Enrique Dussel Peters "The Fox Administration: Three Years After" November 6, 2003

Powerpoint presentation from the event

Professor Enrique Dussel Peters discusses the socioeconomic development of Mexico both before and during the Fox administration, arguing that an emphasis on maquiladora and other forms of low-value-added production do little for long-term economic development.

The Fox Administration’s Macroeconomic Dictatorship:
Liberation is Mexico’s “Glocal” Challenge
By Michelle Johnson, School of Social Welfare

Since 1988 Mexico’s export-oriented industrial manufacturing sector has buttressed Mexico’s macroeconomic policy. When Vicente Fox emerged from the National Action Party (PAN) as Mexico’s first freely and fairly elected president in 2000, many expected a savvy and business-minded leader that would act on a number of reforms to revitalize Mexico’s economy, promote political transparency and improve relations with the United States. According to Enrique Dussel Peters, Professor of Economics at the Universidad Nacional Autónoma de México, three years of economic and political paralysis has instead resulted in rising poverty, increased income disparity and a paucity of new employment opportunities for Mexican workers. As jobs continue to hemorrhage from the manufacturing sector in response to international competition, Peters asks, “Is there life after primitive forms of macroeconomy?” He posits that a “glocal” perspective can help us to understand the ways in which macroeconomic factors combine with regional microeconomic realities to shape industrial futures.

In Peters’ “glocal” model, the increased diversification and shifting of sites of production within global commodity chains marks a departure from earlier types of globalization processes. These newly configured production processes benefit from the examination of regional or “territorial” effects through space and time. For example, when a Wal-Mart order is filled through global commodity chains in ten countries, what are the local effects and linkages within these territories? He argues that the general concept of socioeconomic development and the process by which specific Mexican localities can be integrated into the world market are best understood from this “glocal” perspective. The consideration of “glocal” possibilities first requires an examination of current macroeconomic realities.

The Fox Administration’s macroeconomic policies continue to be dictated by a liberalization strategy characterized by import liberalization and privatization, cheap labor power, foreign investment, controlled inflation and fiscal deficits and a minimalist state approach. Export-oriented industrial manufacturing is at the core of this strategy. With its implementation, exports grew from 30 to 70 percent of total gross domestic product (GDP) in the 1990s. An estimated 3,500 firms managed approximately 96 percent of these “primitive exports,” temporary imports to be re-exported. Peters suggests the polarizing structure of these firms, many of which are maquiladoras, stultify innovation and development in the productive sector.

At the same time, Mexican suppliers have been unable to integrate to world markets due to insufficient financing. Peters points out that bank financing fell in real terms by 85 percent after the passage of the North American Free Trade Agreement (NAFTA) in 1994. And while billions of dollars sloshed through the Mexican economy during the 1990s, only 2-3 percent was captured absent the tariffs, income taxes or other payments to the public sector that might have been harnessed for socioeconomic development. What have these trends meant for workers? A net increase in formal employment opportunities in the manufacturing sector initially led to a rise in consumption. Yet as productivity increased, real wages for workers stagnated and in some years declined, largely due to the overvaluation of the peso.

Peters reported that since Fox’s inauguration, Mexico’s socioeconomic situation has worsened due to political failure to address issues of investment, trade, employment and agriculture. As a result, salaries have stagnated as GDP per capita has decreased to that of the 1980s, leaving more than 2 million new households in poverty during the three year period. The yawning gap between available employment and needed jobs has stretched: from 2001 to 2003 approximately 20 percent of all manufacturing jobs, including 27 percent of jobs in the maquiladora sector, disappeared. Peters argues that export-oriented manufacturing, which hinges precariously on U.S. growth, cannot be expected to support future employment needs in an era where Mexico has suffered a dramatic loss of competitiveness against Asia and Central America. Yet Mexico’s liberalization strategy, the “dictatorship of macroeconomy,” teeters on the assumption of constancy within an export sector that represents less than 5 percent of Mexico’s employment. Liberalization strategy must be seriously rethought, says Peters, with a “glocal” imagination about how to integrate a projected 105 million workers into world markets in the near future.

Peters argues that competitive conditions for the productive sector need to be fostered along with regional-sectoral integration to segments of value-added chains, to include financing and specialized personnel. Poverty rates should be prioritized above inflation rates and reforms must embrace taxation. Institutions, both public and private, must be strengthened. Education is a fashionable human capital discussion that needs to be defined in terms of the demand for educated individuals and the role of universities. Peters suggested that educational investments are currently focused on secondary and higher education to the detriment of primary education for the poorest members of society.
Yet the Fox Administration seems to have no consciousness of the deep crisis within Mexico’s productive sector. And within the discourse of liberalization strategy, discussions of imports or government expenditures are nothing less than heretical. Economic reforms are effectively blocked by the overall lack of strategy, the rotation of officials within the Mexican government and a lack of economic transparency.

Participants asked if hope for reform might lie on the political horizon. In Mexico, governors and local leaders are becoming increasingly powerful. Peters noted that the polls suggest that 85 percent of Mexico City’s residents support Andrés Manuel López Obrador, the mayor of Mexico City who has become well known for his focus on poverty reduction and microenterprise. While it is unlikely that he will impact Mexico’s macroeconomic policy during Fox’s presidency, his popularity suggests that Mexico’s discontent with the status quo has settled in. It is unclear what the 2006 election will bring, although López Obrador is regarded as a frontrunner. In the meantime, the market’s failure to generate employment can be expected to result in growth in the informal sector and immigration to the U.S. Therefore, immigration policy and the “glocal” challenge of integrating workers into world markets should also be of concern to the United States.

Enrique Dussel Peters is Professor at the Graduate School of Economics at the Universidad Nacional Autónoma de México. He presented ”The Fox Administration Three Years Later“ at CLAS on November 6, 2003.

Professor Dussel Peters speaks with students after the event. During his stay, he also offered a one-day seminar sponsored by CLAS on the role of maquiladoras in Central America and Mexico.