Special Economic Zones: Maquiladoras on Steroids

Image from The Economist.

In May of 2016, the Mexican government introduced a law to create a series of Special Economic Zones (SEZs), which were intended to be fully operational by 2018. President Enrique Peña Nieto declared, “They will undoubtedly constitute a milestone for alleviating poverty and inequality.” The first three zones are all located in the southern part of the country: the corridor stretching across the Isthmus of Tehuantepec between Coatzacoalcos, Veracruz and Salina Cruz, Oaxaca; the second in Puerto Chiapas in the State of Chiapas; and the third at the port of Lázaro Cárdenas on the border of Michoacán and Guerrero States.

The SEZs are meant to attract foreign businesses keen to take advantage of numerous tax breaks. For example, for the first ten years there would be a 100% pass on income tax (ISR), a 50% reduction in employer contributions to healthcare and social security (IMSS), and a 0% payment of the value-added tax (VAT), which currently stands at 16%. Few official sources say much about labor costs (or rights), but since the southern part of Mexico has historically much lower wage rates than in northern parts of the country, there is little doubt that cheap labor is one of the principal attractions for businesses seeking to operate in these zones.

Some have compared the new SEZs to the maquiladoras, or finishing plants, which have existed along the Mexican-American border since the 1980s and serve as duty-free zones for the assembly and transport (back to the American market) of everything from automobiles to home appliances. While mainstream economists tout the maquiladoras as instrumental in boosting Mexico’s share of international trade as a percentage of GDP from 11% to 32%, they ignore the fact that these gains were achieved through a 45% increase in labor productivity and a 22% decline in wages. Measures of GDP growth are meaningless without taking into account how they have contributed to the government’s vaunted goal of “alleviating poverty and inequality.” In fact, in all regions of Mexico, income inequality and poverty rates have increased since the beginning of the free market or neoliberal reforms of the early 1990s; today, over 50 million Mexicans live in poverty.

The SEZs are, in many respects, maquiladoras on steroids and represent a dangerous new precedent from the perspective of land, indigenous, and labor rights. Since the 1990s, southern Mexico has been a prime target for mega-projects involving wind turbines, oil and gas pipelines, and mineral extraction. To facilitate these developments, military control has been heightened in order to forestall local resistance to the displacement and land dispossession caused by the projects but also as part of a larger plan, the Programa Frontera Suragreed to by the Mexican government and the Obama administration in 2014 to stem the flow of child migrants from Central America attempting to cross the Mexican frontier into the United States.

As Naomi Klein noted in her 2007 bookThe Shock Doctrine: The Rise of Disaster Capitalism, corporations and governments seize upon the physical distress and psychological disorientation of major natural disasters to push through otherwise unpopular economic policies. The earthquakes of September 2018 in southern Mexico represented just such an opportunity. Two days after the earthquake, the head of the Federal Authority for the Development of Special Economic Zones, Gerardo Candiani, accelerated the process of building the SEZ in the Isthmus of Tehuantepec, ostensibly to assist in the economic recovery. As Carlo Manso, a resident of Union Hidalgo and author of Communality, Indigenous Resistance and Neocolonialism comments:

“It’s a very difficult context for us because the government is…taking advantage of the devastation. People are afraid and more worried about meeting their most immediate needs. While in the midst of surviving this catastrophe and forming bonds amongst ourselves, we also have to find a way to mobilize against the government’s larger strategy — to displace us.”

By one estimate, Mexico still lacks 50% of the land required for the construction of the SEZs. This means that displacement and dispossession of local and indigenous populations represent the only way forward. But in Oaxaca, for example, where 71% of land remains under communal or community control, any such attempts to acquire land through dispossession will inevitably spark massive resistance. In August of 2018, just days before the earthquakes, indigenous and peasant groups gathered at a national forum titled “Extractivism or Life,” where they declared their opposition to SEZs as part of a neoliberal economic model which destroys nature, communal land rights, and traditions. Cynics, no doubt, will denounce such declarations as placing tradition before progress. But this is to miss the point. For the indigenous and rural communities of Mexico, preserving the communal traditions of the past is all about securing an ecologically viable and livable future.

This article was originally published at mexelects.com.

Written by Colin Mooers

Dr. Mooers is Professor in the Department of Politics and Public Administration at Ryerson University in Toronto. Colin is an expert in the political economy of capitalism, political theory and social movements.

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Special Economic Zones: Maquiladoras on Steroids