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NAFTA REVISITED

The Miami Herald
November 10, 2003

By Jane Bussey, Herald Staff

REYNOSA, MEXICO

TEN YEARS AFTER THE DEBATE OVER NAFTA, BOTH SIDES ARE STILL DIVIDED OVER THE TRADE AGREEMENT.

Blue-smocked, blue-jeaned and youthful, maquiladora assembly plant workers stream across busy Porfirio Díaz Boulevard, nine hours of labor - the fruits of NAFTA dreams - behind them and the destiny of Mexico in their future.

The debate in Mexico and the United States over the North American Free Trade Agreement centered on this generation: Young people, given productive lives, would be able to raise their standard of living and buy American products - spurring U.S. exports and jobs, suppressing illegal Mexican immigration and cementing a win-win-win scenario among Mexico, the United States and Canada.

ARGUMENT GOES ON

Ten years after the fierce U.S. debate over NAFTA, The Herald returned to the same U.S.-Mexican border towns of McAllen-Reynosa visited in late 1993 to search for workers in the assembly plants, known as maquiladoras, and to explore how their lives - and Mexico - had changed since NAFTA went into effect Jan. 1, 1994.

Even in this laboratory for regional integration, critics and supporters of the trade treaty remain as divided today as they were 10 years ago.

``It has helped Mexico,'' said 19-year-old Cesar Alejandro Mendoza, who each day stitches Victoria's Secret bras by the dozens at Rey-Mex Bra Production in one of Reynosa's oldest industrial parks.

Litd Monreal, also 19 and fresh from his day at the nearby Korean-owned LG Electronics plant - once owned by the American company Zenith Electronics - has a different assessment. ``There have been many changes in the Mexican economy, but the people have stayed the same; we haven't seen ! any improvement,'' Monreal said.

THE RIO GRANDE

The Rio Grande divides more than just two countries; the border still sharply marks the gap in standards of living between the United States and Mexico.

The worst predictions about NAFTA's effects have not come to pass. The ``giant sucking sound'' of jobs going south, predicted by NAFTA opponent and former presidential contender Ross Perot, was more moderate than the number of American jobs that have gone east to China since 2000. Globalization made some sectors of the Mexican economy more efficient and established production-sharing among the NAFTA countries.

But as NAFTA marks its 10th birthday, results show the trade agreement was no panacea for Mexico's problems, nor was it a magic bullet for U.S. exports or impoverished U.S. border towns like McAllen.

``NAFTA for Mexico has been a success in terms of increasing trade and foreign investment until about 2000,'' said Kevin P. Gallagher, a research associate at Tufts University's Glo! bal Development and Environment Institute.

BENEFITS OF TRADE

But the benefits of trade - the billions in foreign investment - were to be used to finance development, according to stated goals in Mexico's National Development Plan. ``They missed the opportunity to take their foreign investment and build domestic demand and the economy. Now that their investment has dried up, there are no legs for growth,'' Gallagher said.

Part of the disappointment with NAFTA may lie in what were perhaps unrealistic expectations. Those high hopes began with former Mexican President Carlos Salinas.

``We want to be part of the First World,'' Salinas said, adding that NAFTA would allow Mexico to export goods and not people to the United States.

EMBRACED VISION

Workers in Reynosa embraced that vision in 1993. One Reynosa resident even predicted that within 10 years, Mexican salaries would be as high as those in the United States.

But real wages in Mexico are lower today than when NAFTA was approved and have not kept pace with productivity gains, a study by the Carnegie Endowment for International Peace found. The rural sector has lost some 1.3 million jobs, causing farm families to depend more heavily on the $12 billion in remittances sent annually from the United States. Neither poverty nor the flow of undocumented workers has abated.

WEAK GROWTH

Mexico's weak economic growth can't absorb the one million young people who enter the workforce every year, so the flow of undocumented workers to the United States has ballooned from an estimated 200,000 a year in 1994 to more than 300,000 a year today, according to Mexico's National Institute of Statistics.

Government statistics show th! at while extreme poverty has fallen sharply, the number of people classified as poor or extremely poor has risen from 62 million to 69 million, out of a population of more than 100 million.

HOPES AND DREAMS

Mexico's high hopes were matched by American dreams. But even today, after innumerable studies, it's still debatable what U.S. workers lost or gained from NAFTA.

Former President Bill Clinton predicted that NAFTA would create 200,000 jobs in its first two years. The Economic Policy Institute estimated 766,000 jobs had been lost in the first seven years of NAFTA. The Office of the U.S. Trade Representative countered with claims that 914,000 jobs had been gained. Jobs unquestionably went to Mexico in the 1990s, but this exodus was masked by a booming domestic economy that sent U.S. unemployment to record lows.

Despite the different numbers, the U.S. government has certified under the Trade Adjustment Assistance program that as of September of this year 525,094 workers have lost their jobs because of NAFTA.

For both countries, the hand dealt by NAFTA was forever altered by the emergence of a wild card: China as a rising global economic power.

Since 2000, factories in Chinese export zones have replaced towns like Reynosa as the favorite factory floor of U.S. multinationals. More than 300,000 Mexic! an maquiladora workers have lost their jobs since 2000, some because of the U.S. economic downturn, some because of an outflow to Central America but more because of the exodus to China.

Mike Allen, president and chief executive of the McAllen Economic Development Corp. and Foreign Trade Zone, said Reynosa has competed well with China compared to other border towns that have lost scores of assembly plants.

CHINESE COSTS

Prospective companies arrive with a list of Chinese costs and tell Mexico, ``you match this,'' he said.

``There is no social conscience of doing business,'' said Allen, who once was a Catholic priest in Mexico. ``It's the cost of doing business.''

For Mexico, the migration to China costs more than jobs. Of equal concern is the drop in foreign direct investment that was to finance economic advancement.

``We are now witnessing the beginning of the end of the preferential agreement,'' said Mexico's former deputy trade minister, Luis de la Calle, who ran Mexico's NAFTA office in Washington. ``We reached the end of the benefits of NAFTA in 2003.''

Mexico failed to use NAFTA's initial flood of capital to invest in education and urgently needed infrastructure projects such as power plants, roads and water treatment facilities, said Tufts' Gallagher.

This lack of infrastructure is glaring along the border. While Reynosa's ! skies are relatively unpolluted compared to other border cities, and manicured new industrial parks house modern facilities, the city's water treatment plants have not kept pace with the growth in population. Snaking to the border near Reynosa's international bridge is a canal choked with lime-green slime.

Going to work can still mean a 90-minute bus ride down dusty, unpaved roads.

A recent report by the Fitch credit rating agency, Boom Times at the Río Grande: U.S.-Mexico Border Region Expands, warned that lagging infrastructure was causing Mexico to become uncompetitive.

``The long delay or the postponement of investing in all the infrastructure is really putting Mexico at a huge disadvantage compared to China,'' said Gersan Zurita, managing director of international public finance at Fitch. ``It is limiting the potential growth of the country.''

NO SWEATSHOPS

With their blue jeans and even an occasional cell phone, maquiladora workers are emblematic of globalization. Some are refugees from the ravaged rural economy, hard hit by cheap U.S. corn imports. The plants pay more than many other jobs in Reynosa. And despite numerous complaints about low wages and the lack of unions, these are no sweatshops as described in other countries.

In numerous interviews with maquiladora workers, no one blames NAFTA's shortfalls on the United States. If anything, they blame their own government. Nor is the treaty universally unpopular.

``It has helped; you can see changes,'' said Aristeo Hernández, who said he had seen improvements in his own poor neighborhood: water, electricity and sidewalks.

Hernández also gives a high rating to his job at the General Electric small engine plant, where he earns about $90 a week, compared to the average $65 workers say they earn at nearby LG Electronics.
A decade ago, Paulina Hernández described to The Herald her appearance at the Zenith shareholders meeting to complain about conditions at the company's Reynosa plant. ``Our treatment improved,'' she said. ``They gave us orders in a nice way.''

Life remains a struggle, however, said Hernández. Today she fights a personal battle with tuberculosis, while struggling for labor rights as part of the Coalition for Justice in Maquiladoras.

``Our salaries are the same,'' said Hernández. ``In some ways we are worse off; there is a lot of migration to the United States. A lot of people come here from Veracruz but many people from here go to the United States.''

María Elena García also works to support worker rights in the Comité Fronterizo de Obreras, the Women Workers Border Committee.

The 32-year-old former maquiladora worker dismisses many of the NAFTA promises as ``illusions,'' but Garcí! a is fighting for her own dream of a more prosperous future for Mexico's next generation:

``I am working so that my daughter does not have to live the maquiladora life.''

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