Austerity, debt, a sharp reduction in real wages, and an accelerated sell-off of the national patrimony to imperialist big business - that is the capitalists' planned "solution" to the crisis of the Mexican peso. The official scheme, worked out between the government of Mexico and representatives of U.S. and other capitalists, was announced by Mexican president Ernesto Zedillo January 3.
Three weeks after taking office Zedillo was forced to devalue the peso by 15 percent December 20. Over the next week, the value of the Mexican currency continued plummeting by more than one-third against the U.S. dollar. Finance minister Jaime Serra Puche resigned December 29.
In an attempt to stabilize the Mexican economy, the Zedillo government lined up emergency credit totaling $18 billion from Washington, Ottawa, European governments, and 10 major U.S. banks. These credits will be used to guarantee billions of dollars in short-term debt called tesobonos that the government must repay to capitalist investors over the next several weeks. These government bonds have been a major source of financing for the state budget.
The plan, among other things, will hold pay raises in 1995 to 7 percent, while inflation is now predicted to run about 15 percent to 20 percent. Rising prices and interest rates will also drive even larger numbers of poor peasants and farm workers off the land and into Mexico's swelling urban slums. Already the income of the wealthiest fifth of the Mexican population is 27 times that of the poorest fifth.
The labor officialdom in Mexico, tightly bound to the country's ruling capitalist party, put up a show of dissatisfaction with the agreement, seeking to protect their flanks from the anger of workers and peasants already facing more than 15 years of declining real wages, growing poverty and joblessness, and dispossession of land and tools. After Zedillo delayed announcing the pact for 24 hours, however, union officials fell in line and signed the agreement.
The New York Times paraphrased one top labor official as saying "that he, too, thought it was unfair to ask workers to sacrifice again" but thought that the pact "was the only way for Mexico to overcome its current crisis." The outcome confirmed the estimate of an article in the December 31 Financial Times of London that "getting the [union] leaders to sign should not be much of a problem - in Mexico they are used to being told what to do.
"But the fact that real wages only began to recover in 1993 after a 10-year fall," the article continued, "may mean that keeping the unions' rank-and-file from getting restless will be much tougher than in the past."
Besides further lowering real wages, the plan calls for slashing billions of dollars in federal spending. The government has so far studiously avoided specifying where these cuts will come from, but they too will undoubtedly slash deeply into the living and working conditions of workers and peasants.
Another of big business's conditions for the "rescue plan" is the accelerated privatization of Mexican industry and infrastructure. Airports, rail lines, roads, ports, electrical plants, and telecommunications concessions are to be put up for sale to capitalists outside of Mexico. The government will give imperialist banks a freer hand to invest in Mexican financial markets, allowing them to purchase Mexican banks outright for the first time. The Washington Post termed this aspect of the agreement a "national garage sale."
Zedillo is even cautiously probing the sell-off of parts of the state oil enterprise, Pemex, regarded as a symbol of Mexico's sovereignty since the country's oil resources were taken back from pillage by British and U.S. monopolies in 1938. Former president Carlos Salinas de Gortari had floated the idea of selling up to 40 percent of some Pemex subsidiaries, but the proposal was dropped when the big, imperialist-owned petrochemical companies demanded at least 51 percent.
Adrian Lajous Vargas, the newly appointed head of Pemex, is expected to favor allowing privatization of aspects of the enterprise such as petrochemical production and gas pipelines. Lajous is credited with cutting employment at Pemex by more than half, to 106,000, over the last several years.
The Mexican stock market ended the year down 50 percent in dollar terms from 1993, with an especially sharp plunge in the last 10 days. The crash had repercussions throughout Latin America: the value of Argentine stocks fell 15.3 percent in the last week of December, and the Sao Paulo stock exchange in Brazil dropped 16.4 percent.
Interest rates on peso loans from Mexican banks have shot up to between 35 percent and 45 percent. The exorbitant rates increase the likelihood that businesses and consumers will default on loans, threatening the banking system. On top of this, much of the banks' capital is in the Mexican stock market or long-term government securities, the value of which has also fallen heavily.
Zedillo's January 3 plan did not stop the hemorrhaging. The peso dropped further and Mexico's stock market continued its decline, signaling that big business will not let up the pressure for further concessions.
The government has attributed the devaluation in part to renewed activity by guerrilla forces in the impoverished southern state of Chiapas. The Mexican regime has been unable to reach a settlement in the rebellion that broke out a year ago in response to devastating conditions of poor and landless peasants there.
The U.S. rulers are also concerned about the social and political impact of the crisis in the United States. An article in the January 3 Wall Street Journal raised the concern that the weaker Mexican economy and stronger U.S. dollar tend "to increase the flow of Mexicans across the border to the U.S."
And while the headline of the New York Times editorial in its December 29 issue cautioned, "Mexico: Don't Panic Over the Peso," the editors had no plan to resolve the crisis. Their advice to the Mexican president was "to reassure poor Mexicans-they will not be put off again with promises." But the Times conceded that convincing foreign capitalists it is safe to invest in Mexico "will require a degree of budgetary austerity at home that could force Mr. Zedillo to defer some of his planned new social spending for awhile."
The editors of Business Week tried to strike a cheerful note in the January 9 issue, saying, "Mexico remains a promising market for investment." The magazine pointed to the "ongoing commitment to privatize state-owned industries" and "unfettered access to the U.S. market thanks to the North American Free Trade Agreement" to justify their optimism.
Over the past decade, Mexico has been among the top recipients of foreign capital, although the bulk of the funds in recent years has poured into stocks, bonds, and privatization bonanzas rather than into the construction of new or expanded factories.
Last year Mexico was the first Third World country to be admitted to the Organization for Economic Cooperation and Development, an international organization previously limited to the imperialist powers of North America, Western Europe, Japan, Australia, and New Zealand. But the currency crisis in Mexico shows once again that especially in the depression conditions that mark world capitalism today, neither trade agreements nor bursts of big-time profiteering can lift even the most developed nations of Latin America or elsewhere in the semicolonial world into the ranks of the handful of advanced industrial countries that have dominated world trade and politics for close to a century.
Just before the devaluation of the peso, the U.S. business magazine Forbes ran an article entitled "Take a chance on Mexico." It advised bond-holders that investing in "Mexico or Brazil could boost your yield and reduce your volatility."