From iatp@igc.apc.orgFri Mar 24 20:00:45 1995 Date: Fri, 24 Mar 1995 11:38:46 -0800 (PST) From: IATP To: Recipients of conference Subject: NAFTA & Inter-American Trade Monito NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy Volume 2, Number 8 Friday, March 24, 1995 _______________________________________________ Headlines: - MEXICAN TAX INCREASE PASSES, DESPITE WIDESPREAD PROTEST - CONTINUED CLASHES, POSSIBILITIES OF PEACE IN CHIAPAS - SONY BOYCOTTS NAFTA HEARING - NAFTA AND TRANSPORTATION - TRINATIONAL AGRICULTURAL EXCHANGE - ENVIRONMENTAL CLEANUP DESPITE MEXICAN CRISIS? _______________________________________________ MEXICAN TAX INCREASE PASSES, DESPITE WIDESPREAD PROTEST On March 17, after ten hours of bitter debate and some opposition even from ruling party PRI deputies, the Mexican government's proposal to increase the Value Added Tax (VAT) from 10 percent to 15 percent as part of its austerity program was passed by the Congress. The government threatened PRI congressional rebels with expulsion from the party, bringing all but one PRI deputy and one PRI senator back in line to vote for the VAT increase. On March 19, various social sectors, including business, clergy, political parties, and citizen's groups in Nuevo Len, Sonora, Zacatecas, Nayarit, Yucatn, and Tamaulipas demonstrated against the VAT increase. Two PRI deputies who had voted for the VAT increase were attacked in Monterrey as they left a television station after having appeared on the air to defend their position. Business leaders around the country said that many businesses would be forced to close as a result of the tax increase. Government officials estimated that 250,000 people had lost their jobs during the first two months of 1995, and predicted that 500,000 more jobs would be lost during the first half of the year. A nationwide debtors' strike on March 16, called by the El Barzon agricultural organization, shut down 874 bank branches. El Barzon's Mexico City coordinator, Alfonso Ramirez, characterized the organization as "members of the chamber of commerce, not your traditional leftists," and warned that the government's austerity plan presents "a problem ... more explosive than Chiapas." A committee of shopkeepers in Chiapas declared a two-year moratorium on past-due debt totaling $70 million. The Mexican Action Network on Free Trade (RMALC) has called for renegotiation of the foreign debt and for development financing focused on the domestic market. "Mexico's Zedi-Shock 'More Explosive Than Chiapas,'"WEEKLY NEWS UPDATE ON THE AMERICAS, 3/19/95; David Carrizales, Jess Moreno, Angel Amador, Jess Narvez, Luis Boffil, LA JORNADA, 3/20/95; Roberto Gonzlez Amador, LA JORNADA, 3/21/95; Leslie Crawford, "Mexico Austerity Plan Boosted by VAT Rise," FINANCIAL TIMES, 3/20/95; Roberto Gonzalez Amador, "Onate: Quedaran 750 Mil Sin Empleo," LA JORNADA, 3/11/95. CONTINUED CLASHES, POSSIBILITIES OF PEACE IN CHIAPAS Renewed negotiations between the government and the Zapatista National Liberation Army (EZLN) appear likely despite continued conflict in Chiapas, including a confrontation between opposition party PRD and PRI members that left at least six people dead and eight more wounded. The EZLN maintains that it cannot begin face- to-face negotiations until the army withdraws to its pre-February 8 positions. Nonetheless, in mid-March the EZLN General Command offered to begin an exchange of letters with the government, through the National Mediation Commission (CONAI). CONAI, headed by Bishop Samuel Ruiz, has been the official mediator between the parties since early 1994. Such a dialogue could open the way, for the second time since January 1994, to replace the military conflict with political negotiation, though low-intensity conflict seems certain to continue. The PRD-PRI battle took place in the ejido Teoquipa El Bascn in Salto de Agua, and grew from disputes over the taking of land. In parallel developments, cattle ranchers and landowners in the municipality of Venustiano Carranza, warned by members of campesino organizations that they were about to invade, evacuated 25 properties. Landowner associations in the Coalition of Organizations (COC) said they will begin to drive out people occupying more than 2,000 properties in the state. Although President Ernesto Zedillo ordered troops to withdraw from municipalities in Chiapas on March 14, soldiers remained in the public squares and in front of churches and schools in Margaritas and Guadalupe Tepeyac a day later. CONAI noted on March 16 that the Mexican army "remains in its positions in the zone of conflict in Chiapas and up until the present we have not seen that they have withdrawn from a single roadblock." Many of the 26,000 people displaced since January 1994 have begun to return to their communities. All returnees are registered by the army and judicial police, some are taken to new areas, and some are charged for new parcels of land they are going to receive. Many of the returnees are PRI members who left the area when the EZLN emerged in 1994, but others are more recent refugees from the advancing military. Some report being interrogated about Zapatista leaders. The federal government has promised 15 million new pesos (about $2.5 million) to the members of the "Indigenous Groups of the Motozintla Sierra Madre" (ISMAM) to be used for the harvest and sale of over 20 thousand quintals (2,200 tons) of coffee. The government also promised to mediate in the clarification of the murder of Hipolito Hernandez and Darinel Recinos Gordillo, members of ISMAM, as well as the kidnapping of ISMAM's president, Carmelino Ramirez Garcia. Alonso Urrutia and Jess Aranda and Candelaria Rodrguez, "Chocan Militantes del PRI y PRD en Chiapas, Al Menos 6 Muertos," LA JORNADA, 3/15/95; Elio Henrquez and Jos Gil Olmos, "Mantienen Retenes Militares en Margaritas y Guadalupe Tepeyac," LA JORNADA, 3/15/95; AMDH SPECIAL BULLETIN, 3/1-6, 7-13/95; Juan Antonio Ziga, LA JORNADA, 3/20/95; Jos Gil Olmos, "EZLN Declara," LA JORNADA, 3/17/95; "Gobierno Accepta Dialogar con EZLN," LA JORNADA, 3/17/95; "Peace in Southern Mexico, War on the Internet?" WEEKLY NEWS UPDATE ON THE AMERICAS, 3/19/95. SONY BOYCOTTS NAFTA HEARING Sony Corporation refused to appear at the U.S. National Administrative Office (NAO) hearing in San Antonio, Texas on February 13. Businesses argue that the NAFTA side accords apply to the governments of Canada, Mexico, and the United States, and do not obligate individual companies. NAO Secretary Irasema Garza agreed that the labor side accord is a government-to-government agreement, noting that her office has no subpoena power. The AFL-CIO protested Sony's absence, calling it part of a pattern of U.S. companies' avoiding public participation in the NAO hearing process, but praised NAO officials' handling of the hearing. The February 13 hearing focused on complaints that management of Magneticos de Mexico (a Sony subsidiary) conspired with the Mexican government in Nuevo Laredo and the current union to prevent independent union organizing. The AFL-CIO also charged that workers who had participated in the hearing were intimidated by the company. In related NAFTA labor news, Canadian John S. McKennirey has been named executive director of the NAFTA Labor Secretariat, located in Dallas, Texas. McKennirey will serve a three-year term at the head of a secretariat staffed by 15 consultants, lawyers, economists, and administrators from all three countries. Each country also has a National Administrative Office (NAO), which serves as a contact between the Secretariat and that country. In addition to the NAOs and the Secretariats, the NAFTA labor side accord set up a Ministerial Council, consisting of labor ministers from the three countries, and a tri-national Commission for Labor Cooperation governed by the Ministerial Council. "Firms' Absence from U.S. NAO Hearings Comes Under Attack by Labor," INSIDE NAFTA, 2/22/95; Rafael Anchia, "The NAFTA Labor Secretariat Becomes a Reality," INTER-AMERICAN TRADE AND INVESTMENT LAW, 3/3/95. NAFTA AND TRANSPORTATION Mexican truckers, about to face NAFTA-mandated direct foreign competition in border states, are already reeling from deregulation, devaluation, and the sharp drop in imports caused by devaluation. Mexico's trucking industry generates five percent of the Gross Domestic Product and employs more than 1.2 million workers, carrying 85 percent of land cargo and 98 percent of passengers on public transportation. NAFTA mandates a lifting of restrictions on foreign carriers in January 1997. Cross-border trucking grew rapidly in 1994, but southbound traffic dropped drastically this year, creating a trailer shortage for Mexican truckers. Mexican truckers have a ratio of one trailer to each tractor, while U.S. carriers typically have a higher trailer to tractor ratio. Since fewer trailers are coming to Mexico, Mexican shippers have difficulty finding trailers to carry the now-heavier northbound traffic. They are further handicapped by a fleet of trucks in which more than a third are more than 11 years old and 22 percent are 16- 20 years old. Mexican truckers who want to purchase new rigs in the U.S. face steep lending rates and higher costs because of the economic crisis. The new austerity package will also handicap Mexican truckers, most obviously in the immediate 35 percent hike in fuel prices, which will increase by an additional 0.8 percent monthly for the next year. Bridge and highway tolls and airport and railroad user fees will also rise by 2.5 percent monthly. U.S. shippers are not allowed to engage in "cabotage," domestic point- to-point hauling within Mexico. A network of "gentleman's agreements" divides high-density routes among shippers, but also ensures that no domestic carriers operate nationwide. M.S. Carriers, one of the major U.S. truckers doing business in Mexico, has found that differences in shipping practices make their partnership with Transportes Easo more difficult than anticipated. "We felt like we could come in and spend $10 million, and we're going to equip Easo with new tractors and trailers, we're going to give them computer software ... [and] telecommunications systems ... [and] we're going to triple their utilization and we're going to make a fortune," said Craig Coyan, head of M.S. Carriers' international business division. Coyan cited different ordering and return practices as a source of expense for Mexican carriers. Intermodal shipping between Mexico and the U.S. (where barges connect at ports directly to railroads to transfer bulk and containerized loads) has suffered from start-up problems. Traffic imbalance, with more volume going into Mexico than out during 1994, handicapped shippers, and weather conditions at Veracruz, Mexico's main barge port, also slowed traffic. Problematic rail connections in Mexico and high rates charged by Ferrocarriles Nacionales de Mexico also made intermodal shipping less attractive. Mercosur countries, too, are experiencing transport difficulties as a barrier to free trade. High port fees make shipping expensive, but shipping between Brazil and Argentina increased by 25 percent from 1993 to 1994. Rail transport is slow and differing rail gauges make border transfers of cargo necessary. While truck transportation is favored, it also has drawbacks, as only a quarter of the trucks in Mercosur nations are authorized to operate in more than one country. Air transport is expensive for shippers. Lino Javier Calderon, "Growth or Extinction? The Future of the Mexican Trucking Industry," EL FINANCIERO (Import/Export Supplement), February-March/95; Kevin G. Hall, "Bubble Bursts for Mexican Trckers," JOURNAL OF COMMERCE, 3/8/95; Paul Conway, Kevin G. Hall, "M.S. Carriers Finds That the Road to Mexico is Riddled With Potholes," JOURNAL OF COMMERCE, 3/9/95; Allen R. Wastler, "Mexico-US Barge Runs May Stage Comeback," JOURNAL OF COMMERCE, 3/9/95; Kevin G. Hall, "Mexican Businesses Prepare for Bitter Period of Austerity," JOURNAL OF COMMERCE, 3/13/95; Kevin G. Hall, "Mexican Turf Wars Intensify Shippers' Distribution Headaches," JOURNAL OF COMMERCE, 3/10/95; Ricardo de Bittencourt, "MERCOSUR: The Transport Challenge," INTERPRESS SERVICE, 3/95. TRINATIONAL AGRICULTURAL EXCHANGE Meeting in Lincoln, Nebraska, farmers from Mexico, Canada, and the United States discussed common concerns at the Trinational Agricultural Exchange in January. About 40 farmers, rural activists, and agricultural analysts representing 22 groups from the three countries met to analyze the impact of global trade on agriculture and issues of particular concern to farmers in the three countries, including the Mexico-United States white corn market, continuing Canada-United States wheat disputes, the 1995 U.S. farm bill, and Chiapas. Farm organizations from Uruguay, Brazil, and Costa Rica also participated. According to Karen Lehman, of the Institute for Agriculture and Trade Policy's Program on Interamerican Integration, the meeting gave participants a sense that they can cooperate together in a continuing network. Representatives from all countries agreed that agriculture is increasingly controlled by transnational corporations. Export-driven agriculture, favored by the transnationals and supported by NAFTA and GATT trade agreements, has increased rural unemployment and forced migration from rural to urban areas. Leslie Wirpsa, "Farmers Cross Borders to Face Free Trade," NATIONAL CATHOLIC REPORTER, 2/17/95; Karen Lehman, interview, 3/20/95. ENVIRONMENTAL CLEANUP DESPITE MEXICAN CRISIS? According to North American Development Bank (NAD Bank) deputy director Victor Miramontes, Mexico's current economic crisis may actually benefit environmental projects along the border. With pesos in short supply and Mexican lenders charging very high interest rates, NAD Bank environmental loans are an opportunity for relatively low-interest borrowing. NAD Bank can lend to individuals, cities, corporations, or governments on either side of the border. The Border Environmental Cooperation Commission (BECC) must define criteria for projects and approve the loans, which can be made for environmental infrastructural projects. Both Mexico and the United States have deposited funds in NAD Bank, which plans to make its first loan by this summer. NAD Bank's priorities are wastewater, drinking water, and municipal solid waste treatments. However, since the effects of Mexico's economic crisis are felt throughout the economy, Mexican businesses are likely to be less optimistic about environmental investment than the NAD Bank staff. According to the Mexican National Council of Ecological Industries, 95 percent of large industries are in compliance with ecological requirements, but the compliance rate drops to 30 percent for medium-size industry and to 11 percent for small industry. Postponing enforcement of environmental regulations may be sought, as small and medium-size businesses struggling to stay afloat scrutinize the cost of investment in environmental programs. Ron Mader, "BECC & NAD Bank Updates," MEXICAN ENVIRONMENTAL BUSINESS, 1/25/95; "Role of NAD Bank," MEXICAN ENVIRONMENTAL BUSINESS, 2/9/95; Jos F. Garca Quintanilla, "Mexico 1995: Balancing the Environment and Jobs," INTER-AMERICAN TRADE AND INVESTMENT LAW, 1/27/95; Baron F. Levin, "Can Mexico Clean Up Its Act?" TWIN PLANT NEWS, 3/95; Kevin G. Hall, "NADBank's Leaders Want to Make an Early Mark With Small Projects," JOURNAL OF COMMERCE, 3/20/95. _______________________________________________ RESOURCES/EVENTS _______________________________________________ "A Citizen's Guide to NAFTA's Environmental Commission." Friends of the Earth and the Interhemispheric Resource Center, February 1995, 16 pp. Order from Friends of the Earth, 1025 Vermont Avenue NW, 3rd Floor, Washington, DC 20016; telephone 202/783-7400; fax 202/783-0444; email foedc@igc.apc.org or from Interhemispheric Resource Center, P.O. Box 4506, Albuquerque, NM 87196; telephone 505/842-8288; email resourcectr@igc.apc.org. $2 first copy, 50" each additional copy. Description of the North American Commission for Environmental Cooperation, created by NAFTA's Environmental Side Agreement, including structure and procedures of NACEC and list of advisory board members. "North American Free Trade Agreement: Structure and Status of Implementing Organizations." United States General Accounting Office, October 1994, 46 pp. Order from U.S. General Accounting Office, P.O. Box 6015, Gaithersburg, MD 20884-6015. Telephone 202/512-6000, fax 301/258-4066 or TDD 301/413-0006. Document GAO/GGD-95-10BR. Describes organizations created to implement NAFTA, such as Free Trade Commission, Border Environment Cooperation Commission, North American Development Bank, etc. _______________________________________________ Produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. The NAFTA & Inter- American Trade Monitor is available free of charge to Econet and IATPNet subscribers. For information about fax or mail subscriptions, or other IATP publications, contact: The Institute for Agriculture and Trade Policy, 1313 5th Street SE, Suite 303, Minneapolis, MN 55414. Phone: 612-379-5980; fax: 612-379-5982; e-mail: iatp@iatp.org. For information about IATP's contract research services, contact Dale Wiehoff at 612-379-5980, or e-mail: dwiehoff@iatp.org