Salinas's Roller-Coaster Ride
For Mexico's president, the perilous track to a North American free trade zone has its moments
VISIBLE from Los Pinos (the Mexican White House) is an aging wooden roller coaster called Montana Rusa. The ride is an apt metaphor for the vicissitudes of the North American Free Trade Agreement (NAFTA).
Last Thursday, the NAFTA coaster screeched to a halt with an agreement on labor and environment side accords. Still flush from the thrill, President Carlos Salinas de Gortari took a few moments to bask - on national television - over "a new and important step forward in the construction of the largest free trade zone in the world."
The Mexican stock market echoed his sentiments with a 3.69 percent fiesta - the biggest one-day rise this year.
But NAFTA is an emotional wringer for this administration. It took a flurry of long-distance calls to salvage the deal on Aug. 12, leaving most Mexican newspapers on Aug. 13 with headlines falsely proclaiming the side-agreement talks a failure.
In the end, Mexico caved in on allowing trade sanctions, while Canada cut a separate deal. If the trilateral commission set up by the accords deems a nation has violated its own minimum wages, child labor, workplace health and safety, or environment laws, a fine of up to $20 million can be levied on the offending government.
If the United States or Mexican government fails to pay, trade tariffs and quotas automatically revert to pre-NAFTA levels. If Canada fails to comply, the panel's recommendations are enforced through the Federal Court of Canada, which must issue an order requiring compliance and payment of the fine.
At home, President Salinas claims the agreement protects Mexican sovereignty. Opposition parties doubt it. They want to see the fine print of the deal, which will not be officially completed until September.
Salinas also tossed in an apparent last-minute deal sweetener. He promised that Mexican minimum wages (now about $4.65 per day) would increase in tandem with Mexican productivity gains.
This is aimed at US critics who see NAFTA as increasing the number of US companies drawn to Mexico by low wages. What the reform will mean in practice is not clear. Most salary changes are not tied to minimum-wage hikes. For example, if a worker earns more than the minimum wage, he may not receive an increase in his salary when the minimum wage is increased.
The sweetener may also be a political boost for Salinas's own labor constituents, who have been chaffing under his belt-tightening reforms. A just-released study by the Mexican Workers Confederation, which backs NAFTA, shows the minimum wage has fallen 64 percent in real terms over the last 15 years. The study also shows that 29 percent of the Mexican work force earns the minimum wage.
For Salinas, NAFTA is seen as attracting foreign investment and cementing in place the open-market economic reforms of the last two administrations. But like President Clinton, Salinas may find it a challenge selling the public on the benefits of free trade in next year's presidential elections. Mexico's textile, leather, and toy industries have been decimated by import competition. The state-run oil company has laid off 120,000 workers during the Salinas administration. Interest rates are down to just u nder 10 percent, but the Mexican economy has slowed to a crawl.
Nonetheless, NAFTA's approval is not in doubt in the Mexican Congress. Salinas's party controls it. But side accords or no, where NAFTA will go in the US Congress remains uncertain. Those in Los Pinos do not need a presidential directive to "buckle up." They know the NAFTA roller-coaster ride isn't over yet.