April 27, 2001

Counter-Point

Despite Export Boom, Mexico Still Struggling to Get Back On Its Feet

By Martin Espinoza

Mexico's Finance Ministry has released a glowing report crediting the seven-year-old North American Free Trade Agreement (NAFTA) with turning Mexico into an export superpower in Latin America.

According to the report, Mexico shipped 46 percent of the region's total exports last year, a phenomenal $166 billion worth of goods, up 22 percent from the previous year.

The report was released just before the Summit of the Americas, where 34 political leaders gathered to discuss creating a hemisphere-wide free trade zone. At the summit, Mexican President Vicente Fox proclaimed that free trade has brought unprecedented prosperity to his country.

Unfortunately, the human face of Mexico's success still wears an expression of misery and hunger. About two thirds of Mexico's 100 million people are affected by varying degrees of poverty. Since 1994, when Mexico experienced its last economic crisis and currency devaluation, most Mexicans have been struggling to get back on their feet.

Salaries, a fraction of what they were before the crisis, have not kept up with the rising cost of living. Every month, the price of necessities such as bottled water and gas rises — indeed, in some places the cost of living — in Mexico is quickly approaching levels found in some parts of the United States.

Part of the reason for this is that Mexico, though on the one hand an export superpower, is also a deficit-record import junkie. Since 1990, imports to Mexico have jumped 310 percent, reaching $177 billion last year.

While import statistics give at least a rough picture of what Mexico is buying, Mexico's export statistics can be misleading. For example, the Ministry includes in exports statistics provided by foreign subsidiaries shipping to the first world, primarily the U.S. In other words, it doesn't tell you how much money subsidiaries such as Ford de Mexico or Volkswagen de Mexico send back to their parent companies to pay off stockholder dividends.

Since many foreign companies pay little or no business taxes, one-time capital investments and low wages are for the most part the only benefits of NAFTA-generated manufacturing. This is part of the reason Mexico remains impoverished 20 years after the arrival of the first maquiladoras (foreign-owned, low-wage factories).

Much of Mexico's recent export growth is due to the expansion of maquildoras into central Mexico. These factories are no longer restricted to cities just below the border. A maquiladora worker will earn from $6 to $10 a day, at the lower end of pay scale, just above domestic cleaning and retail jobs.

A large percentage of maquiladora workers are made up of rural teenage girls with little or no education — these are among Mexico's most exploitable citizens.

Asked about low wages in Mexican maquiladoras, Vicente Fox assured reporters that a Mexican worker in a maquiladora makes 4 times the minimum wage, more than enough money to get by. Four times the minimum wage in some places is $10 a day.

But there is even more telling evidence of how Mexico's upbeat macroeconomic statistics do not reflect the real Mexico. For months, Fox has been waging a futile war against Mexican consumers with an unpopular plan to tax food and medicines.

The idea, which was hatched last summer, only weeks after Fox toppled the ruling autocracy that controlled Mexico for 71 years, has since been rejected or criticized by every major political voice in the country, even Fox's own conservative National Action Party.

Fox is threatening to cut off welfare-type subsistence programs to some 20 million dirt-poor people if his plan is not approved. This year alone, the government has approved $1.3 billion in subsistence payments to about 3 million families.

Fox must seek a regressive tax as so much of Mexico's economy is "unofficial" or black-market. There are millions of tax evaders across the economic spectrum, from corporate titans to children selling bubble gum at busy Mexico City intersections.

The maquiladora industry has provided unimpressive government revenues, so the money has to come from somewhere. The campaign to tax food and medicines is a sort of red flag on what's really happening in Mexico — it is the sign of an economic policy that only looks good on paper.

Martin Espinoza is a freelance writer who spent the last 3 years in Guanajuato, Mexico.

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