Historia del Neoliberalismo en México - Ernesto Zedillo (25/07/2024)

The Presidency of Ernesto Cedillo: A Turning Point in Mexican Politics

The End of PRI Dominance

• Ernesto Cedillo's presidency marked the end of 71 years of uninterrupted rule by the Institutional Revolutionary Party (PRI) in Mexico.

• His administration began amidst a severe economic crisis, leading to significant losses for millions of Mexicans.

Economic Crisis and Neoliberal Policies

• Cedillo negotiated a substantial financial rescue with Bill Clinton, implementing strict neoliberal policies that negatively impacted workers' salaries and family purchasing power.

• He unilaterally decided to rescue commercial banks using public funds, which burdened future generations with debt.

Political Context and Challenges

• Cedillo took office without clear political direction or extensive bureaucratic experience, facing challenges from the Zapatista Army and concerns over two high-profile assassinations.

• Business leaders were apprehensive about his management style after he dismantled Salinas' finance team and did not retain key officials like Pedro Aspe.

Trade Liberalization and Economic Imbalances

• Rapid trade liberalization led to a current account deficit exceeding $27 billion by late 1994, indicating serious external debt issues.

• The peso was overvalued, causing capital flight as investors withdrew their money from Mexico.

Financial Instruments and Market Reactions

• The government allowed investors to exchange treasury certificates for dollar-denominated tesobonos, increasing attractiveness but also risk.

• This shift resulted in decreased reserves as short-term investments left the country rapidly for profits.

Devaluation Crisis

• On December 19th, Secretary Jaime Serra Puche warned that the peso would be devalued by 15%, signaling impending economic turmoil.

• Economists criticized two major errors during this period: an initial mini-devaluation followed by allowing free-floating currency which fueled speculation against the peso.

Consequences of Devaluation

• Following these decisions, the peso's value plummeted first by 15% then later by up to 50%, leading to widespread unemployment and bank failures.

• The crisis had regional repercussions known as "the tequila effect," impacting economies in Latin America such as Argentina and Brazil.

Economic Crisis and Neoliberal Policies in Mexico

The Economic Emergency and External Aid

• President Cedillo faced an economic emergency requiring sacrifices from all sectors of society. He sought external assistance, resulting in a rescue package exceeding $20 billion from the U.S. government under President Bill Clinton by February 1995.

• In response to the crisis, neoliberal measures were implemented, including increasing the VAT from 10% to 15%, raising public service rates, and limiting wage increases below inflation levels.

Social Impact of Economic Measures

• By mid-1995, interest rates surged, and annual inflation reached 55%. The social consequences were dire; impoverished households struggled to afford basic necessities.

• The financial strain led to significant losses for families—many lost savings, homes, and vehicles. Micro, small, and medium enterprises closed down, resulting in millions of job losses.

Banking Sector Collapse

• The economy contracted by 6.2% in 1995 while social inequality worsened. Cedillo acknowledged that the financial crisis severely impacted living standards.

• To prevent a banking collapse that could destabilize the entire economy, Cedillo controversially ordered the purchase of bad debts from banks using public funds without legislative approval.

Fobaproa: A Controversial Financial Decision

• In 1998, Cedillo requested Congress convert these debts into public debt despite initial rejection; eventually approved with PRI's collaboration with PAN.

• The government ended up purchasing bank debts amounting to over 52 billion pesos through promissory notes that would not be recoverable.

Long-term Consequences of Neoliberal Policies

• This banking rescue increased national public debt fourfold; private sector liabilities became a burden on all Mexicans. By 2022, this inherited debt reached nearly 930 billion pesos.

• As reported by La Jornada in September 2023, interest payments on this long-standing debt exceeded over 1 trillion pesos adjusted for inflation since the mid-'90s.

Expansion of Neoliberalism Under Cedillo

• Despite economic turmoil marked by Zapatista uprisings and crises during '94-'95, neoliberal policies continued unabated throughout Cedillo's administration.

• Key privatizations included satellite communications and railways while allowing private investment in natural gas and petrochemicals as part of commitments to international financial institutions.

Electoral Reforms for Democratic Transition

• In November 1996, reforms aimed at resolving electoral conflicts were passed with support across major political parties (PRI, PAN, PRD).

• These reforms enhanced electoral autonomy and funding for political parties while enabling direct elections for local leaders—seen as significant progress towards democracy.

Political Turmoil and Economic Crisis in Mexico

The Adverse Results of Elections

• The electoral outcomes were unfavorable for the Federal Government and the PRI, losing absolute majority in the Chamber of Deputies and qualified majority in the Senate.

• Cedillo faced significant legislative opposition during his presidency, particularly from Cárdenas' government.

Economic Challenges Under Cedillo

• In 1995, Mexico experienced its worst recession in fifty years, with over a million jobs lost and around 10,000 businesses failing.

• Salinas blamed Cedillo for economic mismanagement, labeling it as "the December error," while Cedillo launched a campaign against Salinas’ corruption.

Zapatista Conflict and Social Unrest

• Cedillo struggled to resolve conflicts with the Zapatista Army of National Liberation (EZLN), initially attempting to discredit leaders before negotiating indigenous rights.

• The massacre of 45 indigenous people by masked gunmen highlighted tensions; the EZLN accused both state and federal governments of complicity.

Social Programs Amidst Poverty

• To address social unrest, Cedillo initiated the Progresa program aimed at improving education, health, and nutrition for marginalized families.

• Despite initial progress, poverty levels remained unchanged by the end of his term.

Student Protests and Political Tensions

• A prolonged student strike at UNAM protested increased enrollment fees; police intervention led to mass arrests violating university autonomy.

• Cedillo attempted but failed to mediate post-electoral conflicts in Tabasco involving irregularities that sparked massive protests led by López Obrador.

Shift in Political Landscape

• The presidential succession process revealed a rift between Cedillo and PRI as Vicente Fox's popularity surged over Lavastida’s campaign.

• This marked an end to PRI's dominance since 1929, signaling a shift towards political alternation.

Economic Legacy Post-Cedillo

• After leaving office, Cedillo worked with corporations benefiting from privatizations he endorsed; however, his administration left a negative legacy.

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