April 1995

by Andrew Wheat

Departments

Editorial: Reclaiming Sovereignty

The Front

• Empty Promises at U.N. Summit
• Selling the Seven Seas

Interview: The Zapatista Struggle

An Interview with Cecilia Rodriguez

Labor

Social Dumping" in Mexico Under NAFTA

by Janice Shields

Economics

NAFTA’s Footloose Plants Abandon Workers

by Tim Koechlin

Book Notes

Mexico: Free Markets Versus Freedom

Names in the News

Resources

World Bank Leaks

Though the survey covered in the memo includes two of India ’s largest dams, Hirakud and Gandhi Sagar, the problems found in the survey are described as the "tip of the iceberg." The surveyed dams account for less than 3 percent of the 947 dams in the safety project’s jurisdiction: the states of Orissa, Madhya Pradesh, Rajasthan and Tamil Nadu.

At least 2,000 people died in India’s worst dam disaster to date when the Machhu II Dam failed in 1979 after being hit with twice the amount of water it was built to hold. Because Machhu II was situated in a relatively remote location, the February 1, 1995 memo says that the failures of either Harakud or Gandhi Sagar would "dwarf" the earlier disaster. Harakud and Gandhi Sagar are considerably larger than Machhu II and were built in "highly populated valleys." The memo was written by William Price of the World Bank’s Asia Technical Division.

"The World Bank’s findings show that the Indian government should halt ongoing dam projects until there is a public review of dam safety in India and measures to minimize the risk to downstream populations are put in place," says a statement from Himanshu Thakker, an engineer with India’s Save the Narmada Movement. Thakker says last year’s monsoon ripped "an 80-foot-deep hole" out of the concrete and rock foundation of the Sardar Sarovar Dam on the Narmada River.

"If the number of deaths from future dam bursts is to be minimized, the World Bank and the Indian government must make public the risk to people living downstream of dams," says a statement from International Rivers Network campaigns director Patrick McCully. "It is cynical and grossly negligent to put lives at risk by not informing people of the real possibility of dam failures," McCully’s statement says.

Bank spokesperson Paul Mitchell calls the internal memo "a public document," but says some people have misinterpreted it. When the Bank loaned India money to conduct the dam safety project several years ago, he says, it was estimated that two-thirds of Indian dams did not meet current safety standards. The way peak flood levels are estimated has changed since many of the dams were built, he says. "It doesn’t mean the dams are unsafe," says Mitchell, who says the memo considers floods with a "one-in- 10,000 chance" of occurring.

Changing Bank Faces

"Once again, a Wall Street insider has landed the job of World Bank President," says Juliette Majot of International Rivers Network, a founding member of the 50 Years is Enough Campaign, which advocates far-reaching Bank reform. "It is Mr. Wolfensohn’s international commercial banking connections, and not his knowledge of the very real needs of poverty-stricken women, men and children of the developing world, that brings him to the World Bank," she says. "He is being hired as a private sector magician, to funnel funds through an institution whose primary role is to lend to the public sector, and have [the funds] come out on the other end in the private sector. It is a public-risk, private-gain game."

Patricia Adams, executive director of Toronto-based Probe International, says the best that can be hoped for is that Wolfensohn will build on the work of his predecessor, Lewis T. Preston, in promoting Bank openness. The danger of recruiting a Bank president from the private sector, however, is that the business culture does not promote broad disclosure of information, Adams says.

Adams parts company with 50 Years is Enough, arguing that the Bank should be abolished - not reformed - because no president is capable of reforming its fundamental failures. "The Bank is, in many ways, a Frankenstein," she says. "None of the parties that created it can control it. The only thing that the United States can do is to withdraw funding. That would probably bring down the Bank - which is fine."

A Bank spokesperson said Wolfensohn would be unavailable for comment until he begins his new job on June 1. Wolfensohn’s acceptance statement expresses admiration for the work of his predecessor. "To follow Lew Preston is a privilege and responsibility," Wolfensohn’s statement says. "He has taken a number of major initiatives which I shall follow."

Corporate Contract

The report, "Contract with Special Interests: The Quid Pro Quo Behind the Contract With America," shows that House Speaker Newt Gingrich led all candidates in such contributions with nearly $425,000.

Corporate and other special interest PACs invested more than $76 million in the elections of 1994.

Special interest beneficiaries include those benefiting from the Contract’s tax cuts, weakening of health, safety and environmental regulations, weakening of product liability law, defense spending increases, taxpayer payments for " regulatory takings," and repeal of the ban on assault weapons.

"Contrary to their rhetoric, the House Republicans are conducting business as usual, except that they are even cozier with the powerful special interests that have financed their campaigns," says Citizen Action’s Michael Podhorzer.

The leading House Republican recipients of PAC contributions were Gingrich, Commerce Committee chair Thomas Bliley ($247,562) and Majority Whip Tom DeLay ($246,024).

- Andrew Wheat and Russell Mokhiber

"Peso Rescue Sets New Limits on Mexico: $20 Billion Aid - U.S. Given Policy Rein." "With Currency Bailout, Is Washington Becoming a ‘Probation Officer’ to its Southern Neighbor?" "Mexican Finance Minister Tries to Soothe Wall St." "Rates Up Sharply in Mexico: 10-Point Rise Made Under U.S. Pressure."

These headlines, from the pages of the New York Times, Washington Post and Los Angeles Times, do not quite mark the death knell for national sovereignty - defined by Black’s Law Dictionary as "the international independence of a state, combined with the right and power of regulating its internal affairs without foreign dictation" - but they indicate that it is critically ill.

The stories detail the drastic conditions - that will plunge Mexico into deep recession - which Clinton administration officials imposed on Mexico in the wake of the peso collapse, in exchange for a $50 billion loan package. The stories report on Mexican Finance Minister Guillermo Ortiz’s "road show" on Wall Street, where he "pleaded" with investors to show faith in the peso and Mexico’s austerity plans. They explain that the U.S.-sponsored bailout plan provides for the attachment of Mexican oil, the symbol of Mexican nationalism. They state that Mexican officials have made private commitments to their U.S. counterparts, ensuring that Mexican economic policy will be vetted by U.S. policymakers for the foreseeable future.

But the wrenching austerity inflicted on Mexico is only half of what the bailout signals about the demise of sovereignty. The other half of the story concerns the loss of U.S. popular sovereignty. The economic rescue plan was described in one Los Angeles Times story as "wildly unpopular with Congress and the U.S. public," and polls showed huge majorities opposing the bailout. With the exception of former Wall Street investment banker and current Treasury Secretary Robert Rubin and a few of his cohorts, it seems unlikely that the poll-watching, which-way-is-the-wind-blowing Clinton administration viewed the plan much more favorably. The Clinton politicos apparently felt no choice but to push a plan that could, at best, have no effect on the president’s political standing, but, at worst, could undercut his performance in the 1996 elections.

That the Mexican bailout was implemented against the wishes of the people of the two main countries that were party to it is notable, but not unique. There is no shortage of examples of democracy failing in Mexico, or in the United States.

What is so important about the bailout from a sovereignty viewpoint is that neither Mexican nor U.S. government leaders felt they had a choice about what policies to adopt. The Mexicans knew that if they wanted bridge loans to pay off investors, they would have to submit to U.S. demands. And while U.S. officials acted in significant part to bail out friends on Wall Street, they also justified the bailout based on the belief that the fate of the United States is bound up with Mexico’s, and that both countries must submit to the dictates of international financial markets.

Democracy is virtually absent from economic regulatory institutions. As a result, the global economy is being integrated in a way that denies people of individual nations the possibility of charting their own future. The start up of the new World Trade Organization will only intensify the problem, as an unaccountable international body is empowered to force changes in broad swathes of national health, safety, environmental and economic development programs and laws.

In the debates over NAFTA and GATT , many across the political spectrum dismissed concerns about the trade pacts’ effect on national sovereignty. Many conservatives and liberals characterized sovereignty as an outdated notion which should properly be cast aside to embrace unfettered international trade and markets. Other liberals and many progressives argued that an emphasis on sovereignty interfered with beneficial international cooperation, and that promoting mutual interdependence would benefit all. Some, especially progressives, contended that, for better or worse, the forces of globalization are marching forward relentlessly and cannot be turned back.

It is time to rethink those notions. The Mexican peso debacle reveals sharp constraints on the scale and scope of democratic decision-making that can come with international trade, global markets and the sacrifice of sovereignty. It is possible to envision democratic structures for international economic management. Reigning in the global economy and rescuing sovereignty are important steps toward cultivating such democratic institutions.

Unless nations reassert their right to use the regulatory tools of a sovereign to control trade, investment and capital flows, the peso crisis will only be a harbinger of other disasters to come, as citizens and even government leaders find themselves unable to shape basic policy decisions.

The ILO prepared the report for the United Nations’ Summit for Social Development that took place here March 6 to 12. The Summit brought together delegates from 182 countries to address the global crisis of unemployment and poverty.

The resulting Copenhagen Declaration, signed by 117 heads of state, urged improvements in health care, sanitation, food production and literacy. But the Declaration failed to suggest how these global needs might be addressed.

The Summit’s much-touted and hotly-debated 20/20 resolution had similar limitations. Wealthy countries agreed to earmark 20 percent of their development assistance for "basic social programs," while recipient nations pledged to spend 20 percent of their national budgets on such programs. But signatory nations refused to define what they meant by "basic social programs."

Nor did wealthy countries rush to pledge new development assistance or forgive loans to poorer countries. Only Denmark , the Netherlands and Austria announced that they would cancel a portion of Third World debt. Other wealthy countries instead preached discipline. It is up to poorer countries to "assume their own responsibilities," said Ruth Dreifuss, head of the Swiss delegation.

"Let us not get hung up on debt alone," advised Rattan Bhatia, the International Monetary Fund (IMF ) representative to the United Nations, at a meeting with non-governmental organizations. "The greater problem is how to raise the resources for economic growth."

While the Declaration says structural adjustment programs advocated by the World Bank and the IMF should encourage "people- centered sustainable development," it embraces "a more favorable climate for trade and investment" as a key to solving the global social crisis.

"We believe that permanent gains can occur only if we encourage free markets and individual initiative," U.S. Vice President Al Gore, head of the U.S. delegation, told delegates. "The market system unlocks a higher fraction of the human potential than any other form of economic organization, and has the demonstrated potential to create broadly distributed new wealth."

Developing countries were not satisfied with that solution. "All we’ve heard is free trade in one big integrated hemisphere," Guyana ’s President Cheddi Jagan complained to delegates.

Absent from the Declaration was any recognition of the role of multinational corporations in the social crisis. French President François Mitterrand did call for implementation of a so-called Tobin Tax, initially proposed by Nobel prize-winning economist James Tobin. Under this proposal, international financial transactions would be taxed at 0.5 percent to raise $1.5 billion to fund social development. While the tax garnered some support from the Canadian and German delegations, the proposal did not appear in any form in the Declaration.

"Given the huge concentration of resources controlled by [multinational corporations], the notion that it would be possible to achieve the summit goals without their active involvement is ridiculous," says Ward Morehouse, president of the New York- based Council on International and Public Affairs.

Across town from the official Summit, more than 2,000 non-governmental organizations (NGOs) also met to discuss the world’s pressing social issues. They criticized the official Summit for neglecting the root causes of the social crisis, particularly deregulation and structural adjustment programs.

"The concept of structural adjustment assumes that the people and the government don’t know what’s good for themselves, and that someone who comes in from outside knows what is," says Hazel Brown, assistant coordinator of the Trinidad and Tobago Network of NGOs. "Whatever money the World Bank gets back through structural adjustment comes at an enormous price of pain in the people."

More than 600 NGOs signed an Alternative Copenhagen Declaration, berating the official Summit declaration’s overreliance on "unaccountable ‘open, free-market forces’ as a basis for organizing national and international economies [that] aggravate, rather than alleviate, the current global crisis."

"Structural adjustment programs imposed by the International Monetary Fund and the World Bank," the Alternative Declaration noted, "have consistently undermined economic and social progress by suppressing wages, undermining the contributions and livelihoods of small producers, and placing social services, particularly health care and education, out of reach of the poor."

The document also criticized the official Summit’s endorsement of the World Trade Organization, stating that under the new trade agreement, "The interests of local producers, in particular, are undermined in the areas of foreign investment, biodiversity and intellectual property rights."

"We’ve clearly tapped into serious and widespread discontent with the refusal of the Summit to deal with the underlying economic and political causes of poverty, unemployment and social disintegration," says one of the Alternative Declaration’s drafters, Vegard Bye of the Norwegian Forum for Environment and Development.

Many at the official Summit, including the Chilean president of the conference, Juan Somavia, credited the NGOs for pushing the Summit to deal with the structural issues behind social disintegration.

With more than 100 world leaders given the stage to make speeches, the Summit provided an opportunity for Third World despots such as H.E. Brigadier-General Thaung Mynt, of Burma ’s ruling State Law and Order Restoration Council (SLORC), to espouse their achievements and commitment on the social development front. The officer explained SLORC’s achievements in the areas of agriculture, health and education since "being compelled to assume the responsibilities of the State in 1988."

Widely seen as one of the most brutal and least legitimate governments in the world today, the SLORC refused to respect 1990 elections in which the National League for Democracy, headed by Aung San Suu Kyi, won 82 percent of the seats in government. Since then, the junta has waged war on its own citizens, recently wiping out rebel Mon indigenous groups who were in the way of infrastructure projects for an oil pipeline being built by Unocal and Total [See Blood in the Pipeline," Multinational Monitor, January/February 1995 ]. "The government of [Burma], while devoting tremendous efforts to alleviate and reduce poverty, is well aware that much remains to be done," Mynt concluded.

- Aaron Freeman

To address overfishing problems, the U.S. Department of Commerce, through its National Marine Fisheries Service (NMFS), is planning to revamp regulations governing fishing rights in U.S. waters. NMFS would like to resort to individual transferable quotas (ITQs) that give fishers and large corporations property rights to fishery stocks in U.S. waters - at no cost. Proponents of the idea include big fishing companies and some environmental groups, such as the Environmental Defense Fund (EDF). An EDF report, "Creating Incentives for Ending Overfishing," says ITQs "create incentives for conservation by giving quota holders a direct stake in the long term health of the fishery."

Fishing companies, the EDF and the NMFS argue that ITQs will conserve fisheries efficiently and with minimal government regulation. Critics say ITQs mean the public will forfeit its ownership of fisheries for, at best, speculative conservation gains.

U.S. fisheries management has historically subjected otherwise open access to fisheries to such regulatory limits as time and area closures, gear restrictions, size limits and quotas. Under this system, fishing rights are nontransferable and non-exclusive and "ownership" is public. "Under open access regimes, in contrast, any fisherman can freely try his luck at making a living from the fishery," says a 1992 NMFS report. In contrast, ITQs "create groups of haves and have nots."

Under an ITQ scheme, the new "owner" of a portion of the available fish stock can sell, trade, lease or give away his or her portion of the fishery. ITQs are allotted as a percentage of the total allowable catch (TAC). Usually, the entire TAC is allotted, so new fishery entrants must buy their way in.

Three small ocean ITQ management programs have been instituted in the United States since 1990. NMFS is considering ITQs for four larger fisheries: the North Pacific Groundfish Trawl Fishery, the Gulf of Mexico Shrimp Fishery, the Atlantic Scallop Fishery and the South Atlantic King and Spanish Mackerel Fishery.

Critics such as Greenpeace fear that transferable fishing rights may consolidate fisheries in the hands of industry giants such as Arkansas-based Tyson Foods, owner of Arctic Alaska Fisheries Corporation. Some charge that Tyson, which has close ties to President Clinton, lobbied for ITQs. Tyson officials decline to comment on the matter.

Fishery competition often leads to over harvesting, so industry consolidation is not necessarily bad. If a company has an effective fishery monopoly, it has an incentive to conserve. But if pollution depletes a fishery or fish prices are reduced as a result of advances in fish farming or increases in the fish population outside of the ITQ, profit and conservation interests could clash.

Industry consolidation combined with fishery property rights may create special dangers. ITQs are usually granted on the basis of historical catch levels. Some say this will reward the most wasteful operations. "ITQs will allow the owners of the largest vessels in the fleet, who have caused the most damage, to squeeze out the sustainable coastal fishermen, who will be unable to compete," says Greenpeace’s Gerry Leape. "If ITQs go forward, the coastal fisherman will go the way of the family farm."

ITQs are attractively simple. But New Zealand ’s experience with them suggests that simpler management is not always better. A Greenpeace report by Leith Duncan documents problems New Zealand has had with the extensive ITQ program it adopted in the mid-1980s.

o Industry, the New Zealand Cabinet and the Ministry of Commerce all lobbied the Ministry of Agriculture and Fisheries for the highest possible quotas as short-term profit motives quickly outstripped stewardship concerns among most fishers.

o Proponents believed that ITQs would eliminate a rush to catch fish, since quota holders had a year to reach their limit. But once fishers exhausted their quotas, they hurried to lease more harvest rights from a quota broker. Transferable quotas diminished the feeling of ownership of a scarce resource and fishers continue to focus on the profit margin.

o The new system sparked increased "highgrading," keeping only the best fish to maximize profit on a quota. Fishers could lease snapper quotas for just under $2.00 per kilogram, but the New Zealand market price was only $2.31. This margin was not enough to cover expenses. However, a higher quality snapper known as iki jimi fetched $5.94 per kilogram in the Japanese market. This provided an incentive to highgrade. Lower quality fish were either dumped at sea or sold on the black market, depleting stocks. New Zealand Minister of Fisheries Doug Kidd estimated that in some areas 80 percent of domestic fish were sold on the black market.

Despite ITQ’s poor track record in New Zealand, the NMFS plans to give away U.S. fishing quotas, a public asset, for free. How this property right is defined will significantly determine what the cost will be to the taxpayer and the environment.

"It is the position of NOAA that ITQs are not compensable under the Fifth Amendment," says Maggie Hayes, general counsel for the National Oceanic and Atmospheric Administration (NOAA). If this view were upheld in court, owners of ITQs would not be eligible for compensation in the event that government action - such as reducing the total allowable catch -diminished the value of an ITQ property.

Since the original entrants into the fishery do not pay for their quota, they are less likely to pursue such a so-called regulatory takings claim. But later entrants will have to pay to acquire ITQs. Caterpillar Tractor, for example, just bought 6,000 shares of the Halibut/Sablefish ITQ in Alaska. Those who pay for their fishing rights are more likely to demand compensation for government actions that diminish the value of their property.

-Ned Daly

by Andrew Wheat

A MONTH AFTER THE MEXICAN GOVERNMENT devalued the peso and triggered a spectacular meltdown of Mexico ’s economy, U.S. Treasury Secretary Robert Rubin described this economic disaster to the Senate Foreign Relations Committee as a "low probability" event that few analysts could have anticipated. Rubin suggested the peso crisis struck like a lightning bolt from a clear blue sky. Yet, despite Rubin’s testimony, such a crisis had been foreseen even before the North American Free Trade Agreement (NAFTA) was approved.

To cite one example, Representative John LaFalce, D-New York, then chairman of the House Small Business Committee, held hearings in February 1993 to examine how dollar-peso exchange rates might affect NAFTA . LaFalce and some of the experts who testified at that hearing considered a peso meltdown to be a high probability almost two years before the crisis transpired. At the hearing, LaFalce observed that:

o a U.S. dollar that bought 25 pesos in 1981 bought 3,270 pesos at the time of the hearing (actually 3.27 new pesos, which moved the decimal on old pesos three places to the left);

o Mexico’s current account deficit was projected to reach $27 billion in 1994 (it reached $28 billion), which would amount to 8 percent of its gross domestic product, a strikingly high amount that many economists consider unsustainable;

o Because the current account deficit and the threat of devaluation spooked investors, Mexico had to pay interest rates of 18 percent to attract foreign capital.

"The exchange-rate relationship between the dollar and the peso will profoundly affect how any NAFTA operates and the distribution and nature of the benefits and burdens of NAFTA," LaFalce said. "Yet NAFTA establishes no mechanism to coordinate monetary policy between the United States and Mexico, nor does it provide for consultations or corrective measures if exchange rates are used to promote competitiveness." LaFalce noted that devaluation was likely. "If the [current account] deficit widens faster than the inflow of capital to finance it," he said, "the Mexican Government will have to decide what to do about the peso, and it will not be an easy decision."

No honeymoon

Despite warnings from LaFalce and many others, NAFTA criticisms went unheeded. In November 1993, most members of Congress put their faith either in the "magic hand" of the marketplace or in Clinton’s impotent labor and environmental side agreements and voted for NAFTA. During NAFTA’s maiden voyage, however, the vaunted Mexican miracle went up in smoke - gun smoke:

o As NAFTA took effect on New Year’s Day 1994, rebels calling themselves the Zapatista Army of National Liberation took over towns in the poor Mayan Indian- inhabited southern state of Chiapas, announcing that NAFTA "represents a death certificate for Mexico’s indigenous ethnic groups."

o Then-President Carlos Salinas’ anointed successor, Luis Donaldo Colosio, was killed by two gunshots in March 1994 while campaigning in Tijuana near the California border; the government presented a young factory worker as Colosio’s lone, demented assassin.

o Ruling Institutional Revolutionary Party (PRI) Secretary General José Franciso Ruíz Massieu was gunned down in September 1994.

o In February 1995, new Mexican President Ernesto Zedillo’s Attorney General, the first opposition party cabinet member in PRI’s history, announced that there was a second Colosio gunman, a member of the candidate’s own security team.

o Former president Salinas’ brother, Raúl, was arrested in February 1995 and charged with masterminding the assassination of Ruíz Massieu, though the government did not declare what motive it attributes to Salinas, a businessman who allegedly has ties to drug traffickers and enjoyed lucrative contracts with his brother’s government.

o Salinas administration Deputy Attorney General Mario Ruíz Massieu, who also has alleged drug trafficking ties, was charged with a cover up in the investigation of the murder of his brother, José Francisco Ruíz Massieu. The former deputy attorney general was detained and imprisoned when he tried to enter the United States, home of the bank accounts in which he deposited at least $17 million, with too much undeclared cash.

Rattling investors

Despite oft-expressed kudos for the Mexican economy’s "sound fundamentals" from Clinton administration officials and Federal Reserve Chair Alan Greenspan, Mexico’s problems were not just political. One troubling indicator that LaFalce noted in 1993 was Mexico’s current account data. The current account measures the net flow of goods, services, investment capital and unilateral aid transfers between a country and the rest of the world. Mexico’s current account deficits, then, reflect the net excess of foreign-supplied capital inflows over domestic capital outflows. In the first eight years after Mexico’s 1982 debt crisis, Mexico’s current account stayed within $8 billion of a balanced account. In 1991, Mexico’s current account deficit doubled to $15 billion and almost doubled again by late 1994. This statistic alone suggested that Mexico was living beyond its means. Given that large amounts of Mexico’s capital inflow went to short-term government debt and to speculative rather than productive investment, these numbers were especially alarming. Foreign debt investors would expect rapid repayment and were likely to withdraw from Mexico altogether if Mexico’s luck soured.

Investors continued their stampede southward, however, because Mexico’s interest rates and investment returns in the early 1990s were bullish, especially compared to those of the United States. This speculative financial stampede created its own momentum. The more investors shifted dollars south, the higher Mexican stocks climbed and the easier it became for Mexican companies and their government to borrow seemingly endless sums of dollars. As investors hit grand slams in Mexican markets, they began to get careless about peso-denominated investments, which one steep devaluation could wipe out. Added to this risk was the danger that investments would not be repaid; many Mexican corporate and government bonds received junk-bond ratings, which are reserved for the riskiest investments.

As investor dollars washed across the border, Salinas technocrats refused to devalue the peso. A strong peso kept foreign investors happy (because a peso devaluation would reduce the value of peso-based investments when they were converted back to dollars), advanced their obsessive war on inflation and treated Mexican consumers to a cheap-import shopping spree going into the August 1994 elections (conversely, a weak peso makes foreign goods prohibitively expensive for many Mexicans).

This and similar political schemes spurred politicians on both sides of the border to ignore the warning lights that flickered across their control panels throughout 1994. Instead, they clung to a fictitious script: that of the Mexican miracle. U.S. and Mexican officials always seemed to need the miracle script for just one more joint political campaign: the November 1993 NAFTA vote in the U.S. Congress, the Mexican presidential election in August 1994, the November-December 1994 U.S. congressional vote on the new General Agreement on Tariffs and Trade (GATT) and the failed subsequent campaign to make Salinas the first head of the World Trade Organization that the new GATT established. In early 1995, desperate Clinton administration officials even resorted to the Mexican miracle script - albeit with a few new caveats - to rationalize their bailout schemes.

By 1994, however, what was once billed as a miracle began to resemble a hoax. Under the strain of the Zapatista rebellion, the political assassinations and the current account deficits, Mexico’s debt underwent a disturbing shift. The Federal Reserve - which doubled U.S. interest rates in the 12 months ending in February 1995 - was making investments more attractive in the United States. Foreign investors in Mexico increasingly demanded higher interest rates, shorter maturities and dollar-denominated debt that would be insulated from a peso devaluation. As the year wore on, foreign and domestic investors dumped cetes, Mexico’s peso-denominated treasury bonds, for its dollar-denominated tesobonos. Foreigners, who held less than $5 billion in dollar-linked tesobonos at the beginning of 1994, held 10 times that on the eve of the devaluation, much of it converted from the riskier cetes holdings. Almost every week, the Mexican government rolled over another maturing debt issue with average maturities of just 10 months.

The 1994 debt shift made Mexico a hostage of short-term market jitters and dramatically increased the importance of the foreign currency reserves that the central Bank of Mexico maintains as a cushion against economic shocks. Yet, the Bank of Mexico ate into these reserves voraciously during 1994, using them to buy pesos to prop up the peso’s value. Foreign reserves, which peaked in February just shy of $30 billion, dropped below $18 billion in April after the Colosio assassination and below $15 billion on the eve of the August elections. Reserves fell again in November, declining to around $5 billion in December.

On December 18, Zedillo met with some of Mexico’s wealthiest business people to discuss a crackdown on a new Zapatista offensive; many analysts believe Zedillo hinted to the chosen few that a peso devaluation was in the works. The next day, rich Mexicans converted billions of dollars worth of pesos into dollars. One day later, the Mexican government announced a 13 percent peso devaluation.

Angered by the breach of Mexican officials’ repeated promise that they would not devalue the peso, foreigners converted pesos to dollars and pulled out of Mexico as fast as possible. By mid-March, three months after the initial devaluation, the peso had lost half its value and Mexico was accepting aid on foreign-dictated terms to pay off billions of dollars worth of maturing bonds that it could not cover. For Wall Street, more than the Mexican standard of living was at stake. Between 1992 and 1994, securities firms billed an average of $133 million a year in Mexican securities underwriting fees and mutual funds raked in $240 million in annual revenue on $17.1 billion in Latin American assets. U.S. banks had $15.9 billion loaned to Mexico in March 1994.

Bailout número uno

Faced with a run on Mexico that was evaporating perceptions of U.S. NAFTA benefits, the Clinton administration masterminded a series of bailouts. On January 3, 1995, a year and two days after NAFTA took effect, the administration proposed an $18 billion rescue plan. The plan consisted of $9 billion in expanded currency swap arrangements from the United States, $1 billion worth of swaps from Canada, $5 billion in Bank of International Settlements (BIS) credit and $3 billion in private bank credit. On January 12, as Mexico’s economy continued to unwind, the administration boosted the U.S. commitment to $40 billion worth of U.S. loan guarantees. Exercising political finesse, the Democratic administration first sat Senate Majority Leader Robert Dole, R-Kansas, and House Speaker Newt Gingrich, R-Georgia, down with Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan. These political heavyweights got the Republican leaders to sign off on the proposal on the spot.

Dole and Gingrich’s prior consent severely limited the ability of the Republican Party to make partisan hay out of the Clinton administration’s bailouts. The chief reason the bailouts were unpopular was the widespread perception that it was structured to reward the very co-dependents who caused Mexico’s economic crisis: the Mexican government and its foreign investor creditors. The main purpose of a bailout was, by the Treasury Department’s own admission, to address Mexico’s liquidity and foreign exchange crisis. But what does this jargon really mean?

The Mexican government issued excessive short-term, dollar-denominated bonds to raise money from investors who, knowing the risks, provided the money in exchange for the promise of handsome returns. Now, the Clinton administration wanted to draw on the funds of U.S. taxpayers and international agencies to make good on Mexican government debt to Wall Street bond holders. This prompted an outcry among liberals and conservatives alike, including most of the large new Republican class in Congress.

Lawrence Kudlow, economics editor of the conservative National Review magazine, testified January 26 before the Senate Foreign Relations Committee, "This is not a bailout of the Mexican peso or the Mexican economy. It is a bailout of U.S. banks, brokerage firms, pension funds and insurance companies who own short-term Mexican debt, including roughly $16 billion of dollar-denominated tesobonos and about $2.5 billion of peso-denominated Treasury bills (cetes). It is also a bailout of the Mexican government which incurred these liabilities. Finally, it could be a bailout of another $20 billion of Mexican private-sector bank certificates of deposit, commercial loans and trade credits."

Voters in November "voted for smaller government and lower taxes," echoed Representative David Funderburk, R-North Carolina, in a February 10 hearing of the House Banking Committee. "If Wall Street wants a sure thing, it should invest in U.S. Treasuries and blue chip stocks," he said.

Rubin insisted the unpopular bailout was needed to defend a broad array of interests: 700,000 U.S. jobs that he claimed depend directly on Mexico’s market; illegal Mexican immigration that he claimed could increase 30 percent in a "protracted crisis;" and "the financial prospects of all emerging markets."

What seemed to move Rubin most was the loss of Mexico as a model for all Third World countries, a model that Rubin and Goldman Sachs helped construct. "Mexico has been, in several ways, a prototype for countries that are striving to put inward-looking, state-controlled models of economic development behind them," he told the House Banking Committee. "A new prosperity based on open markets, a welcome-mat for investment, and privatization is beginning to emerge. But Mexico’s financial crisis shows that these emerging markets are still vulnerable to financial shocks. Helping Mexico through its current difficulties can keep alive the promise of market-oriented reform - the key to growth and stability over the longer term for all of us."

Critics of the Goldman-Mexico model suggested that few Mexicans wanted to be "a welcome-mat for investment" and raised questions about who Rubin’s "us" referred to. "For 10 years now, Mexico has followed the free-market, free-trade creed to a T: trade liberalization, privatization and cultivation of foreign investment," National Autonomous University of Mexico professor Jorge Castañeda, wrote in the January 17 Los Angeles Times. "The results have been dismal: mediocre and sporadic growth (if any), a gigantic current-account deficit stemming from continuing high debt service and a huge trade gap, persistent low savings and a private sector that, with a few exceptions, simply cannot hack it in world markets and takes its money out of the country at the first sign of trouble."

Beset by strenuous objections from liberal and conservative opponents of the $40 billion bailout, and wearying of the administration’s latest threat that the sky would fall if Congress did not carry out Clinton’s trade agenda, Congress balked. Its leaders reported in late January that they could not deliver the bailout votes.

Congressional bypass

Faced with overwhelming congressional opposition to President Clinton’s initial bailout plan, the administration announced an even bigger bailout package on January 31 that made an end run around Congress. Again, Clinton first got Dole and Gingrich to sign off on the plan. The centerpiece of the second package is an unprecedented $20 billion in currency swaps, loans and loan guarantees from the Treasury Department’s Exchange Stabilization Fund (ESF). Congress established the ESF in the 1930s to defend the dollar in the event that the U.S. currency lost an excessive amount of its value relative to other leading currencies. More recently, the Treasury has used the ESF occasionally to defend foreign currencies, but never to the extent now being pursued. The largest ESF amount that the Treasury had previously approved was $1 billion to respond to the 1982 Mexican debt crisis. Previously, ESF credits had been limited to maturities of one year or less. Some credits under the new bailout are to extend up to one decade.

The next-largest component of the Clinton administration-orchestrated package is $17.8 billion in International Monetary Fund (IMF ) credits. Like the ESF funding, the IMF package for Mexico was out of line with anything the IMF had ever done before. It was three and one-half times bigger than what had been the IMF’s largest loan and almost seven times Mexico’s IMF quota. IMF Managing Director Michel Camdessus promised the Clinton administration the funds in the early hours of January 31, before the IMF board voted on the matter. Many nations on the IMF Board did not want to set such a massive precedent and objected that U.S. and IMF staff consultation with the IMF Board amounted to too little too late. Many also viewed Mexico’s problems as primarily a crisis for the United States and Mexico. Britain , Germany , Belgium , Switzerland , Norway and the Netherlands asked that their votes be recorded as abstentions, an unusual dissent in the consensus-run body.

The Switzerland-based Bank for International Settlements (BIS), run by the central bank heads of industrialized countries, provided another $10 billion. But the terms and solidity of the BIS funds are also questionable. A European finance official told the Financial Times in February that the BIS credits amounted to a bookkeeping trick: Mexico could count the funds as part of its reserves but, in fact, it would never access the money.

Liquid gold

The lack of enthusiasm among IMF member countries and BIS central bankers for the bailout is hard to square with the Clinton administration’s presentation of the bailout package. Defending the administration’s approval of the $20 billion ESF package by executive fiat, Rubin claimed hard-nosed business terms underlie the credits, which he said are backed by rock-solid collateral. In the event of a default, he promised, the New York Federal Reserve Bank would garnish Mexico’s oil export revenues. In making the collateral claim, Rubin never directly addressed critics, who suggested that such a foreign garnishment of sovereign revenue was unenforceable, that much of Mexico’s oil revenue was already pledged to other debt obligations and that Mexico, which faces dwindling oil reserves coupled with a rising domestic demand for oil, is expected to become a net oil importer early in the twenty-first century.

Hours after Clinton unveiled his congressional bypass bailout plan on January 31, Texas billionaire Ross Perot offered his perspective on the oil collateral. "The Treasury Secretary and the administration assured us that they have liquid gold collateral," the Texan told the Senate Banking Committee. "Terrific. That’s what bankers fight over." If Mexico really had hard collateral to offer, Perot reasoned, there was no reason for the United States to intervene. The Mexican government with its oil collateral and investors with their troubled bonds could restructure the debt on whatever terms they could work out.

Perot had called Rubin’s bluff. Wall Street did not want to redeem its bonds at less than face value and its financiers would examine the underlying oil collateral revenue with more skepticism than Rubin had. In fact, three weeks later, private commercial banks pulled out of their relatively modest role in the bailout package. Mexico’s negotiations to obtain a $3 billion line of credit from 20 international banks led by Citibank and J.P. Morgan & Co. fell through on March 23. The banks balked, according to the Financial Times, because the Mexican government would draw on their funds only after it used up the other funds in the U.S.-arranged package, and, at that point, Mexico presumably would be beyond salvation. Rubin had told members of Congress repeatedly that it was unlikely that Mexico would draw on the whole bailout package but that the huge sums were needed to restore investor confidence. But the fact that the big banks - whose funds would be drawn upon last - chose to undermine confidence perceptions that affect billions of dollars of their investments in Mexico by reneging on their pledge, suggests that they believed Mexico was much more likely to burn through the full bailout package than Rubin had acknowledged.

Apart from the inevitable post-devaluation improvement in Mexico’s trade balance with the United States - as Mexican goods became cheaper in the United States and many U.S. goods became prohibitively expensive south of the border - Mexico’s situation continued to worsen in late March. Despite a massive injection of foreign funds and the Mexican government offers of interest rates of 58 percent on 28-day cetes, bond holders continued to redeem their bonds for dollars and retreat from Mexico, which reportedly had already burned through at least $13 billion of its bailout package. Mexico is entering a serious recession. The crisis could become even worse if bailout funds prove to be insufficient to stave off widespread Mexican bank failures as heavily leveraged consumers and businesses find it impossible to pay off their debts. Acknowledging the problem, the Mexican government has pledged to make $11.6 billion available to commercial banks, an amount equal to 17 percent of their loan portfolios.

Barring a quick second coming of a Mexican miracle, the Clinton administration will face an agonizing decision soon. One option is to stick to the bailout plan and go further out on a limb by continuing to release new, multi-billion-dollar installments to the Mexican government despite a lackluster response from investors and the Mexican economy. Another option is to declare that the plan is not working and leave Mexico to its own resources. Either way, the political damage to the administration, which made a controversial end run around Congress to put billions of taxpayer dollars at risk, would be enormous. Policymakers on both sides of the border have few options left, save to pray fervently for the appearance of another Mexican miracle.

Sidebar

Newly inaugurated Mexican President Ernesto Zedillo was paralyzed in the first months of the crisis as he tried to balance the irreconcilable interests of two key constituencies, the Mexican people and the U.S. government. By March, U.S. government interests prevailed. The United States would arrange to pay off Mexico’s bond investors, many of whom were U.S. citizens. Meanwhile, the Mexican people would pay for their government’s transgressions through severe austerity measures.

After unveiling a minimalist austerity plan in January that the markets dismissed as insubstantial, the Zedillo administration imposed a shock plan March 9 that amounts to an assault on Mexican businesses and consumers. The plan: increases the federal value-added sales tax from 10 percent to 15 percent; raises fuel prices by 33 percent and residential utility rates by 20 percent; pushes up user fees on ports, airports and toll roads by 2.5 percent each month; and limits minimum wage increases to 10 percent, which, based on the government’s projection of a 42 percent inflation rate in 1995, will inflict an 18 percent decline in buying power on minimum wage workers. Government action also pushed interest rates on consumer credit up to 125 percent.

In addition to these cost increases, says Alfredo Dominguez of the Authentic Labor Front, Mexico’s leading independent labor organization, basic food costs have increased dramatically. "Poor families are getting by only by miracle," Dominguez says. "The minimum wage in the Valley of Mexico [surrounding Mexico City] is 18 pesos, which is $3 a day at the current exchange rate. Workers making minimum wage must make their children, spouses and parents work to survive. A minimum basket of goods [that the government estimates is necessary to support a family] requires at least three minimum wage salaries to purchase." To add insult to injury, Dominguez says, "the government is telling people they must increase their savings rates."

Mexican Labor Minister Santiago Oñate said 250,000 jobs were lost in the first two months of 1995. Oñate predicted that by the end of the year more than one million Mexicans may have lost their jobs.

As the crisis took its toll on Mexican households and businesses, Mexicans took to the streets. Appropriately, debt has been a major organizing theme. Those who have filled the streets in cities across the country include people who cannot pay loans for cars, homes, office equipment, farm credit and credit cards. El Barzón, an organization of small- and medium-sized businesses, organized a national debtors’ strike March 8. Protesting debtors blocked the doors to more than 800 bank branches around the country. The ruling Institutional Revolutionary Party (PRI) responded to a wave of street protests by issuing a new law banning interruptions of traffic. But given the level of protest, the law is unenforceable. A huge demonstration is being planned for May 1 and it is likely that a national strike will be called for mid May, Dominguez says.

-A.W.

Sidebar

The perception that the bailout would benefit elites on both sides of the border unleashed criticism from liberals as well as from conservative economists, who said the bailout posed a "moral hazard," protecting the Mexican government and Wall Street from the repercussions of risky investments and policies. Because of Rubin’s background, the bailout posed certain moral hazards for him, as well.

The Clinton administration recruited Rubin from his former position as co-chair of Goldman, Sachs & Co ., the investment bank that has aggressively carved out a niche for itself in recent years in emerging markets, especially Mexico’s.

Mexico has been first and foremost among Goldman Sachs’ emerging market clients since Rubin personally lobbied former Mexican President Carlos Salinas de Gortari to allow Goldman to handle the privatization of Teléfonos de México. Rubin got Goldman the contract to handle this $2.3 billion global public offering in 1990. Goldman then handled what was Mexico’s largest initial public stock offering, that of the massive private television company Grupo Televisa.

In the financial disclosure form that Rubin filed after joining the Clinton team, he listed 42 Goldman Sachs clients with whom he had had "significant contact," including six powerful Mexican clients. The public sector clients were the Mexican government, Mexico’s finance ministry and Mexico’s central bank. The private sector clients were Teléfonos de México , Cemex S.A. , the largest cement firm in the Americas, and Desc , Sociedad de Fomento Industrial, Mexico’s seventh largest manufacturing conglomerate. Rubin reaped $25 million in compensation from Goldman, Sachs & Co. in 1992 alone.

Just before coming to Washington to head Clinton’s National Economic Council, a leaked letter Rubin wrote to his former clients drew attention to his potential conflicting interests. "I also look forward to continuing to work with you in my new capacity," said the letter. "I hope I can continue to rely on your interest and support ... and would be grateful for whatever suggestions you would offer."

Goldman Sachs has steered billions of dollars of its clients’ money into Mexico. The bank’s clients, partners and reputation all stand to suffer large losses in Mexico unless a successful bailout can be engineered. Heavy losses could encourage lawsuits from disgruntled clients.

The conditions of the bailout require Mexico to privatize more of its economy, including such sectors as oil, highways, ports and electrical power. Such privatizations could offer Goldman Sachs major new business opportunities. Despite this web of connections, Rubin has declined to recuse himself from heading up the bailout. In testifying before Congress, Rubin has said he had only had one conversation with his former Wall Street contacts since the crisis began. "We have no interest in bailing out investors," he told the Senate Foreign Relations Committee in January 1995.

Rubin’s refusal to sidestep this appearance of a conflict of interest falls short of the White House’s rhetoric of two years ago, when Clinton claimed he would impose the toughest ethics standards ever. Rubin’s refusal to recuse himself also sets him apart from Secretary of State Warren Christopher. Christopher recently recused himself from involvement in the administration’s position on a proposed oil deal between a Dutch subsidiary of Conoco and Iran , which the United States has been trying to isolate economically. Christopher recused himself in March after learning that O’Melveny & Myers, the Los Angeles-based law firm that he left to join the Clinton administration, was representing Conoco in the deal. "In conflict of interest matters I think you have to take a conservative position," Christopher said. Conoco has since cancelled the Iran deal.

Treasury spokesperson Howard Schloss says Rubin and the Treasury’s Office of General Council have concluded that Rubin has no conflict of interest on the Mexico bailout. Schloss declines to say what differentiates Rubin’s case from Christopher’s.

- A.W.

Sidebar

Protecting the U.S. dollar is of particular concern not only because the currency has been steadily eroding against the German mark and Japanese yen but also because the bailout itself dragged down the dollar. Another factor in the dollar’s decline is the record trade deficit that the United States is running, including the recent transformation of a U.S. trade surplus with Mexico into a trade deficit.

When the Clinton administration announced its plan to bypass Congress with $20 billion from the ESF in January 1995, the fund had about $25 billion available to lend, according to a Congressional Research Service report.

Three months after Zedillo’s peso devaluation, the peso had lost 50 percent of its value against the U.S. dollar. In the same period, the dollar had lost 15 percent of its value against the mark and about 10 percent against the yen. This erosion in the dollar’s value came despite coordinated efforts by central banks in the leading industrialized countries to drive up the U.S. dollar. "The U.S. monetary authorities are, in effect, loaning dollars to the Mexican monetary authorities," John Mueller, chief economist of Lehrman Bell Mueller Cannon, Inc., said in testimony before the Senate Banking Committee on March 9. "We give dollar IOUs and receive peso IOUs in return. Until Mexico repays these loans, which will take five to 10 years, this amounts, in effect, to issuing new dollars backed by pesos."

Not everyone would agree with Mueller’s contention that the bailout "is almost certainly the biggest single factor in explaining the dollar’s recent decline." But the bailout is widely recognized as an important factor. - A.W.

Sidebar

Multinational Monitor: What lies at the root of the Mexican peso crisis?

Chris Whalen: The Mexican model was never free market. It was never designed for growth in terms of jobs or exports. It was designed solely to raise dollars, to borrow dollars. Most of these dollars were used to either pay for imported consumer products or they were siphoned offshore in the form of flight capital. [Former President] Carlos Salinas, for example, who has never held a real job in his life, leaves office with a net worth estimated in the range of several billion dollars.

MM: How did that happen?

Whalen: He has received gratuities from those below him. Carlos Hank Gonzalez, the outgoing Transportation Minister, has been in politics for 40 years. He used to own a Mexican airline. His son just bought control of Laredo National Bank . This man has billions of dollars in visible net worth - airstrips, ranches, aircraft, real estate holdings all over the world, bank accounts.

MM: Where did he get the money?

Whalen: Corruption. We believe he is one of the biggest money launderers in the country. So, you have this state that oppresses its own people, steals elections, lacks transparency, lacks a legal system that functions. And you ask yourself the basic question - why do we believe that they are going to treat foreign investors any better than they are going to treat their own people? And the answer is that there is no reason to believe that. In fact, the foreign investors once again have been badly mistreated because, by and large, of the $70 billion or so that flowed into Mexico over the last five years, perhaps as little as $10 billion or less went into real hard assets - that is, plant and equipment, capital or new factories that could produce export revenues.

Mexico is extremely over indebted. They probably have more debt service than they have exports this year. And they are headed for another default.

MM: Where did all the money go?

Whalen: It was used to subsidize a very large current account deficit. Most of that deficit was consumer products - food, Barbie dolls - all sorts of things from offshore that they really couldn’t afford. But because the Salinas government kept the peso pegged to the dollar, for a while it worked. Now, as soon as the Federal Reserve started raising interest rates last year, the game was over. The cash flow disappeared.

Keep in mind, if you have [such a large] current account deficit and you are bleeding $2.5 billion a month then you have to raise that amount of money just to stay even. And when you add actual dollar outflows by investors who were selling their peso assets and going back into dollars, the thing just collapses. That is what happened in December. Mexico ran out of money.

The illusion of the North America Free Trade Agreement [NAFTA] was that somehow this country, Mexico, with all this debt and all of these other problems, could be a market. But in point of fact, it is going to be a net cost to the United States for the foreseeable future. And it is going to be an extremely dangerous place for investors.

MM: What is the profile of the average American investor in Mexico?

Whalen: Joe Six-Pack got a call from his broker a year and a half ago. The broker tells him, "They are doing another piece of the Telmex [Teléfonos de México] privatization. I think you ought to buy some." He comes in and buys some at, say, $56 a share. He rides it up to $72. His broker convinces him to hang in there because he thinks it’s going to $80. Now, Telmex is trading at about $30. And that is about the loss the average investor has taken in this thing.

MM: Wasn’t most of the investment from institutional investors?

Whalen: Yes, but they represent individuals. The vast majority of the $70 billion - probably $50 billion of it - was short-term portfolio investment. It was not direct investment in plant and equipment.

MM: What was the basis of your prediction two years ago that the peso would be devalued?

Whalen: Mexico was essentially a debt-driven Ponzi scheme. In other words, [Mexican government officials] were borrowing dollars, but they weren’t creating any means of repayment. There were no new assets here.

The Mexican model gives free market economics a bad name. This is not free- market economics. This is corporate statism. Salinas turned public sector monopolies into private cartels run by his friends. He did not create more opportunity. He did not really open these markets to competition.

Banks in Mexico, for example, were charging people real interest rates of 30 to 40 percent over their cost of funds. What is that? That is usury. The whole system was set for a fall from the outset.

MM: What does this say about NAFTA?

Whalen: NAFTA was designed first and foremost, in my view, to perpetuate single party rule in Mexico. It had very little to do with free trade. Many innocent people were sucked into NAFTA thinking that we were fighting for free trade, when in fact, we were fighting to keep Carlos Salinas in power and keep him liquid.

The people who sold NAFTA were the same people who were on Wall Street selling these investment deals - the largest broker/dealers, the investment banks, the 15 or 20 big U.S. firms with major investments down there. This is the group.

MM: Who is behind the bailout?

Whalen: Wall Street - the friends of Robert Rubin, as I like to put it. It is a subset of the group that pushed through NAFTA. It is basically Fidelity, Trust Company of the West, Alliance - they have been huge buyers of peso treasury bills. They are caught.

Now, these big funds want to socialize the loss. In the past, we have been privatizing the profit. I don’t see them offering to give back some of their profit to help pay for this.

MM: You say that the bailout is being pushed by Friends of Rubin and Goldman Sachs. What is their interest?

Whalen: They have clients who are thinking about lawsuits. If you can keep that exchange rate from sinking further, maybe not as many lawsuits will be filed, á la the derivatives debacle. Why is Dave Malpass, a former State Department official who is an emerging market economist with Bear Stearns, going around saying that the peso has got to go back to 3.5 [pesos to the dollar]?

MM: You seem to believe that the crisis was inevitable. Why?

Whalen: The domestic situation with peso loans by Mexican banks is horrific. If you were a businessman in Mexico for the last three years, your cost of funds has been 20 percent to 30 percent higher than Mexican treasury bill rates - 40 percent, 50 percent, even 60 percent.

At the beginning of 1994, the Mexicans were claiming that inflation was in the single digits. The treasury bill rate fell down to 10 percent. To finance a little export business, you were paying 35 to 40 percent. Nobody can afford that.

What they were doing was rolling the credit. They would give you a little new money. The bank would capitalize the due interest. And they would write you a bigger loan. They would just roll it and pretend that the loan was performing.

But now, at the behest of the foreign creditors, Mr. Zedillo is imposing austerity. He has cut bank on bank loans, banks aren’t making any new loans any more. So, guess what is happening? Everyone is defaulting on loans and tax payments. You are going to have 60 percent to 80 percent default rates on Mexican loan portfolios and credit card portfolios.

We had two warnings of this. One was the collapse in Spain at the end of 1993. In early 1994, Banco Latino in Caracas collapses. The whole Venezuelan banking system is now gone. They have had to refund the deposits. They have now nationalized the whole banking system in Venezuela.

The same thing is going to happen in Mexico. They are going to have to refund deposits. They will have rioting if they don’t refund everybody’s deposit at par. They will have to print money to do it, because they don’t have the revenues. That is a lot of cash - $80 billion to $100 billion in deposits.

Cecilia Rodriguez is the U.S. Coordinator of the El Paso, Texas-based National Commission for Democracy in Mexico, USA (NCD). The NCD publicizes the Zapatista struggle in the United States and Canada. It supports the democratization of Mexico through education and organizing north of the Rio Grande River. Rodriguez underwent a 23-day hunger strike in solidarity with the Zapatistas, which she ended in Washington, D.C. on March 10, 1995.

MM: Who are the Zapatistas?

Rodriguez: The Ejército Zapatista de Liberación Nacional (EZLN). They’re made up of the indigenous peoples of the [Chiapas] area, primarily the Tzeltzal, Tzotzil, Tojolaval, Chol and others.

MM: Can you describe the mission of the Zapatistas and the environment in which they operate?

Rodriguez: Their mission is to bring about a political change in Mexico that will allow indigenous people to genuinely change their lives. They are unable, under the present political system, to access any judicial system. They are unable to procure basic necessities of life. They have no redress, no way to get the political system to respond to their needs.

It’s a set of local issues that made the EZLN grow and made it develop. But it requires a national change in order for these issues to be addressed.

MM: What are the historical conditions that have led to the uprising?

Rodriguez: The conditions of enormous discrimination and poverty and oppression. You could compare it to apartheid in South Africa . The unusual thing about Mexico is that it has two faces. To the public it seems like Mexico is very proud of its indigenous communities; but in reality, they are the most marginalized, the most despised. Mexican culture degrades dark skin, while highlighting white skin. The Mexican media is filled with more white faces now than the media in the United States.

Another factor is the way in which the political system continues to close down avenues of redress for indigenous people. The last straw was the elimination of Article 27 from the Constitution. This article guaranteed communal land to farmers. When that guarantee left, people lost all hope of having any legal redress. And that’s when the EZLN had its most enormous growth.

MM: What was the significance of Article 27?

Rodriguez: That was the reason why the revolution of 1910 was fought. It was fought over land and land tenancy. It was primarily indigenous farmers who fought the revolution of 1910.

Article 27 guaranteed the ownership of land and prevented it from being sold. Land would be passed on from generation to generation. It was something like the homesteaders law. It guaranteed ownership of land, so when there were land disputes, especially when the ranch holders and the land holders in Chiapas began taking over the best land, people could appeal to that constitutional article and say that they were being denied their land. The elimination of Article 27 was part and parcel of the changes that needed to happen politically in order for NAFTA to come into effect. When that was done away with, they had no legal access.

MM: Why was NAFTA such a rallying cry for the Zapatista uprising?

Rodriguez: I think it was, again, the same issue of land. The EZLN is composed of people who are tied to the land, who make their living from the land. They are the tip of an iceberg of discontent in Mexico.

NAFTA eliminated their right to the land, but NAFTA also did many other things; most of all, bringing in a flow of American-made goods that few people could afford. One of the illusions of NAFTA was that Mexico was going to provide 80 million consumers. But by the time it was implemented, people’s standard of living was so low that they couldn’t afford to buy those American-made goods.

They also did not have the productive capacity, principally because of the $70 billion that has come in since the implementation of NAFTA, $50 billion has been in highly speculative investments, not in factories or physical assets - not in the kinds of things that would create jobs and provide infrastructure for the country. So, the Zapatistas expressed people’s tremendous discontent and increasing inability to make a living.

MM: What was the impetus for the Mexican military’s offensive earlier this year?

Rodriguez: I think it all hinges on the status the Mexican government has assigned the EZLN. People have to realize the dual face of the Mexican government. The Mexican government went as far as sending the head of the Justice Department to dialogue with the EZLN. In that way, they gave sort of a de facto legitimacy to the EZLN.

However, when they issued these arrest warrants, they did it under the guise of, "We found these arms caches; the EZLN intends to spread terrorism, therefore we are issuing criminal warrants." By labeling the Zapatistas as terrorists and criminals, the government has essentially shown the other side of their face, the real side; their intent was never to deal with the EZLN in good faith.

There has been almost every violation of human rights that people can imagine: torture, searches without warrants, arrests without due cause, disappearances. There have been 2,400 warrants sworn out. They have moved the military into the Zapatista villages. And what has happened as a result of the terror that the army committed in February of 1995 is that the villagers have abandoned their homes because they are afraid - terrified - of what the military will do. Those who were unfortunate not to be able to flee have been subject to torture. There have been accusations of rapes and mutilation by the Mexican army. The Mexican government completely denies it, even though there have been scathing reports of some abuses by Amnesty International and other human rights organizations.

This has been the nature of the war in Mexico. It is a very dirty war, a war that falls outside of any standard of international humanitarian law.

MM: Can you expand on the political reasons for the recent military initiative?

Rodriguez: I think you could probably identify a group of people which include Mexican financial interests and American financial interests, who basically want a social and political climate that is "stable." Stability to them means no dissent, low wages and a national budget which favors the wealthy and provides absolutely nothing for the majority of the Mexican people. There are now 40 million poor people in Mexico.

It has been this elite group, allied with the old guard of [the ruling Institutional Revolutionary Party (PRI)], that has engineered this move. This is a group of people who are not accountable to anyone.

There was a very telling memo from the Chase Manhattan Bank that called for the elimination of the Zapatistas and said that Zedillo, were he to follow the monetary policies necessary for a stable investment environment, could not in any way fulfill any of the social programs that the Zapatistas were calling for. We also have a statement from the Heritage Foundation that talks more about Zedillo needing to establish national order.

The CIA was deeply involved in helping the Mexican government develop its case against the Zapatistas. There are American-made weapons being used in the attacks. This is a potential Chile or even a Vietnam , because if and when the Mexican Federal Army is unable to deal with what they have now created, which is a guerrilla war, the United States is going to find itself facing involvement.

MM: Can you comment on the PRI’s efforts to undermine the EZLN by pouring money into Zapatista-held territory?

Rodriguez: Those efforts have consisted of giving meal subsidies, crop subsidies, etc. But because of the corruption that’s in place in Chiapas, most of that money goes into the pockets of a few individuals. There is some that is controlled by select indigenous communities at first; but for the most part, it doesn’t serve its purpose. For example, the government will come in and construct a school. They’ll lay the foundation and they’ll build a structure, but they’ll never finish it, and it will just sit there. Or they’ll come in and they’ll plant trees along the road, and never pave the road as it deteriorates. You have towns where the townspeople have to pave their own roads. It’s a system of patronage that doesn’t ever reach the level of being a social program in any genuine way.

MM: Has the Mexican government bargained in good faith in their negotiations with the Zapatistas?

Rodriguez: I don’t believe that the Mexican government ever bargained in good faith. I think they expected to buy off the EZLN. Beginning in January 1994, they have said, "We’ll pave the road to your town. We’ll build you a school." The Zapatistas are seeking much more than cosmetic remedies.

MM: What proposals have the Zapatistas put forth, and how many has the Mexican government responded to?

Rodriguez: The government has said that the Zapatistas had 39 demands and that the government agreed to 34. That’s false.

What they agreed to was to contribute to social programs - to build schools, to pump money into the region, along the lines of programs such as Solidarity [a government-run antipoverty program].

As the back and forth continued, there were secret communications sent to Subcomandante [Marcos] by messenger from Zedillo offering Marcos personal compensation if he would come to some agreement with the Mexican government. This is the PRI’s established way of relating to the Mexican people - bribery, extortion, manipulation, lies. The PRI has been shocked that it has been unable to get the EZLN to respond to those tactics.

MM: In the recent peso bailout package arranged by President Clinton, the Mexican government claims it hasn’t made any concessions in exchange for the bailout. Is this true?

Rodriguez: I think they conceded everything. They conceded the income from oil. They conceded, essentially, the right to plan the national budget over the next 10 years and longer. It’s almost like you have these two groups of people - one in the States, and one in Mexico, who are completely out of touch with reality, who have never faced, or who don’t believe that they face a serious challenge to their power. They say, "These economic policies are what is going to work," regardless of the fact that they are being imposed on an entire nation, and there are millions of people in that nation who will be devastated by those policies. These economic policies are not sustainable for the population.

MM: Who benefits from the peso bailout?

Rodriguez: Basically, short-term investors, people who were interested in speculating on the stock market and who were making some enormous profits there, and who never really intended to stay in Mexico. I think that had the peso devaluation not happened, they would have moved on. They have no loyalty to any particular market. Once conditions are disfavorable, or when they identify more favorable conditions, they would have moved on anyway. This is the fallacy of the economic model that Salinas developed. He developed a dollar-hungry economy that attracts capital that never intends to stay.

MM: Who are these people that you’re talking about?

Rodriguez: They are Merrill Lynch , Goldman Sachs , Chase Manhattan and several mutual funds that were involved in the stock market and that are going to benefit.

MM: What were Mexico’s alternatives to the bailout?

Rodriguez: The alternative was to say, "No." Just like the alternative is to say "No" to the debt. They don’t have any other alternative. I think in many ways that’s the only option that remains available to the Third World.

MM: What is the vision of the World Bank and the International Monetary Fund [IMF] for Mexico’s future?

Rodriguez: I believe that they have a vision that is inappropriate to the country. For the 20 to 25 years that these global policies have been in place, we’ve seen the results; and for the most part, they have not been positive. What they’re trying to do to Mexico is place it in a pressure cooker - make it go through a transformation that it is inappropriate to its present structure.

What has complemented this is the vision of Carlos Salinas - now on the board of Dow Jones - who has been praised by the World Bank and the IMF for the way in which he implemented these economic policies. It’s technocracy taken to its limit - people operating with a set of technical notions about how an economy should work, with complete disregard for the people who make that economy go.

MM: How does it differ from the vision of the future of the Zapatistas and their supporters?

Rodriguez: It’s a complete contradiction. You have two opposing world views. The Zapatistas have a view that people need to be provided for and that the wealth of the country should be used for that purpose. People should not be used for the purpose of speculation or as victims for a vampire, which is the relationship that has existed between Mexico and the IMF, the World Bank, and the United States. That relationship is just sucking the country dry, denying any possibility for integrity, economically or politically.

You have this clash. Even if we didn’t have the Chase Manhattan Bank report that calls for the Zapatistas’ elimination, even if we didn’t have the statements of financial leaders in Mexico that call for the elimination of the Zapatistas, that’s the reality. They must eliminate the Zapatistas because those two world views completely clash, and the survival of one means the elimination of the other.

MM: What would an alternative EZLN economic development model look like?

Rodriguez: If you look at the way the EZLN has conducted itself, you know that it has learned from past armed movements. It has done things very differently, to the chagrin and the criticism of many former members of those armed movements. I think that will be the same case in terms of the development model.

We live in a time where we have to look at the failures of socialism in Eastern Europe, and we have to look at the problems of Cuba . Even if you take away the constant assault of the forces against Cuba, its economy has had problems.

It’s a very difficult question to answer in terms of giving you any specifics, but I think the specific that I can give you is that that model is going to be based on the lessons of history.

I think that they’re going to look at the characteristics that indigenous communities have used to govern themselves. They’re going to look at the balance of the different sectors, the agricultural sector. I think they’re going to look at turning what is now an import-driven model into something else. But that’s about all I can say about it at this point.

MM: What’s the significance of the conservative National Action Party [PAN] victory in the state of Jalisco?

Rodriguez: It’s a concession by the PRI government, which will go through all kinds of shenanigans in order to say, "Yes, Zedillo is really committed to democracy. Here it is. Here is our first evidence: the PAN wins overwhelmingly in Jalisco." The PRI will change. It’s kind of like an amoeba, or like one of these science fiction creatures that changes shape to survive. I believe that’s what that victory means.

The [center-left Revolutionary Democratic Party] PRD should have won the 1988 election. Why didn’t that happen? Now if PAN or the PRD or some unknown party that may come into existence takes power in the country, will that mean democracy? Even if you have other parties - right wing or conservative - democracy is still at issue, because the possibility of a democracy is directly tied to the amount of control people have over their economy. Because of the way in which the IMF and the World Bank and now these loan packages have been put into place, I think it’s irrelevant which party is going to have power.

MM: So, you don’t see significant policy differences between the PRI and the PAN?

Rodriguez: There is a different set of approaches, but neither deals with real democratic change - the kind of change that the Zapatistas envision, which is a change for the poverty-stricken people in Mexico.

MM: Can you comment on the friction between the PRD and the Zapatistas?

Rodriguez: To do that, people have to understand a little better how the electoral system has worked in Mexico. It is designed in such a way as to preclude any genuine participation. Disgruntled PRI members have left and gone on to form parts of other parties. They remain in control of the PRD leadership. The leadership and the base which constitutes the PRD are two completely different things. In the base, I think you have people who really want to see a change and really believe that change can come through elections. In the leadership you have a lot of opportunism. So the EZLN has dealt with the PRD rather gingerly. The Democratic National Convention (CND), for example, is made up of a lot of members of the PRD, but it has never officially sanctioned the PRD. It has never thrown its support to the PRD. That angered many people shortly before the August elections because many people went to the CND expecting the EZLN to endorse the PRD. The EZLN did not because if you seek a government by the people, then you don’t endorse the structure itself.

MM: How strong is popular support for the Zapatistas?

Rodriguez: I think Zapatista support is fairly widespread. There is a lot of sympathy with the Zapatista cause in all the sectors - professional sectors, working class sectors, teachers, students, etc. I think the problem in Mexico is the lack of experienced organizers around the country. But I don’t think that’s any different than social movements in any other country.

The most important contribution that any person can make is to work in their own locale, and one of the things that the EZLN has had to deal with is that they’ll have someone from Chihuahua come to Chiapas and say, "I want to help. What can I do?" And their answer is always, "Go back to Chihuahua and do it there."

I think that the fall of the socialist countries, and the failures in Nicaragua and El Salvador and the inability of Cuba to even survive has been devastating to people. And I think people who have been activists and organizers for a long time are discouraged and demoralized and kind of lost.

In the CND you had many arguments between seasoned people and new people who are tired of rhetoric, and who are attempting to find genuine solutions and methods for getting the message out, for getting people organized, for getting a democracy movement in place.

That’s what they called upon civil society to do. They said armed struggle is not the solution. It cannot be the only form of struggle. We call upon you, civil society, to organize yourselves and to figure out a way to change this situation and to have a peaceful transition to democracy. And I think that, for all of its pain and difficulty, that that began to happen. That is what the investors and Zedillo are reacting to. That is why they are engineering a national witch hunt, a dirty war, in order to terrorize the people of Mexico, in order to send them a message: "Forget it; you’re not in the works here. Your voice is not valid, and if you continue, this is your reward. This is what will befall you."

MM: The Zapatistas are a formidable propaganda force, but can they sustain a prolonged guerrilla war?

Rodriguez: I think the EZLN can sustain a prolonged guerrilla war. What cannot sustain it is the civilian population, and this is the contradiction of the EZLN. Their greatest strength is the massive popular support that exists for them in the Zapatistas’ territory. But it is also their greatest weakness. They could have opted for a military approach in February of 1995 when their people were subjected to torture and extrajudicial executions. They could have said, "The hell with you. This is the way in which we’re going to conduct the war, we’re going up into the mountains and we’re going to fight." What people find difficult to understand is that the EZLN’s purpose is social change in Mexico, not armed struggle and its glorification.

I’d say three-quarters of the Zapatistas’ energy has been put into propaganda, in that dialogue with the press, in that dialogue with the public about why they are fighting. They cannot, with 10,000 or 12,000 fighters in Chiapas, make frontal attacks on an enemy superior in weaponry and in numbers, but they can take their cause to the public and have the public then respond in partnership. They have said to the public, "You have to act in your own ways. We’re not asking you to pick up a gun. But take to the streets. Take to your neighborhoods. Make proposals for how to get a grip on what it is that is happening in the country." This is a different model that people have a hard time dealing with. They categorize them as suicidal, as martyrs, as dreamers and so forth; but what option do you have when you have very poor people who have this integrity and who are willing to fight, and you have this demagoguery that refuses to deal in any genuine way with the aspirations of those poor people? You do what you can do. You create an army and you take your cause to the public and you attempt to build that partnership.

The saddest thing about Zedillo’s military strike is that people really don’t understand what kind of miracle was at work in Mexico. They have no notion of it. The most important memory to me of Mexico is the first Democratic National Convention where Marcos gave his speech. They had 6,000 people who attended, and there was an elderly woman in the audience sitting three or four rows behind me who must have been in her sixties. I asked her what she thought of what was happening. She said, "Well, I don’t know what to think. The only thing I know is that for the first time in all my life I have hope. I have hope that Mexico can be something different and that I can be proud of belonging to this country."

by Janice Shields

TIJUANA, MEXICO - ONE MONTH AFTER the U.S. Congress approved the North American Free Trade Agreement (NAFTA ), Mexico held its first independent union election in 10 years. Unfortunately, neither NAFTA nor this vote ushered in a new era in Mexican labor relations or brought significant improvements to Mexican maquiladoras (foreign- owned factories). Intimidation, corruption and employer interference continue to mar union representation, and working conditions in border plants remain dismal, notwithstanding the much-touted promises of the labor side agreement to NAFTA.

Conditions along the U.S.-Mexican border a year after NAFTA confirm concerns of NAFTA critics, who warned that the lax NAFTA accord would encourage corporations to profit from so-called "social dumping." Multinationals pursuing this practice shift their production facilities from industrialized countries with relatively strict labor and environmental standards to countries such as Mexico, where standards are weak or rarely enforced.

Company unions

"From the time the maquiladoras started to grow here [in Tijuana], unions were set up by the companies rather than the workers, with ‘protection contracts’ signed before even a single worker was hired," says Mary Tong of the San Diego-based Support Committee for Maquiladora Workers. "Workers don’t even know about [the union] unless and until they try to organize or have complaints on the job. Then, the union, which is paid to make sure that there is no labor unrest, tries to keep them from organizing. The so- called union representative is more often a greater threat to organizing than even the company. The company usually doesn’t even have to bother dealing with labor problems because they’re squelched by the union representative."

Workers at Plásticos Bajacal, a subsidiary of Phoenix-based Carlisle Plastics Inc. , participated in the historic vote on whether to replace the official Regional Confederation of Mexican Workers (CROM) with independent union representation. Voting took place on the sidewalk in front of the plant on December 15, 1993. A CROM representative escorted workers, who make hangers, outside the factory gates, where they voted aloud. International observers say 30 CROM thugs with cellular phones filmed each worker’s vote. The Conciliation and Arbitration Board, the government agency which oversees union elections, raised no objection to this process.

Representatives of the proposed independent union requested that the election be called off when they became concerned that supporters would face reprisals from the company and the CROM. Ultimately, the two unions negotiated a settlement in which the independent union got little more than an agreement that workers who had been fired for organizing activity would receive the severance pay legally owed to them.

Carlisle President Clifford Deupree recalls the vote differently. The vote occurred openly according to Mexican custom and the only filming he noticed was done by the media. Votes ran 10 to one against the union challengers, who capitulated, he says. "We are there as guests of the Mexican government. We follow their laws very rigorously. It is not my place to comment on comparative labor law in the United States as compared to other countries."

Despite this setback, the mere fact that an election occurred is "a tribute to the great effort by organizers on both sides of the border," says Tong. The fact that independent union elections are so rare in Mexico illustrates "the failure of NAFTA proponents’ promises for a new era of labor rights," she says.

Another group of maquiladora workers sought independent representation in January 1994. One hundred eighty-seven General Motors (GM) workers tried to register as an independent union at the labor board in Ciudad Juárez, Chihuahua, south of El Paso, Texas. After the labor board failed to respond to this request, workers wearing red bandanas popularized by the Zapatista rebels in Chiapas took over the board’s offices on February 7. Workers from a Ford factory and two other GM plants joined the protest. One worker who participated in the masked takeover told Labor Notes he "wanted to avert the company’s retaliation, while showing the boss there will be a second Chiapas in Chihuahua." But the board rejected the union registration on February 16 and GM fired 15 labor leaders in March. Workers slowed production and resubmitted their request to register an independent union; GM fired 60 more workers. "Employees at that plant chose to leave the employment of the company," says GM spokesperson Michael Hissan. "Under Mexican labor laws, they received a settlement, negotiated to their satisfaction."

Labor side agreement

Activists in Mexico, with some assistance from U.S. and Canadian allies, are pursuing three avenues to help Mexican employees in foreign-owned factories. They are demanding genuine implementation of NAFTA’s labor side agreement, filing cross-border lawsuits against foreign parent companies and taking direct action against employers.

To date, the labor side agreement has been worthless. The agreement established National Administrative Offices in the United States, Canada and Mexico to hear labor violation complaints. Workers from one NAFTA country can submit evidence to the NAO office of another NAFTA country to demonstrate that their country’s labor laws are not being enforced. If the NAO finds merit in the case, officials from the country where the hearing was held meet with their counterparts in the country that violated its own labor laws to try to resolve the dispute.

The NAO held its first hearing in September 1994 in Washington, D.C. The U.S. Teamsters and United Electrical Workers unions charged General Electric and Honeywell with systematic violations of Mexican health, safety and union organizing laws. The U.S. unions acted in solidarity with the Mexican metal workers union STIMAHCS, an affiliate of the Authentic Labor Front, Mexico’s independent labor federation. The unions accused both companies of illegally firing about 150 Mexican workers who attended off-duty meetings with union organizers. Testifying before the NAO, four Mexican labor lawyers said U.S. companies breach Mexican labor laws with impunity because Mexican officials are anxious to please U.S. corporations. Electronic media were banned from recording the proceedings and witnesses were limited to 15 minutes of testimony each. On October 12, the NAO issued a report that concluded that it was "not in a position to make a finding that the Government of Mexico failed to enforce the relevant labor laws." No action was taken against either company.

The NAO released a report on its second case, involving a Sony Corporation subsidiary located in Nuevo Laredo, in early April 1995. The Sony complaint was filed by the International Labor Rights Education and Research Fund, the National Association of Democratic Lawyers, the Coalition for Justice in the Maquiladoras and the American Friends Service Committee. This complaint alleges that Sony workers were denied their right to organize and associate in four ways: Workers who organized were fired; a union election was procedurally flawed in ways similar to the Plásticos Bajacal vote; workers who protested the flawed election in front of the plant were beaten up by police; and a petition to register an independent union was improperly rejected.

The NAO report concludes that, "it appears plausible that the workers’ discharges occurred for the causes alleged, namely for participation in union organizing activities." In the Sony case, the NAO took its toughest position to date - which is not saying much. The report calls for "ministerial consultations." U.S. Labor Secretary Robert Reich has written to Mexican Labor Minister Santiago Oñate to request a telephone conversation about the matter. "It is my hope that we can agree on how to proceed on these matters as soon as you have had an opportunity to review the report," Reich wrote Oñate. "I believe it is important that we continue to discuss the labor rights and industrial relations we have mutually agreed are of critical importance."

A statement from Arturo Alcalde of the National Association of Democratic Lawyers in Mexico City said, "This decision calls attention to the basic problems faced by Mexican workers, namely that government authorities hold the labor law in contempt and that official unions do not respect the democratic rights of their rank and file members."

Sexual harassment is another common grievance among maquiladora workers, most of whom are women. In the first case of its kind, Mexican employees sued U.S.-based National O-Ring in a U.S. court on December 15, 1994, alleging violations of Mexican labor and other laws and demanding at least $2.25 million as well as punitive damages. More than 100 workers who had been employed at Exportadora de Mano de Obra in Tijuana filed the charges against the U.S. company, which they allege is Exportadora’s parent, National O-Ring , and National O-Ring President John Shahid. "If NAFTA opened the border to trade, the border should also be opened in terms of liability," says the workers’ attorney, Fred J. Kumetz.

The suit alleges that the company refused to pay back wages, and accrued vacation and severance pay to over 190 workers who were terminated when the U.S. parent shut down the plant in November 1994. Exportadora’s workers had earned the equivalent of 50 to 75 cents per hour (at the exchange rate in place prior to the peso devaluation) and worked 48 hours per week. The complaint also accuses National O- Ring’s president of sexual harassment.

In May 1994, Shahid allegedly offered to give a Mexican office employee a night course in English, reportedly touching the employee repeatedly on the back in an offensive manner. In September 1994, women employees were required to participate against their will in a bikini contest at the company picnic. Without their permission, Shahid videotaped them, training the camera below their waists. After the women complained about the incident, National O-Ring stopped sending work orders to the Exportadora plant. In December, Shahid told the San Diego Union-Tribune that the video incident never occurred and that his company does not own Exportadora.

The Exportada workers first filed complaints with the Justice Department of the State of Baja California in Mexico. Citations were issued but the U.S. owner refused to appear, arguing that the Mexican plant was a legally separate company for which National O-Ring was not liable. Formal records filed with the government are in a "borrowed name" - the name of a Mexican who is listed as the owner even though all operations and profits are controlled by the foreign company. The U.S. case is pending.

Glimmers of hope

At the local plant level, workers have begun to form committees to function as independent unions that can counter the company unions. "Committees have been established at 19 different maquiladoras in Tijuana," according to Aurora Pelayo, a community activist in the worker colonia of Vista Alamar. "It is hoped that the committees will one day be able to join to form one union for all of the workers."

In their struggle, maquiladora workers have been assisted by cross-border organizations such as the Support Committee for Maquiladora Workers. The all-volunteer Support Committee is run entirely through donations. It seeks to promote and support independent labor organizing in Mexico. To date, the Committee has publicized strikes in Mexican factories and organized tours of the industrial zones and colonias so international labor leaders, politicians and journalists can witness the adverse impact of foreign exploitation along the border. The committee also has sponsored health and safety workshops to train maquiladora workers as leaders in their communities, to organize for better conditions.

"I did not hold out hopes for NAFTA bringing any type of positive benefits to workers," says Tong. However, "the debate over NAFTA did draw together a lot of unionists and others in the United States, Canada and Mexico who never really considered the situation of workers in the maquiladoras before," the organizer says. "They now are realizing that they really need to work hand-in-hand with Mexican workers. That’s the only positive I’ve seen."

Sidebar

Maurilio Sanchez Pachuca, president of the Citizens’ Pro-restoration Committee of Padre Canyon and Community Services, who has conducted a health survey of the area, says "40 percent of Chilpancingo’s population is sick and has learning disabilities." Sanchez built a medical clinic beside his house, but has no more money for furnishings or a doctor, so the building sits empty.

Since the North American Free Trade Agreement (NAFTA) went into effect, the city of Tijuana has begun to artificially extend the mesa so that more polluting plants will tower above the workers’ communities; the Mexican government also is building a taxpayer-financed highway to connect two maquiladora areas for the convenience of the foreign managers.

U.S. and Mexican residents 370 miles to the east also suffer the ill effects of maquiladora-caused pollution. Foreign companies have built approximately 80 plants in Nogales, Sonora, across the border from Nogales, Arizona. Both the Nogales Wash, which flows from Mexico to the United States, and the area groundwater are contaminated with industrial chemicals. The remote cities’ particulate pollution levels exceed U.S. federal health standards, partially due to heavy smoke from the Sonora dump, where industrial products are burned. A recent University of Arizona survey of Nogales, Arizona residents found higher than average rates of multiple myeloma, a rare bone marrow cancer, and lupas, a disease in which the immune system attacks the body.

Maquiladora health and safety

Health and safety conditions inside the maquiladoras are as dangerous as those in the surrounding communities. Aurora Pelaya, a community activist in a Tijuana neighborhood, charges that the problems have long been covered up because "companies have made under-the-table payments to environmental and health and safety investigators for years."

One widespread problem is maquiladora employers’ effort to keep Mexican workers out of the federal health care system. Mexican workers are supposed to receive free federal health care for job-related illnesses. But plants try to avoid written reports of job-related accidents or health problems by hiring their own private doctors who treat workers inside the factories.

"This is not new, but there’s been a tremendous switch-over in the past year [since the North American Free Trade Agreement (NAFTA) went into effect] to maquiladoras having private doctors either on a part-time or on an on-call basis," reports Mary Tong, an activist with the San Diego-based Support Committee for Maquiladora Workers. "Any time there’s an accident on the job or workers get sick with a job-related illness, they go to the doctor hired by the maquiladora rather than the government clinic, so it won’t go on the record, won’t drive the insurance rate up and won’t be traceable to their plant as an on-the-job injury or health problem," she adds.

To encourage company doctors to recognize that they have obligations to their worker patients, not just to their maquiladora employers, the Support Committee for Maquiladora Workers, in conjunction with Mexican doctors, is urging the company doctors to focus their attention not only on patients’ symptoms, but on the causes of their illnesses and on prevention.

Women maquiladora workers, who make up the majority of the overall maquiladora workforce, face special health and safety problems tied to pregnancy. Many women interviewed for a job are asked if they are pregnant. Some plants even require workers to take pregnancy tests every three months. "If the managers find out a worker is pregnant, they do forced speed-ups with no breaks, assign the worker to lifting heavy weights or working on heavy machinery that she doesn’t know how to operate or physically can’t operate and do other outrageous things to force her to quit so they won’t have to pay maternity leave," says Tong. "In one case, managers of the Japanese-owned maquiladora, Tocabi, found out a worker was pregnant and put her in a soldering room with no ventilation to try and force her to quit by the fact that she wouldn’t be able to stand the fumes. She was determined to keep working as long as she could because she really needed the money. It’s a really sad situation, because the baby was born with anencephalies (without a brain) and she feels like she’s responsible because she didn’t quit," relates Tong.

According to Maurilio Sanchez Pachuca, "there have been a number of instances in the last year of babies born with anencephalies." "The companies claim that the workers’ health problems are caused by deficiencies in the people," Jose Bravo of the Environmental Health Coalition in San Diego says. "Management argues that mothers have a folic acid deficiency, which causes anencephalic births. However, the women’s diet consists mainly of corn and beans, which are high in folic acid."

The babies that maquiladora workers do not bear are also controversial. The San Diego, California chapter of Planned Parenthood has established a relationship with the Border Projects Foundation in Tijuana. The foundation has trained local canvassers to provide contraceptives in workers’ communities and within the maquiladoras themselves. The foundation has set up six clinics in the neighborhoods, trained doctors employed by factory clinics and established a center to perform sterilization surgeries. Planned Parenthood and the foundation would like to establish 50 maquiladora clinics in the next year, a Planned Parenthood fund- rasing pamphlet says. "If workers go to state-run clinics for family planning services, they receive bad comments in their personnel files and lose hours of work and pay," says Silvia Baron of Planned Parenthood in San Diego. "Providing these services at the factory allows workers to go to the clinic there during the lunch hour."

Mary Tong worries that employers will pressure workers to use these services. "In my experience with the maquiladora owners, if somebody’s told by a clinic at their workplace, ‘We recommend you get a sterilization operation,’ that really is fairly coercive."

Disorder on the border

In November 1993, the United States and Mexico signed the Border Environmental Cooperation Agreement, which formally established the Border Environmental Cooperation Commission (BECC). The BECC oversees the North American Development Bank, which is supposed to provide financing for environmental infrastructure projects along the border and in other areas environmentally imperiled by the economic integration of the United States and Mexico. Unfortunately, "the BECC’s rules of procedure were negotiated between the United States and Mexican governments behind closed doors without input from either the public or the BECC directors," according to Geof Land of the Arizona-based Border Ecology Project. When the BECC directors met for the first time on October 12, 1994 in Ciudad Juárez, Chihuahua, their first formal action was to approve rules that significantly limit public participation in the BECC’s decision making process. The measure passed by an 8-to-1 margin. Only the U.S. public representative to the BECC opposed the rules. "The rules raise serious doubts concerning the promises of unprecedented ‘bottom up’ public participation and transparency made by President Clinton," says Land. To date, no BECC environmental cleanup projects are even close to being started.

Ironically, U.S. and state laws may do as much to protect the Mexican environment as the BECC. Though there is great concern that much of the waste generated by U.S. companies operating in Mexico is unaccounted for, at least one U.S. company has been fined for violating laws in the United States that require hazardous waste generated by U.S.- owned plants in Mexico to be returned to the United States for disposal.

Alco Pacífico Inc. agreed to a felony judgment of $2.5 million in December 1993 for transporting toxic lead slag across the border and abandoning the waste outside Tijuana. The company’s president was sentenced to 16 months in prison. RSR Industries of Dallas and Quemetco of Los Angeles paid $2.5 million in fines for supplying lead slag to Alco Pacífico.

The money from the fines and settlement was given to the Mexican Secretary of Social Development and Solidarity to help eliminate the lead at the abandoned site and to establish a lead-testing program for children on both sides of the border. "The Mexican government has made little effort to clean up the site and now has asked me to direct the operation," says Los Angeles District Attorney David Eng.

Probably the most hopeful signs for workplace improvement lie with the tentative efforts of the Mexican workers themselves, and with solidarity efforts by U.S. activists.

For example, workers demanded and won ventilation systems at two maquiladoras after they attended a health and safety workshop provided by the Support Committee.

"The workers came up with very innovative strategies to get the company to deal with workplace safety issues," says Mary Tong. For example, the workers at two companies, Sanyo and KSC Electronics, handed out booklets titled, "Does Your Job Make You Sick?," which describe different job-related health problems and what to do about them. The workers underlined the passages specifically related to their plants and then distributed them to all employees. They then anonymously put copies on their managers’ desks. "Because the booklet had been passed around to all of the workers, the managers could not just fire one or two," Tong says.

"They were not even sure where the booklet came from to be able to retaliate against anyone," she adds. Some of the workers then told the managers that if they did not have enough money to put in a ventilation system, the workers would appeal to the foreign owners. "The ventilation system was installed right away," Tong says.

Like the labor and community organizers, environmental and health and safety activists can cite few gains from NAFTA for border residents. They too point only to raised consciousness as a NAFTA benefit. Land says, "NAFTA heightened concerns about border conditions, provided a forum for groups concerned with international discussions, strengthened border networks, and generated increased funding for grassroots organizations."

- J.S.

Sidebar

Smith Corona , for example, has had labor problems since it moved a typewriter plant from Cortland, New York to Tijuana, Mexico in 1992, putting 800 U.S. employees out of work. Tijuana Smith Corona workers planned a strike for October 1994. But "Smith Corona suddenly disappeared from the social security records as if it had shut down," says Mary Tong of the Support Committee for Maquiladora Workers. "There are no more of its workers on the record, so one can only presume that they must have changed their name on the papers and in the social security records. They’re still manufacturing the same products."

"If this is allowed to go through unchallenged, companies won’t even have to shut down," Mary Tong says. "They can just change their names on paper and make like they shut down. They’ll get rid of the workers they consider [to be] the trouble makers and reopen under a different name." Smith Corona declines to comment.

During 1994, at least 16 companies became golondrinas, the Spanish word for "swallows," used to refer to plants whose foreign owners "fly away," abandoning workers without paying owed wages or the severance pay required by Mexican law. At the time of a closure, the company union will often declare a strike and tell the workers to take over the plant and guard the equipment. Under Mexican law, workers are given a legal claim to the plant and the union will extract as much as it can from the golondrina.. If the company does not pay the workers, the equipment can be sold and the workers recompensed. About 70 percent of the proceeds typically go to pay company debts and the union, however, while the workers get whatever is leftover.

- J.S.

by Tim Koechlin

AS THE NOVEMBER 1993 CONGRESSIONAL VOTE on the North American Free Trade Agreement (NAFTA ) neared, President Clinton, economists and corporate lobbyists promised that NAFTA would mean lower prices, higher wages and more jobs. NAFTA advocates dismissed opponents’ concerns that NAFTA would enhance the power and profits of multinational corporations as paranoid and naive, proclaiming that workers and consumers would be NAFTA’s true winners.

Fifteen months after NAFTA took effect, the concerns of NAFTA critics have been borne out:

o U.S. corporations have shifted investment to Mexico at a record pace;

o U.S. imports from Mexico have grown faster than U.S. exports to Mexico;

o and the Mexican economy is a world-class mess.

While it is too early to determine NAFTA’s precise effects on workers, it is abundantly clear that workers in the United States, Mexico and Canada are worse off because of NAFTA. On balance, jobs have been destroyed and the wages and security of employed workers in all three countries have been undermined. The crash of Mexico’s currency and economy will make things much worse, especially for Mexican workers.

Trading away jobs

As the trade numbers for the year-old NAFTA were reported in January 1995, NAFTA’s proponents declared the agreement a great success. Exports from the United States to Mexico have grown, as they predicted, and, as they never tire of repeating, exports mean jobs. But claims of this sort are shamefully deceptive. Generally, exports do create domestic jobs. But, conversely, imports destroy domestic jobs. What NAFTA supporters conveniently overlook is that U.S. imports from Mexico have grown more quickly than U.S. exports to Mexico.

Take automobile trade. Secretary of Commerce Ron Brown and USA*NAFTA, the leading pro-NAFTA corporate lobby, point to a "boom" in U.S. vehicle exports to Mexico as evidence that NAFTA is creating good jobs for U.S. workers. U.S. vehicle exports to Mexico increased by nearly 40,000 in 1994. But auto imports from Mexico increased by nearly 70,000. This post-NAFTA result represents an acceleration of the southerly shift in auto jobs. The "Big Three" U.S. automakers employed some 29,000 workers in Mexico in 1985. By the end of the decade they employed three times that number of Mexican workers.

In the aggregate, too, NAFTA is facilitating and accelerating the relocation of jobs to Mexico. Net exports of merchandise - the difference between U.S. exports of goods to Mexico and U.S. imports of goods from Mexico - have declined precipitously in the past two years. In 1992 (the "base year" for many NAFTA projections) the United States ran a $5.4 billion merchandise trade surplus with Mexico. Net exports declined to $1.7 billion in 1993, and $1.35 billion in 1994.

Since the devaluation of the peso - which makes U.S. goods more expensive in Mexico, and Mexican goods cheaper in the United States - the U.S. trade surplus has dissolved altogether. In recent months, the United States has begun to run a trade deficit with Mexico. In January 1995, imports from Mexico exceeded U.S. exports to Mexico by half a billion dollars, and preliminary estimates suggest that the deficit in February was about the same.

NAFTA supporters were fond of pointing out that sustained net exports mean jobs, but the now-plummeting net export figures translate into job losses. Economists typically assume that $1 billion of net exports means 15,000 to 20,000 U.S. jobs. This suggests that since NAFTA went into effect on January 1, 1994, trade with Mexico has cost U.S. workers something like 30,000 jobs - and, given the Mexican crisis, greater U.S. job loss is sure to follow.

NAFTA-related U.S. job loss is likely to get worse for another reason. U.S. exports of capital goods to Mexico grew by 23 percent during the first eight months of 1994. Clearly, U.S. exports of capital goods - machinery used to produce other goods - create U.S. jobs in the short term. But much of this productive capital will be used to produce goods for the U.S. market. In the long term, these expanding Mexican exports to the United States will displace jobs held by more costly U.S. workers.

Despite the efforts of NAFTA proponents to put a positive spin on a bad situation, NAFTA has not delivered the goods. Widely cited projections that NAFTA would create jobs were premised on the assumption that the U.S. trade surplus with Mexico would grow immediately after NAFTA’s passage and then stabilize. Gary C. Hufbauer and Jeffrey J. Schott of the Institute for International Economics projected an annual trade surplus of $9 billion, and the creation of up to 170,000 U.S. jobs between 1990, when NAFTA talks were initiated, and 1995. But net exports are declining and U.S. workers are paying the price.

Runaway investment

Economists defended NAFTA on the basis of classical trade theory, which argues that free trade makes the economic pie bigger. But allusions to trade theory are misleading because, as Jeff Faux and Thea Lee of the Economic Policy Institute note, "the fundamental purpose of NAFTA is to facilitate the shift in investment to Mexico." For starters, NAFTA is full of provisions eradicating Mexico’s traditional restrictions on foreign investment. The reduction of trade barriers also has the effect of promoting investment in Mexico, because it allows investors to exploit low Mexican wages and lax environmental standards without sacrificing access to the huge U.S. market.

The liberalization of trade and investment between Mexico and the United States in recent years - culminating with NAFTA - has sparked a direct foreign investment boom in Mexico. In 1988, U.S. direct investment flows to Mexico totaled $579 million. Between 1989 and 1993, these direct investment flows averaged more than $2 billion a year. Last year, U.S. multinationals invested more than $4 billion in Mexico, a seven-fold increase in just six years. This investment spurt, much of it at the expense of investment in the United States, means fewer U.S. jobs and lower U.S. wages.

There has also been a foreign investment surge from multinationals based outside of the United States. These corporations, which invested a then-record $1.4 billion in Mexico in 1993, invested $4 billion in 1994. Some of this investment has come at the expense of U.S. investment and jobs, as non-U.S. multinationals, like their U.S. counterparts, increasingly use Mexico as a cheap platform from which to service the U.S. market.

NAFTA also has hurt U.S. workers by enhancing corporate power and undermining corporate accountability. By making the threat of relocation increasingly viable, NAFTA gives mobile corporations an upper hand in their negotiations with workers, communities and governments. A 1992 survey by the Roper Organization of 455 top manufacturing executives found that, if NAFTA was implemented, 24 percent would use the threat of relocation as a bargaining chip to keep wages down.

Corporations have delivered on that promise. In August 1994, for example, unionized workers at Leviton , a Warwick, Rhode Island-based electrical outlet manufacturer, overwhelmingly voted to accept a two- year wage freeze and to surrender overtime pay on 12-hour shifts rather than taking the risk that their jobs would be exported. A Leviton manager warned employees that a vote against the concessions would be "the beginning of the end." Thousands of workers have endured real wage declines because of pressures that come with NAFTA, including accelerating capital mobility, intense import competition and undermined worker bargaining power.

Some pay a higher price for free trade than others. Mexicans and U.S. residents with the lowest incomes are paying more than their fair share of NAFTA’s costs. "NAFTA’s First Year," a report issued by the Alliance for Trade Responsibility, the Citizens Trade Campaign and the Trade Research Consortium, concludes that NAFTA has been especially hard on women and people of color, who are disproportionately represented in labor-intensive industries such as textiles and apparel. But NAFTA has also destroyed thousands of high-tech jobs. The AFL-CIO report "NAFTAmath" points out that U.S. imports of electronics, computer products and telecommunications equipment from Mexico in 1994 exceeded exports by about two to one.

The end of the Mexican miracle

NAFTA already looked like a bad deal for U.S. workers before the December 20, 1994 devaluation. But the subsequent free fall of the peso and broader economic crisis has turned NAFTA into a disaster for workers on both sides of the border. Austerity and depression in Mexico mean that the typical Mexican will become poorer and less able to buy U.S. products. Preliminary estimates indicate that Mexican imports fell by 26 percent from December 1994 to February 1995. David Wyss, research director at the private consulting firm DRI/McGraw Hill, told the Senate Budget Committee that the crisis in Mexico could reduce growth in the United States by four-tenths of a percent, at a cost of up to 350,000 jobs.

For Mexican workers and peasants, this crisis is an unspeakable tragedy. Higher interest rates, dramatic cuts in government spending and a weak currency mean fewer jobs, lower wages and more poverty. Since the new year, hundreds of thousands of Mexicans have already been thrown out of work. The Mexican government has made it national policy to ensure that real Mexican wages will fall even more, by requiring that wages not increase as fast as inflation.

One group is likely to benefit from the unraveling of the Mexican economy: Mexican-based exporters, including multinationals operating in Mexico. Declining Mexican wages and a weak peso mean lower production costs and more competitive exports. While workers on both sides of the border watch their paychecks shrink, employers in Mexico’s maquiladoras are likely to enjoy growing profits. Recognizing this, Nike, which has many of its production facilities concentrated in Southeast Asia, announced within days of the peso’s fall that it would open assembly plants in Mexico. Other corporations are sure to follow in Nike’s footsteps, trampling the interests of underpaid Mexican workers and those who lose their jobs in the United States.

By John Ross

Monroe, ME: Common Courage Press, 1995

424 pages, $14.95

The January 1, 1994 uprising of the Zapatista Army of National Liberation (EZLN) was a direct attack on the neoliberal economic model and corporate globalism. It exposed the corrupt Mexican regime and the brutal effects of its policies on Mexico’s most vulnerable classes.

John Ross presents an impressively detailed account of the uprising and the historical events that led to it. He reveals the uprising as a product of 500 years of Mexican Indian history, covering the genocide by plague and sword of the European "discovery" of America, the "land hunger" struggles in the centuries that followed, the Mexican Rebellion of 1910-1919, the neoliberal "miracle" imposed by ex-President Carlos Salinas that impoverished millions, through the violent protests in 1992 that accompanied the 500th anniversary of Columbus’ landing.

Ross delves deep into the political events in Mexico over the past few years. He presents ample evidence that both the PRI and the U.S. embassy in Mexico knew of the EZLN prior to the uprising, but the PRI withdrew an army initiative to crush the rebels in May 1993 - a move that "flabbergasted" Commandante Marcos - for fear of derailing the NAFTA vote in the U.S. Congress.

He documents the extrajudicial killings, tortures and other human rights abuses of the military following the uprising, and the political cannibalism of the PRI leading up to the 1994 elections. He also suggests the assassination of PRI presidential candidate Luis Donaldo Colosio was a PRI "adjustment of accounts," in Marcos’ words.

Ross also describes the fall from grace of Cuauhtémoc Cárdenas’ Party of the Democratic Revolution (PRD), noting the cold reception given to the PRD by the EZLN, who considered it to be a party of a political insiders.

While deriding the political establishment, however, the Zapatistas remained committed to peaceful negotiations and the electoral process, even after the EZLN’s grassroots base rejected the agreement negotiated between PRI representative Manuel Camácho Solís and the EZLN leadership. An EZLN communique announcing the second Democratic National Convention, which followed rejection of the settlement, noted that "those who think armed struggle" is the only way to separate the PRI from state power, as well as "those who are not willing" to try the electoral path, are "NOT convoked" to the convention.

While the level of detail in Rebellion From the Roots is impressive, at times it approaches overkill. Ross devotes scores of pages, for example, to a play-by-play description of the logistical preparations and events in advance of the second Democratic National Convention. ("Major Moises calculated the depths of the latrines - how many times a day would convention-goers defecate and what might be the volume.") But his account of the driving forces of the rebellion based in the indigenous communities of southern Mexico is comprehensive and articulate.

The Zapatistas have distinguished themselves with their proficiency in the propaganda war. Commandante Marcos’ mastery of the soundbite, careful staging of events and use of technologies such as the Internet have nurtured an EZLN constituency both in Mexico and internationally.

In terms of ideology, the EZLN has not embraced socialism, and has generally shunned standard rallying cries against the likes of "Yanqui Imperialism." "The Zapatista vision is not one of clearly demarcated divisions between social classes with the industrial proletariat being the motor of revolution. For the EZLN, the guiding philosophy may be as simple as ‘justice for the campesinos and the indigenous peoples,’ " he writes.

This concept of justice extends to the role women have played in the EZLN. "Women comprise 55% of the logistical support base," Ross notes. The January 1 Declaration of the Lacandon Jungle also includes substantial demands for women’s rights, including the right of employment and just salary and severe penalties for the physical mistreatment of women.

The EZLN distinguishes itself from other armed struggles in Latin America, including the Sandinista National Liberation Front, Peru’s Shining Path and Colombia’s M-19, by making no demands for political power. Rather than attempt a military takeover of government, they have focused on democratic reform and basic human rights. This integrity and commitment to the grassroots has foiled attempts by the ruling PRI to buy them off with political prizes.

Democracy also extends to the workings of the EZLN. All the results of peace negotiations with the PRI are taken directly to the people in their villages in Zapatista-held territory for several days of consultations. National conventions are held in the jungle to put together the struggle’s platforms. And even the charismatic ladino Commandante Marcos repeatedly emphasizes that he is merely a spokesperson for his indigenous leaders.

"[T]his concept of communal participation is foreign to a world and its pundits accustomed to top-down leadership in which the approval of the pueblos - the people and their villages - is a mere formality that their leaders are charged with guaranteeing."

Heart Attack

The book documents how in late 1985, the 3M Company , anxious to expand its small foothold in the pharmaceutical business, announced the introduction of its first major new drug - Tambocor.

Within two years, pharmacists were filling thousands of prescriptions per month for the drug, which was developed to treat patients with irregular heartbeats.

But in 1989, a clinical trial conducted by the National Institutes of Health (NIH) indicated that the drug was killing patients rather than saving them, Moore said.

Moore, a senior fellow at George Washington University’s Center for Health Policy Research, estimates that 50,000 people died from taking Tambocor and other drugs intended to prevent cardiac arrest.

In the book, Moore charges that:

o The drug industry persuaded thousands of doctors across the country to prescribe expensive drugs on the basis of an unproven medical theory. Researchers believed that suppressing mild premature heartbeats would prevent lethal cardiac arrests. But over a decade’s time, 28 clinical experiments failed to demonstrate the expected benefits.

o Even before it was approved, the 3M company and outside medical experts knew Tambocor could cause deaths.

o The Food and Drug Administration (FDA) also knew about the dangers. "This drug kills people," one top FDA doctor told 3M officials as the agency considered whether to approve Tambocor.

Moore alleges that 3M successfully waged a high-pressure campaign to persuade the FDA to relax safety restrictions on the Tambocor label, despite growing evidence about the dangers of the entire class of antiarrhythmic drugs.

Moore says that despite repeated warnings about this family of drugs, thousands of physicians continue to place their patients at risk of premature death through inappropriate use of the drugs.

In a prepared statement, 3M said Moore’s allegations "have no scientific merit whatsoever - they’re just plain wrong."

"Tambocor is a highly effective medicine that dramatically improves the lives of thousands of people," the 3M statement said. "Tambocor has been thoroughly studied and tested since the mid-1970s by hundreds of leading heart specialists and 3M scientists. It is approved for use in more than 50 countries, some for over a decade."

Junk Cruise

Regency Cruises, owner of the Bahamian flag cruise ships Regent Rainbow and Regent Sea based in Tampa, was charged and pled guilty to violating the Act to Prevent Pollution from Ships.

"Congress and the international community have banned plastic pollution because of its damaging effects on the environment and wildlife," said U.S. Assistant Attorney General Lois J. Schiffer. "Dumping is all too common a problem in the shipping industry."

The Regency case is only the third one to charge dumping of plastic in violation of the Act and the first to charge dumping of plastic beyond the U.S. 12-mile territorial limit.

On February 6, 1993, local fishers saw a school of porpoises swimming through a swarm of plastic garbage bags approximately 25 to 30 miles off of St. Petersburg Beach. The fishers immediately notified the Coast Guard Marine Safety Office in Tampa.

Following the fishers’ instructions, the Coast Guard was able to retrieve some of the bags, which contained information pertaining to that week’s voyage of the Regent Rainbow.

A second crime was detected after a cruise ship passenger aboard the Regent Sea witnessed the crew dumping plastic bags approximately 29 miles off Cortez/Brandenton, Florida, during a cruise that departed and returned to Tampa in February 1993.

Those who provide information leading to a conviction under the Act to Prevent Pollution From Ships may be rewarded up to one half of the amount of any resulting fine.

Pulp Nonfiction

Now, after pleading guilty to dumping harmful sludge and wastewater into Ward Cove, KPC, a wholly-owned subsidiary of Louisiana-Pacific Corporation, will pay $3 million in criminal fines and $3.1 million in civil penalties, and has agreed to clean up the damage it caused.

More than half of the criminal penalty will be suspended if KPC spends at least $1.75 million to complete a pollution prevention program.

"KPC committed environmental crimes over a long period of time," says Lois Schiffer, assistant attorney general for environment and natural resources. "The plea agreement gives the company significant incentive to clean up its act, and it also includes management controls to help assure that KPC will not pollute in the future."

- Russell Mokhiber

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By Harry Browne and Beth Sims

Albuquerque: Resource Center Press, 1993

By Roderic Al Camp

Oxford University Press, 1992

By Viviane Brachet-Marquez

Pittsburg: University of Pittsburg Press, 1995

GATT, NAFTA and the

Globalization of Corporate Power

San Francisco:

Earth Island Press, 1993

By Ricardo Grinspun and Maxwell Cameron, Eds.

New York: St. Martin’s Press, 1993

By Thomas J. Moore

New York: Simon & Schuster, 1995

By Jonathan C. Brown

Berkeley:

University of California Press, 1993

By John Cavanagh et al., Eds.

San Francisco: Institute for Food and Development Policy, 1992

By William McGaughey

Minneapolis:

Thistlerose Publications, 1992

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