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jorge castenada

jorge castenada
Jorge Castenada is a professor of politics and economics at the National Autonomous University of Mexico and author of numerous books and articles on Mexico and Central America.
WHAT SHOULD AMERICANS BE CONCERNED ABOUT IN MEXICO?

Not to get hoodwinked again, not to be sold a bill of goods again that the new Mexican president, the new Mexican finance minister, the new Mexican trade minister, and the new Mexican democracy minister are everything they are made out to be and everything you want them to be.

As long as Mexico has the same political system it has had for 70 years it will continue producing the same type of people, the same Mafia, the same groups in power. They now know what you want and they know how to sell to you what they think you want. You have to decide if you want to keep buying it or not.

AND WHAT ARE THE RISKS?

Well the risks are that if you are sold a bill of goods, you eventually are deceived by it, which is what happened of course at the end of 1994, and someone has to pay for the broken dishes, if you permit the mixing of metaphors this way. The Salinas dream was a bubble. It didn't work. It was a house of cards. It fell down and who had to pay? Americans had to pay. Now they've gotten their money back with incredible interest rates and what have you, they have paid back ahead of time with high interest rates, whatever you want. But the fact is that they had to pay a great deal of money and put up a great deal of political capital to save their friends in Mexico and their interests in Mexico.

It's going to happen again. Whether it will happen this year or two years from now or four years from now, there's absolutely no question in my mind that this is going to happen again, and once again the damage to the United States and Canada to a lesser degree will be significant

MEXICO PAID BACK THE MONEY EARLY, BUT MEXICO IS STILL IN DEBT. ALL IT DID WAS REFINANCE THOSE LOANS.

Could you imagine what would happen if your bank decided that you were way over indebted but that you were able nonetheless to refinance your mortgage in a sound financial operation? Would anybody applaud you for refinancing your mortgage even though you are still heavily over-indebted? No. This was pure Mexican-American hyperbole and spin. There's nothing more to it.

Mexico today has a foreign debt as a percentage of its gross domestic product which is significantly higher than in 1982 when the debt crisis erupted. So if Mexico was over indebted then it is more than over indebted today. That it paid back some of the money beforehand simply occurred because they were able to go to the Euro markets in November and December and obtain 3 to $4 billion at a somewhat lower interest rate, not too much lower, than the money the Americans had lent and this way they're able to get around some of the more humiliating aspects of American supervision of the Mexican economy. But no intelligent, reasonable person can consider a prepayment of the debt as a sign of Mexican economic recovery. It means nothing from the point of view of recovery. It doesn't mean the situation is worse either. It is simply meaningless from that point of view.

GIVE US A SENSE OF HOW BAD IT WAS IN 1994 WHEN THE DEVALUATION OCCURRED FOR MEXICANS.

Well I think you have to first remember that this was the fourth devaluation in 20 years, in less than 20 years, in 18 years at the time, 1976, 1982, 1986-87 and then again 1994. So many Mexicans were in a sense used to this. On the other hand, many Mexicans had been convinced by Salinas's pipe dreams. They believed that this time around, things would be different because this time we weren't picking fights with the Americans and they liked us. This time everything was in private hands. This time we had a young president who spoke English, etc. etc. etc. So although people were used to this, in fact it hit them very hard. It hit enormously hard those people who had debts or commitments in dollars, and then because of the rise of interest rates, it hit people who had liabilities in pesos very hard.

Perhaps the big change in relation to previous devaluations is how this one hit the middle class and even the lower middle class because of the debt in pesos and floating interest rates and the rise in interest rates and because a lot of people had become accustomed to consuming imported goods. Think of it in terms of the lower middle class housewife who was able to give her children an American breakfast cereal instead of a Mexican made breakfast cereal for the previous 5 years. Our kids were happy and all of a sudden she can't afford it anymore. She's got to go back to the Mexican rice krispies. It probably tastes the same as the American rice krispies but try and convince the kids of that. In a sense that's the sort of way through debt and through the cut-off in access to imported goods that the crisis hit more seriously in the first stage and then soon after through unemployment. For the first time in recent Mexican economic history, people lost their jobs. When there had been slowdowns in the Mexican economy before, employment stopped growing, output fell, incomes fell, wages fell but people did not lose their jobs. They weren't laid off. This time they were laid off.

THE EL BARZON MOVEMENT WHICH SEEMS TO HAVE ATTRACTED THE MIDDLE CLASS....... YOU TALKED ABOUT 'THE EL BARZON MENTALITY.' WHAT DOES THAT MEAN?

What I think is more important than the political aspects of the Barzon movement are the attitudinal points of view. That is there's a Barzon type attitude in the country today. First, people began to realize that it was more worth their while to stop paying - making payments on their mortgage or on their car, whatever, than to eventually lose the house or lose the car or lose the credit card largely because they couldn't make the payments but also because the consequences of one were less than the consequences of the other. Once they stop payments on one of these debts and nothing happens, they move on to the other ones. Stop payments on your debt, on your house, then on to your car, then on to your credit card. Once you've done that and nothing happens, maybe you can stop paying your light bill, your water bill, your sewage bill. And once you've done that, you stop paying taxes. And so we have had a collapse, a dramatic collapse by nearly 50% in tax revenues in Mexico, the government's tax revenues between 1996 and 1995. It's not exclusively due to this attitude but it is largely due to this attitude that it is preferable not to pay than to make this enormous effort to pay which at the end of the day is fruitless anyway

WOULD YOU SAY IT'S ANOTHER OF SALINAS'S LEGACIES?

Well it means you have to combine this specific legacy with the corruption issue. You have to realize that people in Mexico were used to corruption. I mean corruption has been a fixture of Mexican life at least since the Spanish got here and that's a long time now. But there had never been anything like the Salinas corruption, in two ways. One, the little they gave the people and two, the amount they took for themselves. Before you had government officials taking money but also providing services, highways, hospitals, schools, and what have you, and taking small amounts of money. You had people - the last president who really wanted to create an empire in Mexico and to perpetuate his power in Mexico through money was Miguel Aliman in the late '40s. The other presidents may or may not have stolen money but they did it in any case to enrich themselves individually to have more money to travel, for women, for paintings, for their hobbies, what have you, but they didn't seek money for political purposes. Salinas, like Aleman, did.

But of course if you want to hang on to power at the end of the 20th century in a country with 100 million inhabitants, and an economy of $300 billion, you need a lot of money. It's an enormous amount of money that you have to stash away and you have to do it many ways. When all of this began to become public, the public opinion of people in Mexico said this is ridiculous. I pay taxes so these guys can do this? I'm not going to do it any more. The services they give me are lousy, the education is lousy, the health care is lousy, the pollution is terrible. They don't collect garbage, the government doesn't work on the one hand and on the other hand they steal all this money. I won't pay.

THAT TAKES US TO PRIVATIZATION UNDER SALINAS. LOOKING BACK ON THE PRIVATIZATION, WHAT'S YOUR IMPRESSION NOW?

You have to view it from two different aspects, the aspect of which ones worked and which ones didn't, and the aspect of the entire way in which it was done and if it could have been done otherwise. I think there were some privatization projects which seem to have worked relatively well. I think the best example is the telephone company which has worked reasonably well. Regardless of whether it was very neat and tidy when it was actually sold, the phone company largely does work better today than before. It could have also worked better if it has remained in state hands. I'm not saying this is the only way it could work and work better but by and large, I think you could call this a relatively successful privatization.

You have the obvious basket cases, mainly the banks of course. I mean the banks were sold in the most irresponsible way imaginable and they are virtually broke. The number of banks in Mexico today that would be totally bankrupt if they were to apply American accounting practices overnight in Mexico is enormous. The banking system in Mexico was sold off to people who were not bankers at prices that were unpayable and should not have been paid without regulation, without oversight, without anything. So you had some decent cases, and some terrible cases.

What was really wrong with it was why they did it and how they did it. They sold off all these companies just to get money to finance the bubble. That's all they did it for. They didn't do it out of ideology. They don't believe in one thing or the other, one way or another. They didn't do it to make such and such a company more efficient. They didn't do it as part of a broad economic strategy. They did it to get money to finance the bubble and to make the Americans happy. That's why they did it. And when you do things that way you don't care who you're selling it to. You don't care how long it takes you. You want to do it fast. You don't want a regulatory framework to look and inspect very carefully what you're doing, who's buying it, where the money comes from, what they're going to do with it, whether they really want to do it, whether they know how to run the damn thing they're buying.

So I think the real sin of Salinas was to carry out such a massive transfer of publicly owned assets to private hands without supervision, without competition, without a regulatory framework and without a strategy, and we're seeing the results today.

THERE WAS ALSO A HUGE RISE IN BILLIONAIRES IN THOSE YEARS IN MEXICO.......

Well there's always been a lot of money here. It's been a country where there are very rich people for centuries. And I'm not sure that the public appearance of more billionaires really reflected a change in the concentration of wealth. What really changed was that wealth in Mexico used to be discrete. It used to be not ostentatious. The very wealthy were careful not to show off too much because they knew that the gaps between rich and poor were so great in this country that if you rubbed it in and you sort of kept showing the poor how poor they were and how rich you were, one day the poor were going to get mad and it was better for them not to get mad. You didn't have to ride in a Mercedes. You didn't have to have glitzy stores, ... this or that all over Mexico City. If you wanted to buy those things you'd go to Paris. If you wanted to have a Mercedes, you could have one in Houston. After all, here all you need is a car to go from one place to another. That changed under Salinas. It became fashionable and acceptable to flaunt wealth and that began to hurt a lot of people.

And in general the sense that wealth should no longer be discreetly removed from public view but should be flaunted. This was part of the Salinas attitude that boom, it's good to be rich. We're all going to be rich, we're entering the First World. Nothing to be ashamed of. Now we're going to be a rich country. It got a lot of people very upset.

What is clear is that there was an extraordinarily close privileged back channel between Carlos Salinas and the Bush administration and then between Carlos Salinas and the Clinton administration but much more with the Bush administration which allowed many things to go forward which would never have gone forward without that back channel, without that trust, without that tight relationship. Clearly there was a very very close sense of trust and confidence there.

WHAT ABOUT THE GOVERNMENT HAVING TO RELY ON THE MILITARY FOR SOME ASPECT OF ITS POLICY?

The fact is the Government doesn't have much choice. It doesn't have a whole lot of options. There is nobody else who can try and deliver law enforcement in Mexico City. At some point this creates a problem because you have to train the military to do all of this. You have to send them abroad. You have to give them more money, you have to buy more equipment, you have to increase the size of the military. And as you begin to do all of that, not overnight, it does not happen from one day to the next, one year to the next, but over five to ten year period, you create a military lead in a country that did not have one. And when you create that military lead, by definition they will have opinions about other things. At some point it would not be inconceivable that if they think they can deliver law enforcement in Mexico City better than the civilians, they might also think they can implement economic policy, better than under the civilians, or defend the borders better than the civilians, or fight corruption better than the civilians. Then you get a self military coup on your hands. That's not going to happen next week, next year or even necessarily this administration. But as you bring the military in, the military inevitably begins to take stances and have ideas about the things that you haven't brought them into. That is an absolutely well known path in Latin America.

WHEN YOU WENT TO VISIT CARLOS SALINAS IN IRELAND, WHAT DID YOU FIND?

Well, I didn't go to visit him, I went to Ireland with my wife on vacation and since we knew he was there, we called him up and we had lunch together. The purpose of my visit was never to meet with him or interview him. I found the man quite at ease and at peace with himself, happily married. He speaks intelligently about most issues except his own administration on which he has a totally a critical view. He is a man who does not seem to be especially depressed or specially ..... and who still has a sense of mission and who wants to rehabilitate himself. And a man who is active in politics in Mexico. Who is in touch, who is informed, who is doing things, speaking to people on a cellular phone, reading the papers on the internet early in the morning, sending faxes, messages, a man who is actively involved in Mexico, in politics and who is very much at peace with himself, mistakenly in my view but....

DOES HE HAVE REAL POWER?

That's hard to say, that's not something that one can conclude from seeing him or not seeing him. My impression is that he is still an immensely powerful person in Mexico. That he is one of the key political forces in this country. And that as long as the administration does not address that issue it will not really be able to move forward.

COULD HE COME BACK?

He could come back, but he couldn't walk on the streets, he couldn't go to the movies, he couldn't go to a restaurant. He couldn't go jogging in the park. Legally he can come back, I would say even politically he can come back, but he wouldn't be able to move. On the other hand, the city can't do anything.

WHY COULDN'T HE MOVE?

Because he is immensely unpopular. I'm sure you've seen the little boys with Salinas masks, with Salinas dolls, I'm sure you've seen the polls on how incredibly unpopular he is by all standards in Mexico. Mexicans believe that he is responsible for all of the disaster of the country. They are largely right, they believe that he tricked them, that he fooled them and he ran off with the money and when you have that sort of national center, there is no way that you can obtain popular rehabilitation. He can conceivably be rehabilitated within sectors of the elite but certainly not in public opinion.



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