From iatp@igc.apc.orgSat Dec 16 10:44:11 1995 Date: Fri, 04 Aug 1995 08:41:08 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 8-4- NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy Volume 2, Number 22 August 4, 1995 ________________________________________ Headlines: - U.S. CONGRESS PROTESTS MEXICO BAILOUT - U.S. DAIRY COMPLAINT AGAINST CANADA - PROCAMPO FALTERS, EL BARZON GROWS - AVOCADOS AND TOMATOES ARE FOCUS OF TRADE DISPUTES - U.S. BEEF INDUSTRY TO FACE INCREASED COMPETITION - EZLN-GOVERNMENT NEGOTIATIONS BUT NO PROGRESS - CHILE FAST-TRACK STILL IN DOUBT - TELMEX BUYS CABLEVISION ________________________________________ U.S. CONGRESS PROTESTS MEXICO BAILOUT In July, the U.S. House of Representatives voted to prevent any future use of the Exchange Stabilization Fund for "the purpose of bolstering any foreign currency." This is the fund used by President Clinton as part of the "bailout" of the Mexican peso, when he proved unable to get Congressional approval of the administration's first assistance plan. The Clinton administration offered Mexico a $20 billion line of credit in February, and had made $12.5 billion in medium-term loans by mid-July. Senator Alfonse D'Amato (R-NY), Chair of the Senate Banking Committee, said he will propose similar legislation in the Senate. The legislation would not be effective until October 1, by which time the line of credit will have been disbursed. The Mexican government said that the vote will have limited effect. Mexico has used the U.S. loans of $12.5 billion and nearly $10 billion from the International Monetary Fund to reduce outstanding dollar-denominated tesobono debt to $7.9 billion, from a high of $29 billion at the beginning of the year. Mexican central bank reserves are currently $13.6 billion. U.S. Treasury Secretary Robert Rubin said that the U.S. might not need to give further aid to Mexico because the Mexican economy is improving. David Wessel, "House Protests Mexico Bailout in Vote on Fund," WALL STREET JOURNAL, July 20, 1995; Daniel Dombey, "Mexico Shrugs Off House Vote," FINANCIAL TIMES, July 21, 1995; Chris Simkins, "Rubin/Mexico Economy," VOICE OF AMERICA, July 17, 1995; David E. Sanger, "D'Amato Seeks to Limit Foreign Bailouts," NEW YORK TIMES, July 22, 1995. U.S. DAIRY COMPLAINT AGAINST CANADA The United States has asked the North American Free Trade Commission to establish an arbitration panel to consider Canadian tariffs on dairy products, barley, and poultry and egg products. The Canadian government says its plans to impose the tariffs on August 1 are in accord with both World Trade Organization (WTO) and NAFTA rules. Canada says the new tariffs are simply a conversion of previous quotas into tariffs, a process known as "tariffication." While tariffication is mandated under the GATT/WTO accord, NAFTA prohibits imposition of new tariffs. Canada says that the U.S., which unsuccessfully tried to get Canadian agreement to end the tariffs under GATT, is "trying to get by the back door what they couldn't get by the front." Ian Elliott, "U.S. Files Ag Trade Action Against Canada Under NAFTA," FEEDSTUFFS, July 24, 1995. PROCAMPO FALTERS, EL BARZON GROWS In principle, Procampo, the Rural Direct Support Program of the Mexican government begun in 1994, offers subsidies to some of the 60 percent of Mexican farms that are under 12.5 acres in size. The direct subsidies of $1 billion to 4 million small farmers for 26 million acres of planted grain was criticized as a vote-buying project of the governing PRI (Institutional Revolutionary Party) during an election year. Program requirements were tightened in 1995 to allow certification only for farmers who could show that they held legal title to their farms and had planted their acreage. The more stringent requirements bar many farmers who, because of skyrocketing interest rates and irrigation costs and the drought in northern Mexico, have been unable to plant. An alternative disaster relief program for farmers who could not plant gives a far lower subsidy on up to 25 acres. President Zedillo has ordered a special government commission to come up with concrete proposals for changing government farm programs to increase productivity and expand the Procampo program. Government bridge loans to farmers have been abandoned this year, and interest rates on available loans are so high that Procampo subsidies could not pay them. The Agriculture Ministry's budget has been cut, decreasing the amount of money available for Procampo. Overdue agricultural debt increased by 35 percent during the first quarter of 1995. El Barzon, a debtor's organization, is demanding renegotiation and cancellation of agricultural loans, suspension of foreign debt payments to allow for rural credit inside Mexico, and an entirely new federal farm policy. El Barzon has grown to 450,000 members in 30 states and the Federal District, including merchants, business operators, truck drivers and taxi-cab owners, as well as farmers. El Barzon's convention in Mexico City in late June issued an ultimatum: El Barzón will close every bank office in the country beginning on September 15 unless there is a moratorium on foreclosures and a national political dialogue on debt. At the meeting, farmers and business people told of "loan promoters" who offered farmers blank promissory notes, and farmers and business people who borrowed money in mistaken reliance on the government's promises of continuing economic growth. Now they face foreclosure. Bankers increasingly use collection tactics such as home visits by lawyers accompanied by uniformed police officers and close contacts with judges who order debtors arrested on "contempt" charges. Such tactics have contributed to a rising rate of suicides throughout Mexico. Banks have also contracted with U.S. auctioneers to sell foreclosed real estate. One, Lasalle Partners, announced in Texas that its scheduled August auction in Mexico City offers "an enormous opportunity to buy Mexican property." Though Lasalle says it seeks Mexican buyers, its extensive U.S. advertising enrages many Mexicans. "They are selling off the patrimony of our nation to the gringos," El Barzon's national coordinator, Alfonso Ramirez Cuellar, says. "We are not going to permit it." Talli Nauman, "In the Drought Zone," EL FINANCIERO, July 3-9, 1995; Mark Stevenson, "Debtors of Mexico -- Unite!" EL FINANCIERO, July 3-9, 1995; John Ross, "Return of the Barzonistas," THE TEXAS OBSERVER, July 14, 1995; Kevin G. Hall, "Zedillo Sets 7-Month Deadline for Proposals on Farm Woes," JOURNAL OF COMMERCE, July 25, 1995. EZLN-GOVERNMENT NEGOTIATIONS BUT NO PROGRESS The fifth negotiation session between the EZLN (Zapatista National Liberation Army) and the Mexican government ended on July 26 after degenerating into name-calling. No progress was made in this meeting, as the EZLN negotiators called government negotiators "liars" and government negotiators said the guerrilla leaders were "insolent and lousy." EZLN Comandante Tacho warned that "We see no will to listen from the current government representatives. They continue with their arrogant and haughty attitude. Their intransigence could lead this dialogue to failure." The next meeting between the two delegations is set for September 5. The opposition National Action Party (PAN) proposed a meeting between Interior Minister Emilio Chuayffet and EZLN Subcommandante Marcos, to which the EZLN agreed "if it will lead to peace, and if it is carried out with all the conditions and guarantees for safety." Margaret O'Shea, "Report on San Andres Larrainzar, Chiapas Dialogue," GLOBAL EXCHANGE, July 26, 1995; Elio Henriquez and Juan Antonio Zuniga, "Trabajaran Sobre un Documento y Dialogaran el 5 de Septiembre," LA JORNADA, July 27, 1995; EZLN COMMUNIQUE, July 25, 1995. CHILE FAST-TRACK STILL IN DOUBT Republican leaders in the U.S. House of Representatives are apparently near agreement on the "fast-track" negotiating authority needed to add Chile to NAFTA. The Senate approval, however, is far from certain. Senate rules require a 60-member majority to approve the fast-track legislation. Senate Majority Leader Bob Dole, a candidate for president, seems unwilling to give President Clinton the power to negotiate extension of NAFTA during the 1996 election campaign. Congressional Republicans also oppose inclusion of labor and environmental protection provisions, while Democrats, less happy with free trade in general, insist on these protections as part of any deal. Canadian officials negotiating with Chilean, Mexican, and U.S. representatives in Mexico City expressed hope that a NAFTA pact with Chile could be reached by the end of 1995. John Maggs, "House Backs Fast-Track on Chile Deal," JOURNAL OF COMMERCE, July 26, 1995; Kevin G. Hall, "Canadian Official Says Nafta Pact Possible With Chile by Year's End," JOURNAL OF COMMERCE, July 26, 1995. AVOCADOS AND TOMATOES ARE FOCUS OF TRADE DISPUTES On July 3, the U.S. Department of Agriculture proposed a new rule that would allow imports of fresh Hass avocados grown in approved orchards in Michoacan, Mexico. The public hearing and comment period will delay implementation of the rule, but it is expected that Mexican avocados will be shipped to 19 Northeastern states by some time early in 1996. California avocado growers oppose the change, arguing that Mexican imports could be transshipped from the 19 Northeastern states, resulting in introduction of pests to California fields. Mexican avocados are already shipped through the United States to Canada and Alaska in sealed containers. The USDA says that new pest-control measures within Mexico, special inspection and shipment procedures, and restriction of imports to colder states where the pests cannot survive will be adequate control measures. Mexico is the world's biggest avocado produce3r, with 45 percent of total world production and production costs less than half of California's. California's crop accounted for 90 percent of U.S. avocado consumption last year. Florida Congressman Mark Foley (R-FL) recently introduced legislation that would link the tomato tariff rate to the Mexican peso devaluation, effectively raising the tariff rate and making Florida-grown tomatoes more competitive with Mexican imports. Florida growers, who sell mainly to the U.S. winter market, have suffered from increased Mexican competition under NAFTA, with Florida's share of the fresh winter tomato market in the U.S. dropping from 70 percent in 1993 to 36 percent earlier this year. Florida growers filed a complaint last March, alleging harm to the winter tomato industry and asking for imposition of tariffs to protect them. The U.S. International Trade Commission denied relief, apparently finding that the Florida growers represented too narrow a portion of the U.S. tomato industry. Peter M. Tirschwell, "US May Lift 80-Year Ban on Mexican Avocados," JOURNAL OF COMMERCE, July 10, 1995; Tom Karst, "Avocado Imports: Rule Could Open Door," THE PACKER, July 10, 1995; Larry Waterfield, "Mexican Tomato Tariffs: Bill Hinges Tax Rates on Pesos," THE PACKER, June 5, 1995; Leslie Alan Glick, "What NAFTA Giveth," TWIN PLANT NEWSLETTER, June, 1995. U.S. BEEF INDUSTRY TO FACE INCREASED COMPETITION Uruguay and Argentina are both expected to begin exporting fresh and frozen meat to the United States as soon as they win U.S. Department of Agriculture (USDA) approval on eradication of hoof and mouth disease, expected later this year. Each country was awarded a 20,000 metric ton beef quota for this year under GATT, the General Agreement on Tariffs and Trade. The imports will have little effect on the U.S. beef import market, which totaled about 751,455 metric tons last year. Most of the imports are expected to be bulk pack meats for the fast-food hamburger market, and will compete with Australian, New Zealand, and Canadian beef already heavily supplying that market. The entire U.S. beef market is oversupplied at present, with beef prices at a 20- year low. The major impact of the Argentine and Uruguayan entry into the U.S. beef market is expected to be displacement of Australian beef exports. In turn, Australia is expected to increase exports to Japan where they will compete with U.S. beef exports. The U.S. sent 368,984 metric tons of beef and beef variety meats, 59 percent of all U.S. meat exports by value, to Japan in 1994. Mexican beef exports to the U.S. increased dramatically in recent months due to the impact of the drought in northern Mexico, but the financial benefit to Mexican cattlemen was diminished because of low average cattle weights. The USDA has also ended an in-bond program for Mexican cattle that allowed Mexican cattle growers to export cattle to the U.S. to take advantage of lower U.S. feed costs, and then to re- import the cattle for slaughter. The U.S. National Cattlemen's Association and the Mexican National Livestock Confederation (CNG) both support bringing back the in-bond program. The CNG has also asked for suspension of Mexican import duties on imported animal feeds. Mexico is expected to see a beef shortage later this year, and U.S. beef imports are still priced too high to win market share in Mexico. Meanwhile, both Cargill Foods and IBP plan to expand processing capacity in Alberta, Canada, and to import U.S. cattle for processing there. Cargill spokesperson John Simons says that, despite stagnant U.S. and Canadian demand for beef, Japan, Taiwan and Korea offer strong markets. Some Montana ranchers say that Canadian cattle imports negatively affect U.S. cattle prices. Montieth Illingworth, "Uruguay, Argentina Plan to Re-Enter US Meat Market," JOURNAL OF COMMERCE, June 26, 1995; Peter M. Tirschwell, "Argentina's Comeback Worries US Beef Sector," JOURNAL OF COMMERCE, June 5, 1995; Chris Aspin, "Mexican Cattlemen to Discuss Devaluation, Drought," REUTERS, June 11, 1995; "U.S. Cattle Chief Questions Mexico Program Loss," REUTERS, June 14, 1995; "Cargill Wants to Process Montana Beef in Alberta," FARM AND RANCH GUIDE, July 14, 1995. TELMEX BUYS CABLEVISION Telmex, Mexico's telephone monopoly, will buy 49 percent of Televisa's cable television subsidiary, Cablevisión in a deal approved by the Mexican Federal Commission on Competition (CFC) on June 20. The deal will unite two of Mexico's largest companies and two of its wealthiest men, Carlos Slim and Emilio Azcarraga. Competitors acknowledge the technological benefits of uniting the two companies, but a director of Marcatel, another company bidding to enter the long-distance market, argues that the merged operation will simply be "a new super monopoly made up of two separate monopolies." The deal was opposed by such large competitors as US-based GTE and its Mexican partner, Bancomer, who wrote to the CFC that: "Such combination would result in monopolistic control over the Mexican telecommunications market," and warned that the deal would be an "unprecedented and plainly uncompetitive alliance of dominant players." Bell Atlantic and Grupo Iusacell argued that the deal violated the terms of Telmex's 1990 privatization, which forbade its participation in broadcast television programming. Other U.S. companies which would be affected by the deal include MCI and Sprint. When the CFC began considering the Telmex-Televisa proposal last November, it was headed by Santiago Levy, a committed opponent of monopolies. Levy was replaced by Fernando Sánchez Ugarte under the new Zedillo administration. The deal must still be approved by the Communications and Transportation Ministry. Claudia Fernández, "The Empire Strikes Back," EL FINANCIERO, June 26-July 2, 1995; Anthony DePalma, "Telmex Gains in Attempt to Buy Cable-System Stake," NEW YORK TIMES, June 22, 1995. ________________________________________ RESOURCES/EVENTS ________________________________________ "Assessing the Rural Reforms in Mexico, 1992-1995," a research workshop of the Ejido Reform Research Project of The Center for U.S.-Mexican Studies, University of California, San Diego, August 25-26, 1995. More than 20 papers will be presented, some in English and some in Spanish, covering various aspects of changing agrarian institutions and laws. Pre-register by August 15. Workshop is free, lunches each day cost $7.50. Workshop will be held at the International Conference Center, Institute of the Americas Complex, University of California, San Diego. Contact David Myhre by email at ejido@weber.ucsd.edu or by fax to 619-534-6447, or mail to Center for U.S.-Mexican Studies; University of California, San Diego 0510, La Jolla, CA 92093-0510. ___________________________________________ 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