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Report from Mexico

Vicente Fox and Globalization

By Yanick Noiseux
5 November 2001

Media from over the planet have saluted Vicente Fox's victory as a wind of change in Mexico. Now, a year later, negotiations with the Ejercito Zapatista de Liberacion Nacional (EZLN) have once again been interrupted. The fiscal policy's reform project creates fear among the population and is handled by former president Carlos Salinas de Gortari's collaborators, which were in turn reappointed by Fox's administration.
These facts do not attest that a real shift in the day-to-day operations of the newly elected Partido Acción Nacional (PAN) administration did occur. To put it bluntly, can we really talk about a serious "change"?

Where is the famous "el cambio" that was requested "hoy, hoy, hoy" ("today, today, today!") by the new president in one of his notorious one-liners introduced during his electoral campaign? Enthusiasm is sliding away and is slowly mutating itself into increasing doubt. If there is one portion of the population that is really beginning to be skeptical of the new administration, it is certainly the informal sector workers. The latter seem to be ignored by the Mexican authority's economic policies. Ignored? Not really, if we consider the fiscal reform project by the Mexican government. In fact, those workers have become the target when it comes to finding new ways of increasing the government's taxpayer base.

This article will try to bring into light the main perspectives concerning informal work in the context of Fox's election to the top of Mexico's administration and in the larger framework of a "neoliberal" project that was launched in the early 80's and which is even more dynamic today. It will sketch a portrait of the informal sector's situation in Mexico. We will try to stress the relationship which exists between the increasing number of informal workers in this country and the apparition of economic policies over-oriented toward the exportation industries. We will be able to see, as we have already mentioned, that Fox's policies are not very different from those of the previous administrations. Another point that we will discuss is the flexibilisation process supported by the workforce which is, at the same time, involved in the informal sector. In order to situate our readers, we shall also try to capitalize on recent discussions initiated around the Summit of the Americas and on other talks submerging from the imminent apparition of a new agreement on free trade throughout the Americas (except Cuba) the now-famous Free Trade Area of the Americas (FTAA). Then we will present the fiscal reform project, a proposition that was well entrenched in the PAN's electoral program, and that the newly elected government should dictate within the next months. This article will expose President Fox's strategy regarding the so-called informal sector. We will see that, once more, that innovation doesn't seem to be on the menu.

The last part will concentrate on the highly ethical question of the "disciplinarisation" of the workforce, which is brought into light by the repression of street vending in Mexico. Regarding this question, we will have to "downplay" the importance of the "Fox effect" concerning the apparition and development of this process. This "disciplinarisation" of the workforce is in fact a long-term process and for this reason, it would be unfair to throw the "towel" directly at Fox. This evolution of the labor market has slowly been constructing itself over the past twenty years now. Nevertheless, we have to admit that the new administration does not seem to go against the wind. This question is critical since crucial aspects are involved. The "permanent authoritative temptation" (this expression is difficult to translate properly in English.; the original formulation, which we prefer, by Moulier Boutang is "la tentation autoritaire permanente") on labor markets, which is wonderfully described by Yann Moulier Boutang, can lead to very suspicious ways of contracting the workforce. An analogy with the Mexican situation will be attempted in this last part.

Vicente Fox Quesada, Mexico's new strongman, climbed up at the country's head last December and, since then, has never ceased to reiterate his faith in globalization. Through interviews and conferences, the Mexican president is flirting with international investors and insisting on the excellent investments opportunities which exist in Mexico. He is also promoting his new direction team and the increased political stability that comes along with it.

It is clear, in the Mexican case, that this strategy is bending toward the pursuit of economic policies strongly focused on the exportation sector. In place since the 1980's, this economic development strategy is still very much controversed. Sure enough, in export volume terms, the figures are vigorously increasing and the growth is continuous. But the vast majority of those exports are sent to the USA, more often than none, and are a part of a network of exchanges within the multinational firms, which doesn't generate much economic spillover for Mexico. Even more important is the fact that these exports are mostly coming from the maquiladora's industry, a source of low paid employment in miserable working conditions, filled abundantly by young women but where, more and more, we can see the appearance of men. The average hourly wage in the manufacturing industry is still at around 1.80 US$ and in the "modern" private sector, the real-wage has declined 4.6% in the last decade. Sign of the times, more than a hundred thousand jobs have been abolished in the border's maquiladora industry as a repercussion of the American economy's stumble, which has been going on since the beginning of the year.

On top of this, a whole panel of the Mexican economy is kept in the margins of this globalization, which may be more accurately termed as "continental economic integration" and is shaped by agreements like North American Free Trade Agreement (NAFTA) or the new FTAA. This "whole panel" that we referred to is none other than the informal sector of the economy. This segment of the labor market has replaced, in terms of jobs creation, the so-called modern sector for over more than 20 years. Owing to an International Labor Organization (ILO) report, we can state that over 85% of jobs creation in Latin America was supported by the informal sector ever since the 1990's. Results regarding the percentage of informal work in the Mexican economy differ depending on the sources but, generally speaking, they all expose an omnipresent position by the informal actors. Statistics from the Organization for Economic Cooperation & Development (OECD) reveal that 44% of the urban workforce is part of this segment of the economy. Amongst other studies where the percentage climbs up to 61.4%, The ILO is reporting that 57% of the non-agricultural workforce is working in the sector. Hernando De Soto, the much-controversed writer of The Other Path which is "The" current bestseller on the topic, goes even further and advances that the informal sector is employing more than 80% of the active workforce. Compared to the Gross Domestic Product (GDP), OECD analysts estimate that the informal sector's worth is around one third of it. Looking at numbers offered by the Mexican government statistics department, the Instituto Nacional de Estadística Geografía e Informática (INEGI), this number drops to only 12% for obvious political reasons.

On this topic, President Fox seems to be seated in-between two chairs. On one hand, he promised formal businessmen to crack down on tax evasion in this sector of the Mexican economy, this position being strongly reinforced by the fact that the street vending associations have a long tradition of being Partido Revolucionario Institucional (PRI)'s supporters. But on the other hand, he is lending his hand to "humbles" in an ambitious "changaros" (Mexican popular expression for a micro business) program (President Fox is always careful about his man-of-the-people appeal), thereby showing all the paradox of his double language.

We have all the reasons to think that these new micro businesses will contribute to stretch the numbers regarding informal work in Mexico. It is not something which is intrinsically bad, the average earnings in the informal economy are actually 3.2 times the minimum wage, but, like we said before, as long as the government maintains economic policies explicitly oriented towards exports, the informal sector's contribution will remain subordinated to this previous one and will only act like a medicine available to a population that tries to reach the end of the month with something on the table.

President Fox's challenge is enormous in regards to the informal sector in Mexico. It is now considered a fact that the informal sector is there to last and its integration within the boundaries of the so-called "formal" economy will never be a complete success. Vicente Fox obviously understands this reality. But when we observe what is really going on every day in the Mexican capital's streets, where intimidation and repression are executed by hundreds of "ganaderos" on small vendors agglutinating in public spaces, we are again confused by the president's rhetoric. This is without taking into account the soon-to-come fiscal reform that will certainly hurt them even more deeply.

Ironically, the expansion of the informality phenomenon seems to gain strength at the same time as Mexico is reaching a greater openness towards international markets (United States, of course is heading the list) and it becomes more and more possible to advance the claim that the informal economy permits a greater flexibilisation of the workforce, thereby transferring to the workers the major part of the pressure inherent to macroeconomic adjustments policies. Since the early 1980's, (a timeframe that corresponds to the economic strategy realignment from an import-substitution model on to a new "liberal" approach centered around the export industry) the informal sector has never stopped growing. This includes periods of relative economic prosperity, as it has been the case since 1996. Since the introduction of NAFTA in 1994, we can observe that the informal sector question has been "shelved" by the authorities. Apparently, this economic sector, in which more than half of the population is employed, is not a priority.

Recently, the Fox administration has announced the amount of the funds made available for the "changaros" program, so we can now say without speculation that the 147 million pesos placed on the table will certainly be insufficient to solve the problem. This represents roughly 15 million US$ or 0.11% of the Mexican government's budget. It is a relatively small amount if we consider the quantity of workers across the sector or if we compare it to other programs, such as education, health or even "modern" industries subvention programs.

We have to keep in mind that even if globalization can be pictured by hyper-mobility and perturbations in our relation to space, it sits on concrete geographical grounds and this is highly visible through the development of mega-agglomerations like Mexico City. These mega-cities are certainly good portraits of globalization's new geography where the informal sector plays an essential role to support the city's privileged access to the globalized networks of capital spinning around the globe. The informal workers are allowing people to use cheap transportation, meals and lodging and those are "market advantages" when it comes to producing in a global economy. Some day, the Mexican officials will have to collaborate this fact…

For all these reasons, we would recommend postponing any further negotiations regarding an enlarged free trade area. Meanwhile, an acceptable deal can be established and integrated in the FTAA agreement's text regarding some crucial social aspects such as, for example, labor market legislation. The rights of thousands of informal workers need to be secured and not be forgotten by new free trade agreements. Unfortunately, those workers have almost no rights whatsoever in this new economy which promotes investments, goods and services, but which completely ignores worker's rights.

It is now time to look at NAFTA's effects on labor markets outside the so-called modern sector. Of course, there is the ILO which studies the informal sector topic very seriously, but we have to admit that the strength of this organization's recommendations is pretty weak compared to the ones presented by other major actors, like the World Trade Organization (WTO), the International Monetary Fund (IMF) or the World Bank. Furthermore, in relation to the NAFTA question, it's the Mexican government itself which discussed the agreement. But this fact apparently didn't prevent worker's rights to be sidelined.

The informal workers represent the majority of the Mexican workforce. A special attention should definitively be given to their cases when President Fox sits down at the negotiations table and discusses the modalities that will establish the conditions in which this globalization will deploy itself over Mexico.

It was easy to predict that these types of questions would be swept away from discussions at the Summit of the Americas, last April, in Quebec City. Governments from the 34 countries did talk about investor's rights; they insisted on a petulant "Democracy" clause (which is nothing more than a rhetorical exercise), they agreed on a year, 2005, to launch the FTAA. Once again, they repeated that it was not that summits' mission to work on topics like the ones we mentionned. Once again, few voices elevated themselves to protect the worker's rights, even less arose to defend the informal ones'. We have to realize that the latter are, however, a creation of this globalization/continental economic integration cemented by agreements like NAFTA and the now-coming FTAA and are built by organizations such as the Organization of American States (OAS).

Unfortunately, the globalization train will apparently leave the informal workers at the station. Over the years others will come and continue to fill the streets looking for earnings. Without any doubt, the working conditions in the streets will get worse and the pie, which is shared by all those workers, will not extend indefinitely. Therefore, each worker will be limited to a smaller portion of it.

Copyright © 2001 by the News Insider and Yanick Noiseux

Yanick Noiseux is a News Insider analyst. Copyright notice

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