MEXICO OPENING NATIONAL CASA FORUM
24-25 August 1998
Civil Society Perspectives on Structural Adjustment Policies
The First National Forum of the SAPRI-related initiative, Citizens' Assessment of Structural Adjustment (CASA), in Mexico was held in the legislative chambers of the House of Deputies in Mexico City on 24-25 August. More than 100 participants from some 50 civil-society organizations -- representing agricultural producers, peasants, labor, environmental groups, small and medium-sized businesses, women, children and others -- as well as from academic institutions and various Congressional commissions, met in plenary sessions and working groups to discuss the impact of structural adjustment policies in Mexico. The event was organized by Equipo Pueblo, the lead organization in Mexico of the civil-society network, SAPRIN, together with Federal Deputy Carlos Heredia.
The Forum was preceded by a series of regional meetings and sectoral workshops held in different parts of the country and designed to involve those whose voice is less often heard, particularly women, children and indigenous people, as well as those who live and work in rural areas. A regional workshop in Oaxaca brought together dozens of community groups and NGOs from the southern provinces of Chiapas and Oaxaca. Seminars were held with Mayan children on the outskirts of the city of Merida in Yucatan province, with youth in the poor neighborhoods of Mexico City, with mothers involved in community childcare centers in the capital and with a range of community groups in Guadalajara. In addition, a national workshop to specifically address conditions in rural areas was organized with the participation of nearly 100 representatives of a range of social organizations active in rural areas throughout the country. These activities were the result of a process of organizing and outreach that began in late 1997 when more than 30 civil-society organizations came together to assess the real impact of adjustment policies on their constituencies and to shape and promote alternative policies. While the Mexican government, and thus the World Bank, have refused to participate in the exercise, civil society has been successful in engaging the House of Deputies in the process, with representation from the three major political parties.
The Forum was inaugurated by Federal Deputy Porfirio Muqoz Ledo, then-president of the House Rules Committee. A plenary session followed the inauguration, with presentations on different aspects of adjustment. The session then broke into three working groups to discuss the impact of adjustment policies in the following areas: businesses, production and labor; social well-being (education, health, housing, food security, social security); and the agricultural sector. The policies that were determined to be generating the major impacts in these areas were: the reorientation of public spending and the role of the state; trade and financial liberalization; and labor-market reform. A synthesis of discussions in each policy area follows.
I. Impact of the Reduction in Public Spending on the Rural and Social Sectors
A range of interrelated policies having to do with the role of the state was identified by civil society as having negatively affected important segments of the population. Principal among these policies are public-spending cuts, the elimination of subsidies, and the privatization of the ejido system of landholdings. The participants' discussion focused on the effects of these measures in two general areas: agricultural producers and the rural population generally; and social programs and low-income sectors of the population.
Forum and workshop participants described a progressive deterioration of living conditions among the rural population and increasing social polarization due to a series of measures designed to liberalize markets and reduce state support for the agricultural sector. These measures have included: removal of price supports for basic grains; elimination of subsidies for productive inputs; rate increases for public services; privatization of state-run enterprises providing services for the agricultural sector; and modification of the constitution and related agrarian legislation allowing for privatization of landholdings under the ejido system in order to liberalize the market for land.
Participants indicated that these measures have led to an increase in basic-grain imports and the dismantling of the production chain (activities that provide inputs and process outputs) in agriculture and agro-industry, with a consequent reduction, in absolute terms, of employment opportunities in the sector. Small-scale and subsistence farmers have been those hardest hit, as their production costs have risen while the relative price of their products has fallen. Concern was expressed about the loss of food security, as small-scale food production has become less viable. Contributing to these problems, the legislation that reversed the land-reform process by permitting the rental or sale of ejido land enticed small farmers to give up their parcels and seek outside employment. As a result, rural unemployment increased. Between 1993 and 1996, some 930,000 agricultural-sector jobs were lost. It is estimated that 8.8 million people now live in extreme poverty in rural areas, where average income is below the minimum wage. Civil-society participants concluded that adjustment policies are serving to exclude one-half of those who had been making their livelihoods through agricultural production, particularly small-scale producers, from being able to earn a living in the agricultural sector. These conditions have induced higher levels of migration to urban areas as well as across the border to the United States. They have also exacerbated the tendency toward the unsustainable use of natural resources, leading to greater environmental degradation.
Meanwhile, according to the participants, the new targeting' of social programs has served to deny many segments of the population needed benefits. The national poverty-alleviation programs, first PRONASOL and then PROGRESA, were designed to provide limited support in a targeted manner only to those in extreme conditions of poverty, rather than to improve conditions for the society as a whole. Participants charged that this policy of targeting resources has been used for political-electoral ends, created conflicts within communities and even within families, and failed to provide for the most basic needs of large segments of the poor. Furthermore, fiscal policies under adjustment that have included the removal of subsidies on basic food items (such as milk and tortillas), as well as price increases for basic goods and services and new taxes on food and medicine, have caused additional hardship for low-income sectors of the population. Participants emphasized that women, children, and the indigenous population have been those most negatively affected.
At the same time, the participants blamed many of the inadequacies in health care and education on reduced public spending on these social programs. Funding cutbacks have adversely affected a range of educational services, leading to high repetition and drop-out rates. Primary education was said to be free only in theory due to expenses that families must incur (and often cannot afford) for uniforms, books and transportation. Access to secondary education was cited as being even more restricted, due both to insufficient space and to the high opportunity cost for poor families of sending children to school when they could otherwise be working to help increase family income. General health-care provision has been restricted to the most basic services, such as vaccinations and family planning, while expanded services have become increasingly concentrated in urban areas. Participants pointed to large discrepancies both in education services and in health conditions and services among different regions and ethnic groups. Minority populations and those in rural areas have less access to the more limited resources. For example, women in rural areas, particularly indigenous women, have a disproportionately high incidence of problems related to childbirth. Provinces such as Chiapas, Oaxaca and Guerrero have higher rates of illiteracy than regions with larger urban concentrations and smaller indigenous populations.
II. Impact of Trade and Financial-Sector Liberalization on Small-Scale and Rural Producers
The principal focus of the participants' discussion of liberalization policies in trade and the financial sector was the North American Free Trade Agreement (NAFTA). This agreement served to legally lock in previous adjustment policies, which had oriented the economy to an expansion of exports to the detriment of the internal market by removing many structural impediments to the international free flow of capital, investment, goods and services. As part of the process of negotiating and implementing NAFTA, a series of liberalization policies was adopted, including the removal of tariff and non-tariff barriers restricting imports, the elimination of subsidies to import-competing industries, and currency devaluations. Foreign capital was granted open access to economic sectors that had traditionally been restricted, while national production, particularly small and medium-scale business, was further disadvantaged due to an increased tax burden. Financial-sector liberalization included measures that removed controls on interest rates, the privatization and deregulation of financial services, and a drastic reduction in the role of the state in allocating credit.
These measures have dealt a severe blow to the country's productive apparatus. The domestic content of finished products for both export and internal markets has been reduced. Many small and medium-scale enterprises have been displaced by foreign corporations with which they are unable to compete, not simply due to the technological superiority of the transnationals, but also because of the fiscal advantages granted to the latter and the greater difficulty faced by smaller domestic firms in obtaining access to credit. Participants estimated that 17,000 to 20,000 small businesses have been forced into bankruptcy as a result of trade and financial-sector liberalization.
The negative effects of these policies have been particularly dramatic in rural areas as a result of the impact on the agricultural sector. Participants cited the inability of farmers to compete with the U.S. agricultural industry, particularly in basic grains, resulting in part from the subsidization of this sector in the United States and from the lack of subsidies available to Mexican farmers. Small producers have been those hardest hit, as the credit market has been reoriented to large-scale, modern and capital-intensive production processes and export opportunities. The number of clients borrowing from a major rural development bank, Banrural, declined from 800,000 in 1988 to 100,000 in 1997, while funds channeled to rural areas by the state-run development bank were reduced from 12.7 percent of the national budget to 4.7 percent in 1995. Following liberalization, financial markets have, according to the participants, provided services neither to small farmers nor to medium or large-scale farmers producing for the domestic market because these are not considered profitable enough. Thus, much of the rural population has been left with no alternative for savings or access to credit.
III. Impact of Labor-Market Reform on Employment, Working Conditions, Incomes and Families
Forum and workshop participants expressed their strongest bitterness over the impact of labor-market reform policies. Measures intended to create flexibility in the labor market have modified employer-labor relations by giving the former greater discretion in determining employment conditions. This has meant greater use of part-time labor and temporary contracts and the absence of benefit packages. As a result, according to participants, there has been an increase in job instability. Flexibilization has also meant a relaxation of labor-market regulation, oversight and enforcement mechanisms. This has led to a failure to recognize unions, respect collective-bargaining contracts, and enforce labor rights, causing a serious deterioration in working conditions. Experiences were recounted of refusals to grant pregnancy or sick leave, failure to pay minimum salary or overtime, employment requirements that women not become pregnant and dismissal if they do.
Wage policy under adjustment has put a cap on salaries, causing a sustained fall in real wages and thus in the purchasing power of working people. Between 1976, when they were at their height, and 1998, real wages lost 90 percent of their value. Forum and workshop participants asserted that this trend has been accompanied by an ever greater inequality in income distribution. In addition, the problem of unemployment has been exacerbated by a massive loss of jobs through the privatization of state-run enterprises and by the bankruptcy of the thousands of small and medium-scale producers impacted by the liberalization of trade and investment.
The effects of these policies on the livelihoods of middle- and low-income families, particularly those in rural areas, were graphically expressed by Forum and workshop participants. They spoke of the increasing difficulty that heads of households have in maintaining steady jobs due to flexibilization measures in the labor market, and they asserted that those who are able to do so generally find that their incomes are insufficient to cover the basic needs of their families. Many are forced to seek a second job, which is difficult to find given the unemployment problem, or to revert to situations of underemployment or employment in the informal sector. These would-be solutions often involve a significant expansion of the working day, as well as greater job instability and income insecurity. Other alternatives sought, particularly by low-income families, include the incorporation of additional family members, often children, into the labor market and migration to urban centers or to the United States. These survival mechanisms provoke changes in the social and family structures that, in turn, generate additional hardship for large segments of the population, with women and children often bearing the brunt of the burden. Families often cannot afford to keep children in school, due to both the direct costs of school materials and the opportunity cost of education. Children are increasingly needed to bring in additional income or, particularly in the case of girls, to take responsibility for household chores for which their mothers no longer have time, including the care of younger siblings. Longer working days for both parents often leave children with inadequate parental guidance and, when combined with intra-household tensions from added responsibilities and reduced purchasing power needed to cover basic needs, fuel social problems such as domestic violence and juvenile delinquency.
Forum and workshop participants affirmed that women suffer discrimination in the labor market and have thus been most negatively affected by labor-market flexibilization. In addition to the gender division of labor, which assigns women the double burden of unpaid "reproductive" work in the home and income-generating work outside the home where they are segregated in service and informal-sector jobs, women often receive less pay than do men for the same work and tend to be the last hired and first fired. Relaxing regulations on hiring and firing allows employers to discriminate against women by, for example, requiring job qualifications such as certification of non-pregnancy or participation in family-planning programs or by refusing to provide maternity leave. Participants indicated that such discrimination is experienced even more by indigenous women and those in rural areas. Women also constitute the majority of workers in maquila factories, considered the most exploitative workplaces due to the low pay, poor working conditions, lack of benefits, and the notorious failure to respect basic labor rights. Participants expressed concern that maquilas continue to be considered one of the most important sources of job creation in the country.
Reporting to the Forum's final plenary, the working groups concluded that the adoption of adjustment measures related to the liberalization of trade and investment, to privatization and to the reduction of public spending in the social sectors has contributed to a process of privatizing profits and socializing losses. Participants concluded that these policies have resulted in the dismantling of the national productive apparatus, both in the countryside and in industry, leading to a deepening of Mexico's social polarization and to a progressive concentration of wealth. The discussions revealed that the most severe effects have been experienced by the more vulnerable sectors of the population, including children, women and indigenous people.
Participants in the Forum and the preceding workshops coincided in rejecting the continued implementation of these export-oriented structural adjustment policies and of related programs that they asserted were dedicated to rescuing, supporting and subsidizing bankers and big-business interests. They agreed on the need for new economic policies that emanate from the priorities and perspectives of the Mexican people and that focus, above all, on engendering self-sufficiency in the production of basic goods. As an essential part of this authentic process of national development, participants emphasized the need for greater transparency in policy design and implementation, and, in particular, for the creation of democratic mechanisms to allow for civil-society participation in this process.