Why Mexicans head for our border

By Ian Robinson

A Nogales family outside their home.

Before visiting the divided border towns of Nogales, students in “Labor in Mexico’s Maquiladora Zone” study the political and economic history of Mexico to provide a context for what they will see, hear and read. Their instructor has condensed some of that information for Michigan Today—Ed.

During World War II, the United States instituted the bracero (farm worker) program, which permitted hundreds of thousands of Mexican workers to cross the border and become contract laborers throughout the Southwest and beyond. When their work was completed, the braceros, who worked with virtually no protection from labor laws, were required to return to Mexico, although many didn’t. When the US-Mexican agreement expired in 1964, this kind of imported contract labor became illegal.

Mexico decided, under its Border Industrial Program (BIP), to create duty-free industrial zones in a 2,000-mile wide, 12-mile-deep strip on the Mexican side of the border with the United States. The goal was to increase trade between the countries and provide jobs for former braceros. But BIP also swelled the populations of such cities as Tijuana, Juarez and Nogales.

Border city governments do not have the right to levy corporate taxes in the border zone, so they get little revenue to support their burgeoning infrastructure needs. And the corporate taxes collected by the federal government in Mexico City tend to be invested in the much poorer regions to the south.

At its peak in 2000, approximately 1.3 million Mexicans worked in the border plants. The recent downturn has wiped out at least 300,000 jobs. So, increasingly, jobs across the border in the USA are attracting not only hundreds of thousands of desperate Mexican peasants from the south, but also recently laid-off maquila workers. Those who succeed in entering the United States work as restaurant staffers and farm workers and in home-building and other low-paying jobs. Once here, they can’t go home easily, so their families are at risk.

In the 1970s Mexico borrowed lot of money from international lenders so it could meet its short-term need for imported oil at OPEC-inflated prices, and invest in developing its own oil reserves. As OPEC prices soared, oil profits had poured into British and US banks, which offered loans at low interest rates to non-oil exporting poor countries so that they could still afford to buy oil.

The interest rate for the loans (after inflation) was very low—often 2 percent or less. But the loans had to be repaid in dollars and at flexible interest rates, rising or falling with the interest rates set by the US Federal Reserve. In 1978, the Carter Administration appointed Paul Volcker as the new Chair of the Federal Reserve Board. Volcker raised interest rates to levels unprecedented in the post-war period, suddenly saddling the poor countries with huge increases in the interest rates they had to pay on the debts they owed to foreign banks. This policy was a major cause of the subsequent global recession.

Demand for Mexican products dropped sharply as the economies of the US and other rich countries contracted. At the same time, Mexico needed more foreign currency earnings to meet its new, 15- to 20-percent interest rates. Falling export earnings and rising foreign debt payments soon became unsustainable. In 1982, Mexico said it would default on the loans unless they were rescheduled so that smaller amounts could be paid each year over a longer period of time.

The International Monetary Fund said to Mexico and other debtors, yes, we’ll reschedule the loans, but first you have to restructure your economies. This restructuring was supposed to increase Mexico’s economic growth rate, but (in combination with the debt crisis itself) it had the opposite effect: Mexico grew at an average rate of more than 5 percent a year from the 1950s through the ’70s, but in the 1980s and 1990s, it grew at half that rate or less.

The 1994 NAFTA pact (North American Free Trade Agreement) exacerbated some of the problems created by the IMF’s structural adjustment programs. NAFTA rapidly phased out all remaining tariffs in the manufacturing sector, putting many small and medium Mexican-owned industries that provided many jobs at high pay rates out of business, by making them compete directly with much bigger, better resourced multinational corporations. NAFTA also dramatically reduced agricultural tariffs—a new factor because early trade agreements had exempted the agricultural sector.

Only 1 to 2 percent of the US population works in agriculture today—the many dying and dead rural towns testify to this great demographic change over the last century. In Mexico, at least 25 percent of the population still relies on “subsistence farming”—farming that produces mainly for family consumption and sells whatever surplus remains for cash income. These small farmers cannot compete with energy- and capital-intensive agribusinesses in the US that, ironically, enjoy heavy subsidies and can sell corn, the national staple, at one-third the costs of production of small Mexican farmers.

The accelerating exodus from the Mexican countryside, to places like Nogales and other Mexican cities as well as to the United States, can be traced to the economic ruin of millions of Mexican subsistence farmers and peasants by Structural Adjustment policies that eliminated their subsidies (while leaving those to US farmers intact) and trade policies which then eliminated the Mexican tariffs that might have counteracted US subsidies.

Ian Robinson, who received his PhD from Yale in 1990, is an instructor in the Residential College and the sociology department and co-director of the Labor and Global Change Program in the Institute for Labor and Industrial Relations.