Date: Sat, 7 Jan 1995 12:26:38 CST
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From: Workers World Service <>
Via NY Transfer News Collective * All the News that Doesn't Fit

Crisis deepens as banks demand wage freeze

By Teresa Gutierrez, in Workers World,
7 January, 1995.

While the dauntless Zapatista National Liberation Army was commemorating the first anniversary of its uprising in Chiapas, the Mexican government was becoming more and more indebted to the whims of international finance capital.

The crisis rocking Mexico's economy confirms the profound effects that the prospect of mass struggle can have on the ruling class.

On Dec. 19, when the EZLN took control of almost 40 towns in the state of Chiapas, Mexico's economy reeled. Foreign investors immediately bailed out of Mexican financial markets in a rush. The central bank's reserves plummeted from $17 billion at the end of October to $6.5 billion.


The government then dramatically devalued Mexico's currency, the peso. It was allowed to float against other currencies, and fell still further.

This 30-percent decline of the peso produced the equivalent of an across-the-board wage cut as prices of basic commodities soared.

The economic crisis was portrayed by bourgeois economists as one of the worst since the 1980s, before Mexico's so-called economic miracle. Wall Street, the U.S. government and the International Monetary Fund were all anxiously awaiting the word from Mexico's newly inaugurated president, Ernesto Zedillo. He was to unveil a "rescue plan" to save the situation.

But his speech unveiling the plan, scheduled for Jan. 2, had to be postponed as union leaders refused to go along with its key demand: a wage freeze.

According to the New York Times of Jan. 2, it is the Mexican government's job now to "convince foreign investors that the Mexican market they once thought the world of was not a mirage."

These investors, over two trading days before the peso was devalued, took nearly $2 billion out of the country. By Christmas, they had pulled out a whopping $10 billion.

How quickly a friend becomes a stranger in the capitalist world. Before NAFTA, these same cutthroat investors did all they could to expand the Mexican economy. In 1993, for example, they ordered the U.S. government to prop up the peso with a $12-billion line of credit. Of course, that money has to be paid back, with interest.

The U.S. capitalist government is not about to abandon the current Mexican establishment. President Bill Clinton said on Dec. 29 that Mexico has made a "serious commitment to reform"--meaning an assault on the workers--"and I would like to see that rewarded."

A member of the U.S. Congress said anonymously that rather than ask a Republican-dominated Congress for funds to lend Mexico, the Treasury Department is likely to use a little known resource, the Exchange Stabilization Fund.


The onus for the current economic crisis is being put on the Mexican government. Economic analysts are saying that Mexico is like Orange County, California: "It did not realize how risky its economic strategy was until too late."

These same analysts blame the crisis on Mexico's $30-billion trade imbalance and on its exchange rate. Others complain that the peso was not devalued in an orderly fashion.

Even though Mexico followed just about every single demand made by the IMF, it still couldn't do enough for it.

But what and who is really to blame for this economic crisis? Why should funds from the U.S. Treasury be used to bail out the banks, instead of helping workers here? Whose crisis is it, anyway?

The crisis belongs to the bankers, and they should pay for it. Crises, it should be remembered, are inevitable under the capitalist system, no matter who administers it.

Wall Street, after all, devised the plan for opening Mexico to further U.S. capitalist domination via implementation of the North American Free Trade Agreement. Now many of these same investors are pointing a finger at Mexico, trying to disavow their own work.

In early December 1994, when the Clinton administration held its lavish Hemispheric Summit in Miami with the heads of state of most nations of Latin America, many political gains were made for the U.S. One of them was to bring Chile into the free trade agreement.

Mexico no longer enjoyed an "exclusive relation" with the U.S. and Canada. This little-talked-about deal with Chile has contributed to the crisis in Mexico.


Now the bankers are playing hardball with the Mexican government. President Zedillo was trained at Stanford University in California, and the captains of international finance expect him to apply the economics he learned there.

They are demanding measures that will assure profits at the expense of the workers.

The "Zedillo plan" to put a lid on wages, prices and government spending comes from the imperialist bankers. They have clearly stated they want a national agenda that will result in more privatization and more cutbacks.

And the Mexican government continues to try to do their bidding. Jaime Serra Puche, Mexico's former finance minister who was described as "bringing home NAFTA," is no longer needed. He has been replaced by Guillermo Ortiz Martinez, who functioned as an executive director of the IMF from 1984 to 1988 and is sure to help carry out the demands of international finance capital.

But the bankers want to have their cake and eat it too. Even as they demand harsh economic measures, they also tell Zedillo he must control the social unrest that is smoldering around the country.

When the Zapatista Army took yet another bold step on Dec. 19, it made it clear to the world that this rebel army is not going away. It showed that Wall Street does not have NAFTA all sewn up in its hip pocket.

The steady resistance of the indigenous army in Chiapas shows NAFTA to be a mere piece of paper before the awakened masses. It is the struggle of the masses--and not IBM or American Express-- that is decisive in determining the outcome of any secret agreement made on Wall Street.

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