NAFTA, Free Trade and Mexico’s Drug War

SHARETweet about this on TwitterShare on FacebookShare on LinkedInShare on Google+

Without providing the slightest evidence, the habitual enemies of free trade have launched a new campaign of lies, insisting that the North American Free Trade Agreement (NAFTA) and “neoliberal” policies in general — which according to them the United States forced Mexico to adopt — are the causes of drug violence.

I read an excerpt from Carmen Boullosa and Mike Wallace’s soon-to-be published book “A Narco History: How the United States and Mexico created the ‘Mexican war against drugs.'” The book’s thesis is that NAFTA opened the US’s door to drugs from Mexico, mixing them with legal trade, which is false.

The authors have little sense of the economic dimensions of NAFTA, but they repeat all the prejudices that critics of free trade have attributed to the trade agreement, and they employ all the usual insults that the dogmatic and misinformed left can muster to attack the free market economic model.

The book tells the history of how various US presidents intensified their war on drugs, and how Ronald Reagan’s success in shuttering cocaine route from Colombia through the Caribbean and Florida forced Colombian cartels to use routes through Mexico for their drug shipments.

The excerpt describes how Mexican cartels developed, and how by 1984 they controlled 90 percent of the cocaine coming to the US through their country, generating income estimated at $5 billion. Like all figures linked to narcotics, these numbers are more guesses than statistics.

The authors have little sense of the economic dimensions of NAFTA, but they repeat all the prejudices that critics of free trade have attributed to the trade agreement…

The authors blame Reagan for adopting the infamous process of “certification” of countries, based on their cooperation with the US in the war on drugs, when it was really Congress that established these requirements on the Executive. Thus, Mexico had to be “certified” in order to access essential credit from the International Monetary Fund (IMF) and the World Bank (WB), thus avoiding the US veto.

It is worth remembering that in 1982, Mexico declared bankruptcy thanks to the populist excesses of Luis Echeverria (1970-76) and Jose Lopez Portillo (1976-82). The book ignores this, attributing all blame on the Fed for increasing interest rates to fight high inflation, which indeed contributed to Mexico’s economic debacle at the time, but was not the primary cause.

The text also asserts that the IMF and WB forced a structural adjustment program on Mexico: “The creditors demanded privatization of public services, cuts in government social programs, a wider opening to foreign investment, and a ruthless concentration on paying back loans and interest.”

SEE ALSO: Mexico News and Profiles

It’s clear the authors of such absurdities have not the slightest understanding that when faced with a public deficit of 20 percent of GDP — stemming from losses by inept and corrupt state firms — Mexico’s only option was to sell, close or liquidate anything that was not providing essential services but simply draining the state’s coffers. Social programs were not cut; on the contrary, they became stronger, thanks to the resources that were saved.

As for paying or not paying the external debt, at that time there were two diametrically opposite cases: Peru, where President Alan Garcia, in his first term, refused to pay the IMF, and Mexico, which renegotiated its debt five times between 1983 and 1989. The results were much worse for Peru, in terms of protracted economic stagnation and inflation.

Clearly, “the poet” and the “radical historian” — as their biographies characterize Boullosa and Wallace — don’t handle numbers well, as none of the numbers cited are remotely true, like the supposed loss of 800,000 jobs in Mexico in the 1980s, when in reality — and despite the crisis — more than 2 million were created.

When it comes to the migration of rural workers to cities and the US, the authors don’t understand that 17 percent of Mexico’s active work force are still involved in field work (in the US, it’s less than 2 percent), producing less than 4 percent of Mexico’s GDP. This guarantees miserable conditions for these workers, meaning not only was it essential for this migration to take place, but it is also essential for there to be more migration in the future. 

After Mexico dismantled — unfortunately, only partially — its swam of subsidies and “supports” for farmers, finally allowing them to own their land — — instead of the dismally inefficient “ejido” system of communal farms –production in the countryside has risen substantially. So much more is produced and exported now than in the era of statism, protectionism, and inefficiency for which the authors yearn. 

This is just a small sample of the large collection of absurdities and lies that socialists repeat like mantras in order to criticize free market economies…

The book also repeats the fallacy that Mexican corn farmers were devastated by imported US grain. That is completely false as imported corn is yellow and used exclusively to feed pigs, an industry which has flourished spectacularly. Nowadays there are more farmers producing white corn for human consumption than before the free trade agreement.

The authors also claim unions were mistreated, which is false, and that President Salinas “ordered a series of attacks on more militant entities,” which is probably a reference to the arrest of Joaquin Hernandez (alias “La Quina”), the corrupt leader of the oil workers union, who indulged in all kinds of crimes and corruption, something which has been well documented. Unfortunately Mexico’s labor laws were not made more flexible until last year, and even then only partially. 

The true causes of drug violence in Mexico have nothing to do with economic and trade policies that significantly raised the economy’s competitiveness. The violence is a direct result of drug prohibition, and the political regimes between 2000 to 2012, which dismantled a very effective national security apparatus which kept the situation under control.

This is just a small sample of the large collection of absurdities and lies that socialists repeat like mantras in order to criticize free market economies, and which are used to gloss up Boullosa’s and Wallace’s text.

*Manuel Suarez is a professor at the School of International Service at American University in Washington DC. He has extensive experience in the Mexican government where he worked as the chief of staff for the Governor of the Bank of Mexico and as a negotiator for the North American Free Trade Agreement (NAFTA) and the Merida Initiative.

SHARETweet about this on TwitterShare on FacebookShare on LinkedInShare on Google+