The West vs. The Rest, The Current State of Play; Latin America Pt 2.1, Mexico.
The previous post, Latin America Part 1, sprawled quite a bit due to the amount of detail required for each country to properly cover the history and the linkages with the present. In this, and the next few instalments I will cover a larger nation at a time (Mexico, Peru, Venezuela, Colombia), then deal with groups of the smaller nations. This should produce more digestible chunks while still providing analytical depth.
Mexico’s history since independence was quite different to the Southern Cone nations. Firstly, a period of geographic shrinkage and internal instability between forces of the liberal bourgeoisie and the conservative elements (landowners, the church, the army etc.) from 1821 to 1876. Then a period of stability and development under Porfirio Diaz (1876 to 1911), followed by the Mexican Revolution (1910-1920) which resulted in 70 years of one-parry rule (1930-2000) of mostly robust growth and development. Toward the end of the one-party rule, the state transitioned from development-oriented policies toward neoliberalism, with disastrous results for development and public safety.
In the first years of independence there was a short-lived constitutional monarchy, then a military regime, then a liberal elected government led by a mixed-race leader who abolished slavery only to be overthrown by the Conservatives and murdered. Central America left the union, the Spanish attempted to reconquer Mexico and France launched a short war against the nation. In 1835, Santa Ana triggered a civil war through his efforts to centralize power, with three breakaway republics being formed (Texas, Rio Grande and Yucatan). The Rio Grande rebellion was quickly crushed, the Yucatan rebellion lasted for seven years. The Texas rebellion, driven by US settlers, developed into the Mexican-American War during which Mexico lost what are now the US states of Texas, New Mexico, Arizona, Utah, Nevada, California, together with more than half of what is now Colorado; approximately half of the nation’s claimed territory was lost with the 1848 peace agreement.
Santa Ana was overthrown, and a Liberal government came to power that successfully defeated the Conservative forces. The traitorous Conservative forces then allied with France to install a French monarch, but with aid from the post-civil-war US (where the northern bourgeoisie had gained victory over the landowning southern elites), the Liberals came back to power in 1867; the monarch was executed together with two Conservative generals. This was followed by ongoing efforts by Diaz to overthrow the government, with him gaining power in 1876. Diaz ran a stable, development-oriented liberal authoritarian government until 1911 during which Mexico significantly developed. From 1910-1920, revolutionary forces of right, centre and left fought in a revolutionary struggle which ended with victory for the forces of the centre (the Liberals) and the demobilization/defeat of the left-wing forces. As in so many other cases, the Liberals had utilized the working class and peasantry to gain power, but quickly moved away from their interests when they gained that power; the peasant leader Zapata was assassinated by the Liberal leadership.
From 1930 to 2000, the one-party state of the Institutional Revolutionary Party (PRI) was established. Land reform was carried out to maintain peasant support, and reduce Conservative power, and clientelist organized labour was strengthened. The PRI successfully sought to subsume much of Mexican society within a clientelist single-party structure, which brought both stability and national development; the latter including the establishment of the state-owned oil company Pemex. After WW2, Mexico successfully practised Import Substitution Industrialization (ISI) during, with the ISI policies helping to facilitate clientelist relations with industrial capitalism. The period of 1954 to 1970 is called the Mexican Miracle for its high growth rates (nearly 7% per year), political and social stability, and economic development; with Mexico predominantly self-sufficient in food, steel and consumer goods.
During the presidency of Diaz Ordaz (1964 – 1970), the state became much more authoritarian and exacerbated conflicts with social movements and unions. The level of repression increased under his chosen successor, Echeverria (1970 – 1976), who was a long-time CIA asset. Developmental economic policies were still followed, and high oil prices sustained a still rapid economic growth rate; although external debt increased rapidly, and the currency had to be devalued near the end of his term. With the rapid growth in oil revenues due to the tripling of oil prices created by the first oil shock, Mexico should have been in a position to reduce external debt while still being able to follow development-oriented policies. The oil shock produced huge revenues for Middle Eastern oil exporters, which were recycled through Western banks who became highly incentivized to increase lending to sovereign states which seemed a safe option. Mexican foreign debt went from US$7 billion in 1972, to US$14 billion in 1974, to US$29 billion in 1977, at a time when state oil revenues were booming. Diaz Ordaz was succeeded by Portillo (1976 – 1982) who inherited the brewing economic crisis but continued to borrow heavily to fund development, including a 33-times increase on PEMEX debt to US$11 billion and an eight-times expansion of debt by the public electricity utility to US$8 billion. Foreign debt accumulation accelerated under his leadership, reaching US$87 billion in 1982. The parallel high levels of capital flight, facilitated by the massive increases in foreign debt, should have provided an adequate warning by itself.
It is notable that Western financial institutions such as the World Bank and IMF pushed the Mexican government to borrow more money even as the dangers of the ballooning foreign debt became more and more obvious. Readers of the book Confessions of an Economic Hit Man may sense more than just obliviousness in the positions of the Western financial institutions, especially when some of their own staff were attempting to raise the alarm. Here we must stand back from just Mexico and look at the geopolitical impacts of the Volcker (and Thatcher) shocks which created a deep global recession, massively increased debt servicing costs for many national-development oriented governments, and crushed oil revenues for revolutionary Iran, the Soviet Union and Mexico (and the commodity export revenues of many other nations). The crushing of Western labour-power, the weakening of geopolitical opponents, and the neoliberal economic restructuring of many states was facilitated. Anyone who thinks that Volcker or Thatcher really believed in something called monetarism should read the excellent book The Secrets of the Temple and understand that their war on inflation was really a class war. I am reminded of the policies of the aptly named establishment-vulture Canadian central banker John Crow (yes, that was really his name!), who kept real interest rates ridiculously high in a period that both destroyed working class power (in parallel with NAFTA) and needlessly inflated the government deficit. The latter was used as the excuse for the massive government spending cuts in the 1990s that the Liberal government had no mandate for. I very much remember traveling from a prosperous New York (with Greenspan cutting rates in the US) to a moribund depression-like Toronto in the grips of John Crow. Mr. Crow was a UK-born Oxford graduate who had served for 10 years in the IMF, the perfect class-war central banker candidate. Once the deed was done, Canadian interest rates could fall for three decades – producing huge profits for government bond holders and inflating a massive property bubble.
Mexico defaulted on its external debts in 1982. Then suddenly the IMF and World Bank were pushing for Structural Adjustment neoliberal policies, backed up by the US Treasury. The major US and other foreign banks were rescued through the suffering of the Mexican people and the aid of the US state. Under the de la Madrid presidency (1982-1988), a graduate of Harvard University who had been Minister of the Budget as Mexican foreign lending had exploded, deep austerity, widespread privatization of state industries, reductions in import tariffs and foreign investor-friendly policies were instituted. Much of the post-war gains in living standards and industrialization were reversed. Unemployment reached 25% as the economy crashed, 100%+ inflation as the currency was heavily devalued, and a distribution of wealth upwards. Real wages in 1987 were only 75% of what they were in 1980, while productivity remained stable, reflecting a huge upward income transfer. De la Madrid also fell in line with the US War on Drugs as the flow of drugs was reorienting to Mexico as the flows across the Caribbean were interdicted by the US; a fateful long-term decision. After eight years of turning its back on major segments of its single-party coalition, there was a split within the PRI and the more left-wing progressive elements coalesced around Calderon who was expelled from the PRI and stood for an opposition party in the 1988 elections. On election day the electoral computer systems “broke down” twice, after which the PRI candidate Carlos Salinas was declared the winner. Later the Congress would vote to destroy without opening the electoral documentation. Episodes 7 and 8 of Season 2 of Narcos: Mexico covers the 1988 election and captures the corrupt nature of the PRI at this time.
The Harvard educated (Masters and PhD) Salinas carried on the privatizations, including the highly questionable sale of Teléfonos de México, the state telecoms provider, to Carlos Slim. In his book, Carlos Slim: The Power, Money, and Morality of One of the World's Richest Men Osomo details the extremely close ties between the two men, and also Slim’s links with the drug trade. As Wired magazine noted in 1995:
The privatization scheme made Salinas godfather to 22 new billionaires. (There were only 2 in the country when Salinas took office; there are 10 today.) Carlos Slim, who headed Salinas' campaign committee during the 1988 presidential elections, made out like a bandit in the privatization drive. But as Andrew Reding, a Mexico analyst with the World Policy Institute, points out, at least two other members of that committee also grabbed big chunks of the privatization pie. Pablo Brener got Mexicana Airlines, and Enrique Molina got a piece of Grupo Financiero Banamex and Banpaís. Referring to the ruling PRI, Reding argues that the "idea was to keep these assets in the Revolutionary family."
Osomo also claims that Slim was acting as a front man for Salinas, covering up the President’s own massive theft of wealth from the state. This period very much parallels the creation of the Russian oligarchs in the 1990s, the corrupt privatizations of Argentina during the same period, and the Indian oligarchs after the end of the License Raj. Salinas also negotiated and signed the North American Free Trade Agreement (NAFTA), that devastated Mexican farmers by exposing them to unfair competition from the heavily subsidized US agri-business sector, and also expanded spending on the Drug War. His chosen successor Colosio started to move away from Salinas and the PRI establishment political agenda. When he was assassinated during the election campaign many Mexicans believed that the assassination was the work of the Salinas and the PRI. Colosio was replaced with the Yale-educated (Masters and PhD) Zedillo who was elected in 1994.
Just after the election, Salinas’ ex-brother in law, and Secretary General of the PRI, was assassinated. Salinas brother Raul was found guilty of planning the murder in 1999, but his conviction was overturned in 2005. Raul’s family was also found to be in possession of US$100 millions the origin of which they refused to account for. Salinas had kept inflation under control using a fixed exchange rate, while at the same time producing an economic bubble through deficit spending combined with excessive consumer spending facilitated by the fixed exchange rate. The result was rapidly growing government budget and current account deficits. The Central Bank also intervened to protect the fixed exchange rate and keep interest rates low, in effect depleting its foreign exchange reserves to aid capital flight. Within weeks of Zedillo taking office the Peso crashed, the financial system went into crisis, and a US$20 billion loan from the US was required as part of the financial rescue. The economy shrank 8.5% in 1995, with real wages falling below the low seen in the 1980s (which itself equalled late 1960 levels), after which it started to recover. Zedillo continued the neoliberal reform, including the privatization of the rail system.
The 2000 elections were managed by a new independent electoral body and were witnessed by many thousands of domestic and foreign poll watchers. Even though there had been some recovery since the 1994 crisis, real wages were still 5% below 1980 levels while productivity was more than 20% higher; in just two decades the share of wages in GDP had halved from just below 40% to below 20%. The result was an end to 70 years of PRI rule with the election of the right-wing PAN candidate, Vicente Fox, the ex-head of Coca-Cola Mexico. The neoliberal policies were continued and after the significant drop in average living standards in the 1980s, and the lack of progress in the 1990s, Mexico did benefit somewhat from the China-driven growth that much of Latin America enjoyed; although Fox’s family members benefitted much more with unexplained sudden riches.
Fox and ex-President Salinas (the leader behind the scenes after making so many members of the elite colossally rich) were instrumental in trying to stop the progressive and extremely popular Mayor of Mexico City, Lopez Obrador (AMLO), from running in the 2006 presidential election. Firstly, through trying to link him in the public mind to fraudulent political behavior, and then by attempting to try him for criminal behavior; a forerunner to the Brazilian lawfare campaign against Lula and Dilma Rousseff. During the 2006 election, Fox broke Mexican law in campaigning against AMLO, and large business interests and the media came together in a campaign of fear aimed at AMLO. Even with this full court press the PAN candidate and Harvard-educated Calderon beat the progressive AMLO by a meager 0.6% in an election widely seen as fraudulent. The documentary Fraude Mexico 2006 strongly makes the case for fraud and covers more widely the nature of the Mexican political system. AMLO would be kept at bay for another 12 years.
Mexico was impacted by the fallout from the Great Financial Crisis (GFC) of 2008, before growth took off again into the 2012 elections. Calderon did carry out major progressive and development policies, such as the expansion of the education system, expanded access to the health care system and the building of interstate highways. He greatly exacerbated violence though, by extensively militarizing the War on Drugs. Homicides in Mexico had declined under his predecessor, now they jumped putting Mexico within the top 10 countries for homicides per capita. The militarization also forced the drug cartels to greatly increase their level of paramilitary abilities, including recruiting members from the very state security groups that were tasked with suppressing them. The breaking up of major drug cartels also only lead to greater violence as new turf wars broke out. His Minister of Public Security was later arrested for protecting the Sinaloa Cartel, raising questions about Calderon’s own links to the Cartel.
In 2012, the PRI returned with their candidate Nieto beating AMLO by 6.6%. This election was tainted by claims of vote buying and also by the candidates very close relationship with the Televisa television network with claims that Televisa had smeared Nieto opponents and passed off electioneering as news. Nieto stepped back from the militarization of the Drug War, but the damage had already been done. He also continued the neoliberal trend by opening up the oil sector to foreign investment, against the wishes of the majority of Mexicans. In 2018 AMLO easily won the presidency. He raised the minimum wage to decrease inequality, cancelled the new Mexico City airport that was seen as a highly corrupt project, de facto pushed private investment out of the oil industry, prioritized social spending over the increases in Drug War and other security service expenditures, and the recreational use of marijuana was legalized. AMLO has also taken foreign policy positions that are at odds with the US, for example harbouring the Bolivian President that was deposed in a right-wing coup.
Over forty years of neoliberalism has transformed the single-party development state dominated nation into one dominated by rich oligarchs (much of their wealth stolen from the state), foreign corporations and drug money. With this configuration of forces, the ability of any progressive leader to significantly change things is severely limited, and the US state is always watching its southern neighbour for any worrying tendencies that need to be dealt with. Any moves that would threaten the dominance of the US, or threaten US elite interests, could be expected to meet with significant US covert and overt responses. It may be that AMLO came to an agreement with the oligarchs so that he would be allowed to become President, at best his policies can be seen as somewhat economically progressive. In this respect, he mirrors Lula of Brazil who was thoroughly disciplined by the Brazilian elites before he was allowed to return to the Presidency.
The Drug War will only ever be dealt with by drug decriminalization in the US, with the Mexican oligarchs and state officials being significantly incorporated with the drug cartels (let alone the CIA drug trafficking links!). Over eighty percent of legal exports go to the US and Canada, and these are dominated by vehicles and machinery produced by foreign-owned plants, plus oil. The nation is also not self-sufficient in food after the effects of NAFTA on domestic food production. Mexico is one of the most unequal societies in the world. The average income of the adult population at purchasing power parity is Euro 17,300, but the bottom 50% only make an average of Euro 3,200, while the top 10% make 31 times as much and the top 1% about 140 times as much. The top 1% possess nearly half of all wealth, while the bottom 50% have no net wealth.
Presidents are only allowed to serve a single term in Mexico, so AMLO cannot stand for reelection in June 2024. Claudia Sheinbaum, the former Mexico City Mayor, looks like the leading candidate from AMLO’s Moreno coalition (allied with the PVM and PT) which is well ahead in the polls of the establishment PRI, PAN and PRD coalition. Although they are still far behind in the polls, the coalition shows how the establishment will come together to try to stop even a mildly progressive candidate. The capitalist class fractions may fight internally, but when push comes to shove they will have no problem acting jointly for the overall interests of their class. Although they don’t have access anymore to the organs of state to help fix elections, there may still be many dirty tricks to come.
References
https://www.wired.com/1995/10/mexico/
https://wir2022.wid.world/www-site/uploads/2023/03/D_FINAL_WIL_RIM_RAPPORT_2303.pdf
https://www.theguardian.com/world/2012/jul/08/mexicans-protest-pena-nieto-election