Mexico News and Analysis: Oct 26 - Nov 8, 2009

1. SME calls for national strike
2. Federal Budget increases taxes
3. New President for the National Human Rights Commission
4. US agents working in Mexico
5. Debt reaches 44% of GNP


1. SME calls for national strike
The Electrical Workers Union (SME) called for a general strike on November 11 to fight the closure of Central Light and Power (LFC) by the Calderon administration last month.  More than 44,000 workers lost their jobs in the surprise Saturday night police action that tried to abolish Mexico’s largest democratic union.  Since the closure of LFC, Calderon has faced increasing pressure to reconsider, both on popular and legal fronts.  Telephone and university workers agreed to join the one day strike, and thousands of students from the National Autonomous University are expected to take an active role.  Campesino organizations are also answering the call. 

Last week more than 25,000 SME workers filed papers with federal courts asking for a restraining order against the closure.  In a series of legal set-backs for the Calderon administration, a federal judge awarded a temporary restraining order on October 30, followed by a permanent ruling on November 6.  A group of 500 volunteer lawyers also filed papers challenging the constitutionality of the closure.  And the Federal Labor Board refused to emit a final decision on the termination of the labor contract between LFC and the SME.

Despite increasing pressure on workers to accept severance deals before mid November, most union members are resisting.  As many as 34,000 workers from a workforce of 44,000 (which includes many salaried and office workers) signed legal complaints.  In addition, the electrical system in central Mexico appears to be falling apart.  Workers from the Federal Electric Commission (CFE) are trying to assume the responsibilities of former LFC workers, but much of the LFC technology is more than 50 years old and patched together haphazardly due to decapitalization over the past two decades by the federal government.  Increasing power outages are leaving tens of thousands of workers unemployed and there is a distinct possibility of a general failure in coming weeks.

Despite a months-long media campaign by the federal government in conjunction with Mexico’s television duopoly, Televisa and TV Azteca, SME workers are gradually winning the battle for public opinion.  Calderon claimed the federal government was subsidizing LFC with more than US$3 billion annually, but the financial situation turns out to be much more complicated.  LFC is a government business and the gradual decapitalization over two decades left the company without sufficient resources to generate electrical power for some 25 million people living in central Mexico.  LFC was forced to purchase power generated by the CFE at high rates, then resell the power to companies at about one-third the initial cost.  In addition, many politically connected companies and federal government agencies, including President Calderon’s home at los Pinos, did not pay for electricity.   


2. Federal Budget increases taxes
A PRI-PAN alliance passed a federal budget last week that increases sales taxes from 15% to 16% and income taxes from 28% to 30%.  In an unprecedented maneuver, PRI Deputies abstained from voting, allowing the tax package to pass while forcing the PAN to assume most of the political costs.  Budget debates this year revealed increasing divisions among ruling elites as the Calderon administration accused large corporations of not paying their fair share of taxes while business leaders bemoaned new taxes in the midst of the worst recession since 1930.


3. New President for the National Human Rights Commission
On November 4, the Senate elected a new President to the National Human Rights Commission (CNDH).  Raul Plascencia, the first assistant to the current President, was chosen over Emilio Alvarez, favored by the institutional left, and Luis Gonzalez, attorney for the National Autonomous University (UNAM).  Plascencia is considered a favorite of the PRI and PAN, and will likely continue the tepid human rights defense of his predecessor. 


4. US agents working in Mexico
At least 1,400 agents from the Drug Enforcement Administration (DEA) and the Immigration and Customs Enforcement (ICE) are working in Mexican territory, based mainly out of US consulates.  Since a series of US invasions in the 1800s, Mexico has jealously guarded its sovereignty, yet the Calderon administration is increasingly allowing US agents to function openly in Mexican territory.


5. Debt reaches 44% of GNP
Mexico’s total debt is equivalent to more than 44% of the gross national product, at least 4% higher than recommended limits established by the International Monetary Fund for developing countries.  Mexico’s total debt reached US$250 billion in August, an increase of 91% since the beginning of the Calderon administration, according to the Bank of Mexico.  Despite this massive debt, the economy continues to shrink, declining by 6.9% in August according to the National Institute of Statistics and Geography (Inegi).  And migrant remittances, the country’s second most important source of foreign currency, declined by 17.5% in September.  With recent news of increasing unemployment in the US, the peso fell to 13.4/dollar, the lowest exchange rate since September.  Yet in the midst of universally bad economic news, President Calderon claimed this week that the recession is over.