Closeup/International Affairs

Mexican time bomb

Oil could be the salvation of mañana country

Arturo Gonzalez June 12 1978
Closeup/International Affairs

Mexican time bomb

Oil could be the salvation of mañana country

Arturo Gonzalez June 12 1978

Mexican time bomb

Closeup/International Affairs

Oil could be the salvation of mañana country

Arturo Gonzalez

Poor Mexico.

So far from God and so near to the United States.—Porfirio Díaz, Mexican President (1876-1880, 1884-1911)

Mexico is in a race to the wire. Population vs. petroleum. Which side hits the tape first could be one of North America’s most important events of this century.

Forget the age-old stereotype of Mexico as a land of chili con carne and sombrero-wearing, tequila-tranquillized campesinos slouched up against adobe walls. A more

accurate representation is an 18-year-old, eager to work, whose economic horizons have been shaped by the two-car-garage symbols seen on the American TV shows piped into his village. He wants a job so badly that he’s willing to move to the slums of Mexico City, or ford the Rio Grande by the light of the moon, to pull down a pay packet and eam a fair share of self-respect.

More than any other demographic fact, the sheer weight of numbers of young people coming on to the Mexican labor market is what shapes Mexico’s pre-

cariously promising future, and warps its tradition-encrusted politics. Just as the Aztecs used to offer the god Huitzilopochtli still-pumping human hearts to assure that night would become day, Mexico seems to pump out babies to create its new future at a rate that is a demographer’s nightmare. This country, so full of life, is too full of new lives.

“It’s the Mexican macho frame of mind that’s the problem,” sighs a birth-control clinic worker, looking out at a quarter-full waiting room. “Plenty of sons means

you’re a real man. And that there are plenty of hands to work the farm. And that you won’t starve when you’re old. So those who eat the least seem to breed the fastest.”

About 30 million of Mexico’s 65 million citizens today are under age 14, portending a new birth tidal wave in the next few years which will further swamp the country’s capacity to deal with social ills. Six thousand new Mexicans are born every day; the national birthrate is now 42 per 1000 (vs. 16 in Canada and 15 in the U.S.A.). The country’s population has tripled since 1940, and less than half the 18-million-strong work force is fully employed. Still the machomonsoon rages on.

Luis Echeverría Alvarez, Mexico’s president from 1970-76, fueled Mexico’s ominous birth boom with an ill-fated slogan, “To govern is to populate.” His successor, the much more conservative José López Portillo, has jammed on the country’s population brakes as best one can in a staunchly Catholic nation. He’s trying to pull a 3.2-per-cent annual population growth rate down to 2.6 per cent. “Birth control” is no longer a forbidden phrase. Family planning advice is now available free in hospitals and clinics. Food and general stores in cities and villages are about to begin selling contraceptives at half cost, something Mexico can well afford since it is the world’s biggest producer of pure estrogen. Syntex, the pill pioneer, is a firm which was born in Mexico.

If there’s any single answer to the massive threat of overpopulation which menaces Mexico, it’s to be found down south in

the dusty, back-country villages of Chiapas and Tabasco, once famous solely for the tongue-searing, blood-red sauce which the campesinos lash on everything they eat. Now the area is famed for another liquid: petroleum. Beginning in May, 1972, near the village of Reforma, geologists began to become excited about what their instruments were recording under Mexican soil. The country has always had some oil; indeed it nationalized British and American firms in 1938 to form Pemex, a state-owned concern which has steadily pumped a moderate flow of black gold into local refineries. But suddenly the trickle has burst into a torrent.

Over 100 potential oil-bearing formations have already been identified, and only 10 per cent of Mexico has been thoroughly mapped so far. The astounded geologists are now predicting Mexico is sitting on about 120 billion barrels of oil, making it the third richest oil country in the world, topped only by Saudi Arabia and Iran. The U.S., Mexico’s obvious customer for this fuel bonanza, has only 29.5 billion barrels left in its reserves. “Oil and gas are the muscles of our anatomy,” says Jorge Diaz Serrano, head of the Pemex organization. “We must use them. This wealth makes it possible to create a new country that is not only prosperous, but rich—where the ‘right to work’ will at last become a reality.”

But for this sanguine prediction to come true, Pemex will have to shape up. It is arguably the most corrupt, least efficient major organization in Mexico. Jobs in the department have long been considered sinecures. Executive positions are openly sold to incompetents if the bribe money is sufficient. Politicians’ wives are routinely “given” one or two Pemex gas stations as

gifts, the profits going into private pockets rather than government coffers. Other Mexican government bureaus routinely dump their least effective executives into Pemex positions, where traditionally they have never been heard of, or seen, again. When Mexicans nationalized their oilfields in 1938, they did so under the cry: “The Oil is Ours.” The local wisecrack now is that Pemex’s employees have adopted the slogan as their very own.

Despite the creaking bureaucracy, the government is investing more than $2.5 billion to triple its ability to produce and refine oil. Some 1,300 new wells are being

dug at a cost of $1.02 billion, funded by 15 of the world’s biggest banks. “The grand illusion is becoming a reality,” enthuses petrochemical planner Cesar Bautista. “Already we are opening plants equal in size to any in the world, and building even bigger ones. We are on the way to becoming world figures in the petrochemical market—permanent exporters, not just marketers of temporary surpluses.” In a gesture designed to please the U.S., Mexico has vowed not to join OPEC, despite its potentially enormous status as a petroleum exporter.

The technicians are determined not to waste a whiff of the precious hydrocarbons. Private firms are being encouraged to create chemical companies which will live off petroleum’s byproducts. Fertilizer plants are going up, to convert petroleum into the nutrients needed to bring life back to Mexico’s cropped-out lands. On their natural gas, the Mexicans have decided, “We either bum it or we export it.” They’ve decided on export. A $ 1,5-billion, 48-inch, 821-mile pipeline is snaking up to the Texas border to be finished next February.

And so the deadly race continues. Thou-

sands of new Mexican mouths to feed each day. The country’s petroleum engineers desperately trying to lift the country’s black, sticky wealth soon enough to bring prosperity to the countryside and stave off a rising popular discontent which can, some political experts say, erupt in violent revolution unless basic human needs are met, and soon.

One study produced evidence that 90 per cent of all Mexicans suffer from some degree of malnutrition or undernourishment. Seventy per cent of the population lives in homes that are two rooms or less. Fifty-eight per cent of the homes have no built-in drainage; only 31 per cent have bathrooms and 42 per cent are still without electric light. The country is short at least three million homes. In 1900, 90 per cent of Mexicans were living on the land; today 50 per cent of the population exists, often in squalor, in Mexico’s thronging cities. And the figure will be 80 per cent by the year 2000. Their shacks, lean-tos and squatters’ hovels turn modern suburbs into slums faster than the city planners can put up new public housing.

Highly touted efforts to create new Mexican towns built around satellite industries have foundered on maladministration, corruption and the stoic resistance of the Indian peasant to change. The modern community of Lazaro Cardenas, planned as a focal point of the “new Mexico,” is today an economic and social disaster zone. More than $1 billion invested in the town has resulted in just 5,000 new jobs— at a rate of $200,000 per position. The only people to get rich are the 2,000 prostitutes who come to town each pay day. “The real problem,” says a weary and disillusioned expert, “is that you can’t turn campesinos into industrial workers in less than a generation.”

The problem is most acute in Mexico City, the country’s capital and the initial destination of most tourists venturing south of the Rio Grande. Just how many Mexicans now live there is a demographic mystery; the city houses a possible 12 million now and is the biggest slum in the world. Almost half its residents are newcomers from the countryside. By 1985 it will balloon sickeningly to 20 million souls and 40 million will live there by the year 2000, making if by far the most overcrowded metropolis on the face of the earth.

Behind the glass and steel hotels and office skyscrapers that tourists and visiting businessmen inhabit is a city in crisis. Hundreds of thousands of campesinos scrabble in the city’s dustbins looking for food scraps, beg pesos from passersby, or mug and thieve to make it through to mañana. Officially, the city’s police have a new murder to solve every 2Vi hours, a new theft to unravel every 20 minutes. The real totals are considerably higher. Kick a pile of tattered rags or papers in a Mexico City slum and there could be a dead, abandoned body underneath. The biggest killer of all,

among males under the age of 24: drink.

Carlos Hank Gonzalez, Mexico City’s energetic and overworked mayor, insists that the community can be made livable for more than just the few rich families who dwell in splendor in the exclusive Lomas and Polanco sections. “Perhaps the principal problem is that we do not love the city enough,” he philosophizes. “Now we have to resolve the problems of the past and present, and plan for the future.”

The biggest problem of the past is, quite simply, that Mexico City is in the wrong place for a major metropolis. It’s the only urban complex among the 15 largest cities in the world that is neither on an ocean, a

major waterway, or at sea level. At an altitude of 7,400 feet, it stands on a soft, spongy lake bed so porous that it is literally swallowing up some of the older, massive buildings constructed during the Spanish rule. Old churches and municipal buildings lean drunkenly as they continue to drop into the subterranean quagmire. Building here is five times as expensive as elsewhere in Mexico. New sewers are needed. Water is in short supply. The city needs at least 680,000 more homes. The roads are choked with 1.5 million cars, the

four-wheeled status symbol every middleclass Mexican family must own. In desperation, the government thrashes about trying to unblock the congestion. Whole departments have been shipped out to other cities, the politicians-in-charge protesting loudly that their careers are doomed if they are shut off from the capital’s corridors of power. But as the bureaucrats pack and go, their places are taken by the never-ending flood of campesinos arriving daily in hope of work.

The major project on municipal drawing boards to unblock Mexico City’s stran-

gulation is a $4-billion subway system ringing the city. Bidding on the project has been fierce with British, American, Japanese, French and German firms all flying in high-powered sales teams to sew up the contract. Japanese salesmen have lavished calculators, free trips to Tokyo, a gift research ship for the Mexican Navy and $6 million in free feasibility studies on Mexican buyers. “This is the biggest deal in the world,” says Britain’s Richard Knowles

through gritted teeth, “and before it’s over we’re going to be scratching each other’s bleeding eyes out. The competition will bribe chambermaids to get into your hotel room, rifle your briefcase, buy up all the telexes in the hotel so they can see what you’re sending back to the home office, bribe officials to lose one of your crucial letters. All very nasty.”

For the Mexican peasant who isn’t willing to scramble for a living in Mexico City’s slums, there is one other widely used option. He walks north to the border towns of Tijuana, Laredo or Juarez, and there he waits. Until a dark night when he joins the estimated 1.5 million Mexicans who, each year, illegally cross the frontier into the United States in pursuit of the stoop labor that Americans are no longer willing to do for themselves. To call them “wetbacks” glamorizes a very easy crossing. There’s no dramatic desperate swim over the Rio Grande. The 1,600-mile border between the United States and Mexico is impassable for only 40 miles.

President Carter has threatened to close down wetback arteries, a sop to American unions which complain that incoming Mexicans—and there are about five million now in the States—are adding to the national unemployment problem in America. “But if he was really serious,” says Wayne McClintock, on the staff of El Paso mayor Ray Salazar, “all he’d have to do is fine any American firm or family hir-

ing an ‘illegal.’ But he’ll never do that. All the housewives in this town would lose their cheap maids and all the factories and farmers their cheap labor. And despite all the bitching about the ‘wetback problem,’ nobody here really wants to give up his own little share of the cheap worker pie.”

Both Mexican and American authorities are enthusiastic about a new technique to put this excess labor profitably to work: the “in bond” factory plan. McClintock explains: “American firms are being encouraged to set up sub-assembly points in Mexican border towns. They are permitted to send over components ‘in bond’—dutyfree in other words. There, the firms hire, train and employ Mexican labor, at local rather than U.S. wage scales. Then the finished products come back into the States duty-free. Everyone benefits. The Mexicans get work without having to leave their homeland. The Mexican border town gets new industry and the American manufacturer gets his product made cheaply without having to resort to illegal wetback labor. Everyone’s happy—except the U.S. unions.”

As little as two years ago, American industry was frankly afraid to invest new capital in Mexico because the country seemed dangerously close to revolution; it’s a land with a long tradition of men with rifles in their hands and bandoliers crossed over their chests taking to the gun to solve political problems.

Mexico is currently a one-party state. The Partido Revolucionario Institucional—PRI—is a creaky, corruption-riddled monolith which, each six years, unanimously backs the outgoing president’s choice of his successor. Echeverría, the last president, is now considered to have been somewhat of a Caligula, maniacally intent on becoming “Señor Third World.” He pandered ruthlessly to populist interests in the country, turned privately held estates in Sonora over to the peasants, fought a semi-civil war in Guerrero and Oaxaca, provoked a massive flight of corporate capital out of Mexico and eventually had to authorize the first devaluation of Mexican currency in 22 years, a drastic 55-per cent slash. As his six-year term drew to a close, he lobbied shamelessly for the Nobel Peace Prize, and to become head of the UN, and ruthlessly threw at least 200 of his political opponents into jail without trial whenever criticism reached his ears.

In the end, however, Echeverría redeemed himself in the history books by naming his former finance minister, the dour, colorless López Portillo, as his successor. “My only commitment,” López says, “is to the people of Mexico. I will not accept other pressures. In matters of my responsibility, only I have decided, now decide, and will decide.”

And he’s been as good as his word. He first made peace with Mexico’s Monterrey Group, a band of free-enterprise industrialists in Mexico’s second most important commercial city, who detested Ech-

everría and clamped down on all their corporate growth programs until he departed the political scene. One of Lopez’s first moves was to make a highly publicized visit to Monterrey to meet with and pacify the disgruntled capitalists; a general feeling of bonhomie has hung over Mexico’s free-enterprise scene ever since. Factories, some working at only 60 per cent capacity, have been fired up again and the Mexico City Bolsa stock index has jumped over the 600 mark for the first time in history.

Mexico reads its political and economic news these days in an increasingly free press, which is gradually throwing off the fears of sudden closure left over from the

harsh old days of the Echeverría regime. Ultimately, of course, the government does hold a rein over the press, because newsprint must all be imported under government licence. “Criticize too harshly and you suddenly find yourself running out of paper,” one editor sighs. The most influential editor in the country is Julio Scherer, formerly of Excelsior. Echeverría manoeuvred him out of his office, but he retaliated by starting a weekly magazine, Proceso, which is widely admired for its independence (and its ability to import paper no matter whose toes it steps on). Elsewhere, money is still the most important factor in Mexican journalism. Invitations to reporters to attend press conferences routinely come with several hundred pesos included in the envelope, to cover the reporter’s “expenses” in getting across town.

Payoffs aside, there can be no doubt that Mexico’s business reporters today can safely record the fact that the country’s fortunes are on the rise. The most serious economic crisis in more than 40 years has been weathered. The world banking community, which three years ago wrote off Mexico as an investment, is back waving fistfuls of loan dollars. Inflation has been sliced down to below 20 per cent. Much of the $4 billion in flight capital which left the country has returned. Annual wage increases have been screwed down to about 12 per cent and tax incentives to industry have been offered; now the market is waiting to see how industry will respond. “The government has done its bit, and the unions have done their bit,” as one senior government official explains it. “Now it’s the turn of business.”

About 4,000 of Mexico’s companies are partially owned by foreign interests— three-quarters of the participation being American. German, British, Swiss and Japanese investors are also prominent; Canada is only marginally represented. But a massive economic push from Mexico’s other “neighbor” in North America seems to be building.

Owlish, bespectacled Randolph Gherson, of the federal ministry of industry, trade and commerce, recently led a busi-

nesslike delegation of Canadian bureaucrats south of the border in search of sales. The group came prepared to talk about sales of Canadian products ranging from railroad ties to energy technology. In a hectic series of meetings, luncheons, dinners and receptions, the Canadians spread out all through the Mexican bureaucracy, selling hard. “I don’t think it’s fully realized,” Gherson says, “that, in the first three months of this year, Canadian banks underwrote almost a half-billion dollars in loans for Mexico. And our own Export Development Corporation has offered lines of credit to both public and private sector organizations in Mexico totalling $1.45 billion. It’s the largest amount Canada has ever offered to any single country. We’re anxious to take these totals even higher. It takes a country with a future of its own to recognize another with prospects.”

Canada hopes for increased trade primarily in the fields of transportation, mining, oil development equipment, fishery vessels and food-processing equipment. Last year about 400 Canadian managers checked into the Canadian embassy in Mexico City while on business trips looking for sales and investments south of the Rio Grande. Clearly Gherson’s task force hopes to increase these numbers dramatically in the months to come. What Canada buys from Mexico in return is primarily tomatoes, shrimps, coffee and car parts.

Most Canadians flood into Mexico’s 17 international airports and 200,000 hotel rooms during the cold months of winter, looking for a sunshine break. About 190,000 arrive each year—close to 10 per cent of Mexico’s annual tourism total. This past winter, eight of them were killed, which prompted a rash of black headlines in Canadian papers intimating that some sort of anti-Canadian purge might be under way in Mexico’s resorts. But Canadian ambassador James C. Langley stressed in an interview that the headlines had been blatantly overplayed. “It was an unfortunate string of crimes,” he says, “but they

were unrelated. I can say unequivocally that all Canadian tourists coming to Mexico are as safe as they are in their own home towns.”

A small percentage of the visiting Canadians come south to “score,” that is buy up Mexican marijuana and smuggle it north to sell at approximately a 900 per cent markup. About 60 per cent of the grass consumed in the United States and Canada is either grown in Mexico or grown in Central and South America and imported across the Mexican border. The chance for big, quick profits sucks more people into the trade, looking for fast bucks from a dangerous but profitable trip. At present, seven Canadians are serving time in various Mexican jails, most of them for drug offences.

“The plight of these prisoners has been badly overplayed in the Canadian press,” insists Ambassador Langley. “In any case, when the Mexican Chamber of Deputies reconvenes this fall, one of the first acts to be voted on will involve a mutual release of prisoners into their own country’s custody. At that time, I expect that those Canadians here who want to finish their sentences in Canadian prisons will be allowed to go.” Hopefully, the headlines about Canadians in the slammer will discourage amateurs from trying their hand at the dope game. “It’s always the one-timers who get caught,” says a jaded policeman.

Drugs aside, however, there’s no doubt that Mexico and Canada will be ever more closely intertwined in the last quarter of the 20th century. Both economies rely on the giant between them, the meat in the sandwich that is North America. With petroleum aplenty, Mexico may well nudge Canada aside as the second most prosperous country on the continent, especially if that deadly serious race between petroleum and people ends up in the one-two order the futurologists feel it must. As always in Mexico,we’ll find out— mañana.1^?