Envío Digital
Central American University - UCA  
  Number 199 | Febrero 1998



Blood in Chiapas, Economic Recovery And the Asian Crisis

Human Rights Center Miquel Agustín Pro and Tata Vasco Center

The indigenous massacre by the Red Mask group in the Acteal municipality of Chenalho, Chiapas on December 22, 1997, leaving 45 Tzotziles dead and 25 wounded—mainly women and children— put Chiapas at the center of world attention once again. Later investigations pointed to Chenalho's municipal president as one of those involved in the crime. While other high-level state and federal government officials were also accused of taking part, the intellectual authors remained carefully masked.

What did this massacre make clear? That armed paramilitary groups exist in Chiapas that are instigated, trained, financed and protected by the army, the state and federal government, the official party (PRI), the political bosses and the cattle ranchers. These power groups want a "dirty war" waged against the EZLN and its sympathizers in order to defend their own economic and political interests. The Miguel Agustín Pro-Juárez Human Rights Center has identified at least ten paramilitary groups working in Chiapas. The Acteal massacre is the bloody consequence of leaving many other crimes committed by these groups unpunished. They have killed hundreds of indigenous people, and just before Acteal even made an attempt on the lives of bishops Samuel Ruiz and Raúl Vera in San Cristóbal de las Casas.

Part of a Strategy

Acteal is a bloody piece of the low intensity war strategy the army has been carrying out in Chiapas for a long time. Through that massacre the government indicated its decision to fight the municipalities that, by their actions, have declared themselves autonomous. In Acteal, Red Mask attacked a group of civilians supporting the autonomous authorities in the Chenalho municipality.

The government strategy is to exacerbate the political, economic and even religious contradictions that exist between and within the communities, to give the appearance that the army has nothing to do with the conflict. It hopes to later turn that very conflict into a factor for pacification and promotion of order.

The army has been testing the zone for a long time to see how far it can push its pacifier role and thereby escalate the anti- EZLN military offensive. At the same time it is increasing its presence in Chiapas, penetrating into Zapatista zones, encircling the EZLN and trying to isolate it from its social support base. The ultimate objective is to disarm the EZLN by force, preparing the conditions for a surgical operation that will decapitate the indigenous armed movement.

Chiapas is not A Local Problem

As long as the government shows no political willingness to fulfill the agreements made with the EZLN, no negotiated solution in Chiapas will be viable. On December 11 and 14—just a week before the massacre—the autonomous and PRI municipal government authorities had signed a joint agreement to put an end to provocations and aggression.

The indigenous bloodshed at Acteal was physical evidence of just how far the possibilities of a solution to the Chiapas conflict had deteriorated after the government's failure to fulfill its agreements with the EZLN on indigenous rights and culture and after the suspension, for over a year, of the San Andrés dialogue. It also put to the test the decision of the EZLN as an armed movement to seek a political solution to the indigenous peoples' unbearable situation. The EZLN has backed off from military confrontation, not responding to army provocations either before or after the massacre.

Acteal totally unraveled the negotiation scheme agreed to at San Andrés; confidence and communication have broken down between the parties. The last government commissioner to negotiate peace did not recover the credibility needed to be able to sit down at the dialogue table. His replacement came with a more restricted function: Negotiation Coordinator. On the other hand, the National Mediation Commission (CONAI) and the Commission for Pacification and Harmony (COCOPA) have been unable to urge fulfillment of the accords or effectively mediate a renewal of the dialogue, while the Commission to Follow up and Verify the Accords was stillborn; it never met after its installation, and could not carry out its mandate.

After the massacre, the national government revealed its intentions by giving a fake version of the facts and demonstrating its total unwillingness to negotiate. It sought to compare the EZLN— protected by the Harmony and Pacification Law—with the illegal paramilitary groups, to thus justify disarming both by force or at least forcing a negotiation with the EZLN on terms more favorable to its own interests. The government also made an effort to limit the conflict and its solution to Chiapas itself, presenting it as a merely local problem that locals must resolve, ignoring the fact that Chiapas and Acteal are expressions of a national conflict whose solution corresponds to all Mexicans. The CONAI and COCOPA proposals, which among other things urge the withdrawal of provocative army troops from the Zapatista zone, aim to unmask the governmental strategy and create conditions for the renewal of dialogue in favor of peace.

The Economy Is Recovering

Peace will be very fragile as long as the war is not attacked at its roots. The war is born of the population's inhuman impoverishment, massive unemployment and the brutal intensification of inequalities. From the global point of view, however, there is no doubt that the economy's behavior in 1997 showed recovery after the severe fall begun in 1995.

The growth in 1997, which finally benefited consumption among the population to some degree and created new jobs, offers guidelines for measures on behalf of an effective societal participation in the economy. Non-exporting businesses can produce and generate more jobs, better consumption and more investment through the domestic market. The opposition parties have begun to respond to this orientation, obtaining modest results thus far. They slightly increased social spending, slightly reduced the cost of public services for the poorest and laid the foundation to monitor public resource administration.

The recovery trend was confirmed throughout the year, with the economic growth of between 6.5% and 7% exceeding official expectations of 4-5% growth. This advance, however, is colored by the severe contraction Mexico suffered in 1995 (-6.2%) due to its restrictive measures adopted in response to capital flight and the peso devaluation in December 1994.

The economy finally returned to its path of growth interrupted in 1995, exceeding 1994's Gross Domestic Product, which is an undeniable achievement. Some 940,000 new jobs were created in 1997 as well, which meant that the total number of workers insured by the Mexican Social Security Institute—an important job indicator—reached almost 10 million.

The economic recovery was felt in almost all sectors— agriculture, manufacturing, trade and services— because, for the first time since the 1994 crisis, the domestic market participated in the recovery. From January to October, the greatest growth (22%) was registered in investment in productive activities. Consumption among the people finally improved as well, growing by 5.6%. Exports, which now represent almost 30% of the national GDP, grew by 17%.

The macro-economy remained relatively stable. Although inflation exceeded government estimates—the government projected lowering it from 27.7% in 1996 to 15-16% in 1997—there was substantial improvement; by November it had only reached 17.7%.

Everything under control

Control of inflation is the main objective of Mexican economic policy, which considers the lowest possible inflation to be a pillar of economic wellbeing, since it attracts more foreign investment. In 1997, although some monetary and financial restrictions were lifted to favor economic growth, the government continued to control inflation largely by keeping salaries down.

Another pillar of inflation control—stability of the peso against the dollar—was maintained through September thanks to the entrance of significant capital into the stock market and into production, as well as the entrance of foreign currency loans to businesses and the government. The value of the peso recovered from January to September—dropping from 7.8299 to 7.7776 pesos to the dollar—but it was an artificial improvement based on Mexico's higher inflation with respect to the United States.

The financial crisis in Southeast Asia permitted devaluation of the Mexican peso without political costs or major capital flight. The devaluation, which had to happen at some point, appeared linked to the bad financial streak throughout the world.

In a year of such significant political changes, the Mexican government and the International Monetary Fund took great pains to point out all these economic achievements as proof of the adequacy of current economic policy. The IMF knew this public reflection was necessary. Given the PRI's control over the government, there had been no domestic opposition to economic policy since 1982, when, to get out of its financial crisis that year, the government made a pact with the United States and the international organizations to introduce radical economic policy changes favoring investment and market openings and privatization. The pluralist nature of today's Congress, however, means that it can put the brakes on the executive's unrestricted freedom of action.

And the Majority?

How did economic recovery and improved consumption translate for the majority of Mexicans whose economic situation did not improve in 1997? The most reasonable response is that, barely emerging from such a serious crisis, recovery cannot benefit everyone immediately, though certainly the creation of thousands of jobs was beneficial. A business organization called the Employers Confederation of the Mexican Republic concluded that, with the annual average population growth of 1.9% exceeding the 1.5% economic growth between 1995 and 1997, then we are poorer.

It is also more than reasonable to criticize the manner of evading crisis, choosing to punish incomes and the living conditions of the majority. Thus it can be seen that the proportion of the population in low-income jobs has been on the rise since 1995. Salaries have also lost value. Between December 1, 1996— when the minimum wage was increased 17%—and December 31, 1997, inflation hit 19.5%, thus invalidating the buying power of the new minimum wage.

Super-Devalued Salaries

Salaries are controlled not only to get out of the crisis, but also to prevent crises. The drop in salary value has been a constant over the last 15 years. The decade between 1987 and 1997 was one of economic pacts. Businesspeople, workers and the government agreed on economic measures to control inflation and, with less emphasis, to promote growth. In December 1987 the minimum wage of 6.4 pesos daily bought 94% of the so-called Indispensable Worker Market Basket, with 35 basic articles. In December 1997 the minimum wage, now 26.4 pesos, bought only 25% of the same basket and only 22.3% of what it bought in October 1976, when it registered its highest level. Between 1987 and 1997 the number of hours of work required to buy the basket, earning minimum wage, increased from 8.36 to 32.22.

Ever More Foreign Banks

The Banking Fund for Savings Protection and all the bank rescue programs together are unable to make national banking activities healthy. This problem is being resolved through the increasing participation of foreign banks in Mexican banks. At the end of 1996, the 18 foreign banks that entered the country in association with Mexican banks had put in 12% of the capital in Mexican banks and managed 9% of the credits.
Although the globalization of business throughout the world is unstoppable, and in itself could be a sufficient argument to justify the foreign bank presence, that presence brings two problems to Mexican banking. First, the virtually bankrupt national banks do business with the foreign banks from a position of weakness and are not favored by effective participation in management of the business or in technological improvements. Second, the country's expansive and precipitous financial opening makes not just the banks but the entire economy much more vulnerable to changes overseas and to conditions demanded by the foreign banks operating in Mexico.

Informal Economy Grows

The main positive economic results appear in the formal economy, among those who pay taxes and are governed by established rules in law and practice. The informal economy— a universal phenomenon— is the other face, where those who are excluded from the successful economy are found.

According to official data, the informal production of goods in Mexico equals 8% of the GDP and informal trade is 20% of formal trade. Private organizations estimate that the size of the total underground economy is somewhere between 40% and 60% of the GDP.

Commerce is the main informal activity. Within it, 1.5 million people, 37% of those employed in formal trade, sell on the street. Food manufacture, textiles, lumber, construction and other services follow in importance.

Informal employment reflects formal unemployment, which has historically been high and continues to increase. Informal employment was never less than 40% of the economically active population between 1970 and 1995. It increased from 55.5% in 1990 to 59.4% in 1996, exceeding the 56% average for Latin America and Brazil's 57%.

Economic Debate Makes its Debut

A significant economic novelty of 1997 occurred in the political arena. With the inauguration of a majority in opposition to the PRI governing party in the Senate and House of Representatives, economic policy issues have ceased being a merely formal debate and have become priority issues on the legislators' agenda. The opposition has already undertaken a review of various governmental actions in the area of privatizations and public resource management: reopening the scandalous CONASUPO case, the privatization process of banks and of TELMEX, and the criteria and resource management for bank rescues.

The clarification of these cases and the actions taken in each one of them should help put an end to unilateral decision- making on issues having to do with the economy as a whole and all of society; they should put a stop to corruption in assigning and managing resources and should initiate a period in which decisions are made by consensus among the parties in Congress, which speak for the interests of broader and more diverse social groups, until now practically absent from decision-making and power structures.

The G-4 and The 1998 Budget

The current economic policy has been the backbone of the country's last three governments, and is thus very jealously guarded. This was notable in the 1998 federal government spending budget and annual income program discussion. For the first time, the budget was subjected to a real debate in the House. The National Action Party (PAN), the Democratic Revolution Party (PRD), the Labor and Green Ecologist Parties—known as the Group of Four or G-4—had reached consensus about various modifications to the government proposal that would favor the economy of the broadest social groups possible. At the last moment, however, PAN changed its vote and supported the PRI.

Balancing government accounts has been an official goal for the last 15 years. The government considers that if spending exceeds income it will generate inflationary pressures, and the debt will damage other sectors of the national economy.

For 1998, the government proposed total spending of 871,568 billion pesos, which meant a 22.8% participation in the GDP. This spending would exceed income by 47.348 billion pesos, a deficit of 1.25% of the GDP, 0.75% more than estimated in 1997.

The opposition parties felt that the deficit could go as high as 3% of the GDP without damaging the budget equilibrium. But aware—and perhaps even fearful—of the political cost and slim probability of success, they chose not to seek spending increases and focused instead on resource distribution.

What Did They Achieve?

A climate of expectation about the debate between the legislative and executive branches regarding the public books began to grow in October. Although the annual budget is not all there is to a country's economic policy, the budget discussion was charged with strong political and social pressures. This grew out of both the opposition parties' commitment to those who elected them on July 6 and the already visible competition for the next elections.

By the end of the debate, the opposition had won some significant improvements: the reassignment and/or reduction of some 15 billion pesos of total spending, of which 6 billion were taken from bank rescue; reduction of the President's discretionary fund from 150 to 50 million pesos; a 37% increase in federal disbursements to municipal governments and direct municipal management of the funds; control measures on public functionaries' incomes; legislative follow-up on public spending; controls over the public debt and the earmarking of income surplus; 20% gas and electricity subsidies for households that earn less than the equivalent of 3.2 minimum salaries; executive obligation to report within the first three months of 1998 on the distribution of the 10 billion pesos it will use to make businesses financially healthy.

More important issues are pending:
-A fiscal reform favoring production and productivity, jobs and consumption, and controlling capital movement and short-term speculation.

-The review of government debt payments, which together with rescue programs will absorb some 135 billion pesos in 1998.

-The clean up of social program management to replace the "hand-out" approach with one that incorporates people's participation in social and economic life.

The Inequality Abyss

The generation of disparities between social groups, economic sectors and geographical regions is implicit in every economic process. There is no greater example than the current world panorama, which concentrates knowledge and economic well-being in a few advanced countries, leaving the vast majority of others at the lower end of the scale almost disconnected from the global economic dynamic. In between are some intermediary countries, of which Mexico perhaps qualifies as one. Social distancing is also produced within each country and in Mexico we are seeing it grow.

Must it be this way? Generalizations are dangerous because they can cover up other realities and other alternatives. Even now, the boom of neoliberal economics, China and India are successfully contradicting its rules because they only use economic formulas they find suitable to their societies. Both countries have a self-sufficient agriculture, which is no small gain, and India is on its way to industrialization; its merchandise circulates massively throughout the world, slowly improving in quality. Meanwhile Latin America remains below the educational levels of countries like Korea or Taiwan.

We all know that neoliberalism did not bring poverty to Mexico. Even if we could remove the heavy load to which this model has shackled our ability and need for economic action, we would find ourselves once again facing realities that came before the model: radical inequalities in income distribution, educational opportunities and individual and social development; and great difficulties organizing labor and achieving productivity not necessarily based on exploitation.

Social Spending in Mexico

It is through social spending that governments can compensate for social inequalities, by favoring the economically weaker groups. Two aspects are important to a better understanding of Mexico's current social spending policy. The first is that greater social spending is required because the economy's growth lags behind demographic growth and income distribution is so inequitable; yet it hasn't increased because economic policy considers it unjustified and counterproductive.

The second is that the social spending policies that do exist are hand-out based; they don't seek to open paths via social programs for the economic stragglers to incorporate themselves effectively into productive life. The markets are trusted to order economic life, but that "ordering" only benefits the most skillful, while the less skillful are promised that their turn will come when there is enough wealth for some of it to trickle down to them. We have been waiting for that moment for 15 years.

For 1998, 360 billion pesos, 41% of total government spending, is earmarked for education, health, social security and regional development. Within that social spending, the Social Development Secretariat (SEDESOL) will use 38.1 billion pesos on programs to combat poverty among 2 million families in 22 states of the Republic. In 1997, 400,000 families were supposedly attended in 504 municipalities with education, health and food programs, basic social infrastructure and promotion of production and employment. But Chiapas' inhabitants have argued to the rest of Mexico that SEDESOL used those resources to pay the paramilitary groups that are now sowing insecurity and death in the zone.

The complex realities of Chiapas, Oaxaca and Guerrero must be seen in the framework of this government option to divert funds despite the chronic extreme poverty suffered by their populations. Economic vulnerability is interwoven with social, cultural and political marginalization of the poor, the majority of whom are indigenous.

Chiapas: Immense Wealth

Chiapas is not poor for lack of resources. There is poverty in the social organization and in the division of labor and distribution of wealth. The whole reality reflects profound discrimination against the indigenous; they are socially undervalued and humiliated, deprived of their land and belongings and poorly remunerated for their labor. We know, for example, that in Chiapas there are still even tiendas de raya, which we had thought were past history. These were company stores in which no money changed hands but the laborers made purchases against a supposed salary level, inevitably exceeding it and becoming more and more indebted.

Chiapas' wealth is one very powerful reason for the conflicts and their necessarily complex solution. In Chiapas, the Río Grande and its over 40 tributaries make up one of the most important hydrologic systems in all of Latin America—116 billion cubic meters, equivalent to 30% of Mexico's total hydrologic resources. Chiapas generates close to a third of the country's electricity, but that energy is used for irrigation on only 3.6% of the total 1.3 million hectares of productive land in Chiapas. The rest of the land can only be used seasonally.

We also know that Chiapas has in its entrails great quantities of petroleum resources, that black gold that attracts both Mexicans and foreigners.

Echoes of the Asian Crisis

Mexico's economic links with other countries will continue to be the Achilles heel of macroeconomic balance. Maybe because of this it will aspire to less growth, since as soon as growth is activated, imports once again outpace exports, leading to pressures for a monetary devaluation which in turn bring inflationary effects, leading to a tightening of the austerity belt.

The equilibrium also tends to be less stable because growth promotes the entrance of foreign capital in the stock market, which means offering high yields for investment while making credit for production and consumption more expensive. This in turn puts a brake on activities in much of the economy.

The international horizon also offers uncertainty because of the effects of Asia's financial crisis. The crisis began in July with the devaluation of Thailand's currency, followed by devaluations in the Philippines, Malaysia and Vietnam. A lot of capital from those stock markets and others in developing countries sought refuge in more stable markets in the United States and Europe. The negative effects of the crisis were absorbed by the Asians, while Europeans and US citizens benefited. The most spectacular impact occurred in Korea, with the bankruptcy of businesses and banks. Also in Japan. The possible origin of the crisis is a combination of excessive public spending together with the great destabilizing power of financial capital, which moves rapidly around the world with no rules to control it. But it may also be due to a strategy to weaken competition from Asian countries which is disadvantageous for Western countries.

In 1997 Mexico's official economic policy benefited from this crisis and the devaluation of the peso, though it is calculated that some $10 billion left the country. The international map for 1998 appears complex: it ranges from the possibility that Asia's financial crisis will continue and hurt the stock markets of developing countries or that Asian devaluations will allow more sales to the United States, displacing Mexican products from that market, to the contrasting possibility that more financial capital could move from Asia to Mexico.

Given the international financial uncertainty, in which crises are becoming recurring patterns, it is most important that developing countries have responses prepared to deal with the crises as well as possible. The Mexican government offered Japan advice about the pertinence of applying severe austerity measures in its economy, cutting domestic market growth. The IMF praised the good conduct of Mexico, which does not apply currency rate controls during financial ups and downs, but it failed to mention that the people feel the effects of that lack of controls in higher prices.

How to Face the Crisis

Mexico has much to learn from the Asian countries. Despite the crises, the productivity of their societies is based on labor, education and a sense of national identity that gives them cohesion and motivation. Even if this crisis was triggered deliberately to weaken Asian competitiveness, these countries will not docilely obey the IMF prescriptions; they will respond their own way.

Since Mexico's foreign financial relationships are weak and it is always lacking money, it should make every effort to promote productive investment that generates better paid jobs than those of the maquilas and contributes to improving technology and the ways of organizing business activity. Money from that kind of investment would not leave the country so easily.

Naturally, that investment is not as easy to come by as is maquila investment. Many of these assembly plants don't even bring machinery in as an investment, but on loan. All they want is authorization to pay low salaries, and to be given free land and free rein to contaminate the environment.

Attractive productive investment requires the country to invest in infrastructure and educate and train its people. It also requires that national businesses be able to compete to offer it better products and services.

And for the unexpected financial shocks, there is nothing better than fiscal controls on very short-term capital. Mexico has allowed capital to develop bad habits; it is easily attracted by profits that are not offered in other countries, but it disappears just as easily, taking with it express profits quickly gained. Chile and Spain now apply controls to that risky fly-by-night capital.

To deal with any type of crisis, the most urgent task is to make the economic environment a space for broad social participation. In Chiapas as well.

Poverty in Mexico: Some Indicators

* How many poor?
* 42 million people out of a total population of 93 million
are poor.

* Of those 42 million, 22 million live in extreme poverty.

* Of those 22 million, 15 million live in rural areas.

* Living conditions
* 25 million people do not have access to potable water
in their houses.

* 40 million people lack the minimum conditions of environmental hygiene.

* A thousand municipalities are extremely marginalized.

* 53% of the population consumes only 1,400 calories daily
(minimum requirement: 2,300)
* Children in poverty
* 15 million children live in conditions of poverty.

* 4 million indigenous minors suffer discrimination.

* 2 million minors have no access to school.

* 800,000 minors leave school because of poverty.

* 60,000 children die annually before their fifth birthday from preventable diseases.

* 9 of every 1,000 children are born underweight.

* 400,000 pregnancies a year are of adolescent women.

* 1.2 million children of migrant workers travel with their parents to northern parts of the country to work.

* 30,000 children are repatriated annually after attempts to cross the border into the United States.

Print text   

Send text

<< Previous   Next >>


Why Did the Rearmed Rearm?

América Latina
Community Radios: Freedom of Antenna!

Blood in Chiapas, Economic Recovery And the Asian Crisis


New Twist with the IMF: The Winners and the Losers

Multilateral Investment Agreement: A World Alert

Caribbean Voices: Coast Women Share their Agenda

Democratic Transition: The Interminable History
Envío a monthly magazine of analysis on Central America
GüeGüe: Web Hosting and Development