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Posted on
02/22/2007 12:01 AM EST
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Free trade, globalization, political unrest
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Richard N. Baldwin T.
A lot has been written about a “march to the left” in Latin America. And in reality, while this is true, there has been a tilt in this direction for quite some time. If you remember, there was an active communist party in México until it morphed into the Democratic Revolution Party (PRD) in the last half-century. In most cases, the left movement has been a reaction to many of the Latin American governments that have been not only corrupt and ineffective but also supportive of an elite and very rich ruling class. A situation that leaves a vast majority of the populations in dire poverty and little recourse to change things remains.
Then, in the last fifteen years or so, the promise of betterment through free trade gave expectations to Latin Americans of better things ahead. When the North American Freed Trade Association (NAFTA) started up between Canada and the US, México asked in. And when that happened, many Mexicans thought of NAFTA as a big magic wand that would suddenly make life better. But the tooth fairy never came for many.
Shortly after México’s inclusion into NAFTA, we had the “financial crisis” of 1994. After destroying most of the emerging middle class, the effect still lingers in the lower class. In fact, the Mexican worker has still to recover what he lost in real wages in 1994. And many that lost jobs with 10,000 companies going bust a year, found that crime paid. And, unfortunately that is still the case for those . . . especially with the huge dope business now infesting México.
It is “politically correct” to blame NAFTA and free trade for so many of our problems. And this is general in most of Latin America for the under class. But what is not realized by most is what free trade is all about.
The idea of free trade is to increase the flow of goods across borders, which also increases the flow of money. So far, so good. But free trade agreements have nothing to do about the distribution of that increased cash flow. These are internal matters, not of free trade. México is actually a world leader in the number of free trade agreements that reach all over the globe. But the benefit is lost on the Mexican poverty class (about 40%). That number remains stable. On the other hand, the upper 10% of the Mexican population is doing very well. The spread between the rich and poor is and has been spreading rapidly here and in Latin America.
Another effect of free trade is to expose formally protected but inefficient businesses to worldwide competition. In the long run, it is good, although in the short run, those businesses that can’t learn and compete will fail. But in the end, you end up with a more competitive country.
But of course, for “free trace” to work, it must be in a free market. Not a market dominated by monopolies, as the market is now in México.
While México looks south to countries like Venezuela and Bolivia that have gone left in the extreme and says that that won’t happen here, think again. The present administration of Calderón is in power only by less than a 1% margin from the last presidential election. It was, in reality a right verses left contest.
México can’t depend on the exportation of their poverty class to the North forever. And that idea isn’t new either. It was Salinas, back in the 80s that proclaimed that México should export goods, not Mexicans. But since that time, the people export business has only increased.
Calderón, to his credit, has started addressing some of the basic problems in México. He has been taking pages out of the platform of the PRD (which is now the second largest party in Congress) to address social issues. He is also taking a much-needed strong stance against crime to try and improve security for the people. But he should remember that for those criminals that he might put out of business, he would need to find real meaningful employment rather than their continuing to work in the crime sector.
A revised tax code that really works and encourages investment to make businesses more efficient while ensuring a fair and efficient collection of taxes (México only collects 11% of the GDP in taxes) would help.
It will be interesting to see if Calderón will be willing to break up the giant monopolies in México (proposed by the PRD) that makes many of the essentials necessary for life here cost more than double of the costs in the US.
The time to do these necessary things in México is not unlimited. México has only to look south to see why.
Richard N. Baldwin T., a HispanicVista.com contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at: R1041643422@aol.com.
© 2007 HispanicVista.com, Inc.
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