Free Markets Spur Protest

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed Sep 08 2004 - 19:34:40 EDT

September 7, 2004


Free Markets Spur Protest

Across Latin America,
Many Feel Let Down
By Economic Changes
September 7, 2004; Page A18

MEXICO CITY -- Mexicans who disagree with U.S.-style economic
policies have resorted to some unusual tactics lately.

Recently, government health-care workers protesting possible cuts to
their pensions threw the severed heads of pigs at government
buildings. In July, farmers opposed to free trade sacrificed a cow on
a major avenue in Mexico City.

Just as surprising as the methods used by protesters, however, have
been their sheer numbers. In the past week, Mexico has witnessed some
of the largest protests since the late 1980s, manifesting growing
disillusionment with a lack of economic growth despite two decades of
ambitious change to open borders to trade and reduce the government's
role in the economy.

Hundreds of thousands of people marched through Mexico City on Aug.
31 to protest President Vicente Fox's plans to overhaul public

>From Puebla, Mexico to Patagonia at the southern tip of Argentina, a
>broad movement made up of unions, farmers and Indian groups has
>flexed growing political muscle. Widespread impatience with -- or
>outright opposition to -- free-market programs threatens to halt
>hard-fought movement toward privatization throughout the region.

Many Latin Americans feel that economic changes during the 1980s and
1990s, such as selling state-run industries, failed to improve their
lives. While Latin Americans still believe a market economy is best,
only 19% are satisfied with the way the market has worked in their
countries, according to a recent survey by polling firm

Despite higher average incomes, poverty has worsened in part of the
region, creating the sense that changes helped the "haves" more than
the "have-nots." Many of the economic benefits to the poor from the
1990s, however, such as vanquishing inflation, are also less visible.

Consider the matter of privatization. In many nations, privatized
services improved quality and access to public services such as
electricity. A third of rural Bolivians now have telephone service,
compared with less than a quarter just a few years ago, government
figures show. And in Mexico, some $33 billion of privatization income
helped increase social spending to 9.5% of gross domestic product by
2000 from 6% in 1984, according to the government.

Yet the Latinobarometro poll shows privatization is Public Enemy No.
1, with 75% saying they are unsatisfied with the sale of state

"Recent studies seem to be reasonably conclusive that privatization
was positive, but there is no question it is less popular. That's a
bit of a puzzle," says John Williamson, senior fellow at the
Institute for International Economics in Washington.

In some cases, privatizations were handled badly or riddled with
corruption. Governments also didn't regulate the new companies to
ensure competition to drive down prices. Benefits of privatization
also are spread widely among consumers and take years to make a
difference, economists say.

The costs of privatization are more visible. As many as 150,000
Argentines lost their jobs during the sale of state enterprises in
the 1980s and 1990s. They now form the backbone of that country's
piquetero protest movement.

For unions, bureaucrats and consumers who enjoy subsidies from state
companies, popular discontent with privatization has allowed them to
successfully oppose selling off more assets, from natural gas in
Bolivia to electricity in Mexico.

In some cases, politicians such as Venezuela's populist President
Hugo Chavez have fanned existing suspicions about capitalism. And
recently, Argentine leader Nestor Kirchner told the visiting head of
the International Monetary Fund, Rodrigo Rato, to "not even dream"
about the country's setting aside more money to repay its defaulted
international debt.

In other cases, public perceptions limit room to maneuver by
more-centrist politicians such as Mexico's President Vicente Fox. Mr.
Fox scored his first significant legislative success in four years
recently with a bill that tries to begin addressing a cash-strapped
state-pension system by requiring new workers at the health-care
agency to pay more of their retirement costs.

Although the bill didn't affect existing workers, the reaction was
swift. On Aug. 31, 200,000 people took to the streets to rail against
the measures. Health-care workers walked off the job during Mr. Fox's
annual state-of-the-nation address. They soon were joined by the
union at the state electricity utility, who fear Mr. Fox wants to
privatize electricity services.

Mexico isn't at risk yet of political instability. And faster
economic growth this year in Brazil and Mexico, the region's two
heavyweights, could ease brewing social unrest in the region.

Officials from Mr. Fox's government say they will continue to press
for change, including overhauling labor laws that date from the
1930s. "We are committed to fighting for the economic reforms we
consider necessary," said Mr. Fox's spokesman, Agustin Gutierrez. Mr.
Gutierrez said the presidency's own private polls show three-quarters
of Mexicans behind proposed changes to labor laws, for instance.

But the protests may be a symptom of worse to come if Mr. Fox
attempts to dismantle what remains of Mexico's economic and political
past. Until now, analysts say, Mr. Fox has been unable or unwilling
to tangle with the pressure groups and unions that were part of the
system under the Institutional Revolutionary Party, which ruled for
seven decades until Mr. Fox's election in 2000.

"What we're seeing now is something that sooner or later was going to
bubble to the surface," says Luis Rubio, head of the Center for
Development Studies in Mexico City. "We've had democracy since 2000,
but many of the rules of the game continue as before."

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