The Front

Chasing Repression

THE MEXICAN GOVERNMENT should "eliminate the Zapatistas" to help restore investor confidence in Mexico , recommended a recent Chase Manhattan Bank report. The recommendation, contained in a Chase Emerging Markets Group political update distributed to the bank's capital markets clients, was first reported in the Washington, D.C.-based newsletter Counterpunch.

The update opined that while the situation in the southern Mexico state of Chiapas "does not pose a fundamental threat to Mexican political stability, it is perceived to be so by many in the investment community." It recommended the "elimination" strategy in order "to demonstrate [the government's] effective control of the national territory and of security policy." The report also stated that "it is difficult to imagine that the current environment will yield a peaceful solution."

 The Zapatistas are a group of indigenous rebels in Chiapas who are demanding widespread social and democratic reforms. In early February 1995, the Mexican army moved troops into Chiapas to hunt down the movement's leaders, sealing off the area to journalists. While the initiative failed to apprehend a single leader, Amnesty International, journalists and the Mexican government's own Human Rights Commission reported widespread illegal arrests and torture by the military.

 Amid international condemnation, Mexican President Ernesto Zedillo, head of Mexico's ruling Institutional Revolutionary Party (PRI), suspended the army's offensive one week after commencing it. Subcomandante Marcos, military leader of the Zapatistas, accused Zedillo of initiating the offensive to please financial backers of President Bill Clinton's peso bailout package. "The uprising has boosted the price of the Mexican Indian blood," Marcos told journalists on February 13. "Not long ago, it was valued at less than two chickens. Now it is the condition for the largest loan of ignominy in history."

 The Chase update was written by Riordan Roett, Latin American Studies director at Johns Hopkins University. Roett worked with the bank while on sabbatical. Roett declined comment on the update, but the Counterpunch report noted that at a January 11 seminar for investors organized by the Washington, D.C.-based Center for Strategic and International Studies, Roett conceded that his war strategy might provoke negative repercussions internationally, but added that there are "always political costs in bold action."

Regarding 1995 elections to be held in the Mexican states of Jalisco, Guanajuato, Yucatan, Michoacan and Baja California, Roett wrote in the update, "The Zedillo administration will need to consider carefully whether or not to allow opposition victories if fairly won at the ballot box. To deny legitimate electoral victories by the opposition will be a serious setback in the president's electoral strategy. But a failure to retain PRI control runs the risk of splitting the governing party." The first of these elections was held on February 12 in the central Mexican state of Jalisco, which includes Mexico's second- largest city, Guadalajara. The conservative opposition National Action Party won those elections with an 18 percent margin over PRI.

The update has created a storm of controversy at Chase. A bank spokesperson says "the views expressed [in the update] did not and do not represent the policy of Chase Manhattan," but offered no further comment. Chase later said that Roett "no longer has a relationship with the bank."

 "How can a business in the service sector, that provided this report to its clients as an integral part of its services to them, disavow something which was clearly its own product?" asks Harry Cleaver, an economist at the University of Texas at Austin. "This is twisting and turning to avoid corporate responsibility, scapegoating the worker whose report it was circulating."

 Chase is one of the eight large, so-called money center banks in the United States that were hardest hit by Mexico's last major debt crisis in 1982. Under a plan promoted by former U.S. Treasury Secretary Nicholas Brady, most large creditors of troubled Latin American nations agreed to reduce principal and interest payments and reschedule the remaining debt, relying in part on financing from the sale of special U.S. Treasury bonds known as Brady Bonds. The eight money center banks have been acting to decrease their debt exposure in Mexico since the last crisis, except for Citibank, which is pursuing a long-term strategy to penetrate the Mexican market. According to its latest 10- K report filed in February of 1994, for instance, Chase reduced its Brady Bond debt in 1993 from $1.2 billion to $505 million. But it still had a $1.4 billion exposure in Mexico, including $1.1 billion to the Mexican government.

 As the bank's 10-K report explains, such foreign debt is a considerable worry to Chase. "International extensions of credit require not only the normal credit risk analysis associated with the decision to extend financing to a particular customer, but also an assessment of country risk. Country risk arises from economic, social and political factors that might affect a borrower's ability to repay . One of the major risk factors associated with cross-border credit exposures is the possibility that a country's foreign exchange reserves may be insufficient or unavailable to permit timely repayment by borrowers even if the borrowers possess sufficient local currency."

The report goes on to say that Chase assesses country risk with a team of economists and political analysts, such as Roett. But both the banks and their regulators had made rosy projections for Mexico before the December peso devaluation. Chase's 10- K notes that it stopped counting its Mexican debt as part of its risky "refinancing country portfolio" at the end of 1991 because the banking regulators' Interagency Country Exposure Review Committee had upgraded Mexico's debt status. Many bankers are particularly angry about the new debt crisis because it took them off guard, they had not taken adequate precautions and because Mexican officials had repeatedly promised them that they would not devalue.

- Aaron Freeman

 

Trashing Haiti

IN NOVEMBER 1988, the infamous cargo ship Khian Sea set anchor in Singapore with its hold empty. The ship's two-year, half- way-round-the-world voyage focused world attention on the whether wealthy countries should be allowed to treat the Third World as a receptacle for hazardous wastes.

 The Khian Sea saga began in 1986, when the city of Philadelphia contracted with the operators of the ship to dispose of 13,764 tons of toxic ash generated by the city's garbage incinerator. The ship left Philadelphia in August, destined for the Bahamas. After the Bahamas refused to accept the ash, the ship wandered the Caribbean for more than a year searching for a dump site.

 The Khian Sea voyage drew extensive international press attention to the issue of hazardous waste exports from industrialized countries to the Third World, where toxics are often disposed of without the knowledge or consent of local communities, and without the safeguards necessary to protect the health of nearby residents.

 Such was the case in October 1987, when the Haitian Department of Commerce gave permission to the Khian Sea to import "fertilizer." When Haitian residents discovered the true nature of the cargo being dumped on a beach in Gonaives, Haiti, the Khian Sea operators fled under armed escort - but not before dumping 2,000 to 4,500 tons of ash. An October 1993 U.S. government investigation discovered that the remainder of the ash was dumped somewhere in the Indian Ocean.

 An early-1995 chemical analysis of the ash by Greenpeace found "anomalously high levels" of cadmium, lead, copper and zinc. Haitian activists are now demanding that U.S. troops returning from Haiti bring back the ash that remains on Haitian soil.

"It is incredible that six years later, communities of Gonaives are still exposed to this toxic waste," says Father Daniel Roussiere, general secretary of Peace and Justice of the Gonaives Diocese. "This toxic ash must be returned to Philadelphia." Peace and Justice was the first of several Haitian organizations - including the Haiti Communications Project, the Federation for the Restoration of the National Environment and the Haitian Coalition for the Protection of the Environment and Alternative Development - to demand that the ash be sent back. They have been joined by the Mayors of Gonaives and Port-au-Prince, who also have demanded that the ash be sent home.

 Around 1,000 tons of ash remain on the beach, although ocean and rainfall have washed away some of the waste. In 1989, roughly 1,000 tons of ash were removed to a containment site uphill from the beach. People living near the storage dump have reported that animals are dying from exposure to the toxic pile.

 The Haitian activists issued a joint statement with Greenpeace in December 1994 to the Haitian government calling for "fair trade, not toxic trade." They recommend that Haiti ratify the Basel Convention, which, following a March 1994 agreement, bans the export of hazardous waste from industrialized to non-industrialized countries. They also are calling on the Haitian government to demand that the toxic ash "be returned to the United States, along with any hazardous waste generated by the American troops."

 The Haitian government appears sympathetic to the activists' demands. "Dumping on Haitian communities is an act of injustice," says Haiti's Environment Minister Tony Verdier. "The Haitian government, in consultation with local organizations, will follow all the necessary steps to make Haiti a toxic trade-free country."

 The U.S. government appears less receptive however. "If the U.S. administration is really serious about its commitment to ban waste trade and promote environmental justice, the U.S. troops should pick up the toxic ash from Gonaives and return it to Philadelphia," says Greenpeace's Marcelo Furtado.

- Aaron Freeman