figure given by Enrique Vilatela, the director of Bancomext,
Mexico’s export-import bank, in La Jornada (Mexico City), July 15,
1996.
7. Raul Llanos Samaniego, “Son importados ia mayoria de los
insumos en las maquiladoras,” La Jornada (Mexico City), August
24, 1996.
8. Jorge G. Castaieda, “El TLC y las relaciones M6xico-Estados
Unidos,” in Various Authors,Los compromises con la nacion (Mexico City Plaza y Janes, 1996), pp. 61-79. This is also the
transcript of a speech delivered in Mexico City on April 11, 1996.
9.Alejandro Romero Ruiz, “Hostigamiento y represi6n contra
mujeres en las maquiladoras,” in La Jornada (Mexico City),
August 22, 1996.
10.Maria Sanchez (her real name has been changed), a worker at
Confecciones Monclova, interviewed by Sedepac’s Maquiladora
Project, quoted in Patricia Amat y Le6n, Ajuste Estructural:
Debate y Propuestas, Lima, Peru, April 30, 1996.
11.Author’s interview, May 23, 1996.
12.The election John Sweeney as president and Ron Blackwell as
director of campaigns; both of these leaders come from the pro-
gressive wing of labor.