Vol. 73/No. 1      January 12, 2009

Ford, Chrysler, General Motors, Nissan Mexicana, and Volkswagen de México have all announced they are closing factories across Mexico for the next month or more—the first time they have ever done so. Honda and Toyota have said they do not plan to suspend production at this point.

The shutdowns will affect at least 20,000 workers, according to Mexican news reports. Many auto parts or auto-related factories are also laying off thousands.

Ford is laying off 600 workers at its Cuautitlán plant for more than a year without pay, ostensibly to retool for future production of the Fiesta car.

Seventy percent of autos built in Mexico are sold in the United States, where demand has dropped as a result of the economic crisis. The auto and auto parts industry is a substantial part of Mexico’s economy, accounting for about one-fifth of its manufactured exports and employing nearly 600,000 workers.

In October, for the sixth straight month, industrial production fell in Mexico. Mining fell 5.2 percent and construction by 2.9 percent. Computer manufacturing dropped more than 10 percent.

Pepsi Bottling Group recently announced it was closing three plants and 30 distribution centers and laying off 2,200 workers. Aluminum producer Alcoa is laying off 500.

Mexico, the world’s sixth largest oil producer, is also being affected by the drop in the price of crude. State-owned Pemex accounts for just 10 percent of Mexico’s export revenue, but one-third of government income.

Applications for jobless benefits in Mexico have increased every month since June, according to government figures. Although unemployment is officially at 4.5 percent, these figures are understated, just as in the United States. The real figure is at least 10 percent, according to a report by the Coalition of Workers of the National Institute for Statistics, Geography, and Data.

By government criteria, anyone who works even one or two hours a week is considered employed, as well as vendors selling CDs on the Mexico City subway or teenagers washing car windshields at stoplights. Millions in the “informal economy”—including those who are hired off the books or scrape by through selling merchandise or services on their own—are not registered with the Mexican Social Security Institute and not included in official unemployment figures.  
 
Peso takes a ‘bungee jump’
In what the Economist magazine called a “bungee jump,” the value of the Mexican peso relative to the U.S. dollar lost a quarter of its value to a record low of 14 pesos to the dollar in October. While this is less than the 40 percent drop during the peso crisis of 1994, the Mexican currency is now at 13 pesos to the dollar, compared to 10 to the dollar in late 1998.

In an attempt to shore up its value, the Mexican government has spent more than $15 billion to buy back pesos. Mexico is among the top 20 countries with the highest foreign currency reserves.

The peso’s fall has pushed up inflation to an annual rate of 6.2 percent by early December—the highest in seven years. But the cost of the “basic food basket”—25 products including meat, eggs, rice, beans, and tortillas—skyrocketed even higher. In Mexico City basic staples rose by 60 percent in the first 10 months of the year.

Starting on Jan. 1, 2009, the legal minimum wage, which does not apply to “informal” workers, will rise a mere 4.6 percent to no more than 54.8 pesos—US $4.15—a day.

The Mexican government reports it spent more than $15 billion in hard currency to import food from January to September, a 28 percent increase from 2007.

More than $1.8 billion went to importing white corn for making tortillas. Imports of U.S. corn, mostly yellow corn, have increased more than eight-fold since before January 1994, when the North American Free Trade Agreement was implemented, breaking down many protective trade barriers. On Jan. 1, 2008, the Mexican government lifted all remaining tariffs on corn, sugar, and powdered milk from the United States.

On average, one acre of land in the United States yields three times more corn than in Mexico due to higher mechanization, irrigation, and fertilizer use. Without tariff protection, thousands more Mexican peasants will be driven off the land.

The pace of immigration from Mexico has slowed somewhat over the last two years due to a combination of fewer jobs and more deportations and immigration restrictions in the United States. Six people per 1,000 inhabitants left Mexico for the United States in 2008, compared to 9.2 in 2007 and 10.5 in 2006, according to Mexico’s national statistics agency. A small number of the estimated 10 million Mexicans who work in the United States have decided to return to Mexico for now.

“You think, ‘I used to earn $600 a week and now I’m getting half of that a week?”’ Daniel Ramírez, a construction worker laid off in Denver in August, told the Associated Press. He decided to move back to San Luis Potosí in central Mexico.

Immigrant workers’ remittances to their families have dropped. In August $1.9 billion was sent to Mexico, a 12 percent drop from August 2007.
 
 
Related articles:
Auto bailout: huge cutbacks for workers
Capitalism’s long-term deflationary crisis  
 
 
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