RROJAS DATABANK Vol. 1, No.4/ 1995
( This set of articles on transnational corporations is
background reading for Dr. Robinson Rojas' teaching
on development )
TRANSNATIONAL CORPORATIONS: THE RECORD
1.- Stop Maquiladorization
2.- GUATEMALA'S DEADLY HARVEST
By Florence Gardner
3.- BANANA DEVELOPMENT IN COSTA RICA
By Christopher van Arsdale
4.- OF OIL AND EXPLOITATION IN ECUADOR
By Anita Parlow
5.- TRADE, DEBT AND PLUNDER IN MEXICO
An Interview with Cuauhtemoc Cardenas
6.- BRAZIL: A TIME FOR REVOLUTION
An Interview with Luiz Ignacio "Lula" da Silva
7.- MEXICAN LABOR: THE OLD, THE NEW AND THE DEMOCRATIC
By Matt Witt
8.- LATIN CAPITAL GOES NORTH
By Holley Knaus
9.- CORPORATE PROFILE BRAZIL'S MEDIA MONOPOLY
By Bill Hinchberger
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
1.- STOP MAQUILADORIZATION
George Bush's proposal for a United States-Mexico-Canada free trade
agreement (FTA) is an attempt to strengthen the power of multinational
corporations at the expense of workers and the environment in all three
Though the details are still being negotiated, an FTA would have high costs
for the United States and Canada. U.S. and Canadian corporations will gain
enormous leverage with the threat to shift production from their home
countries to Mexico unless wages and workplace safety and environmental
standards are lowered. For U.S. and Canadian workers, the demands for
concessions will be virtually endless, because they will never be able to
lower their salaries to the level of Mexican laborers.
The effects of an FTA on Mexico are foreshadowed by that country's
maquiladora program, which allows foreign companies to set up assembly and
other plants that produce for export, mainly to the United States. With all
barriers to trade between Mexico and its northern neighbors eliminated,
additional U.S. and Canadian firms are likely to open factories in Mexico
which will manufacture goods for Northern markets.
The maquila program began in the mid-1960s, but it expanded greatly in the
1980s, when repeated devaluations of the peso lowered Mexican wage rates.
While the maquiladoras have generated some jobs in Mexico's stagnant
economy, they have also contributed a host of social ills.
Almost 500,000 workers are employed in maquilas, most of them young women.
The normal wages at maquila plants are about $23 a week; Mexican workers
are lucky to earn in a day what U.S. workers make in an hour. Ten percent
or fewer of the workers are unionized, and many of the unions are company
Working conditions in the maquiladoras are deplorable. The National Safe
Workplace Institute (NSWI) reports that "most experts are in agreement that
maquila workers suffer much higher levels of injury than U.S. workers." The
NSWI finds that "the vast majority of workers in maquila operations have
repetitive- motion or other injuries" and that occupationally related
diseases are "especially" evident in the maquila industry. Many
occupational diseases have latency periods of four to forty years, but one
sign of the extent of latent disease is that "an alarming number of
mentally retarded infants have been born to mothers who worked in maquila
plants during pregnancies."
Most of the approximately 1,800 maquiladora plants line the United
States-Mexico border, where transportation costs to the U.S. market and
from U.S. suppliers are low. This concentration of maquilas has caused the
northern Mexico region to suffer severe environmental degradation,
resulting largely from the improper disposal of hazardous wastes. Mexican
regulations require plants producing for export to the United States to
ship the hazardous waste generated by their operations back to the United
States, but these laws are almost wholly unenforced. The Border Ecology
Project, an Arizona-based environmental group, reports that the
maquiladoras are unable to account for 95 percent of the waste they
generated between 1969 and 1989.
By further opening the Mexican economy, an FTA would spur the
"maquiladorization" of the entire country. The FTA would lock Mexico into
the maquila model of development, making it extremely difficult for future
Mexican governments to pursue alternative strategies. Foreign firms are
attracted to Mexico because of its low wages and weak health and
environmental standards, and they will leave if those conditions change.
Mexican manufacturers also pay low wages, endanger their workers and
pollute, and they are often more socially irresponsible than the foreign
maquiladora operators. But the issue for Mexico is what sort of development
path it is going to pursue. Mexican firms could play an important role in
a sustainable development plan, but maquiladora plants offer few positive
options. Mexican firms are subject to greater government control and
regulation, and those that produce for domestic consumption stand to
benefit from an overall increase in the wage structure, because it will
increase internal demand.
As a letter to the president of the Mexican legislature from a group of
prominent Mexicans, including author Carlos Fuentes and political scientist
Jorge Castaneda, says, "Low Mexican wages cannot be a permanent feature of
North American economic relationships. That comparative advantage is too
costly for everyone involved: too humiliating and unproductive for Mexican
dignity and economic development; too costly in jobs and welfare of
American and Canadian workers."
For the benefit of people and the environment in Mexico, the United States
and Canada, the proposed FTA should be rejected.
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
2.- GUATEMALA'S DEADLY HARVEST
By Florence Gardner
Florence Gardner was a staff member of the recently closed Environmental
Project on Central America and is now a graduate student at the University
of California, Berkeley. Those interviewed for this article requested
that their names not be used for fear of reprisal.
GUATEMALA CITY--"When I was a kid," says a man far up the Usumacinta River
in Guatemala's Peten rainforest, "the hunting and fishing were very good.
It was simple to keep food on your table; there were wild pigs, birds, but
now everything is gone." The forest is being cleared, says the man, by
"people [who] can't stay where they are and need to come to the Peten to
survive.... In the highlands, the large landowners have grabbed all the
land, and the campesinos [peasants] have no land, no salaries and no way
to speak out for the changes they want."
Guatemala provides a stark lesson on the environmental impacts of poverty,
and of a "development" process which has alienated people from the
resources which sustain them. An estimated 65 percent of Guatemala's
original forests have been destroyed; ecologists estimate that Guatemala's
forest cover could disappear in 25 to 40 years. Huge farms and plantations
producing for export employ pesticide-intensive techniques which poison
field workers and contaminate drinking water. Peasants who once grew crops
for domestic consumption are displaced by large producers.
"The people are like strangers in the land which has belonged to them for
thousands of years, and they are considered second- class citizens in the
nation which their heroic ancestors forged," a conference of Guatemalan
Bishops concluded in a 1988 statement.
Sowing the seeds of destruction
Guatemala's current development model grew out of a CIA-backed military
coup in 1954. The CIA engineered this coup to protect the interests of the
United Fruit Company, a U.S. corporation owning 550,000 acres of
Guatemala's national territory, from a land reform process which threatened
to redistribute 210,000 acres of idle United Fruit land. At the time, the
United Fruit Company was the largest landowner and foreign company in
Guatemala, controlling 40,000 jobs, holding $60 million in investments and
owning 887 miles of railroad track in Guatemala.
The coup overthrew the "ten years of spring" led by two moderate presidents
who reformed some of Guatemala's basic social inequalities. Under
Presidents Juan Jose Arevalo and Jacobo Arbenz, Guatemala had experienced
its first chance at real democracy: the government gave 100,000 landless
families plots of unused land, instituted the country's first social
security system, legalized unions, allowing one-third of the workers to
become formally organized and dramatically expanded public education and
The series of military dictatorships which followed reversed these reforms.
Today, Guatemala has the most unequal land tenure in all of Latin America,
with less than 2 percent of the landowners controlling 65 percent of the
farmland. At the other end of the scale, approximately 27 percent of the
total population is landless and forced to work as part-time wage laborers.
As more land has become concentrated in fewer hands in the last 30 years,
the average size of small farms has declined from 1.71 to 0.79 hectares.
Despite its abundant water resources and some of Latin America's most
fertile land, Guatemala has the third lowest "physical quality of life"
index in Latin America, after Haiti and Bolivia. All of its social
indicators, from health to literacy, put Guatemala firmly at the bottom,
compared even to its impoverished Central American neighbors. Over 86
percent of the population lives in poverty, up from 63 percent in 1981.
Where poverty and malnutrition leave off, the brutality of three decades
of war waged against the Guatemalan people by their own government begins.
In the last three decades, 100,000 Guatemalans have been killed and 40,000
disappeared by the army and paramilitary death squads.
The intense violence of the late 1970s and early 1980s completely destroyed
more than 400 Indian villages. An estimated one million people were forced
to abandon their homes, including 200,000 who fled to neighboring
countries, especially Mexico and the United States. There are currently
46,000 Guatemalan refugees living in camps in southern Mexico. Hundreds of
thousands more are internally displaced--having fled to the slums of
Guatemala City or to the forests to escape repression.
Harvest of destruction
The end of Guatemala's 10 years of spring also marked the beginning of a
tremendous growth in the country's agro-export sector as the U.S.
government moved quickly to ensure a path of development favorable to U.S.
business. In the 1950s and 1960s, the U.S. Agency for International
Development (AID), private banks and U.S.-led multilateral development
banks, such as the Inter-American Development Bank and the World Bank,
provided cheap loans to transform Guatemala's "backward" economy into an
efficient agro-export machine, producing one or two main crops for the
Between 1956 and 1980, large-scale agro-export production received 80
percent of all agricultural credit, as land devoted to cotton increased by
2,140 percent, to sugar by 406 percent and to coffee by 56 percent. The
next export boom came with cattle a few years later. From 1960 to 1978,
grazing land increased by 2,125 percent. This unprecedented period of
expansion transformed the lives and land of Guatemalans more than any time
since the Spanish conquest.
Though extremely profitable for a few, this agricultural boom is
responsible for a tremendous loss in forests since the 1950s, increasing
hunger in the countryside and the widespread pesticide contamination of
people and the environment.
Along with cotton came "miracle-working" pesticides from the United States.
By the 1970s, a Guatemala had earned the dubious distinction of registering
the world's highest levels of DDT in mothers' milk and human flesh--185
times higher than limits set by the World Health Organization. An estimated
80 kilograms of insecticide per hectare are applied to cotton each year in
Guatemala, one of highest levels in the world. This intense pesticide use
has strengthened pest resistance and caused the explosion of new pest
populations, thus requiring more frequent applications of pesticides.
Applications have risen from 8 to 40 times per year in the last two
These pesticides, flowing with the rains into rivers and down the Pacific
plains into the ocean, contaminate fisheries and drinking-water supplies
with toxic runoff. Guatemalan peasants and U.S. consumers are also directly
exposed to the chemicals whether harvesting or consuming contaminated
exports. During the 1980s, there was an average of over 1,000 reported
pesticide poisonings per year in Guatemala, according the New York-based
National Central American Health Network.
The cattle boom of the 1960s brought even greater destruction to the
Guatemalan landscape and to traditional forms of agriculture. Heavily
funded by AID and multilateral development banks, beef production
accelerated deforestation and further impoverished much of the population.
The beef industry, exporting almost exclusively to the United States,
continues to destroy vast expanses of rainforest in the Peten, where 20
percent of Guatemala's 2.5 million head of cattle now graze. In other
areas, peasants are thrown off even the most marginal lands because cattle
can be raised where other exports cannot.
Additional deforestation results, as people dispossessed from their land
move further up the hillsides or migrate to the Peten. Unemployment has
also risen, because cattle ranching requires few workers and displaces
other, more labor-intensive agriculture. The increased marginalization and
impoverishment of the rural majority resulting from the expansion of cattle
ranching has led to the bitter irony that beef consumption in Guatemala is
less than half of what it was 10 years ago, according to a U.S. Department
of Agriculture report.
Beef has undermined the livelihood of Guatemalans more than any other
agro-export. Most campesinos who organized themselves in the late 1960s and
1970s to reclaim their diminishing access to land and resources understand
this fact. Conflict in the countryside escalated as peasants began to
respond to the outright expropriation of their lands by cattle ranchers and
their armed escorts. In 1978, more than 100 Kekchf people were massacred
in the town of Panzos when they marched peacefully to the Government's
Ministry of Agrarian Transformation to appeal for help in settling a
conflict with large cattle ranchers. This massacre was considered a turning
point that resulted in an upsurge of grassroots resistance in the country,
as entire communities of indigenous people joined the popular movement or
the armed opposition against the government.
Other cash crops play significant roles in the agro-export scheme. A few
landowners, using substantial inputs of chemical pesticides and
fertilizers, grow coffee, sugar, tobacco, bananas and cardamom on expansive
plantations. Bandegua, a subsidiary of Del Monte (itself a subsidiary of
the massive conglomerate R.J. Reynolds), holds a total monopoly on banana
production, controlling production from 7,600 hectares in the eastern
Despite the destruction wrought by the export business, many
environmentalists blame individual campesinos for most of the environmental
problems in Guatemala today. Soil erosion has increased in the highlands
in recent years, as displaced campesinos are forced to produce on smaller,
less fertile lands. Campesinos are abandoning traditional agricultural
practices, including fallow periods, green manures and crop rotation in
favor of more intensive, less ecologically sound methods. But one campesino
activist explains, "After being [expelled] from our land and forced to
plant on the very tops of the hills, the fault for this is not ours." He
adds that logging companies which cut "indiscriminately" are responsible
for much of the deforestation.
International creditors such as the International Monetary Fund and the
Inter-American Development Bank are also accelerating the process of
environmental destruction. In an attempt to squeeze more money out of the
country's failing economy, they demand the Guatemalan government undertake
austerity measures. These so-called "structural adjustments" force
countries like Guatemala to cut what are viewed as "non-essential" health,
social and environmental programs [see "Brutal Banking," April 1990,
Multinational Monitor]. Structural adjustment programs also mandate
intensified export production, exacerbating the problems caused by the
New crops, old story
In the last decade, the traditional agro-export model has begun to break
down. The world prices of coffee, cotton, beef and sugar--mainstays of
Central America's economy--have dropped dramatically, while the costs of
agricultural inputs have steadily increased. The foreign loans which
initially fuelled the agro-export system are barely covering the interest
on previous loans and are forcing an overly intensive use of the land. The
toll that the last two decades of large-scale export production have taken
on the environment is beginning to catch up with profits. With up to
two-thirds of all agricultural soil in Central America severely degraded
and a growing problem of increased pests and diseases resulting from
indiscriminate pesticide use, the agro-export system is facing diminishing
At the same time, the growing landlessness, poverty and repression that
have been by-products of this system have led to social unrest now on the
verge of explosion. The Guatemalan government and the lead engineer of
Guatemala's modern export system, AID, hope to take some fuel out of the
flames of revolution by improving the situation of the small farmer-
without undertaking land reform that would challenge those in power.
"Non-traditional" crop production offers a new way to help Guatemala earn
foreign exchange and to temporarily fend off the desperate need for land
reform by providing a lucrative, if risky, way for farmers to make a living
on their shrinking plots. Because many farmers no longer have enough land
to grow corn to feed their families, AID is encouraging them to grow snow
peas, broccoli, cauliflower, melon, strawberries and flowers for export to
the United States and Europe.
But this profit comes at a high price. Campesinos who once grew their food
without chemicals now need tremendous amounts of fertilizers and highly
toxic pesticides to grow their new crops. The new crop's year-round system
of cultivation does not allow the land to rest or the insects and diseases
to die off. Some tropical agronomists believe that it may be impossible to
sustainably grow broccoli and other non-traditional crops in the tropics
because the winter or dry seasons are not substantial enough to break the
pest cycle, so that insects and diseases remain in the soil continuously.
The new pesticide use in the highlands has vast ecological consequences.
Large-scale bird and bee kills and numerous human- health impacts have been
widely reported as the backpack pesticide sprayer joins the machete as the
campesino's other essential tool. Protective safety equipment is virtually
non- existent. In a recent study, more than half the farmers reported
knowing one or more people who had collapsed, been taken to the hospital
or died from pesticide poisoning.
Already non-traditional export crop production is showing signs of strain.
At the Cuatro Pinos cooperative, an AID showcase of the success of
non-traditional crop production, farmers reported that they have had to
double and triple their use of agro- chemicals, especially fungicides, in
the last three years. North American agronomists and researchers in the
area indicate that snow pea harvests are dropping due to increased disease
and soil depletion. Just a few years ago farmers harvested 250 pounds of
snow peas per cuerda (a 40 x 40 meter square) two to three times a week;
now they only get 10 pounds per cuerda and cannot harvest as often. Some
farmers are no longer able to cover their production costs, a problem
likely to worsen as the rest of Central America jumps on the
non-traditional crop bandwagon, bringing prices down on the world market.
In addition to pesticides, the new wave of nontraditional crops requires
small-scale irrigation systems to facilitate growing year-round.
Agronomists and campesinos report that since drilling and pumping for
irrigation began, the water table in some highland areas has dropped and
people are losing access to drinking water. AID loans for these new systems
are adding to the debt burden of small farmers, who are compelled to use
such technologies in order to stay competitive.
Irrigation systems, intensive labor and the use of chemicals entail a much
greater capital outlay for small farmers. A crop of snow peas costs about
$12,373 per hectare to produce, compared with $2,024 for corn, according
to a U.S. Department of Agriculture report. Land prices in the last three
to five years have risen by 500 percent in some areas as a result of
capital- intensive, non-traditional farming. When crops are rejected at the
border or, as happened in 1989, the harvest is lost due to frost or heavy
rains, farmers are left with no crop to sell, no crop to eat and large
bills to pay.
The trend toward non-traditional crops is also contributing to a decrease
in the ecological diversity of Guatemalan farms, as farmers abandon
traditional integrated farming practices where many varieties of plants are
grown together. Now, small farmers all over Guatemala are growing only a
handful of crops to sell for export to the United States and Europe.
Under current economic and political conditions, many poor farmers are
forced to choose between growing non-traditional crops and growing
inadequate amounts of corn on the same piece of land or earning starvation
wages on the plantations. Farmers will not have lasting options for
survival until they themselves have the power to determine the direction
of their own development and the use of local resources. A choice to grow
snow peas or starve is no choice at all.
Addressing the roots
Hundreds of thousands of Guatemalans who have joined the popular movement
for social change are reaching the conclusion that if the root causes of
the crisis in Guatemala are not addressed, they will see an unending cycle
of poverty, war and dispossession.
"We need democracy before we can have political stability and before we
have environmental protection--so that people are not only worried about
starving or being killed. And we need a government that is freely elected
and responds to the needs of the people," says a prominent Guatemalan
However, the call for democracy and respect for human rights goes beyond
elections and fewer killings. Many groups in Guatemala are realizing that
the right to a clean and safe environment and the right for all Guatemalans
to decide how to manage their country's resources are also fundamental
issues of human rights and democracy. "We need to decide what model of
development we want to follow and how we want to use our land and
resources," another environmentalist explains.
Any conception of real democracy for Guatemala must include not just
political justice, but economic justice as well. This places the focus on
the handful of people and corporations who own nearly all the land and
resources of Guatemala. "Redistributing the land is the only real solution.
We cannot dedicate ourselves to palliatives, like how to improve technology
so the campesino can produce a little more on terrible soil. This is not
a solution," states a Guatemalan agronomist.
Analyses of Guatemala's "environmental problem" must be broadened to
include the country's underlying social problems. Until now, mainstream
environmental organizations and development agencies have shaped the terms
of debate about the problems confronting many Third World people. The
voices of the people who have lived from the land for generations, and
whose struggle for survival also includes the survival of the land have not
been heard. A Kekchi explains: "Ecological destruction in Guatemala is a
destruction at the same time of the indigenous universe and of the Indians
themselves. Ethnocide is being carried out in Guatemala against the
indigenous people, not just by killing us by the thousands, but also by the
destruction of our way of life. Today in Guatemala we are facing the
greatest threat to our people since the [Spanish] Conquest. And because of
all this, we believe that we have something to contribute to these
environmentalists who are raising the problems of ecological destruction."
The report on which this story is based, "Guatemala: A Political Ecology,"
is available for $1 from: Earth Island Institute, 300 Broadway #28, San
Francisco, CA 94133.
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
3.- BANANA DEVELOPMENT IN COSTA RICA
By Christopher van Arsdale
Christopher van Arsdale is executive director of the Costa Rican Audubon
SAN JOSE, COSTA RICA--Costa Rica, named for its luxuriant Caribbean
shoreline as seen by Christopher Columbus in 1502, has long been known for
its rich natural endowment and unique biological diversity. Its 20,000
square miles (about the size of West Virginia) account for only .003
percent of the Earth's surface, yet are home to nearly 5 percent of the
plant and animal species known to exist on the planet. Strong health and
education programs, a stable democracy and the relatively large proportion
of national territory set aside for parks and protected areas have
bolstered Costa Rica's image as a nation concerned about the conservation
of its natural resources and the just treatment of its citizens. In recent
years, however, this image has begun to fray at the edges, largely as a
consequence of a development model which encourages large-scale
agricultural production for export in order to service foreign debt.
The banana industry, the country's second largest and an important source
of foreign exchange, is currently undergoing a dramatic expansion. The
government has proposed bringing nearly 21,000 hectares under banana
cultivation with a target production goal of 90 million boxes of fruit for
export annually. Spurred by tax breaks and incentives, banana companies are
buying up new lands or re-occupying old plantations to the tune of 2,000
hectares per year, according to industry representatives. By some
estimates, Costa Rica will overtake Ecuador this year as the number one
exporter of bananas worldwide.
The costs of surging banana production are high, however. Expansion is
huffing a withering natural resource base and local populations are
defenceless against exposure to large doses of toxic agrochemicals. Costa
Rican indices of pesticide contamination and deforestation are now among
the highest in the world. According to conservation groups and the Catholic
Church, the continued unbridled expansion of the banana industry threatens
to unravel the country's hard-won social and environmental achievements of
the last four decades.
Poisoning the workers
Though consumers in the First World have become increasingly concerned with
pesticide residues on fruits and vegetables, workers and their families in
producer countries suffer the detrimental impact of exposure to
agrochemicals more directly. The banana industry in Costa Rica is
responsible for the largest proportion of total pesticide use in the
country, accounting for 25 to 30 percent of all pesticide imports. On the
plantations, pesticides account for 50 to 55 percent of the total cost of
material inputs. One of the main reasons that Costa Rica has been capable
of producing such a large volume of bananas for export is the heavy
application of fungicides, herbicides, nematicides and other agrochemicals.
Workers, their families and local populations near banana plantations,
however, are literally absorbing the real costs of this heavy pesticide
use. Although accounting for only 5 percent of the nation's rural
population, approximately one-third of all reported pesticide poisonings
occur in the banana-growing regions. Field workers suffer 250-300 pesticide
In a pending lawsuit filed in 1985 against the Standard Fruit Company, one
of the principal transnational banana producers in the Atlantic region,
workers sterilized by exposure to the nematicide DBCP are seeking
compensation from the company and from the manufacturers of the product,
Dow Chemical and Shell Oil [see "The South's Day in Court," Multinational
Monitor, July/August 1990]. Company scientists knew DBCP was an extremely
dangerous testicular toxin at even low concentrations when they performed
their first toxicity tests in the mid-1950s. The substance, however, was
so effective at controlling nematodes that Shell and Dow decided to market
the product anyway. It is estimated that as many as 2,000 men were
involuntarily sterilized by their exposure to DBCP throughout the 1970s.
The Costa Rican government finally prohibited the import and use of the
chemical in 1979. But this action did not prevent Standard Fruit from
exporting its inventory of about 180,000 liters to Honduras, where managers
continued to use it without fully informing workers of the dangers.
After years of wrangling in the courts over the jurisdictional status of
the Costa Rican workers' claim, the Texas Supreme Court agreed in March
1990 that the case could be heard in Texas courts. The U.S. Supreme Court
recently upheld that decision. Having won this procedural victory, the
workers may now seek compensation in U.S. courts for damages caused by
exposure to DBCP. A second victory could significantly affect the way
transnational corporations operate in the Third World, since the case would
set a precedent for holding United States-based corporations accountable
in U.S. courts for their foreign activities.
In the meantime, however, workers continue to suffer the effects of acute
pesticide intoxication, dermatitis, eye problems and chronic respiratory
disorders caused by their exposure to chemicals on the plantations, and
Costa Rica's nationalized health insurance company, the National Insurance
Institute, is left to foot the medical bills of the poisoned workers.
Poisoning the environment
The expansion of plantations and the heavy application of agrochemicals
also take a devastating toll on neighboring eco- systems. For optimum
production, plantations must have an array of drainage ditches, all of
which eventually empty into the region's rivers and canals. A large
percentage of the applied pesticides are washed into these waterways and
carried ultimately to the sea, with toxic consequences both for aquatic
life and for the local human populations which depend on the various
intermediate bodies of water for sustenance. Moreover, at least 25 percent
of the pesticides applied by aerial spraying never reach their target but
are instead unintentionally applied directly into ponds and streams or on
farmland surrounding the plantations.
All along the rivers and canals which run through dense jungle parallel to
the shoreline from the city of Limon to the Nicaraguan border, the evidence
of contamination from plantations is visible. Shreds of pesticide-saturated
blue plastic, which comes from bags used to cover the bananas until
harvest, dangle from tree branches near the canals' banks, clearly
indicating the high-water mark. The bags, washed through the drainage
ditches by heavy rains, also end up on beaches, clinging to coral or lodged
in the stomachs of sea turtles.
Local inhabitants of the canal areas, who depend upon aquatic life for
food, have become accustomed in recent years to finding large numbers of
fish floating dead in the waterways, killed by pesticide poisoning. Last
July, in perhaps the largest single fish-kill to date, as many as half a
million fish were found belly-up in the canals. In public announcements,
the Ministry of Agriculture and the Ministry of Health exonerated the
nearby banana companies of all responsibility for the accident, claiming
that the kill was probably perpetrated by local fishers. Local people and
conservation groups are skeptical of the government's pronouncements,
especially since, according to Carmen Roldan of the National University's
Environmental Science Department, "public access to the official
investigation was denied."
In another scene of environmental degradation, the once crystalline and
vibrant array of coral reefs along Costa Rica's Caribbean shore is now
nearly 90 percent dead as a result of pesticide run-off and sedimentation,
mainly from banana plantations. In a 1987 study of Costa Rica's Caribbean
coral, the International Marine Life Alliance states that of all activities
"that have driven material, debris and wastes into the sea, none can equal
the sheer annual tonnage of sediment that flows from the Atlantic-slope
banana plantations." Erosion from the plantations along the Sixaola,
Estrella and Matina rivers has sent volumes of pesticide-laden soil into
the waterways which eventually finds its way to the shore and smothers the
The impact of coral death goes far beyond its scenic value for beach-goers.
Living coral is a primary determinant of productivity in shore fish and
invertebrate populations, providing a sink for nutrients which form the
base of a complex aquatic food chain. The coral colonies support
populations of lobster, crab, snapper, bass, jack and a large variety of
tropical ornamental fish, all of which represent economic resources for
local communities. Thousands of people, especially descendants of Jamaican
immigrants whose culture is closely tied to the sea, depend upon the
continued productivity of the reefs. Local fishers say, however, that
fishing for a living has become exceedingly difficult in the Caribbean
coastal waters over the last 10 years. Marketable ornamental species, which
are perhaps the most coral-specific of all fish in the area, are also
declining in numbers. If present trends continue, the region's capacity to
support ecologically sound development alternatives, such as harvesting
ornamental fish, oysters and lobster, may be eliminated.
The expansion of banana plantations in the area and the visible
environmental damage that results also clash with the economic interests
of the tourism industry. Tourism, the third largest industry behind
bananas, depends on the maintenance of Costa Rica's scenic beauty and its
conservationist image abroad. The Caribbean is an extremely popular
destination for sports fishing and tourism and accounts for a substantial
percentage of the industry's total income. Few tourists, however, will be
attracted by dead rivers and poisoned beaches. Modesto Watson, a tour boat
operator in the region, comments, "I'm afraid we don't have too many years
left before they kill this area off."
According to many agricultural scientists, the plantations could reduce
their agrochemical use while maintaining reasonable levels of production.
Integrated pest management, biological controls and other organic farming
techniques offer ecologically responsible alternatives to complete
dependence on chemical pesticides. Hernan Rodrigues, an expert in
integrated pest management with the National University of Costa Rica,
says, "the technology used on today's plantations is based on the idea
imported from industrialized countries that yield increases can only come
from massive use of chemical pesticides. This technological package is
inappropriate for our reality." A switch to practices less dependent on
agrochemicals, however, would probably require a lowering of cosmetic
standards for fruit in consumer countries. None but the most perfect,
unblemished bananas ever reach the supermarkets of Europe or the United
States. Consumers in these countries may have to learn to accept slightly
blemished or smaller bananas if pesticide contamination in producer
countries is to be reduced.
Poisoning social conditions
"Banana development" has serious social consequences as well, often
dividing families and communities dependent on the multinational
corporations for their livelihood.
In the 1989 year-end Pastoral Letter of the bishopric of Limon province,
church leaders issued a scathing condemnation of conditions created by the
expansion of banana plantations and called on the government to re-evaluate
its policy of expansion. The church leaders focused especially on the
unstable and migratory nature of plantation work and its effect on families
and communities: "The traditional structure of our families is suffering
a grave alteration due to the instability and the economic uncertainty
caused by the continual migration of family members. The consequences are
becoming more and more evident disintegration of families (incomplete
families), deterioration in the education of children, conjugal infidelity
and a lack of time and space for family dialogue and recreation."
Banana companies "maintain about 60 percent of their workers on a permanent
basis, but keep the other 40 percent on temporary contracts which can be
renewed every two and a half months," according to Carlos Acuna, former
director of labor relations for the Del Monte subsidiary, Bandeco. This not
only allows the companies to avoid making social security payments for
nearly half their employees, but also assures that labor will remain
quiescent. "Workers are afraid they will be placed on the computerized
blacklist maintained by the companies and never again be able to find a
job. Any worker known to have participated in union activities in the past
will be denied work. I know because I managed that list when I worked for
Bandeco," explains Acuna.
Temporary workers do not receive permanent housing, their families may be
required to relocate several times within a short period and their work
schedule is highly irregular and often determined by the arrival of cargo
boats. Though workers' salaries are high compared to those of other
agricultural sectors, the extra earnings are absorbed by the higher living
costs on the plantations.
Furthermore, the collective bargaining position of workers has deteriorated
markedly in the last decade. Though Costa Rican law guarantees workers the
right to organize in unions, the companies have effectively squashed all
union activity. Companies coerce employees into joining "solidarity"
organizations dedicated to "harmonious" employer-employee relations. Union
sympathizers quickly lose their jobs and find themselves blacklisted. The
solidarity groups can organize social events for the workers, but they
cannot strike for better working conditions.
Today's bread, tomorrow's hunger
At a recent forum of church groups and environmental and development
organizations, Monseigneur Alfonso Coto, bishop of Limon province,
described "banana development" as "seeking today's bread and tomorrow's
hunger." Dr. Isabel Wing-Ching, sociologist at the University of Costa Rica
and longtime researcher of the banana industry, added that "today's bread
is not for everyone." The wealth created in the production of bananas is
concentrated in the hands of a few multinational companies. Though the
banana industry provides needed jobs and some tax revenue for the state,
the government has not scrutinized the long- and short-term costs and
benefits of banana expansion. The already visible environmental and social
damage caused by the activity portends more drastic consequences in the
future. If Costa Rica is to avoid "tomorrow's hunger," its policymakers
must not wait any longer to seek responsible alternatives to the present
model of "banana development."
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
4.- OF OIL AND EXPLOITATION IN ECUADOR
By Anita Parlow
Anita Parlow is a freelance writer and author who specializes in land and
natural resources in indigenous territories.
The Uniterra Foundation and The Amicus Journal provided financial support
for this article.
TORAMPARE, ECUADOR--"The jungle is everything. We have to maintain the
jungle, take care of the animals and defend ourselves," says Dabo, an elder
in a Huaorani-speaking village in Ecuador.
In August 1990, the Huaorani Indians in the Ecuadoran Amazon held an
unprecedented meeting. More than 250 delegates came to Torampare from 10
villages, poling upstream in dug-out canoes for as many as four days to
talk about indigenous rights in their newly legalized territory. The
organizers of the gathering referred to their assembly as "The First
Congress of the Huaorani." Following an earlier organizing meeting in April
1990, the most isolated indigenous people who inhabit this small corner of
the Amazon, known as the "Oriente," are joining together to respond to
economic, political and cultural challenges to their way of life.
During the week-long meeting marked by the emotion and consciousness of the
birth of a nation, the delegates primarily debated the human costs of the
large-scale development agendas of multinational petroleum companies that
threaten to dominate their homelands.
The Huaorani story is emblematic of the fate of the Amazon. Here, between
the Napo and Curaray rivers, conservationists, indigenous peoples and the
petroleum industry are competing to control the pace and nature of
development. "Our existence hangs in the balance," says a young man from
the remote village of Yasuni who assumed a leadership role at the Torampare
assembly. Poisoning the jungle's bloodstream
Huaorani territory, located south of Lago Agrio and Shushushfindi, the
center of the worst excesses of the frenzied Ecuadoran petroleum projects,
is currently a center of international attention.
The United States-based Conoco Oil Company, a subsidiary of DuPont, plans
to build 90 miles of roads into pristine forest in order to pump oil from
its vast concession in Huaorani territory. The company is also negotiating
for a second concession located in the adjacent and environmentally
"protected" Yasuni National Park, an area noted for its exceptional
biological diversity. Despite its national park status and designation as
a Biosphere Reserve by UNESCO's Man and the Biosphere Program, Ecuador's
controversial management plan for the Yasuni allows the oil companies to
operate in the protected territory. This policy has inspired considerable
opposition from both indigenous organizations and conservationists, who
charge that the petroleum industry operates in an "environmental free-fire
zone," without appropriate constraints.
Perhaps the most notable challenge to the national policy that is designed
to encourage rapid development was a lawsuit brought by an aggressive
environmental law firm, CORDAVI, in Ecuador's Tribunal of Constitutional
Guarantees. The suit attempted to block Conoco from producing oil in
protected national parks, but it was unsuccessful.
Now, it has fallen to international environmental and human rights
organizations--and to the indigenous people themselves-- to protect the
rainforest. Survival International, an indigenous rights group, and several
U.S.-based environmental organizations, including the Sierra Club Legal
Defense Fund, the National Resources Defense Council (NRDC) and the
Rainforest Action Network, have directed their attention to Ecuador,
fearing that Conoco's plans could devastate the nation's rainforest.
"So little is known about the Amazon's complex ecosystems that the extent
of the potential damage is of unforeseen dimensions," says Judith
Kimmerling, author of the NRDC report "Amazon Crude." "It is clear that
petroleum cannot be produced in the Amazon without causing enormous
environmental damage." NRDC calculates that the thousands of rare, unique
and endangered species that lie at the headwaters of the complex Amazon
River system could be permanently damaged no matter how much caution Conoco
Conoco has already conducted core drillings in preparation for obtaining
its production permit. Despite company claims that it used a degree of care
designed to "minimize impact on the rainforest," Survival International
issued an "Urgent Action Bulletin" in March 1990 that focused on the
"severe" destruction of life in this preliminary phase of oil production.
Its report noted: "hundreds of helicopter landing sites are cleared,
explosives are detonated every 100 kilometers and at least 1,000 hectares
of forest are cleared for camps. Highly toxic wastes containing oil,
sulphates, mercury, lead and arsenic are discharged into the rivers. Many
of the rivers which the Huaorani depend on no longer support fish, and
cattle drinking from [the rivers] have died."
Now Conoco, claiming that it will carry out its plans in an environmentally
sensitive manner, is preparing to construct a pipeline and road network in
the pristine forest. It promises to bury its pipeline facilities before
linking them to the existing Trans-Ecuadorian Pipeline System. Ecuador
Conoco President Edward Davis says that the access road to this system will
"not be connected to any outside roads" so that it will not intensify
With the roads and pipelines completed, Conoco will begin oil production.
But opposition from indigenous groups and environmentalists has delayed
Conoco's plans. Davis says he has been waiting for nearly two years for the
government to grant him the permit that will allow his company to be the
first to pump oil from Huaorani territory and a national park. Expressing
dismay with the government's delay, the director of Conoco's Ecuador
Environmental Project Program says that "we've become a lightening rod,
taking the blame for all the oil excesses of the past."
Indigenous groups and environmentalists, however, say the oil companies'
dismal record in Ecuador justifies their concerns. Luis Vargas, president
of Ecuador's Pan Amazonian indigenous organization, CONFENAIE, explains,
"one only need travel as far as Lago Agrio [where Ecuador's oil boom began]
to understand the public health menace and hazardous nature of the highly
toxic contaminants that poison our food supplies and destroy our peoples."
Vargas describes streams and rivers that run black from periodic oil
spills. "The highly toxic petroleum floods combine environmental
degradation and ethnocide."
Evaristo Nugquag, president of COICA, the Pan Amazonian Coordinating
Committee of the Indigenous Peoples of the Amazon Basin, accuses the
petroleum industry of ruthless destruction of indigenous lands. He says,
"for years the oil industry routinely used our open spaces as a free
disposal system, pouring millions of gallons of untreated oil into hundreds
of unlined open pits that bleed into the rivers that the Huaorani view as
the jungle's bloodstream."
He emphasizes that environmental problems must be solved within the context
of indigenous peoples' aspirations to control their borders and their
natural resources. Indigenous control, he says, is essential to indigenous
survival. "Without the rainforest we will disappear. We have no other place
to live." The director of the Torampare community says his people see
their destiny foreshadowed by the fate of the almost totally decimated
Cofan Indians. The Cofan's 20-year encounter with the Texaco Oil Company
has left them hovering on the edge of extinction, with fewer than 500
Health clinic officials in Coca attribute the Cofan's destruction to a
combination of disease from outside contacts, enormous health problems
brought by oil wastes and a sense of hopelessness that too frequently leads
to frontier prostitution and alcoholism which Vargas calls "Ecuador's
The few remaining Cofan and other newly impoverished indigenous groups now
depend upon oil camp food supplies for survival. Their situation contrasts
sharply with the Texas-style luxury enjoyed by oil workers who, as
Representative Joseph Kennedy, Jr., D-MA, noted after a visit to the
Oriente, are provided with air conditioned compounds, swimming pools,
24-hour electricity, telephones and health care, and are often treated to
hunting expeditions in a company helicopter.
Davis says his company will be different. "Nobody produces like that any
more," he says. Describing his efforts to work with both environmental and
indigenous organizations, Conoco's president says the company has taken a
long-term and constructive approach to the problems of the Oriente. He
points to a company-funded health and education program in the impoverished
Oriente, saying, "we like to think we're a stabilizing force out there."
Davis promises that the company will use the "most advanced technologies"
and "highest degree of cultural sensitivity" in its petroleum production
activities in the Oriente. He proposes to "apply the same degree of
caution" to minimize ecological damage that Conoco uses in exploiting
resources in the sea.
But environmentalists reject Davis's claims. The Sierra Club Legal Defense
Fund filed a complaint on behalf of the Huaorani with the Inter-American
Commission on Human Rights to oppose Conoco's plan. The brief points out
close parallels between Conoco's plans and those that decimated the Cofan.
The "airstrips, helicopters, roads, dynamite and motors that reduced the
Cofan to 480 people are nearly identical to Conoco Oil's plans for the
newly titled Huaorani lands," it says. NRDC's Kimmerling adds, "I haven't
seen a written plan that explains how they will" limit environmental
Already the Huaorani are being hurt by oil development. Roads that connect
oil camps deep in the Amazon with towns and cities bring colonists into the
Huaorani area. The 100 kilometer oil road that runs due south from the
frontier town of Coca nearly splits Huaorani territory in half. Colonist
ranchers and farmers, who use the roads, surround the oil camps. They are
the front line of a massive program of Amazon resettlement designed to
defuse the country's land distribution problem. But they impede the nomadic
Huaorani lifestyle by competing for game and wildlife and by destroying the
More generally, the oil companies' operations violate Huaorani sovereignty
over their territories. For the indigenous, the right to control their land
and its resources is the central issue at stake.
The price of oil dependency
Despite environmental and human rights concerns and the terrible record of
oil development in the Amazon, the Ecuadoran government is eager to promote
Conoco's plans. Ecuador is dependent on its Amazon crude production, which
covers nearly 2.5 million acres of forest, to boost the country's sagging
economy. At about 300,000 barrels per day, Kimmerling reports that oil
production accounts for approximately 7 percent of the Ecuadoran economy
annually. From 1972 to 1982, the government earned some $7.4 billion from
oil production. Oil royalties finance close to 80 percent of the payments
of the nation's $12.4 billion foreign debt. Ecuador's Minister of
Petroleum, Diego Tabariz, expresses the widely held government view that
oil production is necessary. "Without revenues from oil production,
Ecuador's economy would collapse."
This oil dependence dates back to 1967, when Ecuador's oil rush began in
earnest at the base camp of Lago Agrio, just north of Huaorani country.
Starting with Texaco, 28 international companies obtained oil-drilling
concessions. These foreign firms sank exploratory wells in areas carved
from pristine, ancient indigenous lands.
In 1971, Ecuador passed the "Law of Hydrocarbons," creating a national oil
company, now called Petroecuador. The Law stipulates that after the oil
companies produce for 20 years, Petroecuador, which controls the oil
concessions, will inherit the Amazon's 29 production stations, refineries
and other operations. But this approach was short-sighted. According to
CORDAVI attorney Marcella Enriquez, "Ecuador's petroleum laws encourage the
companies to come in, exploit the resource without respect for protected
areas and get out quick."
The Ecuadoran government's plans to sell rights to exploit the Amazon's
resources brings it into conflict with the indigenous people such as the
Huaorani who consider Amazon territories their own. And the developing
organizational strength of the Huaorani, the power of existing Pan-American
organizations such as CONFENAIE and support for indigenous groups from
international organizations such as Survival International have forced the
government to recognize at least some of the indigenous claims and to
negotiate with them.
In early April 1990, the government met some of the demands of Ecuador's
indigenous organizations. It expanded the tiny Huaorani Protectorate by
returning nearly two million acres, about one-third of the Huaorani's
original territory. However, the accord, which was delivered with much
ceremony in Quito, does not allow the Huaorani to exercise any control over
minerals on the land and prohibits them from impeding oil- related
Some critics say the land grant was a cynical, tactical move designed to
deflect attention from a national policy that encourages oil exploitation
in national parks. But, at Torampare, the newly elected director of the
emerging Huaorani alliance took a positive view of the land grant. "The
legalized territory gives us a place to begin controlling our destinies,"
The land grant did not create lasting harmony between the government and
indigenous groups, however. Only a few months later, in the summer of 1990,
President Rodrigo Borja acrimoniously broke off talks with CONAIE, which
represents the indigenous confederations of the Coast, the Sierras and the
Amazon. The president of CONAIE, Cristobal Tapuy, a Quicha from the
Oriente, proposed measures for indigenous control of land and natural
resources in their homelands. Borja rejected the proposals, saying such
rights would lead to a "parallel state."
At a symposium held in Quito in August 1990 to celebrated 500 years of
Indian resistance to foreign domination, Tapuy said, "the Indian people do
not want to create a separate state, but we do want autonomy to guarantee
our customs and language and natural resources." He said he is unmoved by
the state's need for revenues which tax the people and their land.
Pointing out that government officials view the Amazon as tierras baldias
or empty land, CONAIE's president said, "The land has always belonged to
our ancestors, [but] we now have to beg for it." Threatening the
possibility of an "uprising" in the Oriente if the government refuses to
legalize other indigenous lands. Tapuy stated, "Our objective is to express
an Indian voice in all forums that affect the tropical rainforests."
Some Huaorani, however, are willing to give up their traditional ways,
especially as life becomes more difficult in the shrinking forest, for a
share of the region's oil wealth. Some see no choice but to move to newly
formed frontier towns. On the bus that travels once a day from the end of
the Via Auca ("Auca" is a Quicha word for the Huaorani that means
"savage")to the frontier town of Coca, a woman like many others who moved
to the Auca Road, confides, we "moved to our finca [farm] here because life
was too hard for us in the Sierras." And at the Huaorani assembly in
Torampare, some delegates suggested that the Huaorani support petroleum
development but demand a percentage of the royalties from the government.
Conoco, which claims to be sensitive to Huaorani interests, would like to
encourage such proposals. Conoco-Ecuador hired Jim Yost, an anthropologist
who lived for 10 years in Huaorani territory, to seek the Huaorani view of
petroleum development. Yost says that "despite a general inability to
understand all of the implications of oil production, the general
[Huaorani] sentiment favors production, protected roads and, perhaps, a
return of royalties from oil production."
The challenges ahead
Whether Conoco will receive permission to go ahead with its project is
unclear. Normally, obtaining a government permit is almost pro forma, but
the opposition from indigenous organizations and international
environmental groups has created new pressures which the government must
Whatever the final outcome of the Conoco proposal, the political topography
of oil development in the Ecuadoran Amazon is forever changed. Their
organizing efforts give the Huaorani a greater chance to survive. As
CONFENAIE's Luis Vargas counselled the delegates who attended the Huaorani
assembly, "If you initiate this congress, your sons will be stronger than
you." And the vocal objections of significant segments of indigenous
communities and international environmental and human rights organizations
have had some effect on corporate and government policies: the government
has delayed approval of Conoco's request for a development permit and
Conoco has determined it essential to at least assert its sensitivity to
indigenous and environmental concerns. That alliance will have to meet many
more tests if the Ecuadoran Amazon is to be saved; even as Conoco awaits
permission to begin oil production, ARCO and UNOCAL are reportedly
undertaking exploratory drilling in the Oriente, with the Ecuadoran
military protecting them from attacks from indigenous groups.
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
5.- TRADE, DEBT AND PLUNDER IN MEXICO
An Interview with Cuauhtemoc Cardenas
Cuahtemoc Cardenas is the leader of Mexico's Partido de la Revolucion
Democratica (PRD). He is widely believed to have won Mexico's 1988
presidential election but to have been denied victory by fraud committed
by Mexico's ruling party.
Multinational Monitor: What would the ramifications of a United
States-Mexico-Canada free trade agreement be for Mexico?
Cuauhtemoc Cardenas: A free trade agreement would consolidate a situation
and a relationship of dependence which has no advantages for Mexico. A free
trade agreement will close the possibility of our making autonomous
decisions. It will violate our sovereignty. Mexico is already one of the
most open economies in the world. I do not think that Mexico will
liberalize more than it already has after a free trade agreement is signed.
I think Mexico has opened its trade as much as it can. Maybe something can
be obtained from the United States, but we must also take into account that
our economy has been in stagnation for eight years. So there is not much
Mexico can offer at this moment.
Mexico has nothing to gain because we have nothing to export-- nothing more
than those items the transnationals are already producing in and exporting
from Mexico. So Mexico will continue as it is: as a supplier of cheap
labor, as a supplier of raw materials and a manufacturer of some low
value-added products. Labor will become cheaper and cheaper; wages have
been declining continuously since 1982.
If present policies continue, our standard of living will continue to
decline and unemployment will continue to increase. Many of the companies
that are working to satisfy internal demand will continue to close or go
broke. Around 75,000 enterprises have stopped working in the last eight
years because of the opening of our borders and the neo-liberal policies
that the government has applied.
MM: Why is the Mexican government advocating a free trade agreement?
Cardenas: The Mexican government wants to sign a trade agreement as soon
as possible because it thinks that a trade agreement will make foreign
investment come to Mexico. This government is desperately looking for
investment and is implementing several measures in an attempt to attract
this investment. Privatization of state companies, privatization of the
banks very recently and the announcement of this new trade agreement with
the United States are all measures to attract foreign investment which has
not flowed to Mexico.
MM: If you become president, would you consider revoking an agreement
signed by the Salinas government?
Cardenas: We have been committed to revising every political, legislative
or administrative measure of this government. That would be one of them.
In our bilateral relationship with the United States or in our
international relations, especially regarding economic cooperation, we will
have to consider our priorities. We need to improve social conditions, we
have to create employment, we have to raise wages and the income of the
people. We have to give assurances so that our economy--not only those
activities or those branches that are export-oriented but also those that
serve our internal markets--can grow rationally. So everything would have
to be revised.
MM: Would you consider putting limits on foreign investment, or going back
to old Mexican standards which are not being enforced?
Cardenas: Foreign investment should comply to our laws. We have the foreign
investment law [which requires a minimum 51 percent Mexican ownership of
all enterprises] and the regulations for the law, how the law must be
applied. We call that secondary law. There is a contradiction between the
main law and the secondary law. So we will have to rationalize, take away
those contradictions which allow foreign investment in violation of certain
articles of the law.
If we have a certain law, and we enforce that law, foreign investment can
go to Mexico. I don't think the law has been the obstacle for foreign
investment going to Mexico.
MM: What has been the obstacle?
Cardenas: There is no confidence in the present Mexican government, a
government that is in power, but not because of the votes it got. There is
no confidence in an economy which is in crisis.
MM: What should the role of foreign investment in the Mexican economy be?
Cardenas: I think foreign investment is complementary. The current
government is trying to make foreign investment the main source for our
Our historical experience shows that we must have state investment in
certain areas. State investment has always been followed by private
national and private foreign investment and, finally, small and medium
investors. I think that experience must be taken into account, and that is
what will happen. In general, I don't think we will have investment if it
is not stimulated by the state.
MM: What are the ramifications of Mexico's dependence on the maquiladoras
[foreign-owned factories which assemble, and sometimes manufacture, goods
for export, mostly to the United States]?
Cardenas: Maquiladoras have helped to promote employment, especially in the
border areas. But the factories do not comply with our laws, and the social
conditions of the workers there are not satisfactory. The workers are not
allowed to unionize. They are not paid as [much as] they should be,
considering the kind of work they are doing. All this must be revised and
put into accordance with our laws.
It is not enough for them to incorporate our cheap labor into their
economic processes. In the second stage of maquiladoras, they should try
to integrate into our economy. An agreement should be reached between the
maquiladora owners, the workers and the state so the products the
maquiladoras are now importing are produced in Mexico.
MM: Do you think that if you put these changes in place, the maquiladora
owners who come primarily for cheap labor would leave?
Cardenas: Maybe some of them will leave. But we will not try to chase them
away. Others may really try to integrate their productive cycles in Mexico.
Our main concern will be raising the working conditions and the income of
MM: How do you evaluate the Mexican government's response to the debt
Cardenas: All the Mexican economic policies have been built around the
payment of the debt. Paying the debt is the main priority of the Mexican
government. That has left no possibilities for investing in social
improvement or reactivating our economy. Economic policy should be devised
around other priorities: improving social conditions and trying to make our
economy grow in a sustained way. That would require us to negotiate other
terms for the debt.
In negotiations around the Brady Plan, co-responsibilities have been
disregarded. That is, there is a co-responsibility of those who lent the
money and those who received the money, especially after both knew that
Mexico was incapable of continued payment. When a certain level of
indebtedness was reached, both sides knew Mexico did not have the capacity
to continue paying. And that part of the debt should receive different
treatment than the part that was used for productive projects. One had,
maybe, economic purposes; the other had, clearly, political purposes.
MM: What point do you mark as the beginning of the second kind of debt?
Cardenas: I do not know where because the Mexican government has never
given clear and detailed information about the debt. We do not know under
what conditions it was contracted, we do not know how it is being paid, we
do not know the commissions that have been paid to different Mexican
government officials for contracting the debt and we do not know the
composition of the debt. There are many, many creditors; we are talking
about more than 500 banks or something like that. So it is very difficult
to know the condition of each credit. And the Mexican government has never
given a detailed account
MM: If you were in power, would you renounce certain parts of the debt?
Cardenas: In the last negotiation of the debt, in early 1990, [the amount
of the debt forgiven] was clearly insufficient. It does not liberate
resources for development. It makes debt service payments easier, but it
is not sufficient to have resources to improve social conditions and to
improve our economy. So we are able to continue paying, but that is all.
The last debt arrangements have not [spurred] development in Mexico.
MM: Would you a consider a full renunciation of the debt, either alone or
in conjunction with other Latin American debtors?
Cardenas: The Mexican government has always been against negotiating [in
conjunction] with other debtors. [But] we think that we should try to
negotiate [along] with other Latin American countries which have similar
problems. We think that it is possible to obtain other terms to continue
payment. We have never considered the possibility of suspending payments
or going to a moratorium as a unilateral decision. We must negotiate and
we must maintain the relationship with the world financial community. We
should make decisions after talking, not before. We must talk, we must try
to open new negotiations. After we see what happens, we will make other
MM: What will be the effects of the privatization of state-owned
enterprises in Mexico?
Cardenas: I think it will affect Mexico in a very irrational way. It is
being done as a matter of ideology: "everything must be privatized because
it is good to privatize." Privatizing or state intervention are not matters
of ideology; they are just mechanisms or measures to arrive at certain
objectives. Through this privatization, many productive cycles have been
broken. That is very clear in the petrochemical industry, for example.
There is much corruption involved in the sales of these enterprises. The
rumor is that many people from the government are buying the state-owned
companies with people from the financial groups. The public does not know
when bids are being taken, who is buying enterprises or at what prices and
under what conditions the enterprises are being sold. When something is
known of the sale of state-owned companies, it is always [the case] that
there was a better bid which was not considered.
MM: How do you respond to the argument that state-owned enterprises should
be sold because they are corrupt?
Cardenas: I think the first step should be to fight corruption. If there
is corruption, first you put the corrupt official in jail. And then you can
do something else with the company.
MM: Would you continue to privatize state-owned enterprises if you were in
power, but in a more rational way?
Cardenas: Some of them, yes. Some of the others, no. You must take into
account that many of these enterprises went to the government after they
went broke in private hands. They had credit from state banks, they could
not pay their debts and they paid with installations and equipment.
We will have to establish which sectors of the economy, like oil and
electricity, are strategic and should be reserved only for state
intervention. We must also establish priority activities, where the
government should have some, but not majority, participation. In
communications and in the food industry, it is very clear that the state
must have a certain control. You cannot just say the government is not
going to intervene in any part of the economy or that it is going to
intervene in everything.
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
6.- BRAZIL: A TIME FOR REVOLUTION
An Interview with Luiz Ignacio "Lula" da Silva
Luiz Ignacio "Lula" da Silva was the presidential candidate of the Partido
dos Trabalhadores (PT, the Workers' Party) in Brazil's December 1989
elections. The former auto worker and labor leader fell just short in his
Multinational Monitor: What is your opinion of the United States-Latin
American free trade agreement which George Bush has proposed?
Luiz Ignacio "Lula" da Silva: Free trade between Holland and Germany or
France and Italy has meaning because the productive structure and costs are
similar, so prices can be more or less the same. But free trade between
Brazil and the United States or Bolivia and the United States would be very
unequal. We would export capital and import manufactured commodities.
Although we may consider ourselves freedom lovers, although we dream of a
society without borders, in this case it is necessary that there be
MM: What do you think about Brazil's recent moves away from its traditional
Lula: If Brazil had invested in computer and software development, it could
begin to change its protectionist policy. However, the country didn't
invest in these technologies. It is important that the country maintain
a protectionist policy for a determined period so that it will be at the
same level as the competitors. Our country must be able to offer modern
goods at prices competitive with the world market. [But], although we
consider ourselves nationalists, we don't want to maintain protectionism
permanently and [support] bad investors and bad enterprises.
Brazil is a country that has a good intellectual base and a good industrial
base. But we are behind where we were ten years ago. Brazil had a bigger
industrial capacity ten years ago than it does today. If, in the last 10
years, we hadn't sent $90 billion to our creditors and this money had been
invested in research and internal development, we could already be
competitive with the most modern countries in the world.
MM: How has the last decade affected workers and the poor?
Lula: Ten years ago, the amount of money paid in wages represented 50
percent of national income. Today it is only 35 percent. The buying
capacity of the minimum wage today is 25 percent of what it was in the
1940s. It is not possible to improve Brazil if there is no redistribution
of income. The poor person in Brazil lives worse than the American poor
person, but the Brazilian rich live as well as the American rich.
MM: How would you redistribute income?
Lula: It cannot be done automatically or by enacting a law. The first
measure would be to invest public sector resources to generate new jobs,
mainly in social areas like education and health programs. Second, [we
must] undertake agricultural reform. Third, the purchasing power of workers
must be recuperated.
MM: Would you mandate that workers receive a certain share of a companies'
Lula: It is not for the government to say that. The government has to
provide the necessary information so that the union movement in its direct
relationship with the bosses may [improve] its wage leverage.
MM: Do you have any plans to nationalize industries or enterprises?
Lula: No. Now the plan is to win the power. If, after taking power, we find
political reasons to nationalize, we will. But it will not be by our
initiative; a decision to nationalize will depend on how the capitalists
MM: Do you have plans for land reform?
Lula: Agrarian reform is an essential condition for Brazilian development.
Brazil could easily feed itself and use agriculture as a solution to the
homeless situation and unemployment and to improve living conditions. In
order for all of this to happen, it is necessary that we have an agrarian
reform. There are millions and millions of acres of land which are now
unproductive and could be made productive with an agrarian reform.
MM: What do you think of the Brazilian government's policy to protect the
Lula: The government has made a lot of noise about the rainforest, but it
is much more worried about its image than [about] solving the Amazonian
problem. We have been defending an environmental policy that takes into
account first the fact that there are people living and working in the
rainforest--the indigenous people, the rubber tappers. We have to take into
consideration that there are already millions of people in the Amazon and
we can't take them out of the forest. But we can do research into
sustainable forms of living for the people who are in the forest. And we
can help the people--such as the gold diggers, who destroy the rivers, the
forests and the land--exploit the Amazon's minerals more rationally. And
with agrarian reform, we will stop the flow of millions of people into the
Amazon by giving them jobs. The government is not [now] doing any of this.
MM: How likely is it that the reforms you have outlined will someday be
Lula: I see all over the world possibilities of great changes. As it was
impossible for Eastern Europe to keep being how it used to be for so many
decades, in the same way it is not possible that the Third World will
continue in its same situation of poverty.
MM: Could a strong reformer be elected in Brazil? Lula: In Brazil, the
word reformist has a bad connotation. The people we have elected are
already reformists. Now it is time for revolutionaries.
MM: But can someone with revolutionary ideas get elected and hold office?
Lula: I see no chance that the military might overthrow a president
affiliated with the PT [the Workers' Party]. The great reforms are
necessary and inevitable; it is just a question of time. I think they will
be supported by the society.
MM: Do you think you will win the next presidential election?
Lula: We have several years yet before the next election, and some other
[candidate from PT] may run. But I think PT will be the government.
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2 LABOR
7.- MEXICAN LABOR: THE OLD, THE NEW AND THE DEMOCRATIC
By Matt Witt
Matt Witt is director of the American Labor Education Center's Mexico-U.S.
MEXICO CITY-- The "dinosaurs" claim to be patriots who put loyalty to
country ahead of special interests. The "neo-cowboys" prefer to call
themselves "modernizers." The "dissidents" say they are simply "democrats."
Behind the colorful battle over nicknames lies a bitter competition between
the three camps in Mexico's labor movement. The outcome of this competition
will have a major impact on multinational corporations which have been
shifting operations to Mexico and on U.S. and Canadian labor groups
concerned about the flow of jobs across the border and the brutal
exploitation of Mexican workers.
The "dinosaurs" are the official labor federations affiliated with the
Institutional Revolutionary Party (PRI) which has ruled Mexico for more
than 60 years. Frequent defenders of government and corporate policies that
have devastated workers during the past decade, the official federations
have lost so much credibility that the regime shows signs of looking for
an alternative set of "responsible" labor spokespeople.
The "neo-cowboys" are a group of union leaders in strategically important
sectors--communications, transportation, utilities, education--who say they
are that alternative. They describe themselves as allies of President
Carlos Salinas in his efforts to "modernize" the economy and make it more
"competitive" by attracting foreign investment. Those efforts, they say,
require workers to make sacrifices and resolve differences with management
through negotiation rather than pressure tactics.
The "dissidents" are a mixture of independent unions and opposition groups
who, instead of trying to revitalize traditional ties between PRI and the
unions, want to create a democratic, militant labor movement free of
government and corporate control.
"Everyone supports 'modernization' in Mexico," said Alfredo Dominguez,
longtime leader of the independent Authentic Labor Front, "but not everyone
agrees on what it means for the labor movement. Does it simply mean more
productivity and more profits? Or does it mean a democratic debate over
what and how goods are produced and how wealth is distributed?"
Dinosaurs: symbols of the past
For the past 50 years, the dominant institution in Mexican labor has been
the Confederation of Mexican Workers (CTM). The CTM is officially
affiliated with PRI, as are some smaller private- sector federations and
the Federation of Unions of Federal Workers (FSTSE). As a condition of
employment, workers in many industries and public agencies have dues
automatically taken from their paychecks both for their PRI-linked union
and for the party itself. The PRI often buses workers covered by the
official federations to demonstrations supporting party policies and to the
polls on election day to vote for its candidates.
The CTM's traditional claim has been that its ties to the ruling party pay
off in benefits for union members. From the 1940s to the 1970s, many
organized workers did enjoy wages and benefits that, while low in view of
the profits extracted, were higher than those received by millions of even
less fortunate Mexicans. But even workers who, in return for a steady job,
accepted Mexico's great inequalities of wealth and near-total lack of
democracy began to lose faith in the 1980s. Due in part to a wage-control
program accepted by the CTM and other union leaders, Mexican workers'
buying power dropped during the decade by more than 60 percent, with the
basic wage now only about $4 per day. Meanwhile, business's share of the
annual gross national product rose from 48 percent to 65 percent.
The CTM and other PRI unions loyally supported their party while it cut
real spending on education, housing, health care and other social benefits
by more than 50 percent. More than half the adult population is now
unemployed or underemployed. "Behind the statistics and figures, we are
living through grave tragedies--as individuals, as families, and as
communities," wrote a group of 1,500 unionists and other lay church members
to Pope John Paul II during his May 1990 visit to Mexico.
At individual companies, the CTM and other PRI unions have actively worked
with management and the government to defeat workers' movements for a
living wage, decent working conditions and democratic rights. For example:
At Ford's Cuautitian plant in the state of Mexico, CTM officials agreed to
cut pay and benefits in half, helped engineer the firing of the workers'
elected leadership and brought in armed thugs who opened fire on the
workers, killing one and wounding eight. The government has refused to
reverse the firings and has not brought any company or union officials to
justice for their role in the murder. [See "Mexican Workers Reveal Problems
at Ford," Multinational Monitor, July/August 1990].
At the Modelo brewery which makes Corona beer for export to the United
States, the CTM recruited strikebreakers to take the jobs of union members
demanding job safety, health protection and a meaningful retirement
For years, the CTM allowed the Tornel tire factory in Tultitlan outside
Mexico City to pay its workers less than their contract required. When
employees sought a government-supervised election so they could leave the
CTM, management fired 650 workers. On the day workers were scheduled to
vote, CTM thugs beat anyone who showed up--and the government labor agency
postponed the election.
At the Fernandez egg farm on the Yucatan peninsula, CTM loyalists beat up
250 workers organizing for decent conditions and the right to an
independent union. The government took seven workers and two of their
attorneys hostage for nearly two months, releasing them only when all the
workers agreed to turn their jobs over to CTM strikebreakers.
Fidel Velazquez, chief of the CTM for 47 of the past 50 years, denies the
federation's involvement in any such acts of violence, blaming "dissidents"
and the press for spreading "false information" even when he is confronted
with hard evidence. When asked about published photos of CTM violence at
Tornel, for example, the 90-year-old union chief told reporters, "We don't
have photographers. To us, the facts are obvious."
Government collusion with the "dinosaurs" belies the reformer image
President Salinas has tried to project to the world by arresting or forcing
the resignation of a few corrupt union chieftains. While Salinas has
portrayed these moves as attacks on corruption, in each case the offending
leaders were causing political problems for the government through
conflicts with multinational corporations, PRI's opposition or the
The attack that received the most international attention came in January
1989, when the army arrested oil union boss Joaquin ("La Quina") Hernandez.
La Quina was viewed as an obstacle by the multinational oil companies that
Salinas is allowing to re- enter the petrochemical industry which President
Lazaro Cardenas nationalized in 1938. The union magnate's replacement
-installed by the government without a membership vote- quickly agreed to
significant concessions in workers' contracts, paving the way for the
eventual arrival of Shell, Exxon and other multinationals.
Other targets of recent government attacks were two CTM leaders in the
maquiladoras, plants mainly owned by U.S. multinationals, which assemble
goods for the U.S. market and generally pay workers--mostly young
women--less than $1 per hour. In many maquiladoras, the CTM or other PRI
federations maintain "ghost unions" or "unions of protection"--paper
structures that collect dues and protect the company from any effort by
workers to organize a genuine union. In other maquilas, official unions
perform the functions of a corporate labor-relations department, enforcing
discipline and removing militant workers from the plant. The government
attacked the two corrupt maquila leaders for occasionally orchestrating
strikes and insisting on a 40- hour work week, when 48 hours is the
Within hours after receiving marching orders from Salinas in September,
1990, Fidel Velazquez announced he was replacing the two officials--not
with democratically elected unionists but with CTM bureaucrats more
acceptable to Salinas and the multinationals.
"Apparently, the maquiladora owners in Matamoros and Reynosa didn't feel
they were getting enough protection for their money," said the leader of
a garment union in a nearby town. "They complained to Salinas, and he
solved their problem."
Neo-cowboys: a modern alternative?
In addition to the nickname "dinosaurs," the traditional PRI union bosses
are often referred to by workers as charros, best translated as "cowboy"
or "wrangler." The term comes from the nickname of a prominent railroad
union leader during the 1940s, "El Charro," who habitually dressed as a
horseman and who accepted money from the government to sell out a major
Playing on this term, many workers accuse the younger generation of
government-allied union chiefs of being "neocharros." The most prominent
target is Francisco Hernandez Juarez, head of the telephone workers' union
and of a newly formed Federation of Unions in Goods and Services (FESEBES)
that so far includes the electric utility workers, airline pilots, flight
attendants and two smaller unions. (The leader of the million-member
teachers union has said her organization will soon join as well.)
In the past few years, the telephone, utility and airline unions all faced
government plans to privatize their companies. Rather than oppose
privatization, union leaders chose to negotiate. Many union members
suffered major reductions in purchasing power, job rights and working
conditions, and, in some cases, large numbers of jobs were lost. In return,
union leaders were assured that their organizations would continue to exist
and that the companies would expand after privatization. "Only 17 percent
of Mexican families have telephones," said a top aide to the telephone
union leader. "This means there is the possibility of a great expansion of
our market. But we need capital to modernize. Obviously, we must develop
a culture of cooperation within the company in order to attract foreign
FESEBES was formed, he added, because the traditional labor federations
"are no longer functioning as intermediaries between the workers and the
government. The government needs someone to negotiate with who is
considered legitimate. President Salinas obviously cannot say so publicly,
but we know that he is in favor of the alternative we are creating."
Critics of the "modernizers" argue that cooperation with the government and
multinational corporations can succeed only if the unions first mobilize
sufficient grassroots power. Private ownership, especially by foreign
multinationals, will mean that decisions about essential services will be
based not on human needs but on profitability, they contend. Investment
capital would be available internally if the Mexican government limited the
interest payments to foreign banks that now consume more than half the
annual federal budget, if corporations and wealthy individuals paid a fair
share of taxes and if controls were implemented to stem the flow each year
of billions of dollars to private bank accounts abroad.
"We have been told that modernization would be carried out in a way that
benefits the Mexican people," said Martha Flores, a telephone operator and
union steward. "But in preparing for privatization we have already lost
many rights that took years to win. Ten thousand operators' positions will
be eliminated by new technology, yet we have not been allowed to
participate in decisions about alternative positions, additional services,
retraining and other ways of preventing the loss of jobs."
FESEBES is different from the traditional federations because it stands for
"union democracy and autonomy" from the ruling party, according to pilots
union leader Homero Flores. Yet, the FESEBES unions have not participated
in mobilizations supporting workers actually demanding democracy and
autonomy, such as those at Ford, Modelo, Tornel or Fernandez Farms. Both
Hernandez Juarez and Jorge Sanchez, leader of the utility workers (SME),
signed the agreements establishing and then renewing the government-
imposed wage control program-agreements which they then criticized as being
unfair to workers. In an appearance at a U.S. union convention, Sanchez
gave his hosts similarly mixed signals concerning the Salinas
administration's top foreign affairs priority, a U.S.-Mexico-Canada free
trade agreement. On the one hand, he touted free trade's supposed benefits,
even though the agreement's primary effect would be to make it easier still
for multinational corporations to profit from lucrative U.S. and Canadian
markets by exploiting cheap Mexican labor. At the same time, he called for
a binational labor conference to discuss proposals the negotiators should
take into account.
Dissidents or democrats
The third force in Mexican labor is a loose collection of left- leaning
groups that call themselves los democraticos--the democrats. Some,
including university workers, seamstresses in Mexico City's garment
district and certain groups in iron and steel companies, have tried to
function as truly independent unions despite strong government opposition.
Such independent unionists have often received crucial training and
organizing support from the Authentic Labor Front, a group originally
established with support from Christian Democratic parties in Europe and
Latin America that now functions independently.
Because the government so rarely grants legal recognition to independent
unions, other democratic groups, like the Ford and Tornel workers, have
tried instead to switch to different official federations willing to
promise some degree of worker control.
In addition, there are reform movements within many of the
government-dominated unions. A leading example is the National Coordination
of Education Workers (CNTE) within SNTE, the national teachers union.
Founded more than a decade ago, CNTE had gained enough strength by April
1989 to call a three-week, nationwide wildcat strike by nearly half a
million SNTE members. As a result of the strike, the old-line PRI politico
who had controlled the union for 17 years was replaced by order of Salinas
himself by Elba Esther Gordillo, a PRI political operative. The strike also
forced the government to accept majority rule by the democratic forces in
several of the largest union locals. Reform efforts continue, however, as
average wages for teachers remain at about $200 per month, most union
officials are still not democratically chosen and the government is
pursuing plans that could divide the national union into 32 state-level
In contrast with the official unions that are dominated by PRI, the
democratic forces shun formal connections with political parties, leaving
individual activists free to participate in politics as they choose. But
the democrats also recognize that it is necessary that they develop
alternatives to the government's economic and social policies, from the
uncritical welcoming of multinational corporations to the privatization and
reduction of public services to the failure to seriously address
"The democratic movement has to move from simply opposing to being capable
of proposing," said Jesus Martin del Campo, a longtime CNTE activist and
spokesperson. "For example, parents and people in the communities know that
teachers' salaries must be raised, but they want to know what else we
propose to do to make education in Mexico more effective and more
In April 1990, more than 60 independent unions and democratic movements
formed the Unified Union Front, the latest in a long series of efforts
during the past 10 years to improve coordination and mutual support among
In addition, the democraticos have increased efforts during the past year
to exchange views with their U.S. and Canadian counterparts, as integrated
investment by the multinationals, free trade agreements and continuing
immigration intertwine the fates of the three countries.
A major theme of such meetings has been the common interest of Mexican,
U.S. and Canadian workers in promoting decent living standards and
democratic rights in Mexico. In recent years, more than half of the 100
largest North American corporations have set up operations in Mexico to
exploit cheap labor, with a resulting loss of hundreds of thousands of U.S.
and Canadian jobs. The democraticos argue that North American unionists
ought to support their struggles as a way to raise Mexicans' buying power,
creating a larger overall market that would result in more secure jobs,
equitable trade, and stable communities on both sides of the border. They
hope the AFL-CIO and its national affiliates will change their traditional
policy of only maintaining official ties with the CTM and begin working
with independent, democratic labor groups.
In the meantime, the democratic groups have been organizing their own
exchanges with North American unionists, including an international women
workers' conference sponsored by the Seamstresses "19th of September"
Union, a Mexico-Canada labor conference on free trade, a multi-union
"Common Interests" conference, a trinational "Solidarity or Competition?"
conference in Minnesota and a visit to Mexico by a U.S. teachers'
delegation hosted by the democratically controlled SNTE locals.
"We need to improve labor's international network for communication and
mutual support," wrote two participants in the October 1990 Common
Interests conference, Mexican Ford worker Marco Jimenez and Minnesota Ford
worker Tom Laney, in a recent joint op-ed article in the St. Paul Pioneer
Press. "Our goal must be to push the companies and our governments to bring
Mexican living and working conditions up toward U.S. levels, rather than
allowing U.S. levels to be brought down."
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2,
8.- LATIN CAPITAL GOES NORTH
By Holley Knaus
SINCE IT BURST on the international scene in 1982, the debt crisis has
dominated Latin American economic policy decisions. But Latin American
countries' efforts to pay back debts have continually been undercut by
their domestic elites. Wealthy Latin Americans have sent capital abroad,
adding significantly to balance of payment problems which arise when more
money leaves a country than enters. From 1973 to 1987, capital flight from
Latin America amounted to $151 billion, or over 40 percent of the total
foreign debt Latin American countries acquired during the same period.
The magnitude of the capital flight problem for Latin America has recently
attracted the attention of economists and bankers worldwide. The 1989 Brady
Plan, proposed by U.S. Treasury Secretary Nicholas Brady, sought to address
the problem by improving the investment climates in Latin American
countries. But economists are increasingly questioning this approach. And
some are pointing to evidence which suggests that capital flight can only
be stemmed by debt forgiveness and direct controls on capital.
The cost of lost capital
Capital flight has intensified Latin America's economic crisis in a variety
of ways. Since the mid-1980s, when new loans dried up and their debt grew
to over $400 billion, Latin American countries have found it harder to make
interest payments. Not only has capital flight exacerbated balance of
payments deficits, it has also diverted funds that could be used to service
Capital flight hinders economic development by limiting Latin American
countries' ability to import the vital industrial inputs which Latin
American countries need to make use of their existing economic capacity.
Capital flight has also reduced the taxable assets and income available to
governments in the region. Latin American governments have not
traditionally taxed their citizens for income earned outside their country
of residence, explains Manuel Pastor, Jr., an economist at Occidental
College, in a report for the Washington, D.C.-based Economic Policy
Institute. Latin American governments scrambling to service the debt, and
no longer able to look to foreign banks for relief, have had to rely
increasingly on inflationary taxes. With the assets of the wealthy shielded
in foreign countries, the burden of debt relief falls disproportionately
on the poor.
The combined effects of capital flight have devastated Latin American
societies. The economies of wealthier countries such as Argentina, Brazil
and Mexico have stagnated in a decade of no growth, while the internal
structures of poorer nations such as Ecuador and Peru have dramatically
Desperate to repatriate lost capital, Latin American governments are
adopting many of the policy recommendations of the multilateral banks. But
these recommendations are brutalizing the people of the region. Sheldon
Rappaport, a spokesperson for the World Bank, says that international
lending institutions offer governments "tough policy advice." They
recommend measures designed to bolster confidence in the Latin American
financial situation by increasing the "opportunity to get returns on
investments [through] reforms to make the economy more market- oriented,"
he says. World Bank and International Monetary Fund (IMF) schemes to
improve domestic investment climates typically involve the imposition of
austerity and deregulatory measures including cutbacks in health services,
education, housing and other social programs and the lifting of price
The social costs of IMF measures designed to attract lost capital were
revealed in Venezuela in 1989. Venezuela has a higher proportion of its
assets abroad than any other Latin American country. Capital flight has
contributed more to the country's balance of payments difficulties than its
debt; over the past 15 years, the overseas assets Venezuela has acquired
have exceeded foreign borrowing by $20 billion. When President Carlos
Andres Perez took office in early 1989, the government, in an attempt to
bring home Venezuelan flight capital, imposed strict austerity measures.
The nation's standard of living plunged, wages plummeted and unemployment
rates soared. In February 1989, anti-austerity riots broke out, leaving
over 300 people dead.
U.S. policymakers expressed concern about the Latin American debt crisis
throughout the 1980s. In March 1989, Treasury Secretary Brady announced a
plan that offered the possibility of some form of debt relief to Third
World nations [see "Bank Relief, Not Debt Relief," Multinational Monitor,
November 1989]. While the Reagan administration primarily called on
countries to run trade surpluses to generate income to pay off their debt,
the Brady Plan focuses on ways to reverse capital flight.
Responding to this new emphasis, the IMF made its support of debt reduction
efforts contingent upon a country's demonstration of its ability to
repatriate flight capital. But bankers and government officials are already
beginning to see the flaws of this approach. Pastor says that the Bush
administration has realized that this contingency in effect "puts the cart
before the horse" and that capital will return to Latin American only after
the debt shrinks.
Still, countries hoping to be placed on the "Brady list" are expected to
implement orthodox IMF policies to stem capital flight: a combination of
austerity measures, including strict wage controls, and moves toward
deregulation to open trade and liberalize foreign investment rules.
So far, the Brady plan has not met with much success, as the test case of
Mexico, a "model debtor" with a government friendly to the United States,
illustrates. Mexico's only success in repatriating some of its lost $55
billion in flight capital did not come through an improvement of its
investment climate based on IMF measures, but through much more direct
means. In August 1989, the government offered a general tax amnesty to
investors who repatriated foreign assets; about $2 billion has returned to
IMF critics such as Andrew Zimbalist, an economist at Smith College, say
that the Fund's policy prescriptions are "much too simple-minded [and]
ideologically based." Although a combination of austerity and deregulation
may help stem capital flight from certain countries, Zimablist says, IMF
measures "tend not to work" and should not be applied across the board to
all Latin American economies.
The IMF's formulaic prescriptions do not appear to jibe with reality. In
his study, Pastor concludes that one of the central tenets of the IMFs
policy recommendations--its emphasis on lower wages as a means to improve
the investment climate--is unjustified. His statistical analysis found
little connection between increases in the labor share of national income
and the outward flow of capital. Pastor suggests that one explanation for
these results may be that higher labor share raises internal demand, making
investment opportunities more attractive.
The scope of the capital flight problem and the failure of IMF- type
measures to solve it suggest that new approaches are necessary. The IMF
and World Bank have long opposed legal limits on capital movement as
incompatible with free market ideology, and have claimed that such measures
will actually exacerbate capital flight because they worsen countries'
investment climates. Pastor, however, found that countries which institute
capital controls tend to exhibit lower levels of capital flight.
It is clear, however, that capital controls will not spur the repatriation
of flight capital. Many economists say the very size of the debt scares off
potential investors, who fear that any profits they generate will be taxed
away by governments in need of cash. Pastor says that only a far-reaching
program, based on substantial debt relief and incorporating moderate use
of capital controls, a progressive redistribution of income and a more
efficient tax system, offers the possibility of solving Latin America's
capital flight problem and, more broadly, extricating the region from its
 MULTINATIONAL MONITOR Jan/Feb 1991 VOLUME 12, NUMBERS 1 & 2
9.- CORPORATE PROFILE BRAZIL'S MEDIA MONOPOLY
By Bill Hinchberger
Bill Hinchberger is a journalist based in Sao Paulo, Brazil. He is
associate editor of the reference book Third World Guide, 1991-1992.
SAO PAULO, BRAZIL--Every evening over 50 million Brazilians tune in to what
many critics call the greatest threat to the country's fledgling democracy.
All eyes are glued to TV Globo, a monolithic television network that some
believe is capable of turning fiction into reality. Given its penetration
into 99 percent of Brazil's continent-sized territory and its 70 percent
audience share in a country of 150 million (where a quarter of the
population is illiterate and millions more are semi- literate), the
assertion has a strong foundation.
But statistics fail to illustrate the reach of Globo's tentacles into the
Brazilian psyche. Consider, instead, a pair of shootings--one real, one
fictional--which coincidentally occurred during the same period in late
1988. While people throughout the rest of the world called for a prompt and
thorough investigation of the assassination of Amazon labor leader Chico
Mendes, Brazilians were sidelined by a version of "Who shot J.R.?"--as a
villainous character in a Globo soap opera fell victim to an unknown
gunslinger. In Brazil, the fictional murder overshadowed the real one.
Another dramatic example shows how quickly and directly Globo can affect
the Brazilian market. When the star of the top- ranking novela, as Brazil's
evening soap operas are called, observed off-handedly, "I don't like the
color purple," sales for purple clothing suddenly plummeted. Responding to
complaints from boutiques, scriptwriters were forced to have the character
change her mind in a subsequent episode.
TV Globo's power is immense. It is the world's fourth largest commercial
television network, ranking behind only the three U.S. giants. The network
raked in record advertising sales domestically in 1989, reportedly between
$500 million and $600 million. It has 78 stations throughout Brazil.
Company officials say that Globo has 8,000 employees. And in 1985 The
Christian Science Monitor reported that its activities generated some
35,000 jobs. The network's programs are shown in 112 countries, including
the United States (on Spanish language stations) and China.
Unsatisfied with its virtual monopoly over Brazil's audience, Globo has
taken steps to exert more direct control over its competition. In February
1990, it reached an agreement with TV Gazeta in Sao Paulo, giving control
over the rights to a wide range of films and mini-series to the smaller
Gazeta. Officials with the second-ranking national network, the Brazilian
Television System (SBT), say that Globo's move was designed to counter SBTs
efforts to boost it's ratings in Sao Paulo, South America's largest city.
Similarly, in 1989, according to Luiz Fernando Santoro, professor of
communications at the University of Sao Paulo, Globo bought up the
broadcasting rights to Brazilian soccer matches "so that nobody else would
get them" and promptly resold them to another network, TV Bandeirantes.
Additionally, Globo has made repeated efforts to purchase a chunk of the
Manchete Network, the country's third largest.
Launched by the Time-Life Group in the early 1960s, Globo was nurtured
under the protective wing of the 1964-1985 military dictatorship, and
kowtowed to the regime enough to earn the nickname "the Ministry of
Information." The network remains a steadfastly conservative force in
Brazilian politics, having played a leading role in efforts to stem the
tide of the country's redemocratization process. Defeated in its attempt
to prolong the dictatorship, the network eventually embraced democracy,
only to enlist in the well-orchestrated and successful campaign in support
of rightwing populist Fernando Collor de Mello's successful 1989
The network's news department has been involved in a series of
well-documented attempts to distort facts. On the eve of the 1989
presidential runoff, for example, Globo presented an edited version of the
final candidates' debate, which even a top Globo executive admitted
highlighted the worst moments of the event for Collor's opponent, leftist
Luis Inacio "Lula" da Silva of the Workers Party (PT). Lula charged: "They
were playing their last hand when we had no time to react."
The power behind the camera
Globo is controlled by one 85-year-old man, Roberto Marinho, whom many
consider to be the most powerful person in Brazil. Globo's sole owner, he
keeps a tight rein on his news department. The British news magazine The
Economist once called him a "one-man conglomerate." Besides the television
network, Marinho runs the daily newspaper O Globo, the country's largest
privately-owned radio network, a record company and a publishing firm, as
well as companies in such diverse areas as telecommunications, electronics,
real estate, agriculture, insurance and banking. Overall, his empire
includes more than three dozen companies operating worldwide, from Europe
to Suriname to Cuba.
Many of Marinho's business initiatives have required official acquiescence
or assistance, and over the years he has developed a symbiotic relationship
with successive governments. Beginning with the military regime and
continuing through the first civilian government under Jose Sarney, Marinho
helped choose a slew of ministers, particularly in the areas of
communications and education (the minister of education determines funding
for the educational projects of the Roberto Marinho Foundation), according
to researchers and Globo insiders. While such influence is difficult to
document, Marinho himself recounted the role he played in choosing one of
Sarney's economic ministers in a May 1990 interview with the daily O Estado
de Sao Paulo. Other examples of Marinho's coziness with top ranking
officials are better-known. When veteran politician Antonio Carlos
Magalhaes assumed leadership of the Ministry of Communications under
Sarney, Marinho promptly transferred the lucrative Globo affiliation
contract to the television station the minister owned in his home state of
Bahia. Coincidentally or not, Magalhaes' ministry later facilitated
Marinho's acquisition of controlling interest in the Brazilian subsidiary
of the Japanese telecommunications company, NEC. The latter deal is now the
subject of a congressional investigation.
Globo's relationship with the Collor administration is more complex. The
Collor family owns the Globo affiliate in the president's home state of
Alagoas, and Collor's brother Leopoldo rose to become regional director for
TV Globo in Sao Paulo-only to be fired by Marinho. According to some
reports, when Collor was elected governor of the minuscule and otherwise
unimportant Alagoas in 1986, the Globo news department assigned a reporter
to cover his administration and ensure that his image was projected
nationally at least twice a week. Candidate Collor sought Marinho's support
early on and received an initial blessing in the form of favorable
coverage, helping mold his image as a reformist. Before the first electoral
round, Marinho had already openly endorsed Collor.
This seemed to be business as usual. So it comes as some surprise that
Globo insiders and observers agree that Marinho is now "afraid" of Collor.
According to Santoro, who in 1987-88 worked at the Roberto Marinho
Foundation, Collor "knows [TV Globo] has to be controlled." Santoro says
Colloris "developing a series of policies to control TV Globo, without
entering into conflict." He points to Collor's selection of Carlos
Chiarelli as education minister as an example of Marinho's new-found
distance from the center of power. Not only does it appear that Marinho was
not consulted, but Collor chose a man who, as a member of the Brazilian
Congress in 1988, led an attempt to open an inquiry into Marinho's
activities. Santoro, like many others, believes that Marinho has enough
skeletons in his closet to seriously threaten his empire should the
government decide to stop looking the other way. "Collor de Mello has TV
Globo in his hand without giving much in return," says Santoro, noting that
the network, like most of the Brazilian media, has continued to support the
president. "He must be saying to Roberto Marinho, 'I won't sponsor a
congressional inquiry, and I'll let you die in peace."'
Marinho's career as a media mogul began when, at the age of 21, he
inherited the Rio de Janeiro daily newspaper O Globo from his father a
month after it had opened. Later, he used that newspaper to declare his
initial support for the 1964 military coup. Already on an ideological
wavelength similar to the dictatorship, Marinho's plans to create a media
empire dovetailed nicely with the military regime's plans for "national
The Globo television network began in 1961, as documented in Daniel Herz's
book The Secret History of the Globo Network. That was when Marinho and
Time-Life negotiated a contract which many claim violated Brazilian
constitutional regulations regarding ownership and investment in the media
by foreigners. Signed in 1962 and carried out as of 1964, the contract
created a joint venture, with direct investment by the U.S. multinational.
(Herz says Time-Life invested more than $6 million between 1962 and 1966;
in interviews with the Brazilian press, Marinho has admitted to receiving
$4 million, which he claims was later repaid.) Time-Life also provided
technical assistance, training and personnel in the areas of television
technology, engineering, administration and commercial activities. Among
the personnel was Joe Wallach, who left KOGO-TV in California and, without
speaking a word of Portuguese, became Globo's executive director. The U.S.
connection went a step further, according to Santoro, who recounts how the
nascent enterprise was given an additional boost by Time-Life's lobbying
of Brazilian advertising agencies, almost all of which were branches of
Aided from abroad by Time-Life and at home by a military regime anxious to
invest in telecommunications, Globo soon overtook what had been the
dominant network since the birth of Brazilian television in 1950, TV Tupi.
Already buying up stations across the country, Globo was the first to take
advantage of satellite broadcasting made possible by the government in
Globo's distinctiveness and popularity stem from its own programming style,
known as the Global Standard, which the Brazilian public has adopted as its
own and which outpaces the competition's technical capabilities. Today, the
network produces an astonishing 80 percent of its programming. Aided by its
own extensive market research and public-preference polls, the network has
proficiently blended high-quality technical production, comparable to U.S.
standards, with a style and content that appeals to Brazilians--"full of
frills, attention- getters and presentation," as Santoro puts it.
Despite the criticism of Globo's hegemony, however, most Brazilians are
comfortable with Globo. Study results included in a network promotional
packet reveal that 55 percent of those interviewed consider Globo the
television network "most connected to the community." It is a video version
The power of the camera
The flagships of Globo's programming are its novelas, part soap opera, part
mini-series. Two separate novelas are sandwiched around the 8 p.m. network
news (guaranteeing, incidentally, the latter's audience), each running six
nights a week for three or four months. They are fast-paced, but lack most
of the melodrama of American soaps and the violence of many U.S. evening
programs. Instead, they provide high doses of romance and intrigue.
Globo's novela operations have been compared to those of the Hollywood
studios, particularly MGM, in the 1940s. To outpace the competition, Globo
signs up many of Brazil's leading actors and actresses--maintaining a
reserve of top talent. Ironically, many of those same stars filmed spots
for Lula's presidential campaign.
Regardless of their personal preferences, those actors and actresses
present Globo's version of reality in the novelas. Researcher Maria Helena
Weber, of Rio Grande do Sul state, analyzed three novelas which appeared
during the presidential campaign in 1988-89.
All three, she concludes, worked to buttress Collor's campaign. Salvador
da Patria (Savior of the Country), which ran as the presidential campaign
shifted into gear in mid-1989, tells the story of a mentally deficient
character who becomes mayor. At first controlled by powerful political
forces, he later expresses independent positions. It teaches, according to
Weber, that "politicians don't need to have a political background, they
don't need to be intelligent, they don't need to have a history." She says
this orientation favored Collor, the former supporter of the dictatorship
trying to hide his background and run against the system.
Weber maintains that the novelas set the ideological stage for Brazil's
depoliticization, precisely as the country drew close to its first direct
presidential elections in 30 years. She adds that this helped propel
Collor's anti-political candidacy and also contributed to the high number
of blank and spoiled ballots in the October 1990 congressional elections
(voting is obligatory in Brazil).
Weber is quick to point out that outside Brazil it may seem strange to
attribute such influence to nightly television programs. But she argues
that in a country lacking an adequate educational system, most people have
few alternative sources of information--a problem compounded by the fact
that Brazil is emerging from a dictatorship and still suffers from a
paucity of solid democratic institutions. "Globo doesn't have power in
isolation," she says. "The problem is that you have weakened political and
educational institutions in Brazil."
In many ways, Globo has followed Hollywood in its efforts to
internationalize Brazil. Many of the world's images of Brazil are created,
owned and marketed by Globo. Like U.S. movie and television producers, the
network pursues strategies of dumping and differentiated pricing structures
to sell its novelas and other selected programming abroad. (A Globo
executive once compared the company's sales tactics to those of drug
pushers. You give it away to capture the market, then up the ante, she
said.) This approach has helped Globo out-distance its main international
competitor in the novela market, Mexico's Televisa.
Globo took two major steps to increase its international penetration in the
past decade. In 1980, it created an international division, and then in
1985, trying to get a foothold in Europe prior to unification, it purchased
TV Montecarlo, which has transmitters aimed toward Italian territory. The
TV Montecarlo project did not develop as well as expected, however. In
September 1989, Globo sold 40 percent of its Dutch-based holding company,
Globo Europa, which controls TV Montecarlo, to the Italian Ferruzzi Group.
But Globo continues to move forward on other international fronts,
particularly in the area of co-productions, having signed such agreements
with Italy's RAI and the Cuban Radio and Television Institute.
Despite the financial strength to which these agreements attest, TV Globo's
future is uncertain--not only because of President Collor's unpredictable
ambivalence toward the network, but also because so much of its identity
and decision-making power are wrapped up in its aging founder. Marinho's
three sons are expected to inherit the operation, but there is no guarantee
that long-time Globo professionals, loyal to the old man, will not look for
new challenges and sweeter contracts with growing competitors SBT and
============RRojas Research Unit/ 1995===============
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