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| Table of Contents | |
| Foreign trade | U.S. GOVERNMENT WORKING TO RESOLVE TRADE DISPUTES WITH MEXICO |
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| Socioeconomic welfare | MEXICO CITY ATTEMPTING TO DEAL WITH RAPID GROWTH IN INFORMAL ECONOMY |
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L A T I N A M E R I C A D A T A B A S E
SourceMex - Economic News & Analysis on Mexico
ISSN 1054-8890 Volume 8, Number 5 February 5, 1997
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Copyright 1996, Latin America Data Base (LADB), Latin
American Institute, University of New Mexico
Director: Rebecca Reynolds Bannister
Managing editor: Kevin Robinson
Staff writers:
Patricia Hynds, Carlos Navarro, Robert Sandels
LADB ARCHIVES: Back issues are referenced to provide
historical background relevant to the articles in this
newsletter. These can be accessed with a subscription to the
LADB searchable on-line archives at http://ladb.unm.edu/ by
clicking on world wide data bases. For subscription
information, e-mail info@ladb.unm.edu or call 1-800-472-0888.
In This Issue:
RETIREMENT SAVINGS COMMISSION PUBLISHES INITIAL LIST
OF 12 PRIVATE PENSION FUND ADMINISTRATORS (AFORES)
* Government to allow more companies to participate
in program
U.S. GOVERNMENT WORKING TO RESOLVE
TRADE DISPUTES WITH MEXICO
* Bill to lift tuna embargo under review
* US government expected to open borders to Mexican trucks
* California growers protest partial end to Mexican
avocado ban
* Mexico seeks to resolve cement, broom, and meat disputes
MEXICO CITY ATTEMPTING TO DEAL WITH
RAPID GROWTH IN INFORMAL ECONOMY
* Tensions grow between shop owners and street vendors
* Economic downturn causes surge in number of street
vendors
* Neoliberal policies also blamed
____________________________________________________________
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Public sector finance & planning
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RETIREMENT SAVINGS COMMISSION PUBLISHES INITIAL LIST
OF 12 PRIVATE PENSION FUND ADMINISTRATORS (AFORES)
In late January, the retirement savings commission
(Comision Nacional del Sistema de Ahorro para el Retiro,
CONSAR) published its first list of private pension fund
administrators (Administradora de Fondos para el Retiro,
AFOREs).
The 12 companies that gained initial concessions have
already started recruiting potential clients, although the
start of the program was delayed until July of this year to
give the government more time to set up a more complete data
base (see SourceMex, 11/13/96 and 12/11/96).
The privatization of the Mexican pension program--modeled
after similar programs in Argentina, Chile, Colombia, and
Peru--represents a major effort by President Ernesto Zedillo's
administration to stimulate the rate of domestic savings (see
SourceMex, 10/16/96).
According to Banamex economist Sergio Kurczyn Banuelos,
the new program is expected to channel a greater percentage of
worker salaries into AFOREs. Kurczyn Banuelos estimates that
10% of Mexico's GDP could be in savings by the year 2001. In
contrast, the existing retirement savings system (Sistema del
Ahorro para el Retiro, SAR) only accounted for about 1.1% of
Mexico's GDP at the end of 1996.
The list of companies that received concessions to
participate in the privatized pension program includes a
number of major banks such as Bancomer, Banamex, Serfin,
Inbursa, Bancrecer, Santander, Bank of Nova Scotia, Banco
Bilbao Vizcaya, Dresdner Bank, and Banorte.
Some of these AFOREs were formed in partnership with
insurance companies such as Seguros Tepeyac, Seguros Genesis,
Provida Internacional, Aetna Life and Insurance Co., and
Boston AIG Company.
At the same time, CONSAR delayed a decision on five other
AFOREs, pending a final review of these applications. This
list includes the AFORE formed by the social security
institute (Instituto Mexicano del Seguro Social, IMSS), as
well as the Zurich insurance company, GE Capital Assurance
Co., Principal International Inc., and Grupo Financiero
Promex-Finamex.
Government to allow more companies to participate in program
According to CONSAR president Fernando Solis Soberon,
other companies will be allowed to participate in the program
in subsequent years.
"The window is never closed," said Solis Soberon. "We
will continue to welcome applications from other companies."
In an effort to promote competition, CONSAR regulations
stipulate that any one AFORE can only provide services to a
maximum 17% of the total market.
However, managers of the AFORE-Bancomer have petitioned
CONSAR to increase that ceiling to 25%, since their pension
plan has already attracted a large number of subscribers.
According to AFORE-Bancomer director Ralf Peters, the pension
plan has the potential to attract about 2.5 million accounts.
For his part, IMSS director Genaro Borrego Estrada said
he expected CONSAR to approve the social security institute's
AFORE XXI by mid-February. The delay in final approval is not
expected to place this pension plan at a competitive
disadvantage relative to the other 12 plans approved at the
end of January. In fact, many union members are expected to
follow the recommendations of their leaders to enroll in AFORE
XXI.
"This is the only AFORE that guarantees the resources of
the workers," said Fidel Velazquez, who heads the workers
confederation (Confederacion de Trabajadores de Mexico, CTM).
"I expect more than 6 million CTM members to choose AFORE
XXI."
Meanwhile, President Zedillo used the IMSS's 80th
assembly in Mexico City to reassure IMSS members that the
AFORE program will help ensure the future of worker savings.
"Those who say that the reform limits workers' rights and
will take away their pensions are wrong," Zedillo said in
reference to strong opposition to the AFORE program when the
plan was first proposed in Congress (see SourceMex, 04/10/96).
At the assembly, Zedillo also said that the government's
contribution to the IMSS budget for 1997 will increase by 700%
over last year's to 21 billion pesos (US$2.7 billion). That
is the largest contribution to the system in Mexican history.
[Note: Peso-dollar conversions in this article are based on
the Interbank rate in effect on Feb. 5, reported at 7.79 pesos
per US$1.00] (Sources: El Nacional, 01/29/97, 01/30/97; La
Jornada, 01/30/97, 02/03/97; El Universal, 01/29/97, 01/30/97,
02/03/97, 02/04/97; Novedades, 01/29/97, 01/30/97, 02/04/97;
The News, 01/30/97, 02/04/97; Excelsior, 02/04/97)
*****************************************
Foreign trade
*****************************************
U.S. GOVERNMENT WORKING TO RESOLVE
TRADE DISPUTES WITH MEXICO
US President Bill Clinton's administration has taken
decisive steps to resolve a number of disputes with Mexico as
the North American Free Trade Agreement (NAFTA) begins its
fourth year of existence.
The US government appears ready to resolve conflicts with
Mexico regarding a longstanding embargo on tuna imports and
access of Mexican trucks to the US. In addition, the Clinton
administration has begun to fulfill its commitment to allow
limited imports of Mexican avocados.
However, the administration's decisions have been met
with strong opposition from domestic interests, which could
complicate any resolution of these disputes with Mexico.
Bill to lift tuna embargo under review
The dispute regarding Mexican tuna was almost resolved
last year when the US House of Representatives passed
legislation to end the US embargo against imports of tuna from
Mexico and five other countries in Latin America (see
SourceMex, 08/14/96). However, the Senate failed to pass a
similar measure at the end of the congressional year, which
effectively delayed an end to the embargo (see SourceMex,
10/09/96).
The US imposed the tuna embargo in 1990, arguing that
Mexican fishing boats were exceeding the 15% international
limit for incidental capture of dolphins in fishing nets (see
SourceMex, 11/07/90).
The legislation proposed last year stated that Mexico and
the other five countries have made sufficient progress in
reducing the incidental capture of dolphins.
US Rep. Wayne Gilchrest (R-Md), who was the principal
author of last year's House bill, has already introduced a
similar bill this year. According to Gilchrest, the measure
is expected to gain approval in the House during the first
half of 1997.
Just as he did with last year's legislation, President
Clinton has voiced strong support for the new measure, which
is also expected to easily gain approval in the Senate.
US government expected to open borders to Mexican trucks
The question of access for Mexican trucks also attracted
some attention early in 1997. According to a report published
in the US daily business newspaper Journal of Commerce, the
Clinton administration has already decided to open the border
to Mexican trucks this year. The newspaper said the decision
would be announced in early February.
Under terms of NAFTA, the US was scheduled to allow
Mexican trucks to travel within the borders of California,
Texas, Arizona, and New Mexico as of Jan. 1, 1996, and to any
point within the US by the year 2000.
However, in early 1996 the Clinton administration delayed
the initial opening of the border indefinitely, citing the
wide difference in requirements in each country regarding
weight, size, and insurance coverage for trucks (see
SourceMex, 02/23/94 and 01/17/96).
The International Brotherhood of Teamsters, which
represents US truck drivers, has also raised concerns that
Mexican truckers could take away some business from US
drivers.
"There's still a strong possibility the Teamsters will
sue and get an injunction to further delay the opening," said
Gary Doyle, project legal director for transportation and
customs with the National Law Center for Inter-American trade.
Regarding the Journal of Commerce report, a White House
spokesperson denied that the administration had actually
reached a decision on the issue.
"We are still analyzing the matter," the spokesperson
said.
Meanwhile, a spokesperson for Mexico's trucking industry
chamber (Camara Nacional de Autotransporte de Carga, CANACAR)
told the weekly business newspaper El Financiero International
that his organization holds a mixed position regarding the
implementation of the NAFTA transportation clauses. In
January 1996, CANACAR issued strong protests against the US
delay in opening the border. But the spokesperson said that
the Mexican trucking industry is not yet ready to compete with
US trucks, which under NAFTA would also gain access to Mexican
territory.
California growers protest partial end to Mexican avocado ban
The Clinton administration's decision to allow limited
avocado imports has attracted protests from the California
Avocado Commission (CAC), which launched a US$300,000
advertising campaign in early January to publicize its
position.
Under an accord with Mexico finalized late last year, the
Clinton administration agreed to allow Mexican exporters to
ship avocadoes to 19 states in the eastern US for a four-month
period from November to February each year (see SourceMex,
10/16/96).
The decision partially ended the US embargo on Mexican
avocadoes, which was imposed in 1914 because of concerns that
Mexican producers had not taken the proper steps to eradicate
pests such as the Mediterranean fruit fly from their avocado
crops.
The partial end to the embargo followed US Department of
Agriculture (USDA) field studies conducted in 1995, which show
that growers in Mexico's largest avocado-producing state of
Michoacan had taken adequate steps to eliminate the fruit fly
from their crops.
California avocado growers contend that the USDA studies
to not present conclusive evidence that Mexican avocadoes are
free of the pest.
"Ignoring scientific data makes a political pawn out of
a billion-dollar industry," said CAC executive Mark Affleck.
Until now, California growers have accounted for 90% of
the avocadoes sold in the US.
On the other hand, growers in Michoacan state argue that
their produce should be given wider access to the US market
because the USDA has certified their produce as free of
disease. The Michoacan growers say they should be allowed to
sell their avocadoes in the lucrative California and Texas
markets.
Mexico's deputy trade secretary Decio de Maria Serrano
attempted to take the middle ground in the dispute. Speaking
in Los Angeles, De Maria said the limited opening of the
avocado market would not have been possible without NAFTA.
Mexico seeks to resolve cement, broom, and meat disputes
While a solution appears possible in the trade disputes
with Mexico regarding avocado, trucks, and tuna, the Clinton
administration must still address other trade conflicts with
its southern neighbor.
For example, the Trade Secretariat (SECOFI) in late
January threatened to file a complaint with the World Trade
Organization (WTO) against US restrictions on imports of
Mexican cement unless the Mexican and US governments can reach
a compromise on the matter.
The issue was a major topic of discussion during a
meeting between SECOFI's deputy trade secretary Jaime
Zabludovsky and US Department of Commerce undersecretary
Stuart Eizenstat earlier this year.
In September 1996, a special NAFTA dispute-resolution
panel unanimously ruled to uphold US compensation quotas
against Mexican cement manufacturers who were accused of
selling their product at lower prices in the US than in
Mexico. The NAFTA panel said its decision was based on "the
best information at its disposal," since the principal company
in question, CEMEX, has declined to divulge information on
cement prices in Mexico (see SourceMex, 09/18/96).
In mid-January, Mexico also formally requested a NAFTA
dispute-resolution panel to examine complaints that the US
government has placed unfair tariffs on imports of Mexican
straw brooms (see SourceMex, 09/18/96).
According to the US government, the tariff of up to 40%
is justified under a NAFTA clause that allows member countries
to impose temporary restrictions to protect an endangered
domestic industry.
Notwithstanding the request for a special NAFTA panel, in
December President Ernesto Zedillo's administration imposed
restrictions to retaliate for the US tariff on straw brooms.
These actions include an increase in tariffs on US liquor and
other products (see SourceMex, 12/18/96).
The Zedillo administration is also under pressure from
Mexican meat and livestock producers to take action against
their US counterparts.
For example, Mexican cattle ranchers in December filed a
complaint with SECOFI alleging that US producers were selling
beef in the US at below-market prices. The protest alleged
that duty-free imports of 154,000 MT of US beef allowed under
NAFTA have created unfair competition for Mexican beef
producers.
One month later, SECOFI asked for consultations with US
counterparts to discuss US restrictions on imports of Mexican
pork. Under NAFTA, the US has been able to block Mexican pork
from the US because of health and sanitary concerns.
Mexican producers contend that the US restrictions shut
them out of the US market totally, while Mexico has placed few
restrictions on imports of US pork. Because of this, they
said, US producers have gained as much as 30% of the Mexican
pork market.
SECOFI official Jaime Zabludovsky raised the possibility
that Mexico may request a NAFTA dispute-resolution panel to
consider this matter.
For its part, the USDA has agreed to review its embargo
against Mexican pork imports. According to USDA officials,
one solution is to allow pork imports from the regions of
Mexico where harmful hog diseases have been eradicated.
(Sources: Siglo XXI, 01/10/97, 01/13/97; El Financiero
International, 01/13/97, 01/20/97; Notimex, 01/12/97,
01/19/97, 01/29/97; Novedades, 01/24/97, 01/28/97, 01/30/97;
Reuter, Journal of Commerce, 01/29/97; Excelsior, 01/13/97,
01/31/97; El Nacional, 01/23/97, 01/31/97; The News, 01/28/97,
02/03/97; El Economista, 10/07/96, 01/13/97, 01/15/97,
01/17/97, 01/21/97, 01/30/97, 02/04/97; El Universal,
12/03/96, 12/16/96, 01/16/97, 01/22/97, 01/29/97, 02/04/97,
02/05/97)
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Socioeconomic welfare
*****************************************
MEXICO CITY ATTEMPTING TO DEAL WITH
RAPID GROWTH IN INFORMAL ECONOMY
In late January, the Mexico City government implemented
a controversial plan to address a surge in the number of
street vendors in the city's central business district. As an
initial step, authorities relocated about 100,000 street
vendors from the area and implemented a three-tiered fee
structure.
Street vendors, known as ambulantes, will now be charged
fees ranging from 5 pesos (US$0.64 cents) to 15 pesos
(US$1.92) daily, depending on the "commercial viability" of
where they locate their stands.
According to Jesus Toledano, secretary general of the
Mexico City government, authorities also offered more than
4,000 sites in public markets and commercial centers as an
incentive to remove 45,000 street vendors from some of the
areas of greatest conflict with shop owners.
However, past attempts to integrate displaced street
vendors into the city's 27 authorized markets have failed to
resolve the problem. In these cases, the ambulantes have
complained that the markets lack sufficient space, and they
said that regulations are too stringent.
Toledano also asked the city's legislative assembly
(Asamblea Legislativa del Distrito Federal, ALDF) to form a
special multiparty commission to draft a more permanent
solution to the rapid growth in the informal economy and
integrate street vendors into the tax-paying work force.
In early February, representatives of organizations of
street vendors met in Mexico City to propose their own
solutions to the situation.
Still, the Mexico City government's plan to remove street
vendors from the central business district met with strong
protests by ambulantes, who claim that the plan is insensitive
to the economic realities of street vendors. In late January,
more than 1,000 street vendors organized a series of
demonstrations in front of City Hall to demanded a suspension
of the city government's "unilateral" actions.
Alejandra Barrios, director of the street vendors group
Asociacion Civica Legitima de Ambulantes (ACLA), said her
organization could live with the fee-based structure. On the
other hand, she described the decision to remove all street
vendors from the central business district as "illogical."
"We are on the street because we need work," said
Barrios, whose organization represents more than 10,000 street
vendors.
Tensions grow between shop owners and street vendors
The growth in the informal economy has fueled strong
tensions between street vendors and shop owners in Mexico
City.
According to the Mexico City Chamber of Commerce (Camara
Nacional de Comercio, CANACO), the large influx of street
vendors into the central business district has forced some
businesses in the area to lose as much as 80% of their
potential sales.
CANACO contends that street vendors enjoy an "unfair
trade advantage" because they are not required to pay income
taxes or collect the government's 15% value-added tax
(Impuesto al Valor Agregado, IVA).
Economic downturn causes surge in number of street vendors
Some economists trace the surge of street vendors to the
economic depression that followed the devaluation of the peso
in December 1994. According to government statistics,
Mexico's GDP declined by 6.9% in 1995, which caused many large
companies to lay off workers and forced many small and medium-
sized business into bankruptcy.
According to estimates published by the ALDF, the crisis
forced a total of 21,000 formal businesses employing five or
fewer workers to close their doors in 1995 and 1996.
"For every formal business, there are two informal
businesses," said Antonio Montiel Guerrero, president of the
small business chamber of commerce (Camara Nacional de
Comercio en Pequeno y Servicios, CANACOPS).
The economists suggest the increase in unemployment after
the crisis drove many workers, especially in large
metropolitan areas like Mexico City, into the informal
economy.
"With no significant social safety net to help the
victims of layoffs, people had to work somewhere," said the
business publication Latin Trade.
According to Latin Trade, the actual number of jobs
available in Mexico City in June 1996 was 10% below the number
reported in June 1993.
Statistics published by the ALDF's economic development
committee indicate that roughly 68% of Mexico City's
economically active population (EAP) is unemployed or
underemployed.
Similarly, a report published by the World Bank indicates
that Mexico's nontax-paying sector swelled to 39% of the
country's GDP this year. This is 12 percentage points higher
than in 1994.
Indeed, a recent study published by the center for
private sector economic studies (Centro de Estudios Economicos
del Sector Privado, CEESP) estimates that the informal sector
in recent years has generated economic activity worth between
28% and 39% of the official Mexican GDP.
The plight of the street vendors has not gained much
sympathy from key authorities. In a television interview in
early December, Mexico City Mayor Oscar Espinosa Villarreal
promised to halt the growth in the informal economy.
"I know of cities with much higher levels of unemployment
that don't try to resolve the problem by letting the streets
and sidewalks fill with ambulantes," said Espinosa.
Neoliberal policies also blamed
Other economists and political observers, while
acknowledging that the recent economic depression magnified
problems for most residents of Mexico City, blame the
structure of the Mexican economy for the crisis.
For example, columnist Leopoldo Trejo Martinez of the
daily newspaper Excelsior said the neoliberal economic
policies followed by former presidents Miguel de la Madrid and
Carlos Salinas de Gortari, as well as current President
Ernesto Zedillo, have failed to create the number of jobs
required by the Mexican economy.
"Citizens have turned to the informal economy to deal
with the structural changes in Mexico," said Trejo.
According to a report in Excelsior, the informal economy
has registered growth of about 13.6% annually, compared with
similar growth rates of 7.4% for the formal economy.
Similarly, economist Jorge Albergo Mendoza Garcia said
the combination of government downsizing and the tendency by
private companies to become smaller and more efficient has
directly contributed to the jobless situation in Mexico.
"The government is reducing jobs and pulling out of the
(formal) economy in nearly every sense of the word," said
Mendoza, who teaches at the Mexico City branch of Instituto
Tecnologico y de Estudios Superiores de Monterrey (ITESEM).
"The state shrinks, the private sector retrenches, the social
safety net is nonexistent, and you create conditions to make
the informal sector grow."
Mendoza published a book on the informal economy in 1994,
which many consider one of the most extensive studies of the
subject in the country. [Note: Peso-dollar conversions in
this article are based on the Interbank rate in effect on Feb.
5, reported at 7.79 pesos per US$1.00] (Sources: El
Economista, 11/25/96; Proceso, 12/06/96; El Universal,
01/20/97; Excelsior, 11/24/96, 01/09/97, 01/22/97, 01/23/97;
La Jornada, 12/16/96, 12/17/96, 01/28/97, Novedades, 12/17/96
01/29/97; El Nacional, 01/28/97, 01/29/97; The News, 12/10/96,
01/20/97, 01/28/97, 01/30/97)
