This is an edited version of a speech to Newcomers, Cuernavaca’s ex-pat community, April 5, and the Tec de Monterrey, April 25, 2013. Additional material and source documentation have been added.
It is virtually impossible to discuss Mexican-American diplomacy without talking about “dependency,” and there is no doubt that Mexico is dependent on the United States. But one can argue that there is a growing mutual dependency that makes Mexico one of the most important countries for the U.S. economy and its security.
Nowhere else in the world does a rich developed nation share such a lengthy border with a poorer developing nation and nowhere else do two neighbors have such an unbalanced relationship. The U.S. has three times Mexico’s population, three times its per capita income, and almost ten times its GNP. For Mexico the U.S. is its number-one trade partner. It sells the U.S. over 80 percent of its exports and buys from the U.S. over 80 percent of its imports. Eighty percent of Mexico’s tourists come from the U.S. and 80 percent of Mexico’s international debt is owed to U.S. public or private institutions. Remittances from Mexicans working in the U.S. are the second largest source of Mexican income after petroleum. Mexico sells the U.S. about 50 percent of its petroleum. The U.S. would like to buy even a larger percentage but Mexico feels the need to diversify its markets due to Washington’s habit of using economic boycotts to punish countries for perceived offenses. So there is no doubt Mexico is hopelessly dependent on the U.S. But while Washington could have ignored Mexico many years ago, it would be impossible to do that today.
The two countries share a 2300 mile border. The fact that the frontier is demilitarized saves Washington hundreds of millions of dollars. During the Cold War the Pentagon used to complain how many more troops the USSR had, not mentioning that a significant part of those troops were committed to the lengthy border with hostile China. The Pentagon has saved billions by the fact that the two frontiers, Mexico and Canada, do not require significant military expenditure. *
(* Of course demands by Southwest states to arm the border have resulted in a considerable increase in expenditures. Doris Meissner, former Commissioner of the INS: “Today, the federal government spends more on its immigration enforcement agencies than on all its other principal criminal law enforcement agencies combined. Spending for Customs and Border Protection, Immigration and Customs Enforcement, and US-VISIT reached nearly $18 billion in fiscal 2012. Contrast that with the $14.4 billion spent for the FBI, Drug Enforcement Administration, Secret Service, U.S. Marshals Service and the Bureau of Alcohol, Tobacco, Firearms and Explosives.” (Doris Meissner, “Moving beyond illegal immigration enforcement,”Washington Post, Jan. 7, 2013).
Mexico with over 113 million inhabitants is the 11th largest population in the world and the second largest in Latin America. It has three times the population of Canada though Canada has five times the territory; Mexico has almost three times the population of all 7 countries of Central America combined. Mexico is the 13th largest economy in the world and thus poses a convenient market for the U.S., a market that would grow significantly if 50 million Mexicans did not live below the poverty line. Mexico is the number three trading partner of the U.S. after Canada and China, and recent articles report the possibility of Mexico overtaking China within a few years. According to Andres Oppenheimer, “ In 2011, the United States shipped more goods to Mexico ($197 billion a year) than to the United Kingdom, Germany, France, Italy, Spain and Ireland combined, and exported more than three times more to Latin America ($366 billion) than to China ($103 billion), according to ITC figures.” (Andres Oppenheimer, “Latin America Should Not Be an Asterisk,” Miami Herald, Jan.27. 2013).
Mexico is the largest source of petroleum and the second largest source of strategic raw materials for the U.S. It is the largest source of immigration to the U.S., both legal and illegal. It is the largest source of drugs entering the U.S. There can be no war on drugs without Mexico’s cooperation. Given that the border is so long and so porous, September 11, 2001 made Mexico’s cooperation essential to Washington’s security concerns. So despite a wide disparity in proportions, interdependence is unquestionable.
Alan Riding (1984: 318) says “Mexico might come to accept its dependence on the United States if it felt that it received respect.” This lack of respect is the recurring theme impacting a number of controversial issues that have strained relations between the two neighbors. It is too soon to evaluate thoroughly Obama’s relationship with Mexico and scholars are just beginning to weigh in on the subject. I want to look at roots of diplomatic controversies during earlier administrations, especially those of Bill Clinton and George W. Bush to present the origins of the most contentious issues and the legacy Obama inherited.
Perhaps no issue sparks so much passion on both sides of the border as immigration. The U.S. is the fourth largest Spanish-speaking country in the world, (after Mexico, Spain, and Argentina) and Los Angeles is the second largest Spanish-speaking city in the world. Hispanics now constitute the largest American minority. To some Anglos, this Hispanization of the United States by legal and illegal migrants constitutes a grave threat. Needless to say there is a different perspective south of the border.
The Mexicans do not refer to illegal aliens, preferring the word indocumentados, or undocumented immigrants. No one can deny that the United States has the right to legislate its own immigration policy, but when the Congressional debates started to get serious in the 1980s, no concern was given to the impact of sending several million Mexicans back to a country where at the time over 40 percent of the population were unemployed or underemployed due to the debt crisis of the 1980s. To many Mexicans the lack of any consultation showed a lack of respect. In addition, occasional shootings of migrants by Border Patrol agents, including one migrant shot in the back, outraged Mexicans who do not believe there ought to be capital punishment for illegal immigration. The Mexican Senate even formed a committee to investigate violations of human rights of Mexicans in the United States.
The controversy crested in California in November 1994 where voters approved by 59 percent Proposition 187 which sought to deal with indocumentados by punishing their children who would be denied education, health care, and social services. The courts eventually stepped in to nullify the results of the referendum. But in the debate over the proposition many speakers used racist rhetoric. Granted many proponents of the legislation were not racist; they were genuinely concerned about their property taxes rising to pay for services for migrants. Mexicans do not comprehend the volatility of the issue of property taxes since, as a total source of Mexican revenue, property taxes constitute one of the lowest percentages in the world. All the state and local taxes on my large home in Cuernavaca were under 100 dollars this year.
Regardless of the property tax debate, Mexicans perceived Proposition 187 as a racist measure aimed at Mexicans. Perception is often more important than reality in foreign affairs. The Mexican perception of U.S. racism had already been reinforced by gripping television images of police beating Rodney King in 1991 and subsequent televised video-taped incidents of California sheriff’s deputies beatings of Mexican migrants.The issue of indocumentados has become even more divisive in the last few years and it was the major factor in deteriorating relations between Mexico and the Bush administration, to be discussed later.
THE WAR ON DRUGS
Competing with immigration as an irritant in bilateral relations, the issue of drugs has occasioned considerable friction. There is no denying that about 70 percent of drugs coming into the United States enter from Mexico: a majority of the marijuana and cocaine and nearly half of the heroin. And the U.N. has cited Mexico as the largest source of amphetamines in the hemisphere with scores of meth labs supplying the local and the export market (http://pikapvs.com/2012/03/31/mexico-ranked-the-leader-of-amphetamines-by-the-un). As the so-called war on drugs entered the political discourse, it tended to be a war declared in four year intervals. The conflict centered on the issue of supply and demand. Washington’s position was that Mexico was not doing enough to limit the supply of drugs crossing the border. The Mexican position was that if you Americans didn’t have 35 million people using the shit we wouldn’t have a problem. If it’s so easy to control supply, why is California the second leading source of marijuana in the U.S. despite superior law enforcement north of the border?
At the time the Reagan administration began sniping at Mexico for its failure to cooperate in the war, total expenditures by the administration were less than the cost overrun on a new helicopter defense contract. Mexico was spending 2 ½ times as much as the U.S. as a percentage of its federal budget and the government had committed 25 thousand army and 10 thousand navy personnel to keeping drugs out of the U.S.
It is very difficult for a poor country to muster sufficient resources to compete with Latin America’s most successful multinational enterprise. Drug lords in the hemisphere are estimated to earn over 4 billion dollars a year, enough to hire private armies and subborn police and government officials. While Mexico was spending 200 million dollars a year on the war on drugs in 1997, the drug lords spent an estimated 500 million dollars on bribery alone (The News, Mexico City, Aug. 12, 1997). The bribery figures surely have increased since 1997 though such estimates are hard to document.
Police salaries on average in the 1980s were as little as 150 dollars a month, and today are still only 300 dollars a month. It is easy for a drug lord to pay a cop’s annual salary just for looking the other way when a shipment passes. Even relatively well-paid police officers have been caught in major drug scandals in Detroit, Miami, and border cities. No wonder Mexico has had to depend more and more on the military to wage this war, with the result that drug scandals are now reaching into military units.
The issue reached crisis proportions in February 1985 when drug lords in Guadalajara kidnapped and brutally murdered Enrique Camarena, a Mexican-American official of the Drug Enforcement Agency, the DEA. Mexico had allowed DEA agents to operate within its borders, though the United States does not allow foreign police to operate within its territority. Camarena was investigating ties between high Mexican government officials and drug lords, and the narcotraffickers wanted to know how much he knew. Camarena was kidnapped, tortured, and murdered, possibly buried alive. A fleeing drug kingpin was stopped at the Guadalajara airport but proceeded to write a check to the police on the spot and flew off. The Reagan administration was so infuriated it closed the border temporarily and minced no words in denouncing Mexico’s response. Mexico claimed Washington had lost just one agent while Mexico had lost a dozen officers that year trying to keep drugs from crossing the border.
To further inflame relations, the DEA paid Mexican bounty hunters to kidnap a physician allegedly present at the torture of Camarena, responsible for keeping him alive. Dr. Humberto Alvarez Machaín was kidnapped and passed across the border where he was taken to Los Angeles for trial. Mexico was indignant at the U.S. failure to attempt legal extradition. Imagine if the Chileans kidnapped Henry Kissinger for his role in the military coup of 1973, or if the Nicaraguans kidnapped Oliver North and tried him for Contra murders of civilians there. Washington would not stand for it. Mexico took its complaint to the World Court in the Hague and pursued the case through the U.S. courts. Years later, when relations had improved considerably during the administration of the first George Bush, the U.S. Supreme Court ruled that the United States had the right to kidnap criminals on foreign soil and bring them to trial in the U.S. The decision did not provoke much debate in the U.S. but earned scornful headlines in Mexico and abroad. Meanwhile, Dr. Alvarez presented evidence that he was somewhere else than Guadalajara and that he was the victim of mistaken identity. In 1992 a district court judge granted Machaín’s motion for dismissal on the grounds of insufficient evidence but not before rancor surged in Mexico over American arrogance. Machaín’s suit for compensation eventually reached the Supreme Court where in 1993 the justices ruled that the U.S. has the right to kidnap criminals abroad, even when there is an existing extradition treaty, and his brief incarceration was not sufficient abuse to grant compensation.
Later administrations on both sides of the border gradually reached accommodation on greater cooperation on the drug issue, but no one can claim that either country is winning the war. More on that later.
Mexico has felt insulted on numerous occasions due to repeated Mexico bashing in the U.S. Congress. During the Reagan administration, some U.S. policy-makers were furious at Mexico for recognizing the rebels in El Salvador as a legitimate political force, and for opposing the U.S.-backed Contra war against leftist President Daniel Ortega in Nicaragua. Bob Woodward, author of Veil, the Secret Wars of the CIA, (1988) interviewed hundreds of officials in the administration and claimed that Bill Casey personally had taken charge of the Contra war and was furious at Mexican sympathy for the Sandinistas. He was determined to coerce Mexico to support U.S. policy. Woodward does not mention whether Casey’s fury with Mexico was related to simultaneous Mexico bashing in the Congress, but it may not be a coincidence that in 1986 Senator Jesse Helms of North Carolina began holding hearings on Mexico as chair of the Senate Subcommittee on Western Hemisphere affairs. Day after day administration officials excoriated Mexico. The heads of the I.N.S., the Border Patrol, the D.E.A., the Assistant Secretary of State for Latin American Affairs, all painted insulting pictures of Mexico.
Imagine if the Mexican congress had responded to events in the United States like the Pentagon procurement scandal or the Congressional Savings and Loan scandal by holding hearings on corruption in the U.S. They would have been told to mind their own business. Mexico was outraged at the insults and lodged a formal diplomatic protest, the most serious response short of recalling its ambassador. It was careful to criticize the Helms committee and not the Reagan administration in damning what it called “a clear and impermissible violation of Mexican sovereignty.” Ten thousand Mexicans protested outside the U.S. embassy in Mexico City. To affirm its sovereignty, Mexico shipped oil on credit to U.S. nemesis Manuel Noriega of Panama. With the two countries barely on speaking terms, this was arguably the lowest point in diplomatic relations between the two countries since the oil nationalization in 1938.
THE BUSH ADMISTRATION
Meanwhile, what was surely a rancorous split on policy between Washington and Mexico was defused by the rapid implementation of the Arias peace plan in Central America. Before George H.W. Bush took office in 1989, bilateral relations had already begun to improve. Shortly thereafter elections in Nicaragua unseated the Sandinistas, albeit with considerable financial interference by the CIA. Perhaps Bush’s connection with Texas and having a Mexican-American daughter-in-law predisposed him more favorably toward Mexico. Simultaneously, a new Mexican president Carlos Salinas (1988-94) had turned away from confrontation and sought greater economic integration between the two countries.
Within a short time bilateral relations improved significantly. Mexico’s economic privatizations and opening to foreign investment pleased U.S. Treasury and Commerce officials. The Brady plan for debt relief was being implemented. The first meeting between Mexican Presidents-elect Salinas and Bush took place in Houston in November 1988, and Salinas asked Bush to include Mexico in the negotiations then underway with Canada for a free-trade agreement. The talking heads in the U.S. media missed the significance of this 180 degree turn in Mexican policy. A country that had traditionally tweaked Uncle Sam to show its nationalism and independence and had sought to diversify its markets in Central America, Europe, and Japan, was now offering to cast its economic future with the Colossus of the North. Many Mexican nationalists felt that would make it impossible for Mexico to ever diverge from U.S. policy, a sentiment perhaps disproven by Fox’s opposition to the war in Iraq, to be discussed later. By the time Bush left office in 1993 NAFTA had been signed and awaited Senate ratification.
THE CLINTON ADMINISTRATION
Ironically, Bush’s successor Bill Clinton’s largest electoral constituency, the American labor movement, opposed NAFTA. But many forget that over one thousand small businesses in the tech sector had raised funds for Clinton, and Clinton had promised to work to open wider American access to the global marketplace. His economic advisers, indeed the economic community in general, saw NAFTA in positive terms in the long run. Whatever influence predominated, Clinton broke with his powerful labor allies and with little to gain politically and much to lose, he announced his support for the treaty which passed the Senate by one vote in 1993, and went into effect January 1, 1994.
Prior to the vote a nationally televised debate on NAFTA pitted Ross Perot against Vice President Al Gore. Perot was either ill-prepared or having a bad day, for Gore blew him away. Perot resorted to blather like “the greatest hope of 40 million Mexicans is to have an outhouse.” You can imagine which quote garnered headlines in Mexico the next day. It was a pathetic example of lack of respect. But Clinton’s support and the approval of the treaty earned gratitude from Mexican government circles. Despite groups in both parties opposed to the treaty, it was a bipartisan victory, negotiated by a Republican administration, backed by a Democratic president, and ratified with bipartisan support in Congress.
NAFTA is a complicated and controversial subject deserving of a separate lecture, but let me make at least a brief digression here. While its critics on both sides of the border have pointed out its drawbacks, there is no doubt that it has tied the three countries’ economies much closer together and resulted in a quantum leap in trilateral trade. In 1993 trade between the U.S., Canada, and Mexico totaled 300 billion dollars. By 2000 it had soared to 500 billion dollars. It’s estimated that each billion dollars in trade represents 25 thousand jobs. In 2011 total trade between the three partners reached a trillion dollars (www.naftamexico.net/…/2012).
The Mexican government reported (The News, Jan. 19, 1999) that since 1989 Mexico had risen from 20th place in world exports to 8th place and that exports as a percentage of GDP had risen from 5.7 to 31.7 percent. (There are conflicting reports with another source claiming Mexico is in 16th place in world exports). The number of exporting companies in Mexico rose 67 percent in five years with almost half the new jobs in that sector where wages were growing faster than in other sectors of the economy. In 1979 oil constituted 80 percent of Mexico’s exports. By 1999 oil had fallen to just 11 percent of total exports (The News, Aug. 1, 1999). During the economic crisis of the mid-1990s, to be discussed shortly, Mexican exports became “the bungee cord that stopped the economy’s free fall.” (John Ward Anderson, The Washington Post, reprinted in The News, Mar.22, 1998)
A great deal could be written about the impact of NAFTA on political reform as well. Such a drastic overhaul of economic relations with two important trade partners could not have succeeded without significant external pressure on the PRI to clean up its act.
Perhaps the most serious criticism of NAFTA is that it devastated many poor farmers and that the benefits in Mexico have not been shared with the poor. Trickle down hasn’t worked. Critics claimed that imports had bankrupted 28 thousand Mexican businesses, driven 8 million more Mexicans into poverty, and destroyed 2 million jobs (Hodges & Gandy 2002:170-171). NAFTA proponents argue that far more businesses and jobs were created than lost. When the agricultural provisions of NAFTA took full effect in 2003, Mexican farmers complained bitterly and at times violently that they were being ruined by having to compete unfairly with U.S. farmers whom the Bush administration rewarded with enormous subsidies prior to the 2002 mid-term elections. Many in Mexico are demanding renegotiation of the agricultural terms of NAFTA where the damage to Mexico has been most palpable. Ironically, Bush administration and subsequent Congressional subsidies to American farmers have driven thousands of Mexican farmers off the land, many of them adding to the migrant flow north. Needless to say, this brief digression hardly does justice to a topic like globalization that has provoked violent protests around the world
Just a little over a year after Clinton won NAFTA ratification, he came to Mexico’s rescue during its greatest economic crisis since the Great Depression. Ernesto Zedillo replaced Carlos Salinas in December 1994. No sooner was Zedillo installed than he discovered the treasury was bare. The Salinas government had spent lavishly to win the election for PRI, not wishing to open the possibility that an opposition president might investigate corruption in his administration. In addition, the overvalued peso and the steep drop in prices of imports due to economic reforms had sent Mexicans on an import buying spree.To make matters worse, a brief renewal of the fighting in Chiapas caused foreign investors to pull out more funds. As millions of dollars flowed out of the country, the national reserves fell below what was needed to shore up the peso. Zedillo announced that the peso would float, but instead it sank like a cadaver with cement boots. The peso fell immediately from about 3.3 to the dollar to 6 to the dollar. By March 1995 it had fallen to 7 per dollar.
Virtually overnight anything with imported components doubled in price. Speculating on inflation, even domestic products like corn prices doubled. Rampant inflation galloped through the economy. How does the U.S. Federal Reserve respond to rampant inflation? It raises interest rates. Mexican short term interest rates hit 90 percent. Anyone who had bought a home or automobile on floating interest rates was devastated. Hundreds of thousands of Mexicans lost homes and cars. Domestic demand fell by 70 percent. Massive unemployment swept through the economy. Average real wages fell to the level of the 1970s.
In addition, Mexico had significant dollar-denominated foreign debt. Overnight that debt burden had doubled. Tesobonos, dollar-denominated bonds, were coming due and the treasury had no money to pay. Mexico was on the verge of insolvency. Billions more of foreign investment fled the country. While the crisis had nothing to do with economic conditions in other countries, investors deserted developing economies as the so-called “tequila effect” rattled stock markets in places like Argentina, Chile, and Brazil. Suddenly this was no longer just a Mexican problem. U.S. bank failures were a real possibility due to their over-exposure in loans to Mexico. Hundreds of thousands of Americans were unaware that their pension funds had invested heavily in Mexico. Massive Mexican unemployment threatened to swell the ranks of migrants seeking to enter the U.S. illegally. The fact of global economic interdependence suddenly made the Mexican crisis a serious threat to the U.S economy.
Recognizing the gravity of the situation, President Clinton saw the need for intervention. He approached Republican Senate Majority Leader Robert Dole and House Speaker Newt Gingrich. Both agreed on the need for a bailout. There was surprising bipartisan support for helping Mexico, or so it seemed, until a group of recently elected House Republicans rejected their leadership and opposed spending money on foreign aid. To make the stupidity bipartisan, Democratic House minority leader Dick Gephart announced his opposition as well, probably due to his close ties to the labor movement, still smarting over the passage of NAFTA. Populist demagogues like Ross Perot and Pat Buchanan joined the NAFTA bashers in opposing any bailout.
Suddenly the danger of Mexican default loomed larger. When the impasse threatened Mexican solvency with severe repercussions for the U.S. economy, Clinton decided to bypass Congress altogether. His Secretary of the Treasury Robert Rubin revealed a Treasury department contingency fund for the support of currency and it didn’t say whose currency. To Republican outrage, Clinton signed an executive order extending to Mexico a line of credit for 20 billion dollars. The IMF and some European countries joined to increase the total credit available. The U.S. line of credit was backed by significant Mexican collateral. Washington could hardly lose since any default was covered by a pledge of Mexican oil.
The bailout festered in the U.S. body politic with Republicans threatening to make it a major issue in the 1996 elections. In August 1996, Mexico delivered a re-election campaign gift to Clinton, repaying the borrowed funds early with 1.2 billion dollars in interest. Mexico had used only 13.5 billion dollars of the line of credit but, having stabilized its economy, it was able to borrow on international markets at better rates of interest. The bailout had worked and the Mexican economy had begun exporting its way out of the crisis. (Del Olmo 1996)
While some had blamed NAFTA for the predicament, it was too early for the trade agreement to have wrought such damage. On the contrary, falling tariffs and the devaluation of the peso had made Mexican products significantly cheaper abroad allowing for a huge expansion in exports. By mid-1996 Mexican exports had increased by 37 percent over the previous year. Of course that meant that some of the NAFTA benefits predicted for the U.S. were postponed since Mexicans could not afford to buy dollar-denominated imports.
To work its way out of the crisis Zedillo had to implement a strict austerity budget that did nothing to enhance his popularity and contributed to the significant political changes to come in the 2000 election.
In retrospect, economic analysts credited the Clinton bailout as a huge success and it became a model for subsequent actions in Thailand and Brazil. But international economic interventions remain a political football in Washington with President George W. Bush saying during the 2000 campaign that he would not act to bail out countries in default. The first test of that came in Argentina in 2001 and Bush let the Argentines default with drastic implications for neighboring economies and caustic resentment of the U.S. and the IMF in Argentina to this day.
As a result of his support for NAFTA and his economic rescue, Mexicans (except for the far left) viewed Clinton as a friend almost from the beginning of his term. Of course repeated disagreements over other issues continued to test the friendship. Mexico was distressed by the Congressional mandate that the president certify annually which countries were cooperating in the war on drugs. If a country was decertified, the administration was required to cut off any financial aid and to vote against loans to that country in international lending agencies. Mexico was already the lowest per-capita recipient of aid in the hemisphere, and most of whatever money did go to Mexico went to keep drugs out of the U.S.
The debates over certification and Clinton’s occasional wavering on the issue occasioned resentment in Mexico where just the threat of decertification was enough to send the stock market plummeting. On one occasion, liberal California Senator Diane Feinstein went to bed with conservative Senator Paul Coverdell of Georgia to propose decertification, despite the fact that Feinstein’s state was the second largest beneficiary of NAFTA. Her demagoguery on the issue was probably due to her indebtedness to the labor movement. In a lighter vein, John McCain of Arizona suggested Congress decertify California, the second largest source of marijuana. On another occasion Senate minority leader and presidential candidate Bob Dole published an open letter to Clinton urging him not to certify Mexico. Clinton’s equivocal statement that he was not sure what he would do caused irritation in Mexico, not altogether mitigated when Clinton ultimately approved Mexico’s certification. To the Mexicans, it was the height of arrogance for the country with 60 percent of the world’s demand for drugs determining who was or was not doing enough in the war on drugs. Fortunately in 2000 at the end of the Clinton administration, Congress finally exempted Mexico from the certification requirement.
Another diplomatic irritant was the Helms-Burton law of 1996, or the Cuban Liberty and Democratic Solidarity Act. The law tightened the 38 year-old blockade against Cuba and provided for economic retaliation against companies dealing with Cuba. It permitted companies or persons that had property confiscated in Cuba to sue in U.S. courts any companies using their former holdings. For example, Teléfonos de México was using former ATT equipment in Cuba. Clinton did not like the bill but it came to his desk the week the Cubans shot down the “Brothers to the Rescue” plane causing an outburst of anti-Cuban sentiment in the U.S. and he signed it in March 1996. Mexico, Canada and the European Union protested Helms-Burton and passed retaliatory legislation forbidding their nationals from complying with U.S. law.
In March 1997, the Treasury Department threatened to fine Walmart Canada for selling Cuban-made pajamas. The Canadian government citing its retaliatory legislation threatened to fine Walmart if it took the pajamas off the shelf. Caught in a no-win situation, Walmart Canada decided to resume the sales and the Treasury Department insisted it would enforce the embargo. Perhaps fearing a suit before the World Trade Organization, the Treasury Department apparently backed off since the pajama game disappeared in the press. Who would have imagined that the battle to undermine Fidel Castro would be waged in the pajama department of Walmart Winnipeg? (New York Times, Mar. 6, Mar. 14, 2003). (Despite press reports linking the pajama controversy to Helms-Burton, the Treasury Department was actually invoking older legislation forbidding foreign subsidiaries of U.S. companies from financial transactions that benefitted Cuba.)
Because of the potential conflicts with important trade partners, Clinton soon regretted signing the Helms-Burton bill. He issued annually a waiver against applying it on national security grounds, to the chagrin of his Republican detractors. His successor George W. Bush, despite his debts to the Cuban-exile community, surprisingly followed Clinton’s waiver policy rather than antagonize major U.S. trading partners. And President Obama has followed suit.
Mexicans were bewildered in 1996 when James Jones resigned as Ambassador to Mexico. A stock market figure, Clinton had appointed him to help shepherd NAFTA through the Congress but he had insisted on a short tenure. (When he came to Cuernavaca to study Spanish I gave him a guided tour of the city in his armored SUV). Clinton was unable to get a replacement for Jones confirmed by the Senate. In an attempt to placate the Republican congressional Mexico bashers, Clinton chose former Republican Governor of Massachusetts William Weld. But Weld’s wife had supported Jesse Helms’ opponent in his last Senate race and Helms held up Weld’s appointment on the grounds that he was soft on drugs. Actually Helms had held up numerous Clinton appointments over ideological differences. Mexicans who felt insulted by U.S. criticism of its democratic failings could not comprehend how just one Senator could keep the such an important embassy vacant for almost two years. Clinton was eventually forced to withdraw the nomination, whereupon Trent Lott pronounced, “All’s Weld that ends Weld.” In April of 1998 Clinton appointed a career diplomat and former Assistant Secretary of State for Latin American Affairs, Jeffrey Davidow, and the Senate confirmed him several months later.
Despite the occasional contretemps, in general Mexicans viewed Clinton favorably and he and Hillary received an enthusiastic reception when they visited Mexico in May 1997. During the reelection campaign of 1996, the bias in favor of Clinton was quite evident in television and press coverage in Mexico. One major television newscaster, reporting on Clinton’s large lead in the polls over Bob Dole commented, “Que bueno. Es un gran amigo de Mexico.”
Needless to say, a country where adultery is not unusual in the macho male population found the Monica Lewinsky scandal a subject for lewd jokes but not a drag on Clinton’s popularity. By the time Clinton left office it is fair to say that bilateral relations had reached their most congenial level in many decades. That is not to say that disagreements over Helms-Burton, trade disputes, a trucking conflict. or water rights would not erupt from time to time, but the general atmosphere was one of cordiality and cooperation.
GEORGE W. BUSH
George W. Bush began his presidency in 2001 very auspiciously with respect to Mexico. He had promised in his election campaign that this would be the “Century of the Americas” and that Latin America and Mexico in particular would be the focus of greater attention. While it is traditional for a new president to meet first with his Canadian counterpart, Bush broke precedent and met first with newly elected Mexican President Vicente Fox in February 2001 at the Fox ranch in Guanajuato. In the Mexican election of 2000, Fox and his PAN party had shocked the world by turning PRI out of office after a 70 year domination of the presidency. The first meeting between Fox and Bush was a honeymoon of cordiality with the press noting their common interest in ranches, leather boots, cowboy hats, and big silver belt buckles.
It’s fair to say that each president used the other, albeit graciously.As a presidential candidate with almost no international experience, Bush had stressed his good relations with Mexico as Governor of Texas to show that he had diplomatic skills. Getting wide publicity for his meeting with Fox would go over well with the U.S. Hispanic voters and demonstrate his diplomatic prowess. For Fox who came into office with the lowest voter support of any president in Mexican history, he needed the showmanship of a cordial relation with Bush to consolidate his image as a leader. The personal chemistry between the two ranchers was indeed exceptional, and Bush offered to work on Fox’s petition for an immigration agreement to give legal status to undocumented Mexican workers in the States. Whether Bush thought he had a chance of getting that through a Republican congress is debatable, but the promise seemed genuine.
Unfortunately, seven months later September 11, 2001 blew Mexico and the rest of Latin America off the Bush administration’s radar. No progress was made on any issue other than Washington’s demand for Mexican border security. For the Bush administration security and drugs seemed to be the only issues of importance, although negotiations were begun with Chile for a free trade agreement. The economic collapse of Argentina and Latin American disillusionment with capitalism led to disenchantment with Washington in South American capitals. South American voters elected leftist candidates in Peru, Bolivia, Ecuador, Brazil and Argentina, on top of the previous 1998 election of provocative leftist Hugo Chávez in Venezuela.
While it is normal to send a vice president, a first lady a secretary of state, or another cabinet officer to attend presidential inaugurations abroad, South America suddenly seemed of slight importance in Washington’s priorities. The Bush representative to the inauguration of Lula da Silva in Brazil (Jan. 1, 2003) was Robert Zoellick, the U.S. Trade Representative, one of the lowest level officials present, excluded by protocol from Lula’s meetings with other visiting dignitaries, and Lula never met with him. And joining South American presidents in Quito Ecuador for the inauguration of Lucio Gutiérrez was U.S. representative Clay Johnson III. “Clay who?” the press asked. He was a deputy chief-of-staff recently appointed deputy director of the Office of Management and Budget. As a minor official, despite his being head of delegation, he could not attend meetings with heads of state, none of whom had ever heard of him, and his presence was taken as a snub to the region and to Ecuador (“Latin American presidents in Ecuador ask, Clay who?” Miami Herald.com. Jan. 16, 2003).
Similarly in Mexico, Fox soon found himself with nothing to show for his friendship with Bush. Fox soon found his fellow rancher’s promises “all hat and no cattle,” to use a Molly Ivins phrase. The opposition parties ganged up on Fox to block his legislative agenda and polls showed that two years into his term Mexicans were disillusioned with Fox’s lack of accomplishments. He needed help from Washington and it was not forthcoming. An execution in Texas served to highlight Fox’s apparent impotence north of the border.
A Mexican-American on death row had appealed his sentence on the grounds he had been denied consular assistance as promised in a treaty both countries had ratified. Fox appealed to the White House which was powerless in an internal matter in Texas, despite Bush’s close ties with his successor as Governor, Rick Perry. Fox telephoned Perry and personally appealed for a stay of execution. But Perry was in the middle of a reelection campaign and you do not stay execution of a cop-killer in Texas, especially during an election. Mexican press and television gave the story remarkable coverage and it seemed that Fox’s prestige was on the line. The execution of Javier Suárez Medina in August 2002 was a devastating blow to Fox’s personal standing at home.
Later that month Fox was scheduled to fly to Texas to deliver speeches in three Texas cities and to be guest of honor at the Bush ranch in Crawford, a special privilege reserved for a few heads of state. Feeling insulted, Fox was forced to cancel the trip, a decision that boosted his popularity at home but likely irritated Bush. Governor Perry was in Mexico City shortly thereafter for a pre-scheduled business meeting.He had not made an appointment to see Fox, and the normal courtesy-visit invitation was not offered.
When Bush flew to Cabo San Lucas for the Asia-Pacific economic cooperation summit in October 2002, the last formal meeting between the two presidents, he did not respond to Fox’s invitation to visit Mexico City. (Washington Post, May 7, 2003) So relations had cooled considerably even before Bush sought Fox’s support in the U.N. for the resolution on war in Iraq.
Under Fox, Mexico had departed from its traditional independence from international commitments and accepted a seat on the U.N. Security Council. Many in Mexico questioned the wisdom of that commitment since it exposed Mexico to potential conflict with its most important trading partner. In the debate on Iraq, Fox not only fell back on traditional Mexican principles of non-intervention and peaceful settlement of disputes, he sided conspicuously with the French and Germans in opposing the resolution, infuriating many in the Bush administration.
In March 2003 the new Bush administration envoy to Mexico, former Texas Railroad Commissioner Tony Garza, gave his first public address in Mexico, infuriating nationalists by threatening Mexico with “undesired consequences” if it did not support Washington in the U.N. (“Alerta Garza a México sobre efectos,” El Universal online, 11 March 2003). Imagine the impact in Mexico of a newly arriving ambassador, like some colonial viceroy, telling the Mexicans, “vote the way we tell you to or pay the consequences.” Carlos Fuentes, Mexico’s famous man of letters, responded defiantly, calling the ambassador “insignificant, meddling, and inexperienced”, with much to learn. Fuentes warned that any U.S. economic retaliation against Mexico would be cutting off its own nose and he warned that any instability in Mexico would create an insecure southern frontier for the U.S., a situation more dangerous than Saddam Hussein (“Tony Garza, “entromedito e inexperto”:Carlos Fuentes, El Universal online, March 3, 2003). Bush himself warned that if Mexico or other countries opposed the U.S. there would be a “certain sense of discipline.” This was just one of several threats provoking fear and resentment south of the border (Paul Krugman, “Let them Hate as Long as They Fear,” New York Times.com, March 7, 2003).
Normally Washington has tolerated an agreement to disagree on some matters, but the war was not one of those issues. The Bush administration’s determination to punish those who didn’t support the war provoked anti-American sentiment all over the world but particularly in Mexico. Fox might have wanted to support Bush but certainly did not wish to commit political suicide at home where about 85 percent of Mexicans opposed the war. The upcoming congressional elections in July would determine whether Fox would spend his last three years as a lame-duck president stymied by a hostile congress (Ginger Thompson with Clifford Krauss, “Antiwar Fever Puts Mexico in Quandary Over Iraq Vote,” New York Times. Com, Feb. 28, 2003). Fox would have paid a high price for a “yes” vote in the U.N. He had nothing to gain and much to lose.
In late March, after the invasion, Fox tried to make up with Bush by a phone call. Bush waited four days to return the call, and just to be sure that he got the message a White House official leaked to the Miami Herald that Mr. Fox had better understand that the relationship had changed (Andres Oppenheimer, “U.S. giving Latin war foes cold shoulder.” Miami Herald. Com. Mar. 30, 2003). Colin Powell was also reported to be snubbing his Mexican counterpart. There was no get-well greeting from the White House when Fox underwent back surgery in March. In contrast to a year earlier, there was no Cinco de Mayo celebration at the White House, and in his public statement Bush omitted any salutation to his Mexican counterpart. Mexico was not the only victim of retaliation since a similar cold shoulder went to Chile, also a member of the Security Council. The free trade agreement with Chile had been worked out much earlier but Bush delayed the signing to signal his unhappiness with President Lagos (Tim Weiner, “U.S. Lays Siege to Mexico’s Chief, and So Do Many Others,” N.Y.Times. com., March 12, 2003). Reports indicated Bush was also very unhappy with Canada.
The Mexican public’s opposition to the war was exacerbated by domestic press and television coverage. To watch television in Mexico was to see a different war than that viewed north of the border. Instead of rah-rah flag waving and victory celebrations, Televisa and TV Azteca reporters in Iraq sent back gruesome images of children burned, maimed, and dismembered by not-so-precision bombs. Mexican media coverage stressed alliance violations of civilian human rights in Iraq.
The result was a significant deterioration in Mexican public opinion with polls showing only 26 percent of the population had a favorable image of the U.S. and only 12 percent had a favorable opinion of Bush himself. (Miami Herald.com, Nov.2, 2003). Polls in Argentina and Chile showed even more devastating measures of anti-Americanism with only 18 percent of Argentines viewing the U.S. as a friendly country (El Universal on line, April 2003). Fidel Castro received a hero’s welcome when he attended the inauguration of Argentina’s new president Néstor Kirchner (Miami Herald, May 27, 2003).
By the end of May there were signs Bush might have rediscovered Latin America and the State Department said the Administration was moving back to its pre-9/11 agenda. Bush extended White House invitations to the presidents of Brazil and Argentina. It seems the mutual resentments were threatening to derail free trade progress and the Rio Group even talked of inviting Castro to join at its next meeting (LAWR, May 27, 2003). Neglect, whether unintentional or deliberate had not been benign.
The Fox administration continued its attempts to heal the fractured ties with Washington but Ambassador Garza admitted, “It is unlikely that we are going to be able to re-create the ‘irrational exhuberance’ of the first days of the presidencies of George W. Bush and Vicente Fox” (Miami Herald.com., May 31, 2003). Subsequent meetings between Bush and Fox at international gatherings were brief and unsubstantive. At Evian France in June 2003 at the G-8 summit, Mexico’s hopes for a formal meeting were denied and the two presidents merely exchanged greetings (Reforma, Jun 2, 2003). In Bangkok Thailand in October 2003 they began a timid reversal of the many months of estrangement in a 35 minute meeting with no substantive results except Bush’s commitment to attend the Summit of the Americas meeting in Monterrey Mexico in January 2004 (El Universal, Oct 20 2003).
Both sides seemed to be treading carefully. Indeed, when Mexico’s Ambassador to the U.N., Adolfo Aguilar Zinser, accused the U.S. of wanting a relationship with Mexico of “subservience and convenience,” Washington’s outrage led Fox to dismiss the ambassador (NY Times, Nov 21, 2003). Meanwhile, the Fox administration cooperated genuinely with U.S. agency goals on other issues. Behind the scenes progress advanced especially on security issues thanks to the rapport between Homeland Security Secretary Tom Ridge and Mexican Interior Secretary Santiago Creel (Los Angeles Times Feb 29, 2004).
At the Summit of the Americas meeting in Monterrey in January 2004 the Mexican press accused Fox of pandering to the United States and the president felt forced to deny publicly that he was a lackey of Bush (El Universal Jan 15 2004). Prior to the meeting Bush did announce that he would send an immigration reform measure to the Congress but skeptical Mexicans viewed it as a 2004 re-election issue for Bush to please Hispanics and most doubted it would go anywhere in the U.S. Congress (La Opinión Jan 9, 2004). Most analysts felt the estrangement engendered by the war in Iraq had still not healed and Peter Hakim, president of the Inter-American Dialogue, said one could not overestimate the damage to bilateral relations, adding that “No relationship was more damaged with the possible exception of France.” (NY Times Jan 9, 2004).*
(*You may remember the outrage in the U.S. at France’s leading the opposition to the war. French fries in the Congressional cafeteria were called liberty fries. A restaurateur in Rochester NY took French wines off the menu, to mention just a few of the irrational responses. I have never been able to understand why some Americans get so apoplectic when France is right.)
At least symbolically, the two presidents appeared headed toward a rapprochement when Fox accepted Bush’s invitation to Crawford Texas in March 2004. The photo-op benefited both men with Bush wooing Hispanic voters and lame-duck Fox playing the role of international statesman (Los Angeles Times Mar 6, 2004). But just as relations seemed to be improving, the immigration controversy overheated once again .
After his 2004 re-election, Bush claimed a mandate for his policies and said he would use his political capital to advance his agenda, but once again immigration reform was not high on his list of priorities. When the issue did emerge again in Washington, it was not due to Bush’s leadership but rather to a groundswell of anti-immigrant sentiment fueled by demagogic radio talk-show hosts, populist isolationist scare-mongers like Pat Buchanan, and ratings opportunists like CNN’s Lou Dobbs. So by the time Congress finally began to address immigration reform seriously, Bush was already approaching lame-duck status and his power even in his own party reduced severely by the unpopularity of the war in Iraq and administration failures surrounding the devastation of Hurricane Katrina in New Orleans.
When the congressional election campaigns cranked up in 2006, many Republican congressmen were distancing themselves from the President. Instead of showing leadership on the immigration issue, Bush let the U.S. Senate take the initiative, and there divisiveness resulted in two different bills. One authored by John Cornyn of Texas and John Kyl of Arizona took a punitive approach, but the Senate approved a more compassionate bill offered by John McCain and Ted Kennedy. Bush personally favored the latter approach that embraced tougher border enforcement combined with work-site inspections, a guest-worker program, and a path to citizenship for some indocumentados.
Republicans in the House of Representatives, led by Judiciary Committee Chair James Sensenbrenner of Wisconsin, revolted against the Senate approach which they demagogically referred to as “the Kennedy bill”, and they adopted a harshly punitive strategy of enforcement only. They would build a wall to keep out immigrants and turn the indocumentados already in the U.S. into felons (Meyerson, 2006).
Lacking positive achievements to run on in the congressional elections of 2006, House Republicans sought to prove to the electorate their determination to crack down on immigrants. They broke with their president on the issue and decided not to negotiate their differences with the Senate. Instead they decided on a pre-election summer road show, traveling the country to hold hearings that would ridicule the positions of the Senate and the President. As The New York Times editorialized (June 22, 2006):
What the Republicans really want to do is take the Senate bill on a perp walk through the red states, relishing the catcalls denouncing it as ‘amnesty’ and using the hearings to milk whatever anti-immigrant resentment they can find or drum up for the benefit of their candidates.
Given the topics that have preoccupied Congress lately, one wonders why the Republicans don’t simply propose a catchall bill aimed at illegal gay liberal Mexican flag burners and be done with it.
While the Republican road show pandered to anti-immigrant hostility, farmers in California plowed under broccoli fields, onions rotted in the fields in Texas and South Carolina, tons of oranges and apples rotted on the trees in Florida and Washington State. The immigration crack down had frightened many seasonal workers who failed to show up for the harvests.
Remarkably, despite control of the White House and both houses of Congress for six years, all the Republicans were able to accomplish was the passage of a bill to construct a fence which their candidates saw as an urgent electoral necessity. Bush waited a month after the bill passed the Congress to hold a small signing ceremony on October 26, twelve days before the elections. The bill required the construction of a 700 mile wall along the border estimated to cost 2.2 billion dollars, not counting maintenance. (Cost over-runs always make such estimates a joke). Many observers point out that the fences already built had not been working (Skerry, 2006). Janet Napolitano, then governor of Arizona said, “Show me a 12 foot fence and I’ll show you a 13 foot ladder.” Nor does the fence address the visa-overstays or what to do with the millions of immigrants already in the U.S.
Mexicans were humiliated by the idea that the U.S. regards them as an enemy nation that must be separated by what they refer to a “wall of shame.” Mexicans do not see themselves as potential terrorists and do not comprehend the U.S. obsession with border security. Not one single terrorist act has been committed by a Mexican. Of course, Mexican authorities recognize that if such a terrorist act did occur the result would be a devastating disruption of border traffic with severe economic repercussions (Gutiérrez, 2006). The Mexican government condemned Bush’s signing of the fence bill and politicians and newpaper columnists of all stripes condemned the measure. To Mexicans the wall is a sign of U.S. failure to enact a comprehensive immigration policy and an appalling contradiction for a country that once took pride in toppling walls (Reforma, Oct 27, 2006).
Mexican authorities were remarkably patient in the face of U.S. incivility. From the beginning they have recognized that immigration reform is a dual responsibility. The Fox administration proposed to Bush an accord that would include a program of temporary workers, some kind of regularization for indocumentados in the U.S., mechanisms for border security to satisfy U.S. concerns, and promotion of development in areas of Mexico with high migration rates (Gutierrez, 2006). No legislation was forthcoming in the U.S. Congress, and McCain even dropped his support for his own bill when he decided to run for president. At the end of the Bush Administration, and contrary to Bush’s personal feelings, the anti-immigrant atmosphere was blistering, particularly in the House of Representatives. To adulterate a line from the late comic Fred Allen, there was so little compassion in the Congress you could fit it all in a flea’s navel and there would still be room left over for six sesame seeds and Rush Limbaugh’s heart. It took two bruising presidential-election defeats before the Republicans would agree to the current bilateral discussions on immigration reform, the results of which we should see in the coming months of 2013.
The U.S. has demanded of Mexico bilateral cooperation on border control, homeland security, drug enforcement, trade issues, and environmental policy. Indeed, there can be no effective U.S. policies on homeland security and drug enforcement without Mexican cooperation. If the U.S. is to take a unilateral punitive approach to border control, why should Mexicans feel compelled to cooperate on other issues? Mexicans see cooperation as a two-way street, not a path dead-ending at a wall. The only significant administration effort came toward the end of the Bush term when Congress approved the Merida Initiative in June 2008 with plans to spend hundreds of millions of dollars to deal with the issues of drug trafficking, money laundering, and security. (http://mexico.usembassy.gov/eng/ataglance/merida-initiative.html).
Mexican outrage over the “wall of shame” and the lingering resentments from the dispute over the Iraq war certainly cast a pall over diplomatic relations by the end of the Bush administration. That is the legacy Barak Obama was handed on taking office in January 2009, after a campaign in which Mexico was hardly a priority. And Obama has been so preoccupied by wars in Iraq and Afghanistan that he paid little attention to Latin America until shortly after his reelection. Certainly both he and recently-inaugurated (December 2012) Mexican President Enrique Peña Nieto realize that there is too much at stake for neighbors to continue to quarrel. The critical issues of drugs, immigration, security, and trade bind the two countries in a mutually dependent relationship that demands cooperation. The war on drugs has cost Mexico tens of thousands of lives, reportedly 80 percent of those using weapons smuggled from the U.S It has cost the U.S. enormous resources devoted to law enforcement and incarceration. According to one source, “The drug war has helped swell America’s prison and jail population to 2.2 million people — meaning that a country with five percent of the world’s population contains one quarter of its prisoners”(msledge, huffingtonpost.com, April 8, 2013. Given Obama’s neglect of Mexico in his first term, one might not have high expectations for Obama’s forthcoming visit to Mexico the first week of May 2013. But it is significant that he started his second term with high visibility trips, first to Israel, and subsequently to Mexico and Costa Rica, perhaps indicating a shift in priorities.
On the level of inter-personal relations between Mexicans and North Americans, things have been much steadier and less mercurial. Cuernavaca has played a large role in that with tens of thousands of Americans who have come to study Spanish in the many language schools here. Some study for months, discover the warmth of the Mexican people, and return home to spread the news. I coordinated college study- abroad groups here for 25 years and then 80 two-week programs for Road Scholar (Elderhostel). How admirable and inspiring that people in their 60s and 70s and 80s came to Mexico to study the language and culture. They went home gushing enthusiasm about the experience, while their Mexican teachers were in awe of their zeal to learn and their mutual affection. Unfortunately, the injurious international publicity of the violence accompanying the war on drugs has caused a precipitous drop in tourism. Perceptions of violence and the unfair State Department Travel Advisory on Cuernavaca have caused incalculable losses of foreign student visitors. Things are starting to lookup in that sector, (the subject of my article to be published soon that will be posted on the blog). And that’s where foreign visitors and residents come in. Student exchanges, foreign tourism, expatriates living in Mexico can contribute to strengthening personal ties and national images. By showing your affection, tolerance, and good-will, you can help shape relationships based on mutual respect.These are the little things that occur every day, year in and year out, without reference to any arrogance or pettiness in Washington. They are the simpatico sentiments that might repair past insults. For those of us who are guests in this country, it would behoove us to always embrace those words of what I think is America’s most beautiful patriotic song:
“America, America, God shed His grace on thee,
And crown thy good with brotherhood, from sea to shining sea.”
SOURCES & ADDITIONAL READING
Most of the material above comes from careful following of events in the press, especially La Jornada, El Universal, and Reforma ( all Mexico City), The News (Mexico City), the New York Times.com, The Washington Post.com, and the Miami Herald.com. CNN Mexico, also available online, offers better coverage of Mexico than most U.S. media (http://mexico.cnn.com). Also invaluable are the journals Latin American Weekly Report (LAWR) and the Mexico and NAFTA Report, both published in London. Many events are recalled from Mexican television and news coverage that I did not save references to. See also:
Burbach, Roger et al., 1996, GLOBALIZATION AND ITS DISCONTENTS (London: Pluto Press).
Hodges, Donald & Gandy, Ross, 2002, MEXICO, THE END OF THE REVOLUTION (Westport Ct: Praeger)
Johnson, Haynes, 1991, SLEEPWALKING THROUGH HISTORY, AMERICA IN THE REAGAN YEARS (NY: Norton)
La Feber, Walter, 1984, INEVITABLE REVOLUTIONS: THE UNITED STATES IN CENTRAL AMERICA (N.Y.: Norton)
Oppenheimer, Andres, 1998, BORDERING ON CHAOS ( N.Y. : Little Brown)
Pastor, Robert & Jorge Castañeda, 1989, LIMITS TO FRIENDSHIP: THE UNITED STATES AND MEXICO (N.Y.: Knopf)
Riding, Alan, 1985, DISTANT NEIGHBORS (N.Y.: Knopf)
Rosenberg, Tina, 2002, “THE FREE TRADE FIX,” (New York Times, August 19).
Shannon, Elaine, 1988, DESPERADOS: LATIN DRUG LORDS, U.S. LAWMEN, AND THE WAR AMERICA CAN’T WIN (N.Y.: Viking)
Woodward, Bob, 1988, VEIL, THE SECRET WARS OF THE CIA (N.Y., Simon & Schuster)
5 thoughts on “THE UNITED STATES & MEXICO: DEPENDENCY & DISRESPECT”
A very detailed and thoughtful history and summary of our relationship with Mexico. Indeed, the US needs to do much more to create an atmosphere in which Mexico can feel it is dealt with as an equal, not a client. I hope that Americans will return to Mexico for study and vacation – it is a beautiful country with wonderful people.
Jim, I reread your excellent article again. Your discussion of NAFTA is good, and you say that NAFTA is so complicated it deserves another lecture. If you ever get around to that, I observe that multinational corporations, both US and Mexican, were all for NAFTA because the end of trade barriers means they can move stuff around easily. They want to integrate world trade because it is in their interest to do so. But the economic nationalists in Mexico don’t see Salinas’ decision to go for NAFTA as about trade at all. Rather, from Mexico’s end NAFTA was about investment. The investment problem started with Echeverría. He scolded the upper ten percent of income groups that own much of the brilliant export platform and don’t pay taxes, and he swung into left populism at the end of his term by letting loose the CNC to land seizures of agribusiness holdings in the Northeast. As he ended his term with 35 per cent inflation and a devaluation, there was a huge flight of capital by big business. Portillo took over in 1983 with a flat economy lacking investment. He went to Monterrey and got down on his knees begging the biggies to bring back the capital. Then he announced that Mexico was sitting on a sea of oil. Mexican Big Business responded to his pleas and also to get in on the oil boom brought back the capital. In 1980 Mexico got a whopping 9 per cent growth. The PRI políticos were skimming off huge sums from the oil boom, money was flowing, and inflation began to skip along. By 1981 it was really running and everyone started talking about a devaluation. In 1982 that became inevitable, and capital flight to avoid it accelerated. Portillo found out that the Mexican banks were also exporting capital. He was enraged. So he nationalized them all. Then he discovered that the banks owned huge amounts of stock and that the State now possessed 35 per cent of Mexican industry! Mexico was on the way to socialism. Big Business panicked. To stop capital flight Portillo put on exchange controls, and the capital flight accelerated! De la Madrid took over a flat economy with no investment in it. For three years he was silent about about economic nationalism. He begged for the capital to come back. Nothing. He asked the biggies what they wanted. “Free trade and privatization of the 1,000 state industries.” So In 1985 De la Madrid began taking down the tariff wall and in his last three years reduced it from 100 per cent to 15 per cent. He privatized 250 of the 1,000 state industries. He partially privatized the nationalized bank by setting up a parallel private bank. But the capital did not come back, and during his term he got no growth while a million new people a year arrived on the job market. Salinas came into Los Pinos. The economy was flat. The attitude of Big Business toward Salinas was this: “Echeverría said he did not consider us enemies and then trashed us. So we took out the capital. Portillo begged for forgiveness and we brought back the capital. Then Portillo trashed us and we took it out again. De la Madrid during his first three years said a couple of times that the Mexican Revolution was still ON. Then finally in 1985 he responded to some to our demands. But not enough! You Salinas, if we bring back the capital, will trash us too. We demand complete free trade and total privatization.” So Salinas said he would give it to them and went to it with a vengance. He privatized 500 of the original 1,0000 state industries and so lowered the state sector to 250 (and Zedillo continued the privatizations). Salinas totally privatized the Bank (and later it passed to foreign banking). Salinas spent huge sums to lobby in the USA for the passing of NAFTA. And it all worked! It worked in this sense, much of the capital came back. I read in the Wall Street Journal that since Salinas was giving US Big Business everything it had ever asked for the investors should reward him by investing in Mexico. And so they did. Where else? The world economy was flat. MEXICO GOT A 4 PER CENT GROWTH under Salinas. CONCLUSION: from the standpoint of the Mexican government NAFTA was not about trade, it was about investment. This is why the Mexican Left sees it as a surrender to Mexican Big Business. After Salinas and Zedillo, there is no way a populist govenment can return to economic nationalism like the South American leaders have been doing. (I do all this from my fallible memory.)
Thanks Ross. You certainly have great insights into Mexican financial politics and I always appreciate your input.
Jim, I have just gotten around to reading this and am impressed by its thorougness, and readability, and DEpressed by what it shows about American–or at least recent American–Mexico-bashing from the right. My own thoughts on NAFTA (very uninformed and more so because economics has always been a mystery to me) was that it would wind up enriching corporations in both countries and impoverishing workers ditto. Anyway, I will keep in touch with your blog with continuing pleasure, Bernie
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