Reportaje 14 | Zedillo: Crisis, represión y neoliberalismo

Economic Crisis in Mexico: A Historical Overview

The Context of Economic Challenges

• The current generation in Mexico faces low salaries and no retirement pensions, contrasting with a past where economic conditions were different.

• This situation is attributed to decades of neoliberal economic policies that favored private enterprises over state institutions, leading to significant wealth disparities.

Key Events Leading to the 1994 Crisis

• The economic crisis of 1994 was exacerbated during Ernesto Zedillo's presidency, marking the end of uninterrupted PRI dominance in Mexican politics. Zedillo took office on December 1, 1994, inheriting a country with severe fiscal deficits and unregulated banking practices.

• High-profile political events such as the assassination of Luis Donaldo Colosio and the Zapatista uprising created investor panic, further destabilizing the economy.

The Impact of Financial Decisions

• Investors holding Teso Bonos faced losses due to government decisions that guaranteed debt payments in dollars rather than pesos, leading to diminished international reserves for Mexico. This uncertainty prompted discussions about devaluing the peso.

• Zedillo's administration made critical errors by prioritizing business interests over national stability, which led to an explosive devaluation of the peso and widespread financial speculation among investors.

Consequences of Devaluation

• The "December Error" resulted in a drastic devaluation from 3.4 pesos per dollar to 9.4 pesos within Zedillo's term, significantly increasing poverty levels as debts became unmanageable for many citizens.

• Many Mexicans lost their savings and properties due to this economic collapse; businesses failed en masse resulting in massive job losses across various sectors. To mitigate these effects, the government initiated an emergency economic program funded by substantial loans from foreign entities like the U.S., totaling over $50 billion.

Political Reforms Amidst Crisis

• In response to the turmoil following currency devaluation, Zedillo proposed reducing Supreme Court ministers from 26 to 11 shortly after taking office—an initiative criticized as an attempt to reshape judicial power favorably towards his administration.

• Critics argued that this move aimed at creating a court aligned with his interests rather than improving justice delivery; reforms passed unanimously but raised concerns about constitutional violations and judicial independence post-reform implementation on December 31, 1994.

Impact of Economic Policies in Mexico

The Formation of a New Judicial System

• On January 1, 1995, President Ernesto Zedillo appointed new ministers to the Supreme Court after a 52-day process, aiming to establish a court aligned with his administration's interests.

Economic Crisis Triggered by Currency Devaluation

• Following the peso devaluation, Mexico's economy contracted by 6.2%, leading to skyrocketing interest rates and an increase in bank defaults by 150% within a year, resulting in a banking crisis.

Government Response to Banking Failures

• Zedillo recognized that failing to rescue the banks could lead to widespread economic repercussions across Latin America, reminiscent of the "Tequila Effect," which threatened international capital flows.

Mismanagement and Corruption in Banking Sector

• The privatization of banks led to inexperienced entrepreneurs managing them for profit rather than focusing on productive credit. This resulted in unsustainable lending practices that exacerbated financial instability.

Public Funding for Private Debt Relief

• To prevent further financial collapse, Zedillo initiated the purchase of bank debts through a fund called FOA-PROA. However, this primarily benefited wealthy elites who had defaulted on loans while burdening taxpayers with repayment obligations.

Long-term Consequences of Debt Management

• Two decades later, Mexico continues repaying Fobaproa debt amounting to over 552 billion pesos. Only a small number of individuals profited from this arrangement while ordinary citizens bore the financial burden.

Legislative Complicity and Accountability Issues

• The legislative approval from PRI and PAN facilitated corruption as private debts were transferred to public responsibility without accountability for those who issued risky loans without guarantees.

Privatization and Its Political Ramifications

• With impunity prevailing, no one faced consequences for reckless lending practices. Zedillo pushed forward privatization plans targeting national assets like railroads while manipulating constitutional reforms for private investment benefits.

Railways Privatization: A Neoliberal Shift

• Zedillo’s administration sold Mexican railroads under neoliberal policies despite their historical significance. This decision was justified by claiming financial limitations necessitated private sector involvement for efficiency improvements.

Concentration of Railway Ownership

• By the late '90s, two major companies controlled 95% of Mexico's railway system due to privatization efforts initiated during Zedillo’s presidency. This shift prioritized freight transport over passenger services significantly impacting public transportation access.

Aftermath: Violence Against Protesters

• Following his term, Zedillo joined Union Pacific's board after privatizing Ferromex. In June 1995, police violence against protesting farmers resulted in multiple deaths and injuries during an operation linked to state officials' orders.

State Violence and Impunity in Mexico

Excessive State Force

• The Mexican state exhibits excessive force, often paramilitarized, to violently suppress organized groups with various demands. Despite severe human rights violations, those responsible remain unpunished, leading to ongoing impunity.

Impunity as a National Crisis

• A significant issue for the country is the pervasive impunity that allows individuals who violate laws—such as thieves and murderers—to escape justice. This enduring lack of accountability poses a grave threat to Mexico's democratic and civil progress.

Historical Context of Repression

• The repression of civil organizations continued under President Cedillo's administration, notably during the Acteal massacre in Chiapas in 1997. Political conflicts arose amid violent repression against communities sympathetic to the Zapatista Army of National Liberation (EZLN). Disappearances and murders became commonplace during this period.

Paramilitary Actions Against Indigenous Communities

• The government employed paramilitary forces rather than uniformed military personnel to carry out acts of violence against communities, creating divisions among them. Notably, on December 22nd, a paramilitary group attacked indigenous organization Las Avejas using military-grade weapons.

The Acteal Massacre

• During an eight-hour massacre at Acteal, 45 individuals were killed—including pregnant women and children—while praying in a chapel. This event exemplifies the brutal tactics used by state-backed paramilitaries against vulnerable populations.

Government Accountability and Recognition

Cedillo’s Criminal Legacy

• President Cedillo was directly implicated in pursuing these violent actions against indigenous communities; his administration faced no repercussions for its role in this senseless war against civilians. In 2020, however, the Mexican state acknowledged its responsibility for these crimes under President Andrés Manuel López Obrador's leadership and offered reparations to victims' families.

Economic Policies Under Cedillo

Pension System Privatization

• In 1997, Cedillo initiated another wave of privatization by reforming the pension system under claims that it was financially unsustainable due to debts incurred by the Mexican Social Security Institute (IMSS). This led to significant changes affecting workers' retirement benefits.

Impact on Workers’ Savings

• The privatization effort shifted workers' savings from public management into private banks under misleading promises of better individual accounts while ultimately benefiting private entities at workers' expense through speculative investments rather than enhancing their pensions.

Consequences of Economic Reforms

Deterioration of Pension Rights

• As a result of these reforms, not only did pensions move away from state control but also access requirements increased significantly—from 500 weeks to 800 weeks—making it harder for workers to retire comfortably amidst growing corporate profits from pension funds managed by private firms.

Political Shifts Post-Cedillo

Transitioning Power Dynamics

• The elections of 2000 marked a pivotal shift with Vicente Fox winning presidency as part of PAN after years dominated by PRI rule under Cedillo’s administration; this change reflected public discontent with previous governance characterized by crises and perceived subservience to U.S interests rather than prioritizing national needs.