Tag Archives: Mexico

NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico, by Don Quijones

Mexico’s low wages are still compelling for many manufacturers. From Don Quijones at wolfstreet.com:

That wages have remained so low for so long is not by accident; it’s by design.

President Trump’s repeated bashing of the North American Free Trade Agreement between the US, Canada, and Mexico has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s much cheaper labor costs. Tecma Group, a firm that helps US and Canadian firms relocate to Mexico, has more business than ever. In the past few weeks alone, it has helped a cleaning equipment company and packaging company move.

Mexico Consulting Associates, headquartered in Chicago, has three new clients interested in Mexico. Keith Patridge, who heads McAllen Economic Development, estimates that at least 12 companies will be installed this year in the north-western city of Reynosa. Another firm, Tacna Services, has helped two companies get set up in the Baja California area.

The southward migration of U.S. companies continues unchecked even as Trump threatens to abandon NAFTA, provoking fear and consternation among manufacturers that have production and supply chains spread across the three countries. If Trump followed through on his threat, traded goods would be subject to tariffs of around 3.5% in the case of Mexican companies and 7% in the case of US ones, according to Benito Barber, an economist for Latin America for Nomura Holdings.

On Tuesday a new coalition of major automakers, suppliers, and car dealers urged Trump not to withdraw from NAFTA. The members of the “Driving American Jobs” coalition include trade associations that represent major global car manufacturers such as General Motors, Toyota Motor, Volkswagen, Hyundai Motor, and Ford Motor.

The coalition has sponsored an advertising campaign aimed at convincing the White House and American voters that NAFTA has been instrumental in boosting production and employment in the US auto industry — a dubious claim given that all global vehicle manufacturers, which can manufacture just about anywhere in the world, always search for cheap labor to maximize the bottom line.

And in NAFTA-land the cheapest labor is in Mexico, where assembly line workers earn an average hourly wage of around $2.50. The average hourly wage for workers in US motor vehicles manufacturing is $28.70 and in auto parts manufacturing it’s $18.19, according the Bureau of Labor Statistics.

To continue reading: NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico

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Thoughts from Below the Rio Bravo: A Preliminary to Going into Hiding, by Fred Reed

Fred Reed engages in an uncommon exercise: he’s an American trying to look at America from a foreign perspective. He will, as he knows, take his share of shots (SLL knows how it feels). From Reed, at theburningplatform.com:

To understand of many Mexican attitudes toward the United States and immigration, you have to go back to the Mexican-American War of 1846-48, of which most Americans have never heard. The United States attacked Mexico in a war of  territorial acquisition, occupied Texas, California, New Mexico, and Arizona, and drove south to conquer Mexico City. It did it because it could.

The attitude of Americans who have heard of the war is usually, “Get over it.” Mexicans have not gotten over it. People get over things they have done to others more easily than they get over things others have done to them.  Tell Americans to “get over” Nine-Eleven, or Jews to get over Germany.

There is in Guadalajara a large and prominent monument to Los Niños Heroes, the adolescent cadets who marched out to defend Chapultepec as the Americans conquered Mexico City, much as the VMI cadets tried to defend Virginia in the Civil War. Countless Mexican towns have a street called Niños Heroes. They remember.

The base of the monument to Los Niñoes Heroes in Guadalajara. It reads, “Died for their country.” You know, like Iwo Jima and all.

This does not make for a keen appreciation of the Exceptional Nation. Nor does memory of the conquest arouse sympathy about immigration–or, as Mexicans see it, emigration. It explains the occasionally heard phrase, “La Reconquista.”

Throw in the drumbeat from racialist sites to the effect that Mexicans are stupid, filthy, criminal, and parasitic, and Trump’s asserting that they are rapists and what all, which resonates in Mexico as Hillary’s Deplorables speech did in Middle America. And of course there was the bombardment of Veracruz, of which Americans have never heard, and  Pershing’s Incursion, and Washington’s history of attacks, invasion, installation of dictators in Latin America and support for others.

To continue reading: Thoughts from Below the Rio Bravo: A Preliminary to Going into Hiding

After Fake Promises of Transparency, NAFTA Negotiations Start in Secrecy. And Lobbying is Heating Up, by Wolf Richter

Meet the new trade agreement, same as the old trade agreeement. From Wolf Richter at wolfstreet.com:

Americans aren’t allowed to know what’s being negotiated at their expense.

The first round of re-negotiating the North American Free Trade Agreement between the US, Canada, and Mexico began on Wednesday and is scheduled to last through Sunday. And the one thing we know about it is this: Despite promises in March by US Trade Representative Robert Lighthizer (USTR) that the negotiations would be transparent, the USTR now considers the documents and negotiations “classified” and they’ll be cloaked in secrecy.

But corporate lobbyists have access. And they’re all over it.

The Electronic Frontier Foundation put it this way:

Once again, following the failed model of the Trans-Pacific Partnership (TPP), the USTR will be keeping the negotiating texts secret, and in an actual regression from the TPP will be holding no public stakeholder events alongside the first round. This may or may not set a precedent for future rounds, that will rotate between the three countries every few weeks thereafter, with a scheduled end date of mid-2018.

But during his confirmation hearing in March, Lighthizer had promised to make the negotiations transparent and to listen to more stakeholders and the public. The EFF reported at the time that in response to Senator Ron Wyden question – “What specific steps will you take to improve transparency and consultations with the public?” – Lighthizer replied in writing (emphasis added):

“If confirmed, I will ensure that USTR follows the TPA [Trade Promotion Authority, aka. Fast Track] requirements related to transparency in any potential trade agreement negotiation. I will also look forward to discussing with you ways to ensure that USTR fully understands and takes into account the views of a broad cross-section of stakeholders, including labor, environmental organizations, and public health groups, during the course of any trade negotiation.

He said that “we can do more” to ensure that we “have a broad and vigorous dialogue with the full range of stakeholders in our country.”

Senator Maria Cantwell tried to have Lighthizer address the skewed Trade Advisory Committees that currently advise the USTR, by asking:

“Do you agree that it is problematic for a select group of primarily corporate elites to have special access to shape US trade proposals that are not generally available to American workers and those impacted by our flawed trade deals?”

To continue reading: After Fake Promises of Transparency, NAFTA Negotiations Start in Secrecy. And Lobbying is Heating Up

To Ted Cruz: Further Militarizing Mexico’s Drug War Is a Horrible Idea, by Brain Saady

Ted Cruz proposes spending billions more on the futile drug war, sending the US military down to Mexico to help its government. At least now you’re not considering a flaming crazy if you suggest legalizing various drugs. The needle moves, but slowly. From Brian Saady at antiwar.com:

Ted Cruz recently provided an exclusive interview to Breitbart News. He asserted that the U.S. military should be working in conjunction with the Mexican government to fight the cartels. He didn’t suggest a full-scale invasion, but he did propose something similar to our program, “Plan Colombia.”

If you’re not familiar, Plan Colombia is officially the U.S. foreign military aid program for Colombia aimed at preventing drug trafficking. The U.S. has provided the Colombian government with $10 billion of military aid over the last 15 years.

Senator Cruz said of Plan Colombia, “It was treated less as a law enforcement matter than as a military matter. Where our military went into Colombia and helped destroy the cartels.” His assessment was partially accurate because Plan Colombia isn’t purely an anti-drug strategy. Instead, it is essentially part of a broader U.S. geopolitical strategy in which our country uses the pretense of the drug war to resurrect Cold-War-style intervention.

However, Cruz’s belief that Plan Colombia helped defeat the cartels is completely wrong. First of all, that gives the impression that the program effectively reduced drug production. That couldn’t be further from the truth. The White House released a report in March stating that cocaine production in Colombia had reached record levels last year, roughly 710 metric tons.

Secondly, the program went into effect in 1999, which was many years after the Medellin Cartel had fallen and not long after the leadership of the Cali Cartel had been captured. Plan Colombia was first implemented when the most powerful drug trafficking organizations weren’t traditional crime organizations. Instead, the drug trade was fueling the country’s civil war between the right-wing paramilitary group, the AUC, and the communist rebels, the FARC.

Proponents of Plan Colombia believe that U.S. military support was a factor that led to the eventual disarmament of the FARC and the end of Colombia’s 52-year civil war. That point is debatable. But, even if you concede it, “peace” was reached at what cost?

To continue reading: To Ted Cruz: Further Militarizing Mexico’s Drug War Is a Horrible Idea

Mexico’s Economy Is Being Plundered Dry, by Don Quijones

Debt and corruption will be the ruination of Mexico. From Don Quijones at wolfstreet.com:

Debt is suffocating the economy, but where did the money go? 

The government of Mexico has a new problem on its hands: what to do with the burgeoning ranks of state governors, current or former, that are facing prosecution for fraud or corruption. It’s a particularly sensitive problem given that most of the suspects belong to the governing political party, the Institutional Revolutionary Party (PRI), which ruled Mexico uninterruptedly from 1929 to 2000. It returned to power in December 2012 with the election of Enrique Peña Nieto. And it clearly hasn’t changed its ways.

Some of the accused governors were so compromised they went on the run. In the last few weeks, two of them, Tomás Yarrington, former state governor of Tamaulipas, and Javier Duarte, former governor of Veracruz, were tracked down. Yarrington, accused of laundering proceeds from drug trafficking as well as helping Mexico’s Gulf Cartel export “large quantities” of cocaine to the United States, was ensnared by Italian Police in the Tuscan city of Florence. He faces possible extradition to the United States.

Yarrington’s successor as governor of Tamaulipas, Eugenio Hernández, a fellow PRI member who is also accused of close ties with narcotraficantes and money laundering, has not been seen in public since last June.

As for Duarte, he was caught this week by police in Guatemala. Like Yarrington, he wasn’t exactly laying low. Among the accusations he faces is that of buying fake chemotherapy drugs, which were then unknowingly administered by state-run hospitals to children suffering from cancer. He and his cohorts purportedly pocketed the difference. He is also alleged to have set up 34 shell companies with the intention of diverting 35 billion pesos (roughly $2 billion) of public funds into his and his friends’ deep pockets.

In just about any jurisdiction on earth, $2 billion is a substantial amount of money, even by today’s inflated standards. But in Mexico, where neither the super rich (accounting for a very large chunk of the country’s wealth) nor the super poor (accounting for roughly half of the population) pay direct taxes of any kind, it’s a veritable fortune.

To continue reading: Mexico’s Economy Is Being Plundered Dry

Is Mexico Facing “Liquidity Problems?” by Don Quinines

Mexico isn’t in a deep debt hole yet, but it’s certainly digging. From Don Quijones at wolfstreet.com:

When it comes to debt, everything is relative, especially if you don’t have a reserve-currency-denominated printing press.

At 49% of GDP, Mexico’s public debt may seem pretty low by today’s inflated standards. It’s a mere fraction of the debt loads amassed by bigger, richer economies such as Japan (229% of GDP), Italy (133%) and the United States (104%). But when it comes to debt, everything is relative, especially if you don’t enjoy the benefits that come from having a reserve-currency-denominated printing press.

In Mexico’s case it’s not so much the size of the debt that matters; it’s the rate of its growth. In the year 2000 the country had a perfectly manageable debt load of roughly 20% of GDP. Today, it is two and a half times that size.

Last year alone the Mexican state issued a grand total of $20.31 billion in new debt, the largest amount since 1995, the year immediately after the Tequila Crisis when the country needed an international bailout to rescue its entire banking system from collapse. The money it received also helped repay a number of giant Wall Street investment banks that had gone all in on Mexican assets.

There are plenty of reasons behind Mexico’s current debt issues. Top of the list is the dramatic reversal of fortunes of the country’s shrinking oil giant Petróleos Mexicanos, A.K.A. Pemex, which until a few years ago provided as much as one-third of the Mexican government’s national budget. After decades of “bad management, lack of vision, negligence, abuse and in many cases, corruption,” in the words of Mexico’s Business Coordinating Council, Pemex is now bleeding losses and buckling under €100 billion of debt.

If Pemex is unable to service its debts, Mexico’s government will have to step in, again. The problem here is that Mexico’s government is also struggling to rein in its own debt addiction, with some states already on the verge of bankruptcy. One state governor, Javier Duarte of Veracruz, did so much fiduciary damage during his mandate that he’s now on the run after allegedly misappropriating vast sums of public funds.

To continue reading: Is Mexico Facing “Liquidity Problems?”

Invading Mexico: More Brilliance from Washington, by Fred Reed

Fred Reed’s hypothetical US invasion of Mexico is a brilliant exposition of the pitfalls of waging offensive war, a subject SLL recently examined in Riptide. From Reed on a guest post at theburningplatform.com:

Time: “You have a bunch of bad hombres down there,” Trump told Peña Nieto, according to the excerpt given to AP. “You aren’t doing enough to stop them. I think your military is scared. Our military isn’t, so I just might send them down to take care of it.”

With Trump it is difficult to tell bluster and carney-barker showmanship from serious consideration or actual intention. While clearly a threat, the remark may have been intended only to intimidate, and the ascription of cowardice to the Mexican army only ill-bred. Trump’s military record leaves no doubt as to his own courage. Given his administration’s threats of military action–war–against China and Iran, the possibility that he will send troops southward may be worth pondering. Whether the President has the faintest idea of what would be involved in very much worth pondering.

If troops are sent, what will they face in Mexico? What would they do? How many would they be?

To begin with, the narcos look exactly like everybody else in Mexico. They do not carry ID cards saying “Narcotraficante.” They can easily blend into the general population. If GIs try to operate here, the inability to distinguish narcos from everybody else will quickly lead to intense frustration. Frustrated troops become angry. They begin to hate the locals as in all such wars they hated the dinks, gooks, slopes, zipperheads, sand niggers, and rag-heads. Mexicans will begin to seem treacherous to them, as always happens when US troops go to countries they do not understand. All Mexicans will come under suspicion.

To continue reading: Invading Mexico: More Brilliance from Washington