Neoliberalism and Commodity Production in Mexico details the impact of neoliberal practice on the production and exchange of basic resources in working-class communities in Mexico. Using anthropological investigations and a market-driven approach, contributors explain how uneven policies have undermined constitutional protections and working-class interests since the Mexican Revolution of 1910.
Detailed ethnographic fieldwork shows how foreign investment, privatization, deregulation, and elimination of welfare benefits have devastated national industries and natural resources and threatened agriculture, driving the campesinos and working class deeper into poverty. Focusing on specific commodity chains and the changes to production and marketing under neoliberalism, the contributors highlight the detrimental impacts of policies by telling the stories of those most affected by these changes. They detail the complex interplay of local and global forces, from the politically mediated systems of demand found at the local level to the increasingly powerful municipal and state governments and the global trade and banking institutions.
Sharing a common theoretical perspective and method throughout the chapters, Neoliberalism and Commodity Production in Mexico is a multi-sited ethnography that makes a significant contribution to studies of neoliberal ideology in practice.
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About the Author
Thomas Weaver is professor emeritus at the University of Arizona School of Anthropology and founder of TWeaver Writing and Research. James B. Greenberg is a professor of anthropology and research anthropologist at the University of Arizona. William Alexander is an associate professor of cultural anthropology at the University of North Carolina, Wilmington. Anne Browning-Aiken is cultural anthropologist at the University of Arizona.
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Neoliberalism and Commodity Production in Mexico
By Thomas Weaver, James B. Greenberg, William L. Alexander, Anne Browning-Aiken
University Press of ColoradoCopyright © 2012 University Press of Colorado
All rights reserved.
The Neoliberal Transformation of Mexico
James B. Greenberg, Thomas Weaver, Anne Browning-Aiken, and William L. Alexander
[These are] the same failed ideas that got us into this mess in the first place.
— President Barack Obama, Referring to Neoliberal Policies Fort Myers, FL, February 10, 2009
Neoliberalism, as a form of market fundamentalism, is both seductive and one of those dangerous economic ideologies that seems impervious to the lessons of history (Carrier and Miller 1998). On its seductive side, neoliberalism embraces many of the core values that are at the heart of US society: freedom, democracy, individualism, and entrepreneurship. It is how these goals are pursued that is the stuff of politics, with great differences between liberal and conservative visions of both markets and the role of the state. Despite its name, neoliberalism is a right-wing economic philosophy that emphasizes laissez-faire free markets, free trade, and private property and at the same time is deeply distrustful of government intervention and regulation. With hindsight, it is now abundantly clear that laissez-faire capital left to its own devices (although perhaps vices is more accurate) encourages risk and rewards greed, and the price of failures has all too often been paid by the innocent. No one doubts that neoliberal deregulation is responsible for the recent debacles in the mortgage and securities markets, which, as they quickly went global, destroyed more economic assets than any natural disaster. But neither neoliberalism nor its catastrophic consequences are new (Craig and Porter 2006; Phillips 2008; Smith 2005; Soros 2008). This disaster is only the most recent — one could easily find similar problems at the roots of the 1907 and 1929 crashes — in a long history of economic failures in which nascent neoliberal ideologies prior to the post–World War II institutionalization of global neoliberalism, described later in this chapter, have been applied. This book will document the high costs of these failed ideas in Mexico's experience with neoliberalism, a particularly illustrative example.
Nowhere has neoliberalism been more widely implemented or its impacts been more profound than in Mexico. Mexico's previous political economy, in fact, was anathema to everything in which neoliberals believe. The Mexican Revolution in 1910 was fought in reaction to more than a half century of nineteenth-century liberal policies, which had concentrated wealth, land, and power in the hands of a tiny elite class and reduced vast sectors of the population to abject poverty. The 1917 constitution enshrined rights for Mexico's peasant and working classes. It restored lands stripped from communities by haciendas and plantations and sought to protect Mexico's sovereignty over its lands, waters, mineral rights, and so on. The Mexico that eventually emerged from these struggles was a corporate state — a contradictory mix of capitalism, socialism, and fascism. Mexican state-led capitalism racked up impressive growth between 1940 and 1970, with an annual average GDP growth rate of 6.4 percent (World Bank 1986:1).
THE BIG PICTURE
One effective way to understand the implementation of neoliberalism in Mexico is to look at World Bank reports. If we follow the World Bank's distinctly neoliberal argument, increasingly serious structural problems belied Mexico's booming economy. Because Mexico's industry was protected from foreign competition, it became less and less competitive internationally, and by the late 1960s its share of world exports was declining steadily. From the Bank's point of view, Mexico's protectionism especially penalized agriculture and mining by skewing incentives and drawing private capital away from investing in these sectors (ibid.:5–6). At the same time Mexico's export earnings were rapidly losing ground, its continuing imports of capital goods and exports of raw materials were creating chronic trade deficits (ibid.:2).
Despite these imbalances, public expenditures accounted for a modest share of the Mexican GDP — on average, about 15 percent annually into the mid- 1960s. Under President Luis Echevarría (1970–1976), in hopes of ensuring continued economic growth and employment, Mexico embarked on a program of expansion of the public sector, financed largely through foreign borrowing on prospects of oil income. During Echevarría's administration the number of parastatal companies more than doubled, to 845. Eventually, the bill for this expansion came due. By 1976 the public-sector deficit had reached 10 percent of the GDP; inflation — which had closely followed world trends — rose to 15 percent, and capital flight ensued (ibid.:5–6). Under Echeverría the currency began a sustained trend of devaluation beginning in 1976, when it fell from 12.5 to 22.5 pesos per dollar (Bailey 1984:79). The trend continued as an adjustment to economic imbalances. By 1976 the external debt had risen to $27.9 billion, and inflation stood at 60 percent (Buffle and Sangines Krause 1989:145–147).
Under President José Luis Portillo (1976–1982), Mexico continued to borrow heavily abroad against its oil revenues to make investments in railroads, nuclear energy, freeways, oil pipelines, and the steel industry. Unfortunately, all this borrowing abroad continued to be predicated on high oil prices, which had risen dramatically — from $4 a barrel in 1970 to over $15 per barrel in 1979. By 1982 the combination of falling oil prices (as a result of both overproduction and price cuts by OPEC [Organization of Petroleum Exporting Countries]) and rising world interest rates threw Mexico into a debt crisis. As the economic crisis worsened, capital took flight; despite Portillo's 1982 pledge to defend the Mexican peso "like a dog," the worst peso devaluation in history followed. Finally, the fiscal deficit reached 17.6 percent of GDP, and the Mexican government was forced to devalue the peso by 268 percent in nominal terms. As the peso fell, capital flight estimated at $100 billion followed, not only thwarting the growth of the economy and sending interest rates skyrocketing but also increasing the national debt by 71 percent between 1976 and 1985 (Adams 1997:3–4). In 1982, in full crisis mode, President Portillo blamed capital flight on the banks and nationalized the banking system and 467 bank-owned firms (Krauze 1998:757–761). In an effort to stem capital flight, the banks imposed foreign exchange controls that included the forcible conversion of "Mex-dollar" deposits and suspended principal payments on the US $60 billion foreign debt.
President Miguel de la Madrid (1982–1988) began his administration facing a depression greater than any in the post-revolutionary period. The external debt had risen from a manageable 30 percent of the GDP in 1981 to 63 percent in 1983, with interest on the national debt absorbing half of the country's export income (Bosworth, Lawrence, and Lustig 1992:7). Eighty cents of every dollar earned from the oil industry was owed to foreign banks. The debt had climbed to over $100 million when Mexico declared a debt moratorium in 1982. Bailing Mexico out of this crisis required a worldwide effort by banks supported by the US Federal Reserve, the International Monetary Fund (IMF), the World Bank (WB), and the US Department of the Treasury (Adams 1997:6). Their support, however, was conditional on Mexico taking steps to put its economic house in order, which entailed adopting neoliberal policies.
From 1982 to 1985 the IMF backed a program to stabilize Mexico's economy through fiscal and monetary constraints. The program failed as a result of slow structural reform, and a new monetary crisis ensued, with the currency rate set at 150 pesos per dollar.
These loans came with a set of conditionalities that obliged the borrowing governments to both adopt strict monetarist measures and institute free market and free trade policies (Easterly 2005:3; Koeberle 2003:251). Although the intent of the structural adjustment program (SAP) was to stimulate economic growth and help governments clean up their finances, the specific measures applied depended on local circumstances. Commonly, these programs included a variety of neoliberal measures to reduce government spending, open markets, and encourage exports. As these neoliberal policies were implemented, specific parts of the economy experienced immediate impacts. Neoliberal measures to reduce government expenditures ultimately translated into cutting programs and subsidies and downsizing spending on health, education, and welfare (Kolko 1999). The immediate effects included increased unemployment as government and other civil servants were laid off, loss of services, and rising prices as subsidized commodities were forced into line with the market.
Frequently, monetary reforms included devaluation of the local currency against international currencies such as the US dollar. Such devaluations have a double impact: they make national goods more competitive in the world market, but they also drive up the price of imports. To curb inflation, neoliberal reforms typically included measures to restrict credit by eliminating ceilings on interest rates, causing rates to soar and credit to dry up. Under the banner of market liberalization and free trade, actions were taken to lift restrictions on foreign investments in local industry, banks, and other sectors of the economy that enjoyed special protection and to abolish or cut tariffs, quotas, and other restrictions on imports. To encourage the competitiveness of exports, SAP reforms often sought to deregulate export-oriented sectors of the economy and to free these sectors from government controls that protected labor, the environment, and natural resources (Babb 2005; Bello 1996:286). Because ultimately so much rests on "getting prices right," these packages often include policies to hold the line on wages or even to force them down (at least in terms of their true foreign exchange equivalents) in an effort to make exports more competitive (Greenberg 1997).
With support from the IMF, in late 1982 Mexico initiated a stabilization program using a combination of fiscal discipline, exchange rates, and monetary policy to deal with the drastic contraction of domestic demand. Between 1982 and 1985, public-sector expenditures and investments were cut drastically. Exchange rates fell to unprecedented new lows. Import controls were dismantled. Between 1982 and 1984, Mexico's imports fell by 22 percent, while its non-oil exports rose by 62 percent. Even in the face of declining oil prices, Mexico's net foreign reserves increased from a negative US $2 billion to US $6.5 billion during this period. The initial results of the stabilization effort in 1983–1984 were impressive. The fiscal deficit fell substantially, to 8.5 percent of GDP in 1983, though it leveled off in 1984 (World Bank 1986:12–13). Although fiscal and monetary policy had begun to ease and exchange rates had appreciated in real terms during 1984, this substantially increased public borrowing and renewed inflationary pressures.
In 1985 international oil prices dropped by 50 percent, and the loss of US $8 billion in export revenues (about 6.5 percent of GDP) again strained Mexico's fragile economy (World Bank 1987:3–4). Inflation was much higher than expected, increasing to 63.8 percent. At the same time, real wages fell between 25 and 35 percent, and consumption per capita was below 1980 levels (World Bank 1986:9–13). Protests were heard as peasants, workers, and even the middle class began to feel the impacts of neoliberal reforms and policies. To make matters worse, in 1985 a disastrous earthquake occurred in Mexico City, with an estimated 20,000 killed. The government appeared paralyzed and refused any assistance from the United States and other countries.
In the hope that additional neoliberal measures would help its reeling economy, in 1985 Mexico took out new structural adjustment loans for trade liberalization. These loans contained the condition that Mexico would carry out the structural reforms needed in the areas of trade liberalization, foreign investment, agriculture and petroleum development, industrial restructuring, technology transfer, public-sector finances, and resource management (ibid.:20–22). As part of this package, Mexico eliminated tariffs on 45 percent of dutiable goods and reduced tariffs by about 60 percent on most controlled goods (ibid.:17). This dramatic reduction in tariffs made it possible for Mexico to apply for GATT (General Agreement on Tariffs and Trade) membership in November 1985. To further demonstrate its commitment to trade policy reform, Mexico negotiated a new loan with the IMF that contained provisions that reduced the risks of incomplete implementation or backsliding on trade policy reforms (ibid.:vi.). Nevertheless, by late 1985 it was clear that Mexico had not recovered and that little progress had been made on structural reforms. Non-oil exports had declined. The fiscal deficit had risen to 9.8 percent (ibid.:13), and most components of the balance of payments had deteriorated (ibid.:15–17).
Mexico formally joined GATT in mid-1986 and embarked on a three-year program to lower tariffs. In response to deteriorating economic conditions and in hopes of stimulating economic growth, the Mexican government intensified its program of structural reforms and streamlined procedures to expedite approval of foreign investments (World Bank 1987:3–4). For example, Mexico dropped its requirement that the government had to authorize foreign majority ownership of small and medium-sized firms (ibid.:9). As a result, direct foreign investment (DFI) in Mexico increased from about US $26 billion to US $40 billion between 1989 and 1992. Of this DFI, 62 percent was from the United States, while the next-largest country had only 7 percent (World Bank 1994:vii). But the hope that these neoliberal measures would help Mexico's economy was again thwarted when the US stock market crashed on October 19, 1987, causing import licensing to drop from 90 percent in 1985 to 23 percent in 1988. Major repercussions were felt in Mexico and other Latin American countries (Bosworth, Lawrence, and Lustig 1992:8; Weaver 1994).
In 1987, in an attempt to support structural adjustment reforms, the World Bank and the IMF put together a comprehensive financial package for Mexico that provided another US $10.7 billion. This loan came with conditions that closely linked the implementation of reforms in the areas of trade liberalization, tax reform, and privatization to loan disbursements (World Bank 1987:4). As part of the structural adjustment reforms, Miguel de la Madrid introduced tax reform as part of his 1987 budget. The budget called for a reduction of public expenditures by about 1.1 percent of GDP. This loan was part of a larger program of bank financial and technical support for Mexico's 1986–1988 trade liberalization program, which included trade policy loans as well as export development and industrial reconversion projects to assist both private- and public-sector firms in their adjustment to a more open trade policy environment. The loan was intended specifically to support the reduction of non-tariff barriers. In making this loan, the WB argued that trade liberalization would increase non-oil exports, which would more than compensate for the losses associated with additional imports (World Bank 1986:v).
Mexico's next president, Carlos Salinas de Gortari (1988–1994), a Harvardtrained economist and previous minister of programming and the budget, fully embraced neoliberalism. Under Salinas de Gortari, public enterprises and subsidies were targeted for privatization and elimination (World Bank 1987:6–7). In 1988 the government decided to privatize its chemical, textile, pharmaceutical, and petrochemical interests. This was later extended to include transportation equipment, coffee, and fishing (ibid.:8). In agriculture, reforms sought to diminish the role of parastatals in agricultural marketing, storage, and processing; to liberalize trade in agricultural products; and to decentralize and streamline the Ministry of Agriculture and "rationalize" the public investment program in the sector. This effectively reduced subsidies on agricultural inputs and, except for some low-income urban consumers, virtually eliminated subsidies on foods (ibid.:4, 9).
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Table of Contents
1 The Neoliberal Transformation of Mexico James B. Greenberg Thomas Weaver Anne Browning-Aiken William L. Alexander 1
2 Theorizing Neoliberalism James B. Greenberg Thomas Weaver Anne Browning-Aiken William L. Alexander 33
3 Neoliberalism and the Transnational Activity of the State: Offshore Control in the US-Mexico Mango and Persian Lime Industry Robert R. Alvarez 51
4 Tracing the Trail of Table Grapes: The Effects of Neoliberal Policies in Sonora, Mexico Rebecca H. Carter William L. Alexander 75
5 Maize and Indigenous Communities of Oaxaca: Two Victims of Neoliberalism Alvaro González Ríos 99
6 Disjuncture between Economic Policy and Sustainable Use of Natural Resources: Water Case Studies in Sonora, Mexico Anne Browning-Aiken 115
7 Privately Unsustainable: Ecological Resiliency and Watershed Resources in an Arid-Land Ejido Robert M. Emanuel 141
8 Policies of Conservation and Sustainable Development: Fishing Communities in the Gulf of California, Mexico Marcela Vásquez-León 165
9 Neoliberalism and the Social Relations of Forestry Production in Chihuahua Thomas Weaver 187
10 The Impact of World Bank Policies on Indigenous Communities Salomón Nahmad 209
11 The Impact of Neoliberal Policies on Rural Producers in Oaxaca, Mexico James B. Greenberg 225
12 Neoliberal Capital and the Mobility Approach in Anthropology James B. Greenberg Josiah McC. Heyman 241
13 Coffee, Neoliberalism, and Social Policy in Oaxaca Paola Ma. Sesia 269
14 Up the Mode in the Period of Post-Neoliberalism Thomas Weaver 293
15 Conclusion: Structural Adjustment, Structural Violence James B. Greenberg Thomas Weaver Anne Browning-Aiken William L. Alexander 315
List of Contributors 343