Drug War Capitalism (16 page)

After seven years of destabilization and terror linked to the drug war, Mexico is undergoing a series of reforms and signing on to new agreements that deepen the North American Free Trade Agreement, which took effect in 1994. As the Mérida Initiative continued into 2014, the US government proposed to use it increasingly to focus on political and legislative reforms that are under way. “In Mexico, Mérida Initiative assistance will continue to transition to increased capacity-building activities geared towards strengthening Mexican institutional reforms, rule of law, and violence prevention in partnership with the Peña Nieto administration.”[33] There’s no shortage of ways for the US to get involved in policy changes in Mexico, as there has been a slate of reforms since Peña Nieto was elected in July of 2012, including energy reform, financial reform, tax reform, labor reform, political reform, education reform, and telecommunications reform. “If all of this unfolds successfully, Peña Nieto will have moved Mexico forward more than anyone since NAFTA was passed, putting Mexico on the path to economic and democratic modernity,” James R. Jones, co-chair of Manatt Jones Global Strategies, told journalist Eva Hershaw in late 2013.[34]

In addition to the reforms, Mexico is party to the Trans-Pacific Partnership, a secretive trade agreement between twelve nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. According to the Office of the US Trade Representative, “This agreement will advance U.S. economic interests with some of the fastest-growing economies in the world; expand U.S. exports, which are critical to the creation and retention of jobs in the United States; and serve as a potential platform for economic integration across the Asia-Pacific region.”

The US and Mexican economies are deeply linked, and the robustness and protection of both countries’ economies is an oft-cited justification for the drug war. According to
Strategic Forum
, a US military journal, “In recent years, almost 85 percent of Mexico’s exports have gone to the United States, making Mexican economic success dependent on the balance between trade and security. U.S. economic success is also dependent on this balance. Continued prosperity depends on reliable homeland defense and security, which can only be achieved through greater coordination and information sharing among military partners as well as the law enforcement and interagency community. President Calderón promised to improve security, thereby enhancing prosperity for the Mexican people.”[35] Though at the beginning of his term Peña Nieto made links between violence and economic growth, it is an increasingly rare refrain for high-level politicians in Mexico and the United States, who are attempting to shift the discourse toward the purely economic. “Preventing violence and promoting economic and social development are part of a vicious cycle,” President Enrique Peña Nieto told
Time
magazine after his election. “Without better economic opportunity you can’t have better public security, and vice versa.”[36]

Not all of the policy reform work is taking place using Mérida Initiative funds. Nonetheless there is coordination between Mérida programs and USAID’s competitiveness programs, which aim to create a policy environment that is more favorable to transnational capital.[37] One of USAID’s program goals is to see that the “Government of Mexico becomes more effective in curbing monopolies and eliminating anticompetitive practices.”[38] According to a call for proposals issued in January 2012, “USAID is working with Mexican partners to improve economic governance and increase private sector competitiveness.”[39] The agency’s focus is on advocating for a new regulatory regime and additional privatization, efficiency, and foreign direct investment in the transportation, financial, energy, and telecommunications sectors.[40] “USAID is supporting Mexican-led initiatives to improve the country’s competitiveness by working with Mexican federal, state, and local government entities, nongovernmental organizations, and the private sector to improve Mexico’s business-enabling environment and build sustainable support for continued policy reforms and systemic changes.”[41] USAID funds the Red Mexicana de Competencia y Regulación (Mexican Network on Competition and Regulation, RMCR) and the Centro de Investigación para el Desarrollo, A.C. (Center for Research for Development, CIDAC), whose policy proposals for Mexico’s economy look like they are drawn directly from a US State Department wish list.[42] CIDAC promotes the advantages of increased foreign direct investment and more aggressive privatization programs. In addition, USAID subcontracts work to private firms, which are tasked with carrying out various programs designed to improve the investment climate in Mexico. This is significant because many of the firms subcontracted by USAID are military contractors who have participated in reconstruction efforts in post-war zones. These firms are the same ones that were tasked with helping implement reforms once the US and its allies invaded and occupied Iraq. In Mexico, the destruction isn’t wrought by US bomb attacks, but nevertheless the country has been deeply damaged by the drug war. Here, reconstruction and reforms are implemented alongside ongoing terror and violence.

In 2009 USAID awarded Abt Associates $17.8 million to carry out the Mexico Competitiveness Program, which is made up of four parts: building sustainable environmental governance, increasing private sector competitiveness, making precursor markets more competitive, and increasing investment in and use of clean energy.[43] Abt subcontracted out the private sector competitiveness section of the program to Casals & Associates. According to Casals & Associates, this segment of the program has the following goals:

• • Increasing government transparency and accountability
  
• • Promoting competition within government through policy reforms and regulatory changes
  
• • Improving government communication
  
• • Promoting nongovernmental organization networks and public-private partnerships to strengthen the role of civil society [44]
  

Casals & Associates and Abt Associates both have direct ties to the US military; Casals & Associates belongs to DynCorp, a defense contractor that, according to its website, has “recruited, trained, and deployed more than 6,000 highly-qualified civilian peacekeepers and police trainers to 11 countries, including Haiti, Bosnia, Afghanistan, and Iraq, for the Department of State,” while Abt got its start “transferring defense-related technology and systems to civilian application.”[45]

Both of these military-linked corporations are today at work in Mexico promoting policy reforms designed to improve the experience for transnational corporations and investors seeking to do business in Mexico. Their programs are unfolding at the same time as the country undergoes militarization and paramilitarization because of the drug war.

Another USAID-funded program in Mexico is being carried out by Evensen Dodge International, a global capital markets firm that helps Mexican states raise money by arranging for the issuance of bonds and loans that make resources available to invest in public private partnerships.[46] According to the US State Department, “Evensen Dodge International, a financial company, is working with U.S. Embassy Mexico and the Government of Mexico to carry out reforms to the legal framework of pension funds at the federal level. [Fernando J. Gama of Evensen Dodge] said that these reforms are enabling Mexican states to finance renewable energy systems.”[47] If there is any doubt about the benevolence of USAID and foreign assistance programs, it was quelled in 2001 by US Secretary of State Colin Powell, when, in a rare admission, he spoke to the true role of US development aid: “Just as surely as our diplomats and military, American NGOs are out there serving and sacrificing on the front lines of freedom.… [NGOs] are such a force multiplier for us, such an important part of our combat team.”[48]

Peña Nieto’s Reforms?

Days before President Enrique Peña Nieto’s inauguration, the
New York Times
reported that “he has promised to rewrite the tax laws, open the state-owned oil sector to private investment and rein in Mexico’s powerful monopolies.”[49] Peña Nieto’s promises align almost perfectly with USAID-coordinated economic and financial proposals for Mexico.

Before assuming office, Peña Nieto’s PRI party joined with Calderón’s PAN to pass a labor reform law that introduced hourly wages (about 70¢ per hour) instead of daily minimums, and lessened the legal requirements on corporate contributions to the social security program. This strike against the already precarious Mexican working class was Calderón’s parting shot and helped usher in a new era of reforms under the PRI. When he took office on December 1, 2012, Peña Nieto launched the “Pact for Mexico,” a coalition of the country’s three largest political parties that has introduced education, financial, tax, political, and energy reforms.
^[50]
By and large, the reforms being implemented in Mexico are based on the model of austerity and structural adjustment. The promotion of structural reforms in Mexico is enshrined in the Mérida Initiative and provides a crucial example of how drug war capitalism works to transform national economies to benefit the corporate sector.

In early 2014, I visited Alejandro Hope at his office in Polanco, one of Mexico City’s swankiest suburbs. He’s an analyst who has worked with a variety of Mexican and US think tanks—including the Mexican Institute for Competitiveness (IMCO) and the Wilson Center—and I asked him what he thought of Peña Nieto’s first year. “There’s a lot of wishful thinking and propaganda. Peña Nieto’s first year was not a good one,” he said. Hope pointed out that the education reform, the telecommunications reform, and the political reform are still only partially realized, stalled at the level of implementation and state acceptance. “If the energy reform hadn’t have been passed in mid-December, Peña Nieto’s first year would have been declared a failure.”

Regardless, it’s worth a look at some of the reform initiatives that have been pushed through under Peña Nieto’s leadership. On December 11, 2012, ten days after he took power, the Mexican government changed two articles of the constitution, resulting in what they said was an education reform. “What was approved isn’t an education reform, rather a labor and administrative reform in disguise,” wrote columnist Luis Hernández Navarro in
La Jornada.
[51] Hernández maintains the legislation opens the pathway to the privatization of the education system. The changes introduce standardized testing and increased labor precarity for Mexican teachers, and require English classes for Mexican students. The reform was heavily contested; two months of marches and blockades by teachers, especially Indigenous teachers from impoverished rural areas in the southern states of Oaxaca and Chiapas, showed street-level resistance against it. Tents were erected, and a protest camp, which lasted for months at the Monument to the Revolution in Mexico City, was built. For months, teachers refused to return to classes until their demands—for multilingual education (Spanish and Indigenous languages, not English) and no standardized testing—were met.

The stakes are high when it comes to Mexico’s education system, and the US corporate sector in particular has a lot riding on innovation and education in Mexico.
“With Mexico able to provide US companies with young, skilled and cheap labor, and with the US able to play a potentially crucial role in the transfer of technology and know-how to its southern neighbor, there is clearly plenty of room for the two administrations to push ahead with further economic integration,” according to a recent article in the
Financial Times
. General Electric has an important center for research and design in Querétaro, which is fast becoming the country’s most important aerospace cluster. Engineers, 115,000 of whom graduate in Mexico each year, are particularly sought after, as they can be hired in Mexico for less than $1,000 a month. This is a crucial element in Mexico’s ability to attract foreign direct investment in advanced manufacturing, like the automobile and airplane industries. According to data from Mexico’s Secretary of the Economy, the number of aerospace companies in Mexico rose from 61 to 249 between 2005 and 2011, and 85 percent of aerospace exports are to the United States. Aerospace exports more than doubled to $4.3 billion over the same time period.[52] By 2011, the automotive industry represented 6 percent of FDI in Mexico and 23 percent of Mexico’s exports. In a speech given the same day Enrique Peña Nieto assumed his role as president of Mexico, the US ambassador to Mexico had this to say: “Increasing competitiveness has enabled Mexico to take a larger share of U.S. imports—about 13 percent this year. This trend is being driven by the rising cost of labor in China and the impact of high-energy prices on transportation. There are compelling reasons to believe that it is not just a short-term phenomenon. While Mexico has been the second-largest destination of U.S. exports for some time, some economists now predict that Mexico will overtake China to become the largest source of imports into the U.S. by 2018.”[53]

There has been pressure from international finance institutions to change the education system in Mexico; in a December 2012 press release announcing the renewal of a $73 billion credit line for Mexico, the IMF called for reforms to the education system, among other things.[54]
Peña Nieto has already earned the admiration of the International Monetary Fund, whose leaders said they were “very impressed with President Pena Nieto’s structural reform agenda.”[55]

The strategy, at least according to economic elites, is working. On May 8, 2013, Mexico’s Finance Ministry (SHCP) presented to Congress a 927-page financial reform, consisting of thirteen decrees and amending thirty-four federal laws. Changes to the financial system are necessary not only to encourage foreign direct investment, but also to allow for the beginnings of shifting the tax base away from state-run petroleum company Pemex, which in turn was part of clearing the path to privatization. The same day the reform was published, Fitch Ratings raised Mexico’s credit rating to BBB+, citing “greater than anticipated commitment of the new administration and Congress to pass structural reforms.”[56] Finance Minister Luis Videgaray explained that the reform aims to increase competition in the banking sector and create incentives for lending.[57] Videgaray twice pointed to Chile, long the Latin American poster child of neoliberalism, as a model for Mexico’s financial system. “Regardless of the reforms, the performance of the Mexican economy over the last three decades has not been satisfactory,” read a report released prior to the reforms by the Mexican Central Bank.[58] In a March 2012 presentation, a Bank of Mexico representative correctly said that the pending reform agenda for the country’s central bank would improve the ease with which companies can do business in Mexico, remove “legal obstacles,” prevent labor flexibility, “strengthen the rule of law,” and consolidate macroeconomic policies.[59] “A poor track record of paying back loans, limited consequences for non-payment and a challenging legal environment for collections also dull lending in Mexico,” reported the
Wall Street Journal
,[60] so among the key objectives of the reform bill, is “improving trial procedures seeking faster resolution of controversies and granting enhanced rights to lenders through the courts, which are likely to expedite collections.”[61]