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After the TLC

Economic statistics aren't very sexy. Often, they are misleading. As my daddy used to say, figures don't lie, but liars figure. Voodoo economics, now forever identified with George Bush, is an old and well established religion, practiced by self-serving opportunists everywhere. Like a lot of the defective and dangerous products shipped by U.S.-based corporations to unsuspecting Latin American consumers, statistics have a short shelf life, unspecified amounts of hidden ingredients, and not much nutrition. Nonetheless, if taken in moderate amounts, with plenty of skepticism, they can reveal the trends.

For example, ponder the figures released by the Mexican government on the first day of October, 1995, which revealed that during the first eight months of 1995, over 750,000 jobs were lost in the Mexican industrial sector. That's about 130 jobs per day. And remember, these are government figures; some economists say that the news could easily be twice as bad.

According to INEGI, the official government office of statistical research and census taking, only about 1/3 of the working population made a living wage at a normal job in the first half of 1995. About the same number were employed in the "informal" sector (street vendors, black marketeers, casual labor, etc.). Of the other 1/3, about half were employed but not earning a living wage, and the other half were unable to find work.

The head of the Mexican Chamber of Commerce spoke to a large and important gathering of economists, government officials, academics and bankers on the same day, and said "the lifeblood of Mexican industry is in a state of imminent collapse". The way to resolve the problem, he said, is to give more tax breaks to investors, reduce the taxes to manufacturers, and encourage more export-oriented industries.

The problems with export-oriented industries, as the folks on both sides of the border are discovering, while much more complicated than I can explain, are basically twofold: the cheaper your money (in terms of Dollars), the more you can export; and an industrial base that concentrates on exports may be unable to build a viable home-consumption industry to produce those items which your people can no longer afford to import.

For instance, take the Goodyear plant outside Mexico City. A grimy, dismal example of industrial blight, operating for over 30 years, this plant employed a substantial work force, making tires for the domestic market. After NAFTA (the Mexicans call it the TLC -- no irony intended), the subsequent devaluation of the peso, and the economic troubles which followed, the projections were that sales would fall by 1/3. "Fortunately", the problem came built in with its own solution: export!

Manufactured for half as many dollars as before devaluation, Mexican tires became easily sellable in the U.S. Production increased to meet the new demand, profits for Goodyear soared -- and the work force has not been expanded by one employee. Domestic sales have not gone up, and sales of imported products have continued to slump. Imports, all paid for in Dollars, are twice as expensive. Few can afford them. This makes the Balance of Payments look good (Mexico has moved from a net importer to a net exporter), and that is sure to please the International Monetary Fund, the Chemical Bank, and other financial institutions to whom Mexico has mortgaged her financial soul.

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