It was startling to find the New York Times—reporting from the Davos, Switzerland 2013 World Economic Forum—situating Mexico at the top of a list of five Latin American countries that were enjoying an “economic renaissance.”1 In Mexico, one is most likely to hear that the social fabric has shredded and that the nation is near a point of decomposition. Such views may be exaggerated, but they are less so than the latest public relations barrage seeking to alter the prevailing unfavorable international image of Mexico. On their march to return to power and institute sweeping policy changes, the PRI’s sorcerers and alchemists launched this campaign after the presidential election in July 2012, pushing it to new heights with the inauguration of Enrique Peña Nieto in December. Echoes from this grand cosmetological effort to put a new face on Mexico are becoming ubiquitous: In January 2013 Larry Fink, CEO of the world’s largest financial asset management firm—controlling $3.9 trillion—opined that Mexico is “an incredible growth story.”2 Even the seasoned Mexico correspondent of the generally sober Financial Times, proclaimed, at the close of the Davos Forum, the arrival of the “Aztec Tiger.”3
After returning from participating in the 2013 Davos Forum, noted Mexican columnist Sergio Sarmiento, in the right-wing Reforma newspaper, argued that Mexico was not, but stood on the threshold of becoming, the Tigre Azteca. In his view, the final consolidation of Mexico’s PRI-initiated 30-year neoliberal project to create another “Asian Tiger” (such as Korea or Taiwan) now hinged on clearing three major (interrelated) hurdles—the privatization of the energy sector, the need for a new (more regressive) tax system, and the effective end of the huge (unregulated and untaxed) informal economy.4 Sarmiento advocated extending the 15% Value Added Tax to food and medicines but remained silent about the tax-exempt status (for individuals) of capital gains income as well as government bond and long-term private sector bond interest payments.
It is a good measure of the success of this current ideological offensive that we find serious observers, even those identified as “progressives,” such as Joseph Stiglitz and León Bendesky (a columnist for La Jornada, Mexico’s leftist daily), willing to describe the state of the Mexican economy with terms such as “prosperous,” “competitive,” or exhibiting a “positive environment,” let alone suggesting there is now a “rush” (or scramble) for Mexico.5 From the right to the left, then, an overnight consensus seems to be solidifying.
It was in February, immediately after attending the closed-door sessions of “Latin America’s Davos” in Álamos, Sonora that Sarmiento wrote of the impending arrival of the “Tigre Azteca.” The virtually unknown Álamos Alliance Summit meetings bring together a range of top level economic policy makers, pundits, and academics from throughout Latin America, the United States, and Canada.6 Among the many powerful individuals known to have participated in past Summit meetings is the most revered inspiration for Chile’s Chicago Boys, Arnold Harberger. Harberger was the head of the Chile Project—operated by the economics department at the University of Chicago beginning in the 1950s—that trained the legions of market fundamentalists (i.e. Chicago Boys) who subsequently formulated economic policy throughout General Pinochet’s military dictatorship (1973-1990).
Harberger has been a featured headliner on more than one occasion, including in 2012. Having served as the long-time “academic director” of the Álamos Alliance until 2012, this “godfather of free market economics in Latin America” again participated in the Summit in February.7 As in years past, the 2013 Summit gathered a number of individuals who are part of the organizational structure of Marió Vargas Llosa’s Peru-based International Foundation of Liberty (IFL), founded in 2002. With strong ties to the Heritage Foundation, the Cato Institute, and at least 27 other right-wing policy centers in the United States, Latin America, and Spain, IFL is an organization currently coordinating the highest circles of reactionary power in a broad effort to delegitimize progressive governments in Latin America.
At this exclusive gathering there were at least two participants linked to the Washington-based Cato Institute, including a major organizer, Roberto Salinas León, who leads the Mexico Business Forum, and Ian Vásquez, Director of the Center for Liberty and Prosperity of the Cato Institute. Mexican Chicago Boy participants included José Manuel Suárez Mier (M.A. & Doctoral Studies, University of Chicago), rated as one of the few genuine Mexican Chicago Boys, and Dr. Carlos Hurtado López (University of Chicago 1985), budget undersecretary under President Fox (2000-2006). Two practiced Mexican image-conjurers, Luis de la Calle and Luis Rubio, authors of the image-spinning 2010 book Middle Class: Poor no More, Developed not Yet, that has charmed major media in the United-States, attended in 2012 and 2013, respectively.8
Their small, obviously well-financed, book—claiming falsely that Mexico had become a “middle-class” society—was part of a premature effort to reset negative international perceptions of Mexico after decades of calamitous neoliberal structural changes that resulted only in economic semi-stagnation and the forced migration of millions to the United States.9 The “middle-class” claim of these authors is based on ethereal criteria, such as households that own a business, make payments on scheduled debt, have gone to a movie theater, or live in a city—thus excluding from the calculation the poorest one-quarter of the population who live in rural areas and small towns. These authors ignored the best indicator of all—annual median family income—signifying the midpoint in the income distribution. In 2008 this amounted to only $8,592 for a family of four. The figure included both market income and the value of transfer payments received from government programs.
By accounting for the lower cost of living in Mexico relative to the United States (known as the adjustment to Purchasing Power Parity), the median level for Mexican family income becomes the equivalent of that of a U.S. family of four with an income of $12,287. Yet, even after this large adjustment, Mexican median family income remained at only 84% of the $14,600 that the World Bank recently proposed as the threshold entry level to “middle class” status in Latin America for a family of four.10 The median income is attained by only a statistical handful of families clustered at the mid-point in the distribution of income—the rest in the bottom half of the population, particularly those in the bottom third of the populace, live at a large distance from this median level. Furthermore, given wage stagnation or decline since 2008, it is clearly the case that the majority of Mexican families in 2013 subsisted even further below the World Bank’s very low definition of “middle class” income. This has been confirmed by the latest government report on the distribution of income, for 2010, which showed that the median family (after adjusting for inflation) suffered a 4.9% income decline in relation to their 2008 level.11 According to this 2010 study, after making all the calculations and adjustments, at least 60% of the population had incomes below the World Bank’s threshold number for entry into the lowest level of the “middle class.”
Mexico lags far behind Chile in terms of institutions designed to ideologically embed the neoliberal paradigm, but efforts to catch-up have been on display at the Álamos Alliance conferences.
The best measure of the power and scope of the Álamos Alliance Summit meetings is the inclusion of the most powerful members of the Mexican policy-making elite. Augustin Carstens, currently head of the central bank and ex-secretary of the treasury, was among the 30 participants at the 2011 summit. The 2012 summit was graced by the presence of Mario Sánchez Ruiz, president of the Business Coordinating Council (the peak business organization), which has increasingly become the all-but-de-facto national policy-making entity as the neoliberal era has advanced. The leading persona of the 2013 summit was President Carlos Salinas (1988-1994), who was joined by Pedro Aspe, the former secretary of the treasury. Aspe has long been remembered for his overweening confidence while in power and for his clumsy assertion in late 1992 that cost him much of his public legitimacy. Unforgettably, he stated that poverty is, among Mexicans, one of the great myths.12 Well-remembered for this, his name is most strongly associated with the cataclysmic economic collapse which began in earnest during 1994, with massive capital flight as a result of growing demands to sell off short-term international government notes denominated in dollars. Just after President Salinas left office, the peso collapsed, the government ran out of hard-currency reserves, and Mexico was forced to receive what was at the time the largest international bail-out from the IMF, the U.S. Federal Reserve, and the Bank for International Settlements to limit the economic downturn.13 Aspe and Salinas had orchestrated the “selling of Nafta” in México for years by keeping the peso wildly overvalued in order to create the illusion of wealth among Mexico’s small but high-spending middle-class. They gorged on shopping trips to the United States and cheap international travel while generally saluting Salinas (though few will now admit it). Aspe and Salinas also knew that the way to sell NAFTA to the U.S. Congress was to have a huge trade deficit with the United States, which convinced a naïve congress that even more trade with Mexico would deepen the U.S. advantage. When the house of cards fell, Aspe was viewed, rightly or wrongly, as both inept and most responsible for the debacle.
Given this, the slow rehabilitation of Aspe is remarkable. Due to the return of the Salinas cadre—arguably the major PRI tacticians behind President Peña Nieto’s victory—the new president chose his campaign coordinator, Luis Videgaray, for secretary of the treasury. Videgaray played a key role in an off-the-program high-level meeting for financial institutions at the 2013 Davos Forum, where the main attraction was the impending PRI effort to privatize Pemex, Mexico’s resource-rich national petroleum company. Behind Videgaray stands Aspe. Videgaray attended the top Mexican neoliberal economics program, ITAM, for his BA degree and then moved to MIT for his PhD This was exactly the educational course of Pedro Aspe. Returning to Mexico, Videgaray went to work with Aspe at the treasury and has maintained a close association ever since. Aspe has been instrumental in the current public relations operation to revise the economic image. For example, in early 2012, Aspe appeared before the Mexico Institute of the Wilson Center in Washington, D.C., asserting that “Mexico finally looks competitive (since China entered the WTO in 2001), and this is extremely good news.”14 He was, apparently, one of the precursors of the current around the “prosperous, competitive” trope. His headline appearance at the Álamos Alliance Summit, 2013, is further confirmation of his once again towering stature.
In Mexico, solid evidence of a major turn away from the semi-stagnation, briefly interrupted by ephemeral bouts of expansion that has gripped the nation during its 30-year neoliberal policy implementation, simply does not exist. Predictably, due to the 2012 election, Mexico re-entered the political business cycle in 2011-2012. Every six years (frequently borrowed) public funds are haphazardly spent to bolster the support for the incumbent’s party at the state and national levels. Because of expansionary public spending and a recuperated export market for Mexico’s cheap-labor manufacturing plants, Mexico enjoyed modest per capita income growth, averaging 2.7%, after inflation, for 2011 and 2012. But, according to data compiled by the UN’s Economic Commission for Latin America, the broader context was zero growth in 2008, a -7.1% nosedive in 2009, and then a limited rebound of 4.4% in 2010.15 The latest expansion was partly driven by a 100% increase in State and Municipal debt from 2009 onward, leaving half the state governments (and numerous municipalities) unable to service these new debts by late 2012.16
Beyond the anticipated burst of public spending, Mexico encountered exceptionally favorable export prices for precious metals and petroleum, while benefiting from recovered U.S. vehicle sales. By volume, auto and truck exports to the United States shot up by 64% from 2009 through 2011.17 Mexico has also attracted hot money flows due to the historically unprecedented levels of international liquidity, thereby permitting the Federal Government to roll-over its debts at a nominal rate of interest. Mexican bonds held by foreigners leaped from $11.3 billion in 2006 to $123 billion today.18
Whatever meager improvement that might be found in recent growth statistics, average Mexicans have gained nothing: Average workers’ monthly pay in the formal sector in 2012 was 13.5% below that of 2007.19 Meanwhile, the portion of the workforce defined as “informal”—working without a contract and legal rights to protection for hours worked and completely without health or social security benefits—remained at 59% in 2011 and 2012—the same as 2005 when the government began using its current method of calculation.20 This was before the passage of a new labor law, late in 2012, now officially permitting extensive outsourcing and temporary contracts under across-the-board freedom-to-fire-at-will conditions, which will now exert further downward pressure on wages. Although, formally, the new labor law was signed by outgoing President Calderón, it was universally understood to be a major part of incoming President Peña Nieto’s project to finalize Mexico’s neoliberal transition. Behind the initiative stood the towering and implacable employers’ association, Corparmex, which had lobbied hard to overthrow the key working-class victory embedded in the Revolutionary Constitution of 1917. While Corparmex’s propaganda claimed that job creation was their motivation, in December 2012—the first two months under the new labor law—213,000 formal jobs were lost. Now employers no longer have to pay more than symbolic severance payments to long-time workers. Before repeal, the labor law mandated a lump-sum payment equal to 20 days of pay for each year worked, plus three month’s pay.21
In the 1980s Mexico embarked on the consolidation of a neoliberal export-led model based on assembling activities where, essentially, the sole national input was cheap labor. One result has been that inflation adjusted salaries collapsed to the point where, last year, they averaged only 68% of the level achieved in 1976! Surprisingly, this calculation was made by the economic research center of the peak business association, the Business Coordinating Council—the guiding force behind the export model over the past 30 years.22
There is no single statistic, or combination of statistics, that can encapsulate the socioeconomic conditions the underlying population endures with this export model. Nevertheless it would be foolish to ignore Mexico’s most renowned poverty expert, Julio Boltvinik, whose 2010 estimate places 66% of the population in the poverty category (ranging from extreme to moderate).23
But, instead of taking such matters into consideration, at the Davos Forum, Joseph Stiglitz opined; “I have a favorable view of Mexico” because it is “more competitive than China.”24 Presumably, he was making reference to comparative wage levels—information that has been well known in Mexico since 2009. However, if competitiveness is the issue, Mexico is very far from China’s league: According to the competitiveness metrics of the World Economic Forum attended by Stiglitz, Mexico ranked 53 in 2012—below its 2005 level—while China was positioned in 29th place. Competitiveness is determined by a range of factors. One is unit labor cost, determined by both wage rates and labor productivity. As is well known, China’s wages are now rising rapidly. However, according to Conference Board data, total labor productivity grew 7.6% per year 1995-2009—as a consequence of upgraded manufacturing processes, innovation and scientific applications. Chinese suppliers, with ever-higher technological capacities, constantly increase their participation in the complex web of production.
Mexico has some niches of high productivity—especially in the “Detroit South” auto sector. Yet in Mexico, transnational firms are the dominant suppliers to these high-productivity enclaves. This arrangement creates few “spillovers” into the national economy. As a result, according to the Mexico-based think tank CIDAC, annual total labor productivity grew only 0.011% per year between 1991-2009.25
According to Mexican economic consultant León Bendesky, Mexico today is a “magnet” as investors “rush” into the economy, presumably hoping to gorge on low wage labor.26 For Mexico’s majority over the past 30 years, low wages have meant more low wages, a vicious cycle softened only via massive migration. Mocking the “low-wages-road-to-prosperity” view adopted by Stiglitz and Bendesky, many critical economists are fond of saying that if low wages were really a magnet attracting foreign capital then Haiti would be a prosperous nation. This article offers a challenge to Stiglitz and Bendesky: Explain how further extending the low-wages-combined-with-foreign-direct-investment approach will release the interminable semi-stagnation trap that has bound Mexico for 30 years.
Although foreign direct investment in the transport equipment sector has been important in recent years, the idea that Mexico is now destined to be resuscitated by such investments is evermore erroneous. For starters, such investments are not necessarily meant to add bone and muscle onto the receiving economy—funds can flow into shopping centers, luxurious high-rise apartment buildings, ostentatious resort complexes, discos, and casinos, etc. Frequently what is termed a “foreign investment” amounts to a mere exchange of existing property titles having no positive effect on the economy. Above all, when placing foreign investment at the center of the analysis, it is important to calibrate the net effect—incoming direct investment minus outgoing direct investment. For years net direct investment has been dramatically declining. In 2012 incoming direct investment dropped by 17% from its 2011 level. Meanwhile outgoing investment by Mexico’s largest transnational firms continued to surge. The net effect was a first-time outflow of nearly $13 billion.27 Regarding direct investment, then, Mexico is de-capitalizing as Mexican capital “rushes” for the exit. If Mexico is indeed a “magnet,” its polarity is set on negative.
Aspe and Salinas have been magnificent necromancers, fooling all of the people, all of the time, with their vague and evasive assurances that Mexico stood at the very threshold of entry into the league of “advanced industrial nations.” Beginning in the mid-1980s, it appeared that Mexico’s long history of underdevelopment was near an end with entry into the GATT (General Agreement on Tariffs and Trade) in 1986 (backed by Salinas and like-mined technocrats) and the massive privatizations begun under his predecessor but carried to new heights by Aspe and Salinas. This was followed by the signing of NAFTA in late 1993 and the orchestration of a new foreign investment law ending the policy of “Mexicanization,” which had reserved strategic and priority areas to national firms. This process culminated with the entry into the OECD in 1994. However, the entire project fell to pieces with capital flight, the PRI split by political intrigues of Hobbesian proportions, the peso collapse of 1994, and finally the profound economic crisis of 1995. Until the very end, Aspe and Salinas were certain they were too agile, too intelligent, and too well connected for such events to ever overtake them; after all, they had duped their own populace and (barely) out-maneuvered the very sizeable U.S. opposition to NAFTA.
The Economist portrayed Peña Nieto as “coming out swinging” upon taking power.28 He certainly did deliver an uppercut to the glass jaw of organized labor as his administration shepherded through the new labor law imposing neoliberal flexible working conditions. This important legislation, technically signed by President Calderón in his last moments, marks a profound reversal of one of the crucial social justice elements of the Constitution. Neoliberalism continues to evolve, now armed with “fast policy”: Labor’s advocates, locked in another era, were left running far behind events. Peña Nieto’s next blitz was to commence in January with the Crusade Against Hunger.29 The “crusade” is not directly tied to the poorest of the poor—the small cultivators. It reeks of Salinas’s National Solidarity Program (1988-1994), ostensibly designed to provide a safety net for the poor but dismissed by social policy specialists as a duplicitous effort to capture them politically.30 Immediately after this out-of-the-blue announcement, in Davos, Treasury Secretary Videgaray, along with the director of Pemex, signaled to international corporate leaders (before such matters had a real airing in Mexico) that the national oil company would undergo “modernization.”31 Fundamentally, this will entail as complete a denationalization of Pemex as possible: The PRI insists that this massive sell-off of nationally owned assets can never be termed “privatization.” Bold and fast, these were two of the three hallmark characteristics that marked the era of Aspe and Salinas. The third characteristic was overreach. Bolder and faster are two characteristics of their contemporary surrogates. Overreach, as demonstrated by the cosemetological “prosperous/middle-class Mexico” tropes deconstructed here, is once again the modus vivendi of Mexico’s economic and political elite.
1. Liz Alderman, “On Lookout in Davos for Next Growth Story in Emerging Markets,” New York Times, January 26, 2013, B7.
2. Shannan Siemens, “BlackRock’s Fink: Investors Moving to Stock ETFs,” CNBC, January 17, 2013, accessed January 31, 2013, http://www.cnbc.com/id/100389039/BlackRock039s_Fink_Investors_Moving_to_...
3. Adam Thomson, “Mexico: Aztec Tiger,” Financial Times, January 30, 2013, accessed February 12, 2013, http://www.ft.com
4. Sergio Sarmiento, “Tigre Azteca,” Reforma, 18 febrero 2013, accessed February 26, 2013 http://www.sergiosarmiento.com/index.php/columnas/reforma/300-tigre-azteca
5. León Bendesky, “Desaliento y arrebato,” La Jornada, 28 de enero 2013, 28; Victor Flores Olea, “¿México próspero?,” La Jornada, 28 de enero 2013, 20; León García Soler, “Davos, Santiago y el Elíseo,” La Jornada, 27 de enero 2013, 10; Roberto González Amador, “En Davos, el panorama mundial se ve más despejado,” La Jornada, 25 de enero 2013, 27.
6. Ricardo Valenzuela, “México: Alianza Álamos 20” Hacer Latín American News (21 de enero 2013, consultado 30 de enero 2013, http://www.hacer.org/latam/?p=24513; Redacción, “ Kiy yor.com http://www.kioscomayor.com/columnas.php?artid=47756&relacion=kioscomayor...
7. José Manuel Suárez Mier, “Arnold Harberger,” Aquelarre Económico, 20 de febrero 2012, consultado 23 de febrero 2013, http://www.quadratindev.com/esl/Opinion/Aquelarre-Economico8
8. Luis de la Calle y Luis Rubio, Clasemediero: Pobre no más, desarrollado aún no. (México, D.F.: Centro de Investigación para el Desarrollo, 2010); William Booth and Nick Miroff, Mexico’s Middle Class is Becoming its Majority,” The Washington Post, March 17, 2012; For a detailed critique of this book see James Cypher, “Mexico since NAFTA: Elite Delusions and the Reality of Decline,” New Labor Forum, (20), 2011, 61-69.
9. For an analysis of Mexico’s neoliberal era see James Cypher and Raúl Delgado Wise, Mexico’s Economic Dilemma: The Developmental Failure of Neoliberalism. (Rowman & Littlefield, 2011).
10. INEGI (Instituto Nacional de Estadísticas Geografía y Informatica), Principales Resultados de ENIGH 2008 (INEGI, 2009), 11, 14. Cypher, “Mexico since NAFTA: Elite Delusions and the Reality of Decline,” 63-66. Francisco H. G. Ferreira, et.al, Economic Mobility and the Rise of the Latin American Middle Class. (World Bank, 2013), 2.
11. INEGI, Encuesta Nacional de Ingresos y Gastos de los Hoages: Principales Resultados (INEGI, 2011), 23.
12. Jesús Sánchez, “Campañas de contraste,” El Financiero, 2 de junio 2011, 31.
13. Committee on Banking, Housing and Urban Affairs, U.S. Senate, The Mexican Peso Crisis (US Government Printing Office, 1995), 260-269; 314-318.
14. Pedro Aspe, “Mexico Economy Structurally Sound, in Spite of Modest Growth,” Mexico Institute, February 4, 2012, accessed February 21, 2013 http://www.wilsoncenter.org/event/mexico-economy-structurally-sound-spit...
15. ECLAC (Economic Commission for Latin America and the Caribbean), Statistical Yearbook for Latin America and the Caribbean, 2012. (Santiago: ECLAC, 2012): Table 220.127.116.11; ECLAC, Balance Preliminar de las economías de América Latina y el Caribe. (Santiago: ECLAC, 2012).
16. Roberto González Amador “Moody’s: deudas de estados y municipios se dispararon por los comicios de 2012,” La Jornada, 31 de enero, 2013, 12; Roberto González Amador, “En sólo cuatro años se duplicó la deuda contratada por los estados y municipios,” La Jornada, 24 de octubre, 2012, 10.
17. Export.gov. “Total Number of Vehicles—Automobiles and Trucks,” Export.gov., May 25, 2012, accessed June 30, 2012, http://export.gov/mexico/leadingindustrysectors/eg_mx_042754.asp
18. Juan Antonio Zúñiga, “Bonos de deuda interna a extranjeros, principal fuente de divisas en el sexenio,” La Jornada, 20 de septiembre, 2012, 28; Juan Antonio Zúñiga, “El gobierno está ‘cauteloso y alerta’ ante ‘reversión’ de flujos de divisas,” La Jornada, 23 de enero, 2013, 33.
19. Carlos Fernández-Vega, “Economía ni fu ni fa,” La Jornada, 25 de enero, 2013, 28.
20. INEGI, Boletín de Prensa núm. 013/13, 21 de enero, 2013, Cuadro 3, 13.
21. John Cremeans, Handbook of North American Industry, 2d ed. (Bernan Press, 1999): 48.
22. Lilia González, “Fundar una alianza renovada, propone el CCE a Peña Nieto,” El Economista, 26 de noviembre, 2012, consultado 26 de enero, 2013, http://eleconomista.com.mx/industrias/2012/11/26/poder-adquisitivo-tiene...
23. Julio Boltvinik, “Midiendo mal la pobreza de ingresos,” La Jornada, 22 de abril, 2011, 25.
24. Flores Olea, “¿México próspero,” 20; García Soler, “Davos, Santiago y el Elíseo,” 10.
25. CIDAC (Centro de Investigación para El Desarrollo), Hacerlo mejor: Índice de productividad en México. (México, D.F.: CIDAC, 2011): 17.
26. Bendesky, “Desaliento y arrebato,” 28.
27. ECLAC, “Mexico: National Economic Profile” CEPALSTAT: ‘Net Foreign Direct Investment’, http://interwp.cepal.org/cepalstat/WEB_cepalstat/Perfil_nacional_economi...
28. Economist, “Coming out Swinging,” The Economist, December 22, 2012, 53.
29. Laura Poy Solano y Matilde Pérez, “La Cruzada contra el Hambre no incluye a campesinos ni a la producción agrícola,” La Jornada, 24 de enero, 2013, 19.
30. Asa Crisitina Laurell, “The Transformation of Social Policy in Mexico,” in Confronting Development, eds. Kevin Middlebrook and Eduardo Zepeda (Stanford University Press, 2003): 339.
31. González Amador, “En Davos, el panorama mundial se ve más despejado,” La Jornada (Mexico City), January 25, 2013, 27.
James Martin Cypher is a research professor in the Doctoral Program in Development Studies at the Autonomous University of Zacatecas and the co-author of Mexico’s Economic Dilemma.
Read the rest of NACLA's Summer 2013 issue: "Chavismo After Chávez: What Was Created? What Remains?"