Why Mexico's So-Called Liberalization Is Bound To Fail Again

Current privatization proposals for the telecom and energy sectors suggest Mexico has learned little from the partial, and failed, liberalization processes of the past.

The Central Bank of Mexico
The Central Bank of Mexico
Luis Rubio

MEXICO CITY — Insanity, Einstein once said, is doing the same thing over and over again and expecting different results.

Thirty years ago, during a deep recession Mexico chose the path of liberalization and privatization to try to finally achieve the economic growth that had been eluding the country during the final period of rule of the center-left Institutional Revolutionary Party (PRI).

In that first period of reforms in the 1980s, the country privatized an ample range of firms (telecommunications, banking, broadcasting, steel and agriculture). A significant sector of the population was not happy. While certain privatized firms prospered, others, especially banks, went bankrupt and generated enormous costs, which the public had to pay through taxes.

More importantly for our purposes here, many of the privatized firms evolved into oligopolies — with a few suppliers controlling the market — obstructing the population's creative capabilities and curbing the potential for economic growth.

Unfortunately many of the reforms being discussed today in Mexico seem to be heading in that direction.

The countries that have had success opening up their economies, liberating protected markets and especially those dominated by state-affiliated firms, share one key characteristic: They've built competitive models that allow the market to function. That happened in the United Kingdom and Chile, two successful cases by any measure.

Things went differently in Mexico. What was owned by the former monopolistic state firms went into private hands, but there was no truly free market wherein transparency and competitiveness determine results.

Two models

I remember a debate in the late 1980s involving a prominent member of Mexico's privatizing entity and another official whom Chile had entrusted with privatizations some years before.

The Mexican official explained his logic in the privatizations process, saying firstly that the most important criterion was that the highest bidder should win, to assure the transparency of the process. He said the lesson of past privatizations was that despite experts' advice to start by selling small firms to win experience, in Mexico they had decided to privatize large firms first, to send investors a strong signal.

The Chilean official, who had prepared a long presentation, understood these comments to mean that privatization had not actually even begun in Mexico. He refrained from making his presentation in order not to seem to be contradicting the Mexican official's statements. Instead, he spoke for barely two minutes, simply stating that the aim of privatization in Chile had not been to make money, but to restructure markets and develop industries.

The criticism was brief but withering, and the subsequent years have proven him right, both in Mexico and Chile.

A quarter-century later, debates here show that Mexico has learned nothing. Instead of discussing how the energy market would be after the current opening up, all that seems to matter is how much will stay in state hands. Instead of trying to find a vibrant and competitive energy market, discussions are all about keeping a Sovereign Fund as an unending source of unaudited monies for all-too-familiar goals.

The same goes for the recent electoral reform, where power was the only thing on legislators' minds. Who would control the electoral process and the business opportunities affiliated with it. With telecoms, the rumor mill (the only, really buzzing market in this country) has it that the reforms are being tweaked and fine-tuned. But discreetly, in the backrooms. Which means we are sticking to our usual logic of clientele politics, influence-peddling, control and corruption. Einstein would remind us not to expect different results this time around either.

The experience in both historical moments suggests there is something in the DNA of Mexican politics that impedes the country from doing things in an open and transparent manner, through market competition. Political leaders seem to reject relying on the creative capacity of Mexicans, and above all abandoning the tradition of using the public sector for personal enrichment or to purchase the intentions that help you win or keep power.

We all know the learning curve is costly, and in that sense, such hiccups would be explicable if we lacked experience. The problem of course is that experience isn't lacking, and in contrast with previous decades, we now also have overwhelming evidence and data.

Our experiences of the 1980s and 1990s and those of other countries are more than enough to convince us that only a competitive and transparent market will allow us to achieve the stated goals of constitutional reforms and economic growth.

As we speak, the case of telecoms and broadcasting is showing us that oligopolies hamper growth. Was that the unstated objective?

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Ecological Angst In India, A Mining Dumpsite As Neighbor

Local villagers in western India have been forced to live with a mining waste site on the edge of town. What happens when you wake up one day and the giant mound of industrial waste has imploded?

The mining dumpsite is situated just outside of the Badi village in the coastal state of Gujarat

Sukanya Shantha

BADI — Last week, when the men and women from the Bharwad community in this small village in western India stepped out for their daily work to herd livestock, they were greeted with a strange sight.

The 20-meter-high small hill that had formed at the open-cast mining dumpsite had suddenly sunk. Unsure of the reason behind the sudden caving-in, they immediately informed other villagers. In no time, word had traveled far, even drawing the attention of environment specialists and activists from outside town.

This mining dumpsite situated less than 500 meters outside of the Badi village in the coastal state of Gujarat has been a matter of serious concern ever since the Gujarat Power Corporation Limited began lignite mining work here in early 2017. The power plant is run by the Power Gujarat State Electricity Corporation Limited, which was previously known as the Bhavnagar Energy Company Ltd.

Vasudev Gohil, a 43-year-old resident of Badi village says that though the dumping site is technically situated outside the village, locals must pass the area on a daily basis.

"We are constantly on tenterhooks and looking for danger signs," he says. Indeed, their state of alert is how the sudden change in the shape of the dumpsite was noticed in the first place.

Can you trust environmental officials?

For someone visiting the place for the first time, the changes may not stand out. "But we have lived all our lives here, we know every little detail of this village. And when a 150-meter-long stretch cave-in by over 25-30 feet, the change can't be overlooked," Gohil adds.

This is not the first time that the dumpsite has worried local residents. Last November, a large part of the flattened part of the dumpsite had developed deep cracks and several flat areas had suddenly got elevated. While the officials had attributed this significant elevation to the high pressure of water in the upper strata of soil in the region, environment experts had pointed to seismic activities. The change is evident even today, nearly a year since it happened.

It could have sunk because of the rain.

After the recent incident, when the villagers raised an alarm and sent a written complaint to the regional Gujarat Pollution Control Board, an official visit to the site was arranged, along with the district administration and the mining department.

The regional pollution board officer Bhavnagar, A.G. Oza, insists the changes "aren't worrisome" and attributes it to the weather.

"The area received heavy rain this time. It is possible that the soil could have sunk in because of the rain," he tells The Wire. The Board, he says, along with the mining department, is now trying to assess if the caving-in had any impact on the ground surface.

"We visited the site as soon as a complaint was made. Samples have already been sent to the laboratory and we will have a clear idea only once the reports are made available," Oza adds.

Women from the Surkha village have to travel several kilometers to find potable water

Sukanya Shantha/The Wire

A questionable claim

That the dumpsite had sunk in was noticeable for at least three days between October 1 and 3, but Rohit Prajapati of an environmental watchdog group Paryavaran Suraksha Samiti, noted that it was not the first time.

"This is the third time in four years that something so strange is happening. It is a disaster in the making and the authorities ought to examine the root cause of the problem," Prajapati says, adding that the department has repeatedly failed to properly address the issue.

He also contests the GPCB's claim that excess rain could lead to something so drastic. "Then why was similar impact not seen on other dumping sites in the region? One cannot arrive at conclusions for geological changes without a deeper study of them," he says. "It can have deadly implications."

Living in pollution

The villagers have also accused the GPCB of overlooking their complaint of water pollution which has rendered a large part of the land, most importantly, the gauchar or grazing land, useless.

"In the absence of a wall or a barrier, the pollutant has freely mixed with the water bodies here and has slowly started polluting both our soil and water," complains 23- year-old Nikul Kantharia.

He says ever since the mining project took off in the region, he, like most other villagers has been forced to take his livestock farther away to graze. "Nothing grows on the grazing land anymore and the grass closer to the dumpsite makes our cattle ill," Kantharia claims.

The mining work should have been stopped long ago

Prajapati and Bharat Jambucha, a well-known environmental activist and proponent of organic farming from the region, both point to blatant violations of environmental laws in the execution of mining work, with at least 12 violations cited by local officials. "But nothing happened after that. Mining work has continued without any hassles," Jambucha says. Among some glaring violations include the absence of a boundary wall around the dumping site and proper disposal of mining effluents.

The mining work has also continued without a most basic requirement – effluent treatment plant and sewage treatment plant at the mining site, Prajapati points out. "The mining work should have been stopped long ago. And the company should have been levied a heavy fine. But no such thing happened," he adds.

In some villages, the groundwater level has depleted over the past few years and villagers attribute it to the mining project. Women from Surkha village travel several kilometers outside for potable water. "This is new. Until five years ago, we had some water in the village and did not have to lug water every day," says Shilaben Kantharia.

The mine has affected the landscape around the villages

Sukanya Shantha/The Wire

Resisting lignite mining

The lignite mining project has a long history of resistance. Agricultural land, along with grazing land were acquired from the cluster of 12 adjoining villages in the coastal Ghogha taluka between 1994 and 1997. The locals estimate that villagers here lost anything between 40-100% of their land to the project. "We were paid a standard Rs 40,000 per bigha," Narendra, a local photographer, says.

The money, Narendra says, felt decent in 1994 but for those who had been dependent on this land, the years to come proved very challenging. "Several villagers have now taken a small patch of land in the neighboring villages on lease and are cultivating cotton and groundnut there," Narendra says.

They were dependent on others' land for work.

Bharat Jambucha says things get further complicated for the communities which were historically landless. "Most families belonging to the Dalit or other marginalized populations in the region never owned any land. They were dependent on others' land for work. Once villagers lost their land to the project, the landless were pushed out of the village," he adds. His organization, Prakrutik Kheti Juth, has been at the forefront, fighting for the rights of the villages affected in the lignite mining project.

In 2017, when the mining project finally took off, villagers from across 12 villages protested. The demonstration was disrupted after police used force and beat many protesters. More than 350 of them were booked for rioting.

The villagers, however, did not give up. Protests and hunger strikes have continued from time to time. A few villagers even sent a letter to the President of India threatening that they would commit suicide if the government did not return their land.

"We let them have our land for over 20 years," says Gohil.

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