By José Luis Valdés-Ugalde
Director of the Center for Research on North America (CISAN) at the National Autonomous University of Mexico (UNAM), jlvaldes@servidor.unam.mx, www.cisan.unam.mx.
Despite a hopeful beginning, Mexico seems to be going backward in its move toward democracy and economic progress. Its economic model stems directly from the inability to allow the profound transformation of the polity that would make it possible to carry out reforms to make the Mexican economy viable. The enormous commitments the current government has made in its struggle against crime has had a negative impact on regional integration.
2001: The Beginning of the Return to the Debacle
Not long ago, Mexico forsaw a complicated but promising transition to democracy. Pluralism in the legislature, despite the continued existence of a closed political regime, was an encouraging sign of Mexico’s liberalization. The main political parties seemed to understand that after 1988, when the PRI candidate, Carlos Salinas, was elected president, the best way forward was to seek consensus for building robust institutions capable of supporting and leading to the new Mexican democracy. In fact, a positive joining of forces was achieved that led to the consolidation of the Federal Electoral Institute (IFE), then headed brilliantly by Jose Woldenberg. However, something very serious took place in recent years that says a great deal about the shapeless nature of our political and social structure. The political parties, which in theory should have pushed gently for the great changes that Mexican society was demanding, consolidated their monolithic power by taking advantage of the huge economic privileges given to them by electoral norms in what is one of the Americas’ most expensive electoral systems. Thus, plutocratic, authoritarian temptations were imposed, dominating the PRI, as well as the PAN, the PRD, and the bonsai parties. As a result, the legislature has run riot over the institutions of political transition, and has been subjected to the tyranny of the parties.
The Cost of Democracy
The maintenance and conservation of Mexico’s democratic system is expensive. Despite enormous outlays of public resources, Mexico’s democracy is profoundly ineffective at implementing the national political agenda, which includes matters vitally important for the country’s future. Many of our political actors operate factionally, according to their own agendas—when they’re not secret—and their own priorities that are set by personal interests. To a great extent, this system is similar to the old PRI tradition. Our democratic transition has not yet produced the services it needs to function. The public’s perception is that legislators’ actions, far from naturally reflecting the popular mandate, are completely divorced from the will and sentiments of the citizenry. Along the way, they have hijacked priority issues of the national agenda such as energy conservation and energy alternatives, structural reforms of the economy, organized crime, employment, deficient public and private services, and sustainable growth.
Mexico’s legislators are also paid out of proportion to their effective administration of government. The salaries paid to Mexico’s legislators on a commensurate currency basis are higher than payments made to legislators of NAFTA partners, Canada, the European Parliament, the German Budestag, and all of the Latin American countries.
Is Mexico Still PRIísta?
Although far from its glory days, recent evidence points to the restoration of the PRI party that was hegemonic for 70 years. This is no minor matter for Mexican democracy. On the one hand, it reflects the scant imagination and effectiveness shown during the years of democratic alternation, both by the previous and the current administration. On the other hand, it shows that the absence of both a modern left and a modern right capable of fostering a strategic, inclusive, forward-looking modernization project allows the most noxious traditions and practices of the past to remain in place.
A comprehensive political-institutional structure among the political actors and the branches of government has not been formed to deal with the enormous complexity of Mexico’s democratic transition and the huge need for economic change that would advance the benefits that modernity offers. There has been practically no significant progress in any field that would justify the idea that “getting the PRI out of Los Pinos” had made a profound difference beyond its simple ouster. This is explained by the lack of a clear strategy for political change, as well as the lack of political will and integrity on the part of all the actors involved. The result is political, social, and economic stasis.
In short, Mexico’s political and social climate has failed to change. A broad majority, beyond ideological dogmas, has not been forged to articulate a coherent plan to dismantle the institutions and forms and traditions of state authoritarianism dominant in Mexico for more than 70 years. Customs and usage from the old regime are preserved and cultivated daily, permeating the bad political dealings over the last eight years. Politicians, party and electoral bureaucracies, and the citizenry itself have not been able to free themselves from that old ambiance that has so unfortunately characterized Mexican political, social, and institutional life.
This situation has put its stamp on Mexican society. In addition to systemic and social deterioration, stagnation has seriously injured the already battered national civic culture. The terms of representative democracy have been misunderstood; the forms of the democratic institutions have deteriorated; corporatist alliances have been reproduced in the fashion of the old political traditions of the last century; demagogic, irresponsible leaderships have been reproduced; and corruption has increased. In the end, alternation in office, instead of eliminating stumbling blocks, has produced and preserved more than the Mexican system can tolerate. Moreover, the governing class’s lack of societal skill, the threat of organized crime, the profound economic crisis stemming from the U.S. economic crisis, and the failed economic model and its handling by the government have dramatically hemmed in the state and society and has made the restoration of authoritarianism more likely.
Mexico may well be submerged in the deepest social crisis of the last three decades. Mexican society’s most vital interests have been adrift in a no-man’s-land or sequestered amidst the authorities’ overwhelming ineffectiveness. Police corruption and criminal activity are out of control. Every day brings news of executions and kidnappings all over the country. The drug-trafficking gangs are getting stronger. Their attacks are increasingly ferocious, reinforcing the official hypothesis that kidnapping has now become a business. Social and political degradation is monumental. In the face of this decadent spectacle, where the security of each one of our fellow citizens is at stake and individual freedoms are checked, we can see in the distance a diminished political class that understands very little of the whole panorama and can come to no consensus among its own members.
The hypothesis is beginning to gain credence that politicians, in their incompetence, have produced enormous vacuums of power at different levels of decision-making that have been filled by organized crime. According to different sources, the implementation of federal security policies costs more than US$120 billion a year (15 percent of Mexico’s GDP), with more than 90 percent of crimes going unsolved and allowing a crime to be committed every 22 seconds. The security figure surpasses the combined annual production costs of the agricultural, mining, construction, and gas and electricity sectors, which represent 12 percent of GDP. Is this imbalance acceptable? If this scenario does not change, we are sentencing ourselves to run in place forever, like Alice in Wonderland.
NAFTA, Truncated Integration?
Given this political scenario, the setbacks in the economy are no surprise. Moreover, the integration process does not have the impetus that it could have had, due to the lack of strategic structural reforms.
In this context, Mexico seems to be the big loser in the hemispheric dynamic. Given the current state of relations of the countries in the hemisphere, the perception is that Mexico lags behind most Latin American countries with regard to priorities, exchanges, and real dialogue, and is also politically and economically removed from the United States. The distance between Mexico and the United States has increased for two main reasons. The first is an almost absolute lack of reciprocity and sensitivity on the part of the United States regarding mutually important issues like immigration and security. The second is a deep-rooted confusion about the definition of the relationship between Mexico and the United States, a confusion involving the relationship’s lack of definition and formality. The result is an imperfect friendship that is destructive to Mexican society.
Mexico has insisted on forging a relationship with the United States based either on a personal identification between the two countries’ leaders or on a supposed special relationship between the countries. In so doing, it has neglected relations with the South and missed the opportunities its exceptional geographical position offers as the neighbor and intermediary with the United States, a bridge between North and South (Central America, the Caribbean and South America), and a focal point for migration.
Seemingly, geography acts to Mexico’s detriment because its proximity to the United States limits its foreign policy opportunities, rather than broadening them. It moved from authoritarianism, in which foreign policy was not a result of consensus, to an incipient democracy, in which foreign policy was improvised with national interests left undefined and forged under the failed Washington Consensus. Mexico’s distance from Latin American has been deepened by a series of events and omissions that have torn away its place as a regional leader. This has caused resentment in the rest of the hemisphere because of the lack of effective policy and undefined interests and priorities. Examples of poor policy include deliberately putting migration at the top of its foreign policy agenda, focusing exclusively on Mexican migration northward and ignoring its role as a receiving and transit country for migrants from the south; Mexican diplomacy’s low profile during the clashes with Cuba and Venezuela; its waffling in implementing the Puebla-Panama Plan; the frail alliance with MERCOSUR; and its paralysis in the face of the break-up of the G-3, among other things.
Conclusion: Is NAFTA an Integration Model at a Standstill?
Originally proposed as the hemispheric integration model par excellence, 15 years after coming into force, NAFTA is sunk in a political and operational crisis. The operational crisis can be seen in the loss of its share of international trade, which has dropped from 19 percent to 14 percent between 2000 and 2006. Each member country has also lost international trade shares: the United States dropped from 12.1 percent to 8.6 percent; Canada, from 4.3 percent to 3.2 percent; and Mexico, from 2.6 percent to 2.1 percent. By contrast, China increased its share of world trade by 4.7 percent, displacing Mexico in the U.S. market, to represent 15.84 percent of U.S. imports, while Mexico only represents 10.81 percent. The fact that the integration economies NAFTA was expected to generate failed to materialize is one of the reasons for this apparent stagnation. The integration strategy did not move forward in infrastructure, logistics, and technological innovation, and at the same time, the treaty itself was not designed with a focus on complementing production.
These criticisms show a weakening of the Mexican model for integration. Nevertheless, speculating about possible hemispheric integration based on NAFTA demands that we analyze the lessons that the Mexican experience offers. Despite NAFTA’s apparent deterioration as a model for integration and growth, it is undeniably the bloc with the greatest economic power and largest portion of world trade. The difference among the sub-regional blocs in terms of trade volume is abysmal: MERCOSUR represents only 11 percent of NAFTA’s exports and only 4.9 of its imports. With regard to inter- and intra-regional trade, NAFTA countries do 55.85 percent of their trade with its other members and only 5.8 percent with the rest of the non-NAFTA countries of the hemisphere. Meanwhile, Central and South American trade with North America represents 33.4 percent of their total, and more than intra-regional trade (24.3 percent). Undoubtedly, the biggest attraction the United States can offer in terms of trade is entry into its market, which does not automatically translate into development, economic growth or, in the last analysis, active integration for its trade partners.
Evaluating the treaty’s results by looking at Mexico’s indicators gives us an idea of the effects of hemispheric integration on the framework of an amplified NAFTA. Between 1994 and 2006, Mexico’s imports as a proportion of its GDP grew 15.1 percent and came to 28 percent of its total trade. The trade surplus vis-à-vis the United States has come to more than US$70 billion. While in 1995 Mexico had 51.2 percent inflation, by 2007 it was down to 3.76 percent.
Other implications are not as positive. Mexico lost competitiveness worldwide, going from 35th place in 2000 to 58th place in 2006, according to the 2007-2008 Global Competitiveness Report. No matter how important the growth of exports, the export model has shown little capacity to pull the national economy forward given that its real growth rates have remained very low. The much praised trade surplus with the United States contrasts with the overall trade deficit with the rest of the world and the urgency of diversifying trade: from January to December 2007, Mexico’s trade balance accumulated a preliminary deficit of US$11.183 billion. On the job front, according to the U.S. Department of Commerce, from 1993 to 2007, 26 million new jobs were created in the United States. On the other hand, a shadow is cast over the five million jobs created in Mexico by the 1.3 million jobs lost in agriculture, the deficit in the agricultural trade balance, and the very patchy liberalization in that sector.
On the whole, no matter how much better it is than the rest of the regional blocs in the hemisphere, NAFTA’s participation in world trade has dropped from 19 percent to 14 percent and China has filled in the vacuums of trade leadership, going from 3.8 percent to 8.3 percent of world trade. In fact, annual trade growth figures are not very encouraging either. While MERCOSUR grew 28 percent in 2004 and 23 percent in 2005, with Venezuela achieving its most dynamic growth at 43 percent, NAFTA grew 22 percent in 2004 and dropped 13 percent the following year. In both periods, Mexico grew 14 percent and the United States 14 percent and 12 percent respectively, which were lower rates than those of Brazil, Chile and Venezuela.
Given NAFTA’s relative decline as a model for integration and growth, how attractive can it be for the South American economies, which, at least in the MERCOSUR, have grown 28 percent in 2004 and 21 percent in 2005, while NAFTA has sustained a 9-percent drop from 2004 to 2005 with a trade growth of 13 percent? Within NAFTA, northward migration has not lessened because the development gap among the member countries has not shrunk. On the contrary, remittances (US$24.354 billion, last year) have become an instrument for pseudo-development. From the south, proposals for hemispheric integration are not completely inclusive and increasingly tend toward sub-regionalization.
Integration projects have been proposed in which strategic vision is limited due to the asymmetries among the proposed participants and the absence of a political will for reciprocity. Therefore, the question continues to be relevant as to how to integrate asymmetrical economies without incurring stagnation and dependency among the less developed countries in a continent in which economic, political, and social differences are huge. Given the current state of the South American region, the impetus for integration cannot come solely from the North, but must also come from the South. It is debatable whether, given U.S. national security priorities, there is any possibility of reviving a comprehensive integration project. And, if there were any intention by South America to foster integration, it is by no means clear whether Mexico would be included and in what capacity. In any case, Mexico is facing domestic political crises of governance and modernization that are of similar scope to its notable loss of competitiveness in the region and the world.