From Labor's Champion
May, 1989
Developments in Mexico, especially the conditions faced by the Mexican working people and their class struggle, are of great concern to the workers of the United States. Information, contact and joint actions between the workers of Mexico and the United States are essential for the advance of the revolutionary struggle in both countries. This is the third of a series of articles on the situation in Mexico.
In late 1976, the Mexican government announced the discovery of vast new deposits of oil, both along the Caribbean coast and in the southern state of Chiapas. The estimated potential oil reserves were 250 billion barrels, close to that of Saudi Arabia, which has the world's largest reserves. There were also proven deposits of 200 trillion cubic feet of natural gas, with estimates of 4 times that in potential reserves.
The Mexican bourgeoisie claimed that these discoveries would pave the way to Mexico's financial independence from the imperialist countries. But as Mexico is a dependent capitalist country, these new discoveries could only increase its dependency. That is just what happened. The Mexican government promised that it would not export its oil mainly to just one country, but by 1981 the U.S. was getting 80% of Mexico's total oil and gas exports, followed far behind by Israel, Japan, Spain and France. Oil has become a major raw material export for Mexico, with oil exports making up 75% of total exports. The oil goes mostly to benefit the foreign monopolies, as exports are more than 50% of Mexico's oil sales, and 90% of Mexico's oil exports are in the form of crude oil. Mexico was the first country to sign a contract to sell crude oil for the U.S. Strategic Petroleum Reserve, and it agreed to accept $3 per barrel less than OPEC's price.
There were plans to build a natural gas pipeline from the gas deposits in Chiapas all the way to Texas. The Bechtel Corporation, one of the largest U.S. construction and engineering monopolies, was one of the main contenders to build the pipeline. However, massive street demonstrations in 1977 and 1978 forced the Mexican government to stop the extension of the pipeline to Texas so as not to sell off all of the country's natural resources.
The new oil discoveries have led to increased control by foreign monopoly capitalists of related areas of the economy. The Mexican government further eased restrictions on machinery imports and foreign investments, so that today the whole petrochemical industry is dominated by the imperialist companies. And already by 1978, 30% of U.S. industrial investment in Mexico was in the chemical industry.
While industries in Mexico pay only 1/3 of the world market price for oil and gas products, the Mexican people have experienced repeated price hikes for these products. Mexico's oil wealth has become another area of exploitation for the U.S. and other monopolists. Rather than benefiting the Mexican people, it has contributed to their increased poverty.
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Mexico's oil is produced by PEMEX, a Mexican state company, but as we have seen, much of its production is mortgaged to the U.S. monopolies. Leading circles in the U.S. bourgeoisie, the Rockefeller family in particular, have been pushing Mexico to export its oil and use revenues from this to increase the import of manufactured goods and machinery from the U.S. David Rockefeller is the former president of Chase Manhattan Bank and the chief founder of the Trilateral Commission, an organization of representatives of the monopoly bourgeoisie of the U.S., Western Europe and Japan. In 1981 he formed a new group, the Americas Society, made up of major U.S. monopoly capitalists with investments in Mexico and other Latin American countries, to work with U.S. government officials to coordinate policies. Rodman Rockefeller, David's nephew, chairs the U.S. section of the Mexico-U.S. Business Committee, which similarly groups U.S. monopolists that invest in Mexico. This group has been particularly active in pushing for increased exploitation of Mexico's oil resources.
Mexico's oil wealth has been used as an excuse by the U.S. to threaten Mexico with the possibility of military intervention. James Schlesinger, Energy Secretary under former U.S. President Jimmy Carter, had called securing U.S. oil supplies "a military responsibility." Various other U.S. bourgeois representatives, including former president Ronald Reagan, have declared that the revolutionary upsurge in Central America is a "threat" to Mexico. Obviously, they mean a threat to the continued domination and exploitation of the Mexican working people by U.S. monopolies. U.S. workers must clearly support their class brothers and sisters in Mexico by actively opposing any threats of intervention, as well as supporting all steps taken by the Mexican people against their continued oppression.
Mexico's oil resources, besides going directly to benefit the imperialist oil monopolies, have also served to increase, not diminish, Mexico's huge debt to the imperialist banks and lending agencies. Much of PEMEX's new investment has been financed by foreign loans.
In 1981 alone, PEMEX bought $2 billion from U.S. oil equipment companies. U.S. monopolies such as Occidental Petroleum and Dresser Industries have made tens of millions of dollars from oil related sales each year. Other oil-related monopolies such as Hercules and Dupont (which took over Conoco Oil in 1981) from the U.S., and Mitsubishi, Japan's largest monopoly, have set up joint ventures with Mexican companies.
During the early 1980s, PEMEX's spending was double its income. In 1982, it had a debt of $25 billion, 1/3 of Mexico's foreign debt. (The state electricity company, CFE, was responsible for another 15%.)
In 1981, a $4 billion short-term loan to PEMEX was organized through the Bank of America. U.S. banks made up 40% of the loan, while Japanese banks made up another 30%. This was also the year that declining world oil prices began to make clear that oil was no solution to Mexico's dependency. The country had to cut its oil export prices by at least $8 per barrel. This cost Mexico $10 billion in exports during the first 6 months of 1982.
One can see the overall effect of oil on Mexico's economy. Before the huge oil discoveries in late 1976, a devaluation of the peso by almost 100% had led to a doubling of the foreign debt, to almost $50 billion. After the beginning of large scale oil exports, Mexico's debt further increased, to $80 billion in 1982. The austerity program imposed by the U.S. banks and international lending agencies led to further devaluations of the peso in 1982. These brought about a 10-fold decrease in the peso's value relative to the dollar since 1976. The U.S. imperialists also negotiated agreements for Mexico to sell the majority of its oil and gas to the U.S., at less than world market prices. Mexico became the U.S.'s number one foreign oil source.
In return for further mortgaging its economy to the U.S. monopolists, Mexico's bourgeoisie obtained new loans and credits amounting to $10 billion. But these loans only lead to further crises down the road. And we have already seen the effects of the austerity program on Mexico's working people, who have suffered a 50% decline in real wages since 1982, to less than $3 a day.
In the next issue we will examine how the enormous growth of Mexico's foreign debt, most of it owed to U.S. banks and U.S.-dominated lending agencies, has led to a sharp fall in the standard of living of the Mexican working people.
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