MEXICO: PESO
DEVALUATION &
SOCIAL-POLITICAL
Twice in the space of two months the Mexican peso has been devalued relative to the American dollar, the European currencies, and the Japonese yen. The first time, September 12, its value was reduced from 12.5 to 19.6 pesos to the dollar.. The second time, October 26, the peso was "Floated" and fell from 19.6 to 26.5 to the dollar. Thus, the peso lost more than half its dollar in just a few weeks. According to Dr. Ernesto Fernândez Hurtado, official spokesman for the second devaluation, the cause of the operation was the same in both coses: "strong pressure on the exchange market" provoked by speculafive dollar buying. In reality, the "adjustments" foreseen for the first devaluation and the results the government hoped to achieve did not occur in the expected proportions. The economic crisis Mexico is now experiencing has thus been intensified. It is true that the second devaluation was followed by a temporary stabilization of the peso, which rose again on the free market on November 9. Its exchange rate now "Floats" in the area of 24,83 pesos to the dollar. Official circles hope that the rate will rise to about 22 pesos to the dollar by the end of November. But such a slight rise would be the direct result of aid from the International Monetary Fund: a loan of $1,200 million which the Mexican government obtained in exchange for the first devaluation. But the fragility of the economic situation in Mexico, the enormous weight of the foreign debt, and the persistent balance of payments deficits are generating fear of new devaluations and new and accentuated conflicts between the state and private entrepreneurs of the same type that occurred in the period just before the second devaluation.
CRISIS by Antonio Cuadros In contrast with the first devaluation, which occurred in a more or less unexpected manner, the period preceding the second devaluation was marked by an atmosphere of tension, criticism, and recriminations between the state and its nationalist spokesmen on the one hand and those groups of Mexican capitalist entrepreneurs most clearly tied to imperialist capital on the other hand. These groups centered their attacks on the "wasteful" character of the administration of President Lufs Echeverrfa and on the political priorities that have determined the amplification of public investment (above all in the realm of the "economic and social infrastructure") under the Echeverria government (1971-76). They assigned responsibility for the fall of the peso to the public finance deficit and the concomitant inflation, said to have been triggered by the "social demagogy" of Echeverría. These crificisms reflect strategic and immediate differences between the nationalist regime and sectors of the private big bourgeoisie. The private capitalists, for example, criticize the expansion of state and parastate enterprises, which they call "excessive. " (Expenditures in this area had nearly tripled under the Echeverría government.) The growth of the state sector has resulted primarily in an enormous increase in the public debt. The Nacional Financieria (a public investment company) has invested 113.5 million pesos during the past forty years, 64.5% of which has been raised by loans abroad (or loans from foreigners). A good part of these investments were mode during the six years of the Echevería government. The objective of the Mexican big capitalists is obvious: The state must no longer play such a decisive role in economic development. According to them, it is time to put an end to the growth of the state sector at the cost of an increasingly heavy foreign debt. The most audacious representatives of the bourgeoisie have gone
MEXICO so far as to propose that the majority of nationalized enterprises be sold to the private sector as a way out, that is, as a way of resolving the crisis of public and foreign financing of the Mexican state. In terms of more immediate interests, the stakes in the conflict consisted of a series of fiscal measures taken by the Echeverria goverment since August 31 aimed of channeling resources toward pruning public finance and the public sector of the economy. For instance, the government decreed a tax of 15% on export income. The response of the capitalist group of Monterrey, the most powerful of the private capitalist groups in Mexico, was immediate: This group, along with 80% of the enterprises if controls, completely suspended sales abroad, thus increasing both the trode deficit and speculation against the peso, which precipitated the devaluation. In the course of this confrontation, which was waged with unusual aggressiveness by the Mexican bourgeoisie, the government was defeated by private capital. The industrialists refused to supply even a minimal Fraction of the resources needed to pay for the various public investment projects, even temporari ly (even though in the longer term these projects profit the private sector, precisely because of their character as expenditures on the economic and social infrastructure). They likewise refused to foot the bill for the various movements supporting wage demands which had occurred in the meantime. And the government capitulated. The export tax was lifted one day before the second devaluation. At the same time, the CEDIS (Tax Value Certificates), which are a variety of state subsidy accorded export enterprises, were reestablished. Hence, the industrial and financial bourgeoisie emerges strengthened from the two devaluations. If was this bourgeoisie - and not the mass of small savers, as has been demagogically asserted in the bourgeois press — that exerted the major pressure on the government to change the orientation of economic policy. And it was the bourgeoisie that gor its way. After the devaluation, the Mexican Institute of Financial Specialists (IMEF), an organization of private employers, formulated new criticisms of the alleged ly wasteful behavior of the Echeverría government. The government was once again forced to respond, timidly defending the nationalist-type perspectives and priorities of is economic policy against increasingly powerful and aggressive private capitalist groups which not only lock "social consciousness, " but also pretend to misappreciate the specific role played by public investments in the process of accumulation of capital in Mexico. The greater aggressiveness of the well-off bourgeoisie against the Echeverria regime also has another target: the decision made by Echeverria just before the end of his term to grant poor and landless peasants half a million hectares of fertile land in the state of Sonora in northern Mexico, land which the large capitalist landlords of this state had previously appropriated 24 illegally in order to establish modern mechanized agriculture: The poor peasants acted on this decision, massively occupying these lands without waiting for the verdict of the courts (which have a solid trodition in Mexico of ruling in favor of the owning classes). Once again the bourgeoisie cried scandal, denial of justice, and violation of respect for the courts and separation of powers. The bourgeoisie maintained silence about the fact that the formation of vast private domains in the state of Sonora and elsewhere (sometimes under the cover of property shared out among various members of the same family or owned by front men) is in open violation of the Mexican constitution, supposedly the "supreme law, " After the Mexican revolution of 1910-17, this constitution limited land ownership to 100 hectares. This campaign of violent denunciation of the nationalist regime by the private bourgeoisie was accompanied by a strike of industrialists and large merchants in eleven of the thirteen Mexican states, as well as by an export strike and a massive flight of capital, at a rate of $400 million a week to Texas banks alone. It should also be added that imperialist circles, particularly representatives of North American imperialism, strongly supported this campaign of the Mexicon bourgeoisie. For months U.S. newspapers have been denouncing the threat of the establishment of a "socialist regime" in Mexico, systematically discouraging Americon tourism, And in fact tourism has declined, and with it one of the factors providing supplementary income to help cover the heavy Mexican trade deficit (which rose to 53,000 million in 1976). Washington's irritation of Echeverrfa is a result both of several initiatives taken by the outgoing Mexican president in the realm of foreign policy which were annoying to American imperialism and of a desire to blackmail Mexico economically in order to keep this country out of OPEC (Organization of Petroleum Exporting Countries) and prevent any measure that would conflict with the interests of the American firms established in Mexico. In spite of the rapid industrialization of Mexico during the past several decades and in spite of the vast rural exodus, peasant agitation nevertheless remains endemic in several Mexican states. It is not at all limited to the state of Sonora, where Echeverria wanted to set an example in order to counter somewhat the reactionary assault that has been mounted against the ruling Nationalist party. The case of the state of Guerrero is quite significant in this regard. Until recently, 66% of the population of this state had an average monthly income of 250 pesos, that is, 520 before the devaluation of the peso and $12.50 at the present rate of exchange. In spite of the presence in this state of the tourist center Acapulco, the vast majority of the inhabitants live in
complete misery. The total absence of credit or financial aid to this state leaves the small formers at the mercy of monopolists, merchants, and local usurers. The result was the beginning of a rural guerrilla war, strongly repressed by the army. But the government had to make some concessions to the poor peasants. Although the credits accorded to 725 ejidos (peasant communities) in the state stood at only about 30 million pesos a year at the beginning of the 1970s, they were sharply increased to 450 million pesos in 1975. The government also decided to combat middlemen and private monopolists by using the Mexican Coffee Institute and the Vicente Guerrero Forest Company to intervene in the purchase of commercial harvests. These measures were belated, petty, and insufficient. But they once again revealed the specific bonapartist character of the Mexican bourgeois government. In spite of all the repressive violence with which it periodically strikes the independent action of the workers, peasants, and students, it is also periodically led to seek to maintain and stabilize its popular base by making some economic, social, and political concessions to the popular masses. It is above all these concessions that irritate the big bourgeoisie, even if they serve the interests of this class in the historic and long-term sense, for they retard determined anticapitalist revolutionary action on the part of the majority of the proletariat and poor peasants.
End of relative prosperity
What appears clearly after these two devaluations is that the Mexican economy has now entered a period that definitively closes the stage of relative "prosperity"
based on an orientation of accelerated economic growth in which the state was the main motor force in the accumulation of capital. This crucial reversal in the economic cycle cannot be concealed by any amount of official rhetoric. Everybody feels obligated to make predictions these days. There are those who belleve that the devaluation will serve to stimulate a phase of economic recovery and will relaunch an economic cycle comparable to that which prevailed during the era of "stabilized growth" that followed the devaluation of 1954. It is obvious that this prediction is based on abstract reasoning and that in reality there is no basis for such optimism. In 1954, just after the devaluation that set the peso exchange rate at 12.5 to the dollar, the international capitalist economy entered a long-term boom which ended in the late 1960s. Mexico amply profited from this international capitalist expansion. Today one can hardly predict a new boom of the international capitalist economy. The recrudescence of the crisis of the international monetary system with the fall of the pound sterling during recent weeks and the factors revealing a new ebb in economic activity in the United States during the last quarter of 1976 confirm that the 1975 economic upturn was only transitory and that we are heading toward an even deeper crisis. In a country like Mexico, which remains structurally dependent on the imperialist economy and its financial decision-making centers, it is totally irresponsible to pursue a policy of increased foreign debt. This path engenders the most pronounced inflationary pressures, directly proportional to the increase in the public debt (which now stands at 522, million) million). These two phenomena - growth of the foreign debt and galloping inflation - represent the two major threats to the immediate future of the Mexican economy. The situation is further aggravated by the frend toward stagnation of material production which has been manifested since the beginning of the 1970s. This year the slowdown in the growth of production will attain an even greater scope, because the government had not considered the risks of the immerse social and economic pressures of the magnates of industry and finance. There is no point in insisting on the fact that in all branches of the economy the skyrocketing of prices has Intensified this trend toward stagnation of production: Following inflation and the reduction of the purchasing power of the masses, this has already become clear in the chemical industry, the steel industry, the shoe industry, construction, textiles, and the automobile industry, all of which have suffered pronounced reductions in their markets.
The automobile industry has suffered a 35% sales decline, which includes the Volkswagen trust. In fact, this company has begun demanding that its Mexican subsidiary be "nationalized, " that is, that it be funded by the Mexican state. The construction industry is working at only 30% capacity. There is a serious threat
MEXICO that more than 300, 000 workers will be laid off. In the textile industry, which has been in serious crisis for the past two years, there is a similar threat of unemployment. The bureaucracy of the CTM (the Mexican trade-union federation) has proposed the introduction of a three-day workweek in this industry, with a proportional reduction in wages, in order to avoid massive layoffs!
Even in an industry like steel, which had been the showcase of the nationalist demagogy of the Echeverría government and in which production had risen from 3 million tons to 6 million tons during Echeverria's sixyear term, the atmosphere is openly somber. When the
Sicartsa industrial complex in Truchas was opened after much celebration and fanfare, the government had to admit that the second phase of construction, planned for the thind quarter of 1976, would not be initiated.
The new phase of construction requires investments of
30 million pesos, and this sum cannot be raised in the short term after the two devaluations.
In fact, what may be expected in the short term is an aggravation of social tension, especially between private capitalists and the public sector, over the
"proper" use of the public debt. The pressure of imperialism has been manifested publicly and obviously in this domain. The present astronomical level of the public debt makes illusory any hope of a new boom of the capitalist economy in Mexico through new massive support from foreign capital. The other immediate perspective is one of "overhauling" all the industrial branches, with an accentuation of monopolistic concentration in the sectors linked to the big multinational firms; the ruin of small industry; an aggravated shortage of commodities in the border regions, where the reign of the dollar is more "sovereign" than elsewhere; the worsening of inflation and a rising cost of living. All this results more or less automatically from the two devaluations. Austerity policy The crisis the Mexican economy is now going through thus threatens to be reflected in very hard blows against the wage corners and the less privileged layers of the population in general. The "austerity" measures that have been taken - wage freeze, factory shutdowns, and massive layoffs - are the logical by-products of the political victory won by the Mexican bourgeoisie through the two devaluations. All these features of economic and social evolution once again highlight the capitalist character of the Mexican economy, regardless of the weight and scope of the nationalized sector. They emphasize the necessity for the working class and the workers movement to adopt an orientation and organization of class Independence of the bourgeoisie, the state, and the nationalist government. That is why the Political Bureau of the Partido Revolucionario de los Trabajadores (PRT — Revolutionary 26
Workers party), Mexican section of the Fourth International, issued an appeal in the November 15, 1976, issue of its newspaper, Bandera Socialista, to all the workers organizations in Mexico to form a vast workers united front to defend the working class against the effects of the austerity policy. The first objective of this united front must be to defend real wages and the social gains won by the past struggles of the working class. It must also take consciousness of the fact that the bourgeoisie and the goverment will inevitably further attack the purchasing power and jobs of the workers in view of the crisis their economy is now going through. The only means by which to avoid greater poverty for the working class and to put an end once and for all to the hunger suffered by millions of Mexicans is to attack the economic system that is synonymous with inflation, permanent unemployment, and poverty for broad popular layers. Thus, the defensive struggle around purchasing power and jobs must be linked to the struggle for broader anti-Imperialist and anticapitalist objectives, such as:
*Opening the books of all the big companies so that the toiling masses can check the veracity of the arguments with which the private capitalists and the government explain and justify the price increases, layoffs, factory closures, inflation, etc.i
*Workers control of industry, large-scale commerce, and finance, in both the private sector and the nationalized sector;
*Formation of popular committees against the high cost of living and against capitalist austerity in all the popular neighborhoods and in all regions, committees that can carry out a broad united mobilization of the toiling masses, uniting the trade-union forces, the forces of the tenants associations and inhabitants of the slums, the student and peasant organizations, and in general all the exploited and oppressed layers of the population. Their main function would be to expose, denounce, and combat price increases and to organize the broodest united mobilizations and struggles in order to attain this objective. The Political Bureau of the PRT hails the formation of a united front of the Mexican Communist party, the Mexicon Workers party (PMT), and the Popular Socialist party (PSP) aimed at propaganda and agitation against the austerity measures taken by the Echeverría regime in its death agony. It declares that the PRT is prepared to participate in any common action to defend the economic interests of the Mexican workers and it proposes non-exclusive unity in action in a national campaign of workers against the high cost of living and copitalist austerity. The serious economic, social, and political crisis in Mexico at the moment when Lopez Portillo succeeds Echeverria makes the struggle for the class independence of the Mexican proletariat a question of immediate and burning importance for the Mexican workers. November 15, 1976
BRAZIL GEISEL REACHING OUT FOR VOTES ON THE NOVEMBER 15 MUNICIPAL ELECTIONS In the midst of a deepening of the economic and political crisis opened after 1974, which day by day threatens to become transformed into a social crisis of profound consequences, the country is preparing for the