From Labor's Champion
April, 1989
U.S. Monopolies Rake in Super-Profits
Developments in Mexico, especially the conditions faced by the Mexican working people and their fight for a better life, are of great concern to the workers of the United States. As conditions grow more desperate, the people's struggle in Mexico is accelerating. The advance of the popular struggle in Mexico contributes greatly to the development of the U.S. workers' struggle. this is the second of a series of articles on the situation in Mexico.
Together with the growth of agriculture, Mexico's industrial expansion since World War II was hailed by the bourgeoisie as another "economic miracle." Mexico was transformed from being an exporter of raw materials to a country industrially dependent on U.S. imperialism, assembling and producing goods for export, and recently becoming a major oil exporter. As with the development of agriculture, Mexico's industrialization benefits only the U.S. and and other foreign monopoly capitalists and the Mexican bourgeoisie, at the expense of the Mexican workers.
From 1940 to 1975, Mexico's industrial output increased over 9-fold. Meanwhile, direct foreign investment by U.S. monopolists increased about 24 times, from some $400 million in 1940 to $9.6 billion in 1985 (out of $14.6 billion total foreign investment). The percent invested in manufacturing went from 7% in 1940 to over 77% in 1980. The rate of profit in the dependent countries, due to the super-exploitation of the workers there, is always higher than within the U.S. The profit rate for imperialist corporations in Mexico is 18.3%, the highest rate in Latin America.
U.S. monopoly capitalists, through direct investment, provision of credits, etc., control the most strategic areas of Mexico's economy. Already by 1970 U.S. monopolies controlled 57% of the auto industry, 76% of rubber, 54% of mining and metallurgy and 64% of transportation equipment, to take just a few examples. There are 2,100 U.S. companies with investments in Mexico, and 71% of the largest 100 U.S. companies have investments in Mexican manufacturing. The U.S. monopolists make up 70% of all foreign investments there. For U.S. imperialism Mexico is clearly one of the most important countries for export of capital.
Other foreign imperialists (England, West Germany, Switzerland, Japan and France, in order of their direct investments in the country) control much smaller shares of the Mexican economy. The Mexican bourgeoisie is itself left with a secondary role in the exploitation of its "own" workers. It is concentrated in the areas of light industry, banking, agriculture, services and tourism. (For comparison, the 50 largest Mexican monopolies had a total capital of $456 million in 1977, while total direct foreign investment in that year was $5.6 billion.)
Direct investment is only one way in which U.S. monopolists profit from the labor of Mexico's working people. Many "Mexican owned" companies are actually owned by U.S. capitalists, who use Mexican "prestanombres," Mexicans who lend their names to a foreign company. This is done to evade laws requiring majority Mexican ownership, to get easier credit from Mexican banks and to assuage Mexican national pride. It is a trick with which U.S. bourgeois politicians are quite familiar. In 1960 George Bush formed an oil-drilling operation, Permargo, in Mexico using Mexican businessman Jorge Diaz Serrano to disguise the 50% U.S. ownership. The capitalists in the Democratic Party are also no strangers to the exploitation of Mexican workers. Former Vice Presidential candidate Lloyd Bentsen owns a large ranch in Texas that uses mostly Mexican immigrants.
The U.S. also benefits from a continuing trade surplus with Mexico, the U.S.'s third largest trading partner. This is largely due to the general conditions of unequal trade suffered by all dependent countries in their relations with the imperialist countries. They are forced to sell cheap and buy dear in a world market controlled by the imperialists.
Finally, the imperialist banks gain tremendous super-profits from the continuing payments of debt service on loans. This is the main way that U.S. imperialism exploits surplus-value from Mexican working people. We have already stated that Mexico pays some $10 billion each year in debt service. We will go further into the causes and consequences of the debt in the following article. Let us just point out here that Mexico's debt made up 17% of the total U.S. bank loans to all the dependent and revisionist countries. Before the 1982 crisis, the 10 largest U.S. banks (including Citibank, Chase Manhattan and Bank of America) had some 40% of their capital in loans to Mexico. This has since been reduced to 30% as the banks moved to protect their capital by diversifying their investments.
Some of the clearest examples of how Mexico's industrialization benefits the U.S. monopoly capitalists, not the Mexican people, are provided by the maquiladoras. These are foreign (about 90% U.S.) owned assembly plants, concentrated mainly along the U.S. border, but a few are in the area of Mexico City area as well. They are concentrated in the electrical and electronics industries, textiles, transportation equipment and furniture. They exist only to exploit the cheap labor of the Mexican workers. All components are shipped in from the U.S., assembled, and the finished products are again shipped out to the U.S. The U.S. companies pay no customs duties on the imported components, and pay only a minimum export tax on the value added by the labor of the Mexican workers. The maquiladoras are exempt from any laws that restrict foreign ownership of companies in Mexico.
As of June, 1988, there were 1,370 maquiladoras employing more than 370,000 workers. 65% of the workers are women, the great majority between 17 and 26 years old. The Mexican plants are becoming even more significant to the U.S. monopolists than those in East Asia, which for a long time have played a major role in providing cheap labor for assembly operations. The maquiladoras pay even lower wages, and have the additional advantage of having much lower transportation costs since they are much closer to the U.S. Mexico already imports about $10 billion worth of components to be assembled each year. The U.S. hopes to double its investments in the border area over the next 7-8 years, and to expand operations in the rest of the country as well.
The Mexican government and U.S. capitalists claim that the maquiladoras are benefiting Mexico by providing jobs. But the unemployment rates in the border cities are still extremely high because of the influx of new workers from the interior of the country. The only gain from the maquiladoras is that the workers, and particularly the women, have become more concentrated and have started to organize. Many new unions have been formed in the industrialized North of the country, and as the struggle progresses, the workers' revolutionary consciousness will undoubtedly increase as well.
In the next issue we will look at the consequences of the discovery of large petroleum resources in Mexico in 1976. Given Mexico's situation as a dependent capitalist country, petroleum has become one more area for indirect exploitation by U.S. imperialism. We will see how the whole development of dependent industrialization, including the petroleum industry, aided in the enormous growth of Mexico's debt. This debt allows the imperialist countries to suck out profits from the labor of all Mexico's working people, through debt repayment under the IMF-imposed austerity programs. We will also look at some of the struggles of the Mexican workers, and see some of the ways that U.S. workers can support these struggles against our common enemy, U.S. imperialism.
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