by Saul Landau and Diana Starratt
Organic Farming in Cuba
by Peter Rossett
Behind the Lines
Editorial: Sham Engagement
The Front: Talking Trash
Interview: Fighting For Irish Workers
An Interview with Patricia O’Donovan
The Ugly Canadian: Robert Friedland and the Poisoning of the Americas
by Roger Moody
Mexico’s New Billionaires
by John Summa
Book Notes: Thinking Globally
Names in the News
Jeffrey Lane, a former Hughes engineer, alleges he was denied pay increases and promotions at Hughes based on his race. Lane’s lawyers argue that he was denied promotions from 1977 to 1991, despite being assigned to work on projects staffed by more senior, higher paid, white co-workers. When David Villalpando, a white supervisor and co-plaintiff in Lane’s suit, complained to Hughes management, the company retaliated against Villalpando by re-assigning him, and against Lane by demoting him "in a manner calculated to embarrass him personally and professionally," according to the suit. A separate suit brought by Villalpando claims Hughes told him to produce false performance appraisals in order to justify the demotion.
The jury ordered Hughes to pay $40 million each to Lane and Villalpando in punitive damages.
According to a brief company statement, the verdict "was irrational, irresponsible and outrageous." Hughes indicated that it would appeal.
The explosion and the resultant fire trapped miners in a gallery 900 meters below the surface. The workers were employed by Syam & Company, Ltd. , which is renting different mining galleries from Schwager.
A week after the accident, Schwager announced that its mining installations in the region would be closed and 220 miners would lose their jobs, prompting 320 miners to take over one of the galleries at the mine on October 11. Miguel Valencia, a representative of the miners, says his colleagues were willing to remain in the gallery, which is roughly 1,000 meters below the surface, until a solution involving the government could be reached. The miners agreed to leave the mine after 11 days, when an agreement to have the workers employed in other sectors was reached with authorities.
The Schwager mine, which originally began operations in the mid-1800s, was incorporated into the state-owned coal company ENACAR in 1973 and then privatized in 1985. But depressed prices in the coal industry in the late-1980s caused massive layoffs. Schwager laid off the last of its 443 miners in March 1994 and has been renting out its installations to Syam and other companies since then.
Under their contracts, miners are required to work long hours at low salaries and are prohibited from unionizing. A mother of one of the victims who was killed in the explosion says her son used walking shoes while working in the mine and had to borrow his safety hat because Syam did not provide even the minimum protective clothing to the miners.
"It isn’t worth having a mining industry if so many lives are lost," says Concepción Archbishop Antonio Moreno, the ranking Catholic prelate in the region.
MAXXAM, in which Hurwitz maintains a 60 percent stake, purchased Pacific Lumber , the world’s largest logger of redwood lumber, in a 1985 takeover financed mostly with junk bonds. To finance the debt from the takeover, the company doubled its logging rate of virgin redwood forests in California [see Ravaging the Redwoods: Charles Hurwitz, Michael Milken and the Cost of Greed," Multinational Monitor, September 1994 ].
Industry sources approached about the deal told the Wall Street Journal that "Hurwitz is weary of the pressure on [Pacific Lumber’s] logging plans from environmental lawsuits, wildlife regulations and even Congress," referring to the Headwaters Forest Legislation introduced by Dan Hamburg, D-California, and Barbara Boxer, D-California, that would authorize funds for the government to purchase 44,000 acres of land Pacific Lumber intends to log.
The proposed sale "seems consistent with MAXXAM’s track record of buying a tract, logging it to hell and keeping the cream property for itself," says Jim Owens, director of the Washington, D.C.-based Western Ancient Forests.
MAXXAM refused to comment on the proposed sale.
Investigators from the Bureau of Land Management (BLM) found a "consistent pattern in which the company routinely underreported the amount of oil and gas it had produced and sold," according to Josh Kurtz, the author of the article. Estimated losses from six Meridian sites spot-checked by the BLM investigators are $3.9 million. Extrapolating from this figure, losses from Meridian’s 1,073 federal oil and gas leases in the region would total $22.9 million.
"The laws set oil and gas producers free to report what they’ve pumped and sold on an ‘honor system,’ with scant government scrutiny" said the article. "The big losers in this ‘honor system’ are the taxpayers of New Mexico."
Representatives from the state of New Mexico BLM, federal BLM and Meridian refused to comment on the investigation.
-Carolina Cabieses/Latinamerica Press and Aaron Freeman
As President Clinton met with leaders of the Asia Pacific Economic Cooperation (APEC ) this month to discuss improving U.S. trade with countries in the Pacific, the flimsy reasoning of constructive engagement was extended to justify increased trade with Indonesia , a country whose human rights violations are "on a staggering scale," according to Amnesty International. "The human rights situation in Indonesia has deteriorated in the run up to the APEC summit, ... as the government has sought to rid the capital of ‘economic and political criminals,’" Amnesty reported. "The crackdown ... has broadened in recent months to affect government critics, labor activists as well as a variety of socially marginal groups."
Meanwhile, Indonesia maintains its illegal occupation of East Timor , where over 200,000 people - one third of the Timorese population - have been killed or have died of starvation or disease since the 1973 Indonesian invasion.
This ongoing repression notwithstanding, and despite massive evidence to the contrary, Clinton stated at a November 15 news conference in Jakarta, "[W]e reject the notion that increasing economic ties and trade and partnership undermine our human rights agenda. We believe they advance together."
In the case of the Western Hemisphere’s largest recipient of U.S. military assistance, Colombia , U.S. "engagement" has bolstered a repressive regime which routinely carries out extrajudicial executions and unarmed civilians. A decision to be active in human rights issues in Colombia "is tantamount to signing your own death warrant," according to Amnesty.
Curiously, there is one country in particular to which the United States has not applied the skewed logic of "constructive engagement." The Cuban embargo, an embarrassing, hypocritical relic of the Cold War, has been maintained despite the fact that Cuba no longer poses any conceivable threat to U.S. security.
In carrying on its unilateral, disingenuous crusade, the United States has declared itself the vanguard of the Cuban human rights cause, defying a broad international concensus that includes leading Cuban dissidents and 102 members of the United Nations which supported a resolution condemning the embargo (the United States and Israel were the only countries who voted against the resolution).
The 1992 Cuban Democracy Act denies the island nation basic economic necessities, including food and medical supplies, "so long as [Cuba] continues to refuse to move toward democratization and greater respect for human rights."
Where were these lofty principles during the MFN debate?
The truth is, the embargo has little to do with such humanitarian principles. "My objective is to wreak havoc in Cuba. ... My task is to bring down Fidel Castro," declared Cuban Democracy Act sponsor Robert Torricelli, D-New Jersey, at a recent panel at Georgetown University. "Don’t take your boot off the snake," echoed Clay Shaw, R- Florida, at the March 1994 House Committee Hearings that examined the possibility of normalizing relations with Cuba.
In part, the embargo exists because Cuba is an embarrassment. Formerly the playground for the U.S. rich and powerful, with much its population reduced to prostitutes and servants of various sorts, Cuba picked itself up and threw out its oppressors. Allying itself with the Soviet Union, it thumbed the United States at every turn.
Castro’s Cuba is not without its problems. Political democracy is absent; hundreds of Cubans - including many who are prisoners of conscience - are unjustly imprisoned for up to four years for so-called "dangerousness." And a combination of the collapse of the Soviet Union, internal planning mistakes and the embargo have sent the economy into a tailspin.
But rising from an impoverished de facto U.S. colony, Cuba now consistently ranks among the world’s highly industrialized countries in basic indicators such as literacy rate, life expectancy and access to clean water and adequate sanitation. The Cuban government has developed systems of universal education and top-notch health care for all its citizens; and hunger, even under the embargo, is not a severe problem. These basic rights are widely available in Cuba, but it is just short of heresy to talk about the humanitarian gains made by the Castro regime in the United States.
More importantly, in choosing its independent path, Cuba has become one of the last bastions where Northern economic interests and the desires of multinational corporations are subjugated to domestic needs. Even under the recent liberalizations in the Cuban economy, Cuba remains a society that, relative to most other countries, places the needs of its population higher than the concerns of global capital.
While history and personality play a part in the embargo, the embargo’s reasoning is primarily motivated by a desire to squelch any national development efforts that might demonstrate a viable alternative to the multinational corporate-friendly, neoliberal "free market" model.
The Cuban embargo is a shameful component of U.S. foreign policy. Like policies of constructive engagement, the embargo is designed solely to force deregulation of economies; and if human suffering and violations of national sovereignty must occur in the process, so be it.
Attention junior-high teachers: have we got a deal for you. Teach your kids about the environment with a cutting-edge educational program - a multimedia extravaganza complete with color slideshow, interactive software that features color graphics and hands-on activities galore. And best of all, it’s free, and it comes with the U.S. government’s stamp of approval.
It’s called WasteWorld. "The kids really responded well to it," enthuses Diane Pirello, a junior-high teacher in Beloit, Wisconsin - just one of WasteWorld’s scholastic supporters.
Here’s how WasteWorld works. Students pretend to be citizens of WasteWorld, a fictional community that has to choose between various waste disposal options: recycling, landfilling or incineration, or some combination of the three. They carry out various exercises that explain what happens to trash after the trucks take it away. The climax comes when the students enter their choices into the software program, which then sets forth the consequences for their simulated community.
WasteWorld positively bristles with facts on trash. But those facts deserve closer scrutiny, particularly the author’s name and hidden agenda. Both are entirely omitted from this painstakingly thorough program.
The U.S. Department of Energy sponsors WasteWorld and underwrote its development and production costs. Agency officials contacted for this story, however, could not even answer basic questions about WasteWorld. Such questions are instead referred to a private organization called the Integrated Waste Services Association, or IWSA. Who is IWSA? "IWSA represents companies that build and operate waste-to- energy (WTE) facilities," notes a brochure, "as part of a community’s integrated solid waste plans." Waste-to- energy is the term by which the U.S. incinerator industry likes to be known.
Margaret Ann Charles, IWSA spokeswoman and overseer of the WasteWorld project, denies any hint of partiality toward the industry she represents. "I don’t want to bias the program toward waste-to-energy," she insists. "The program is about integrated waste management." Oddly, IWSA’s commitment to avoiding bias extends to environmental groups - most of whom are skeptical about the merits of incineration. Not even the most moderate of incineration critics, the Environmental Defense Fund, has been invited into the review process. "If they don’t believe in an integrated system, I don’t see the point in asking their opinion," says Charles.
Charles’ "integrated system" refers to the concept of "integrated waste management." Under the Bush Administration, the Department of Energy and the Environmental Protection Agency endorsed this concept, which holds that community waste disposal plans should "integrate" a combination of approaches. But the Bush Administration ruled incineration to be an essential element of any "integrated" plan. So integrated waste management is by definition pro-incineration.
This thinly-veiled advocacy of incineration is mirrored in WasteWorld. If a student enters into the software program a waste management plan that excludes incineration, the response comes back: "energy experts are upset" and "no one is too happy with this choice." No environmental or economic arguments are cited against trash-burning, in contrast to the many such arguments delivered in the real world.
The slide show also gives kids a through-the-looking-glass picture of waste management. For example, it explains that "leftover ash ... is taken to special landfills designed to safely manage the ash," referring no doubt to monofills, landfills that take only incinerator ash. But a study by the New York-based research group INFORM Inc. surveyed a number of state-of-the-art incinerators and found that about half dump their ash in regular solid waste landfills.
The slide show also asks the following rhetorical question: "Are landfills environmentally friendly?" The answer, "Yes - modern landfills protect our underground water supplies," could have been scripted by the industry itself. Statements like these, which stretch the truth or ignore areas of serious disagreement, litter WasteWorld like candy-wrappers outside a convenience store.
It’s a WasteWorld world
WasteWorld is now used in schools across the country, apparently raising no alarm bells among teachers or students. After pilot-testing WasteWorld at over 500 schools during the 1993- 94 school year, IWSA formed a peer review committee composed strictly of teachers. Outside critics of the incinerator industry were locked out just as before. Nonetheless, the teachers reported back that WasteWorld "slants [the] picture of WTE as [a] better solution than it is," according to an update report from IWSA to the Department of Energy.
Charles does not seem to have heard this complaint. Her list of revisions only nibbles away at the margins: format the software for IBM-PCs, say a bit more about source reduction, and so on. In early 1995, the Department of Energy is expected to approve nationwide distribution for the next school year, revisions or no revisions.
Materials that advocate some viewpoint can play a valuable role in the educational process if, as suggests Ed McCrea, Executive Director of the North American Association for Environmental Education, they are "clearly labelled as such in the opening." No warning label appears in the opening to WasteWorld. In fact, IWSA’s very name appears nowhere in WasteWorld but a tiny copyright notice.
Even worse, critical viewpoints have all been silenced. Rather than explore opposing arguments and conflicting pieces of evidence, as any program deserving of the adjective "educational" would, IWSA excludes any voices that disagree with its own. WasteWorld worships only one god - and it is a noxious god of fire.
- Tom Hilliard
by Saul Landau and Daina Starratt
HAVANA - Cuba, the last bastion of socialism in the world, is making an inexorable, painful transition to a modified capitalism. It is integrating its economy into the world market and making concessions, grudgingly, to the dictates of venture capital and all the logical consequences that follow from its penetration of the island.
For six years, Cubans have moved from privileged membership in the Soviet economic bloc to the lonely status of competitors in the court of world investment. To grasp the enormity of the change, compare Cuba in 1989, with $8 billion of imports (many on credit) and conducting 85 percent of its trade with the Soviet bloc, to 1994, when the country’s imports have dropped to less than $2 billion and it imports COD.
The Cuban economy has yet to level out from its dramatic descent after Soviet aid, beneficial trade, and investment drastically declined at the end of the 1980s. Cuban leaders now look to foreign capital as at least a temporary floor to stop the free fall of the economy. They ignore the paradox of depending on foreign capital to save socialism as a necessary concession to world reality, and confine their energy to salvaging the health care and education systems, the gains of the 36-year-old revolution.
Cuban officials continue to speak confidently, as if they still possessed the pre- Soviet collapse capacity to retain degrees of socialist purity that other nations, like China and Vietnam, have had to forego. "We will keep control of the internal economy, while we open the export and tourist sector for foreign investors," Vice Minister for Foreign Investment Osvaldo Castilla contends. But how can officials distinguish between the two areas, especially as voracious foreign and Cuban entrepreneurs try to increase the private sector space? Rather than offering a blueprint for Cuba’s conversion to world capital economics, while maintaining some socialist institutions on the island, Cuba’s leaders resort to new versions of triumphant rhetoric.
The internal economy
Today, above all, we must save the Revolution and survive," President Fidel Castro explained to a group of U.S. visitors last January. "And, under these very special conditions, we have to adapt and adjust our economic policy to the goals we pursue, which are not intended to imitate the capitalist model. They are not intended to give up socialism and its goals - even if we are obligated to use capitalism’s mechanisms in a number of activities."
Fidel insists that the reforms will not necessarily pull Cuba inescapably down the capitalist path, and that even without the Soviet parent, Cuba will not compromise its commitment to socialism. But the government’s inability to maintain a viable economy without Soviet support undermines slogans like "socialism or death." "In 1994 Cuba those words have become synonyms," says a Trade Ministry official, recounting one of the thousands of jokes about the economy that fill daily conversation.
Since 1992, the state has not supplied much of the populace with sufficient food and other necessities. Changes made in 1993 and 1994 by the National Assembly in labor relations, price subsidies, taxes, and monetary policy take the country further from the eroding socialist model, but they do not offer a new model. Rather, the government responds to crises or to the unpleasant facts of dreary, daily life.
In 1993, Fidel succumbed to mounting pressure and legalized the dollar rather than arresting a significant percentage of the population for possessing foreign currency. Legalization further undercuts the socialist ethic. Cubans with dollars lead privileged lives, whether or not they work for them. Some receive remittances from their families; others, like artists and writers who sell to foreign galleries or book publishers, earn hard currency. The majority of dollar-bearers work in the burgeoning tourist industry. Busboys, waiters, tourist taxi drivers and chamber maids use tips to buy food and other commodities at the dollar stores.
"We are the true consumer society. Everyone consumes; no one produces," remarks Gutierrez Alea, Cuba’s award winning film director. Without cheap oil, the government has had to ration ruthlessly, close down factories, reduce bus service and renege on its guarantee of 100 percent employment. One result of the transformation has been the resuscitation of the once despised timbiriches, the small business people.
The National Assembly, after excruciating debate about socialist principles, agreed in 1993 to allow self-employment in 120 different occupational categories. By the summer of 1994, more than 150,000 individuals held self-employment licenses. Tens of thousands more are self-employed without permission - i.e. without paying taxes.
Most recently, free agricultural markets, where food is openly sold in pesos, were re-opened on October 1. Fidel had closed "peasants’ markets" some 10 years ago because he said they corrupted the population and the socialist system. But in the changed climate, Defense Minister Raúl Castro (Fidel’s brother) stated firmly, "if there is food for the people, the risks are inconsequential." The Cuban government has also recently announced the opening of "industrial markets," where artisans will sell their wares in a similar manner. These markets will open December 1.
By late 1994, Cubans have come to accept as routine what 10 years ago party watchdogs would have labeled "the distortions of capitalism." The University of Havana now offers graduate courses in "economic renovation," a euphemism for studying capitalism, that offers topics like sales and marketing and uses a text written by mainstream U.S. economist Robert Samuelson. Five years ago a professor suggesting such an addition to the economic curriculum would have faced ideological heresy charges.
In November 1993, Cuban economic planners listened avidly as two officials from the International Monetary Fund (IMF), formerly labeled a "temple of capitalism," advised them on the virtues and consequences of the Eastern European transition to the market. Cuba has petitioned to re-enter the World Bank and the IMF, but the United States continues to veto admission on ideological grounds.
Tourism and the export sector
Non-U.S., foreign capital appears disinterested in Cuba’s revolutionary rhetoric, seeing only the advantages of exploiting the island’s skilled labor force and easy repatriation of profits. As a Brazilian entrepreneur visiting Cuba remarks, "Cuba is like a puddle of water and I see myself as a sponge."
In June 1994, Ernesto Melendez, minister of foreign investment and economic cooperation, reported that there were 146 joint venture enterprises between Cuba and 28 other nations, in 25 sectors of the economy. An additional 130 projects were under consideration. The Spanish lead the investors with 32 joint ventures already established. Ironically, Canada and Mexico, the United States’ NAFTA trading partners, are also ranking investors in Cuba.
Major sectors of the economy, including tourism, mining, pharmaceuticals and telecommunications, are open to foreign investment. President of Parliament Ricardo Alarcón says foreign investment is now open to all sectors of the economy, even sugar cane production, which had been previously off-limits.
Cuban officials emphasize that they have maintained their sovereignty in the joint venture partnerships, by selling shares rather than entire businesses to foreigners. According to Vice Minister Osvaldo Castilla, the government transfers its shares to a Cuban company which then sells a percentage to a foreign investor. "The ideal is 51 percent Cuban, and 49 percent foreign; but each case is different. For example, in the case of theInternational Textile Company , 70 percent is Mexican owned, because it is so difficult to sell textiles abroad."
The government also tries to control labor relations. Joint ventures pay a government-operated employment firm in dollars for their employees. The government then pays these employees in pesos, and also continues to provide them with health care and pension benefits. The joint ventures can fire employees, who then return to the government employment pool and receive "unemployment" until or if they find a new job. Although the Cuban government provides no accurate data, officials admit that unemployment and underemployment have become serious problems.
Most foreign investors have shunned problem-ridden industries and are drawn instead to tourism. A decade before the Soviet collapse, foreign investors coveted profits that they envisioned through the sale of Cuba’s climate and beaches. By 1994, tourism has become the principal area of foreign investment and the country’s second most important economic activity after sugar production.
Cuba also offers investment opportunities in industries that spin off of tourism, like Voral Negro, a growing jewelry manufacturing and distribution concern that offers its products in tourist hotel stores. Aristides Ruiz, its director, glows over the gold and silver earrings, bracelets and necklaces, inlaid with black coral. "We use primitive equipment," he explains as he watches an artisan use a 1940s press and blow torch to mold a ring, "but the quality, we think, matches the standards of Europe."
In 1993, 560,000 tourists brought $720 million to the island. This year, the industry hopes to attract to beach resorts upwards of 600,000 visitors, mostly from Canada, Western Europe and Latin America, who should spend some $900 million. Armando Amieva, commercial attaché at the Cuban Interest Section in Washington D.C., shows no defensiveness in promoting investment in the tourism sector. "It provides the most rapid turnaround for investor’s dollars," he says. Indeed, investors expect to recoup their investments in the hotel sector within four years - and then reap big profits.
Cuba has negotiated joint hotel ventures with companies like Sol-Melia, Raytur, and Guitart Hotels of Spain, LTU of Germany, Superclub of Jamaica, Delta Hotels of Canada and the Dutch Golden Tulip International. Such enterprises have provided 1,200 new hotel rooms in Varadero Beach alone and project an expansion of 7,200 more over the next five years. Cuba hopes to continue to expand in this sector, and is banking on the allure of its beautiful beaches and skilled work force, in which "one of every eight working adults is a skilled technician and one of every fifteen holds a masters or better," according to Regino Boti, vice president of CIMEX, a newly created company to promote investment and business.
Mineral exploration, mining and refining rank second to tourism in attracting foreign investment. Mineral production declined dramatically in recent years due to oil, chemical compounds, spare parts and raw material shortages, but even with the cutbacks, Cuba remains the world’s fifth largest nickel producer. Canadian investors in nickel also look with interest at Cuba’s still un-mined cobalt, the world’s largest deposits of the mineral.
Sherritt Inc . of Canada has a 15-year contract for nickel from Moa Bay, off the northeast coast of Cuba. It invested $1.2 billion last year to renovate the smelter at Moa and to construct a sulfuric acid plant there. In June, Sherritt announced a contract with Cuban-owned Compania General de Niquel to mine, refine and market nickel and cobalt internationally. Furthermore, Sherritt’s refinery in Fort Saskatchewan, Alberta, which uses the Cuban nickel, will be included in the jointly owned assets, giving the Cuban company a piece of Canada. Other international mining partnerships include British, Italian, Canadian and Australian corporations working in exploration, mining and refining.
Cuban oil production has increased from 120,000 tons in 1960 to 1,100,000 tons in 1993. In June, Sherritt Inc. and Fortuna Petroleum Inc. of Canada, in partnership with Cuban state petroleum company Cubapetroleo, struck oil in the Cardenas Bay, in Matanzas Province some sixty miles east of Havana. Initial tests demonstrated a production capacity of 3,750 barrels per day. In the same month, the British-Borneo Petroleum syndicate announced an agreement for a 50 percent working interest in another oil exploration project.
In September 1994, Mexpetrol, a Mexican consortium consisting of PEMEX , the National Bank of Foreign Trade, the Mexican Petroleum Institute, Mexican Maritime Transportation, and several private firms, signed a $200 million deal to take over Cuba’s Cienfuegos oil refinery. Mexico will pay Cuba in a debt equity swap and give Cuba a percentage of the refined oil.
The Cubans have also attracted foreign investments in citrus cultivation. In 1993, Cuba negotiated three joint-ventures with Greek and Israeli investment companies for citrus and fruit production. Israeli BM Corp. , for example, runs one of two citrus packing houses in Jaguey Grande. At 115,000 acres, the joint venture’s citrus plantation is the largest under single management in the world. Production has increased considerably under BM Corporation’s management, with the introduction of Israeli drip irrigation technology. By 1995, Cuba hopes to produce 1.6 million tons of citrus - a 60 percent increase from 1993 levels.
A fourth sector of Cuba’s economy, the pharmaceutical and biotechnology industries, provide additional prospects for foreign exchange. Cubans are able to produce recombinant interferon and the drug PPG, "that not only reduces cholesterol," Castro chortled to a visitor in January, "but stimulates your sex drive as well." Cuba’s biomedical sector has patented additional products, such as meningitis B and hepatitis B vaccines, a remedy for vitilaigo, and an ointment which enables real skin and not scar tissue to grow over burns. In the early 1990s, Cuba received more than $200 million for selling 10 million doses of its meningitis B vaccine, three quarters of which went to the Brazilian government to fight an outbreak in Rio de Janeiro. In June, the Brazilian government negotiated a $30 million deal to import Cuban medicines that will allow Cuba to repay part of its $40 million debt.
Mexicans and more recently U.S. companies have signed accords with Cuba to improve telecommunications. An upgraded system is essential to attracting foreign entrepreneurs. In June, the Mexican consortium Grupos Domos signed a letter of intent to purchase 49 percent of EmtelCuba, the Cuban phone system, for $740 million. The telephone and oil agreements with Mexico will cancel nearly all of Cuba’s $340 million debt to that nation.
In October 1994, the U.S. Federal Communications Commission, acting on State Department recommendation, approved proposals from EmtelCuba with Wiltel International, MCI, LDDS Communications, Sprint, and IDB-Worldcom to provide direct communications between the United States and Cuba. AT& T , which has provided limited, operator-assisted long distance service to Cuba since 1921, also signed an agreement to expand the existing service. Negotiations over the U.S.-Cuba phone link had been stalled because the Cubans had asked for a $4.75 surcharge, which the U.S. government refused, claiming that it would allow the Cubans to earn too much money, in contravention of the embargo policy. In the end, the two countries settled upon a $1 surcharge, even though the U.S. government receives $1.75 for calls to Guantanamo Base.
The social repercussions of capital
Cubans need the dollars and technology provided by these foreign investors, but capital carries baggage that contains serious threats to the revolution. As Carlos Fernandez de Cosio, chief of the Foreign Ministry’s U.S.-Canada department, explains, "I think the capacity to cope with foreign investment will be the biggest challenge of the revolution." His euphemistic understatement underscores Cuba’s dilemma.
The most obvious social distress of the new arrangements comes as a result of the expansion of Cuba’s tourist industry. Those over 50 remember the Havana of the 1950s, a U.S. tourist playground dominated by gangsters who also ran gambling, drugs and prostitution. "We are aware of the problems associated with the tourist industry," Commercial Attaché Amieva says. "We have prepared our population with education and training. We are doing all that we can to prevent tourists from bringing in drugs. We have done environmental studies to make sure that the new developments do not destroy the environment."
Such rhetoric belies the facts of life in Cuba, where dollars fuel a parallel economy that weakens the coherent fibers of Cuban society. Those working in tourism, from prostitutes to hotel porters, and those who receive dollars from relatives in the United States, enjoy privileges simply by virtue of having convertible currency. Unusual inequities result. A tourist cab driver or a prostitute can earn in a week the equivalent of a doctor’s annual salary.
Ten years ago, there was almost no serious crime in Cuba. In January 1994, a group of 120 U.S. visitors celebrating New Year’s in Havana suffered 12 different muggings in the course of a week. Meanwhile, Cuban officials try to downplay the seriousness of the upsurge of crime and especially the reappearance of prostitutes.
An informal sex tourism trade has developed on the island. Castro acknowledged this when speaking to Brazilians in 1992, but said, "Our hookers don’t do it out of obligation, of necessity. Here prostitution doesn’t occur for that reason but because somehow they like it."
Despite this questionable assertion as to the motivations of Cuba’s prostitutes, need is quite relative. For three decades, Cubans lived well compared to most Third World countries, but recently, they have slid downwards - from a guaranteed 3,000 to less than 1,700 calories a day.
U.S. leaders, the arch missionaries of free trade and capitalist values, continue to pursue Mafia-style revenge policies against Fidel Castro. Washington calls current policy to stop trade, commerce, investment and travel between the United States and Cuba an "embargo;" Cubans say it is a "blockade" because Washington interferes with other nations’ efforts to do business with the island.
Despite Cuba’s apparent attractiveness as an investment opportunity, big capital hesitates to invest in an area the United States has made the object of an ideological vendetta. The Cubans claim that U.S. intimidation dissuades 9 out of 10 potential investors.
On October 26, 1994, the United Nations General Assembly voted overwhelmingly 102 to 2, against the U.S. embargo policy, marking the third straight year of UN calls to change the policy. The European Union and member nations of the Ibero American summit have also condemned the embargo. And Cuba’s leading dissident, Elizardo Sanchez, says, "U.S. policy impedes rather than helps" the reform cause.
International opinion has had little impact. As if smelling blood, U.S. policy makers tightened restrictions on Cuban trade after the Soviet Union collapsed. "The beast is wounded," said Jose Sorzano, former National Security Council official. "It’s time to go in for the kill."
This militancy marked a dramatic shift from the policies of the 1970s, when the Nixon and Carter administrations had eased embargo restrictions in response to pressure from U.S. subsidiaries operating abroad. By 1973, Argentine-made Fords, Chevies and Dodges were sold in Cuba and by the end of the decade the number of loopholes in the embargo had increased. Cubans bought U.S. products from subsidiaries in Panama, Canada and various Caribbean islands.
But the increased trade caused alarm bells to sound in the offices of the Cuban American National Foundation (CANF), a right-wing association of Cuban businessmen that has played an extraordinary role in shaping U.S. policy toward Cuba over the last decade. CANF acquired an inordinate share of political clout by making strategic campaign contributions and gaining influence in key sectors of both political parties
In 1989, to block investment in Cuba’s tourist industry, the Treasury Department’s Office of Foreign Assets Control named Tabacalera, a large Spanish government-owned company, a "specially designated national of Cuba," thus depriving the company of any trade or commerce with a U.S.-based company. This dramatic pronouncement occurred just weeks after Tabacalera announced its plan to undertake a joint venture with the Cuban government to develop a tourist enclave. The Spanish government protested, and after several weeks of discussions with the Departments of State and Treasury, the company was "undesignated." On the following day, Tabacalera canceled its joint venture "for economic reasons."
"It was a classic case of threat and intimidation," a Spanish diplomat told Multinational Monitor. "The U.S. officials said that if Tabacalera went ahead with the project there would be many obstacles to restoring trade between it and U.S. companies. For example, if Tabacalera used any U.S.-made part in any of the development work or construction, that would violate U.S. law, and all trade and commerce would be cut. Under those conditions, who would be crazy enough to continue?"
In April 1991, Wagner Canhedo, the president of a Brazilian investment group and owner of VASP airlines, personally led the negotiations for a 60 percent interest in the Cuban airline Compania Cubana de Aviacion. Canhedo was willing to invest $800 million. Cuba needed cash and new aircraft to replace its aging Soviet aircraft for its new tourism plans. VASP would benefit from Cubana’s access to juicy air routes to Europe.
U.S. officials informed the Brazilian government and VASP that, should they buy Cubana shares, they might not be able to buy spare Boeing parts for their commercial aircraft. In addition, they told Brazil that the Pentagon would cease purchase of Bandeirante troop transport planes made in Brazil. When confronted with this as an example of threat and intimidation, a U.S. national security official, speaking with a smile, says, "We didn’t threaten them or tell them not to go through with the deal. We just advised them about what might happen if they did."
In 1992, the United States stepped up pressure on Cuba still further with the Cuban Democracy Act of 1992, authored by Congressman Robert Torricelli, D-New Jersey. During his candidacy, Bill Clinton strongly supported this legislation, which closed the loopholes of previous decades by prohibiting U.S. subsidiaries from trading with Cuba and banning ships that docked in Cuban ports from U.S. ports for six months. This past summer, the Cubans submitted a complaint to the United Nations detailing the extraterritorial pressure placed upon foreign governments and companies under the Clinton Administration.
Some U.S. friends and allies responded to the tightening of the embargo by passing blocking laws that seek to limit the effectiveness of Torricelli’s Bill. For example, business people in Canada or Britain who refuse to do trade with or invest in Cuba because of the Cuban Democracy Act are subject to prosecution by their governments. An official from the Canadian International Trade Office, explains, "The Canadian government has its own policy of advising potential investors about the U.S. claim against Cuba." The official firmly states that the United States does not dictate Canadian policy. As if to emphasize this point in action, Canada resumed aid to Cuba in March 1994, beginning with $300,000 in emergency food.
In September 1993, the State Department instructed U.S. missions abroad to request foreign governments to pressure their nationals and firms not to negotiate with Cuba or make state investments. U.S. representatives maintained that investors would inevitably get bogged down in lawsuits, as soon as Cuba sold expropriated U.S. goods or goods made on expropriated U.S. properties to foreign buyers. Further, the United States would be "displeased" to see its friends and allies doing business with Cuba as long as its government remained antidemocratic. Cuba claims that as a result of such "persuasion," negotiations with businesses from various countries, even deals already agreed upon, have fallen apart.
A U.S. official visited with executives of the Canadian Sherritt Inc., for example, to persuade them not to establish business relations with the Compania Cubana de Niquel because the site allegedly once belonged to a U.S.-owned refining plant, expropriated by the Cuban government in the early 1960s. When asked about the specific "persuasive" methods, a Sherritt official says, "Sherritt’s current negotiations in Cuba are sufficiently sensitive that it is not appropriate for us to make a public response to your question." Sherritt Inc. appears to have been undaunted, however, by the U.S. approach and finalized a major deal with the Cubans.
Those businesses which have resisted U.S. pressure have had to deal also with threats from right-wing Cubans and CANF in the United States. When the Italian company Benetton announced its intention to open a string of retail outlets in Cuban tourist centers, Miami Cuban Americans threatened to boycott its U.S. stores. Benetton persisted. Similarly, Cuban exiles threatened to boycott all Colombian products last March if the Colombian government did not halt its plan to send 15,000 to 20,000 barrels of oil a day to Cuba.
The United States has also exerted strong pressure on Cuba’s nearest neighbors to isolate the socialist nation. In February 1993, Washington threatened to remove the preferential economic status and deny tariff parity for the exports of members of the Confederation of Caribbean States (CARICOM ) if they allowed Cuba membership in the organization. CARICOM members acceded to Washington’s demands to prevent Cuban participation in their confederation, but did include Cuba as part of their new trade bloc, the Association of Caribbean States (ACS), which formed in July.
A more open future
Cuba is integrating itself into the world economy despite the heavy U.S. pressures. Economists at think tanks have drafted comprehensive plans for converting the Cuban economy, but the political leadership has remained in a state of denial over the extent to which labor relations, subsidies and entitlements will undergo drastic changes in the near future as a result of the return of capital. It will be difficult for even the staunchest revolutionary to talk business all day with CEOs and IMF officials and then shift gears and act like intransigent socialists at Party meetings.
"The best Cuba can hope for in the middle-run future," says Julio Carranza, an economist at the Havana-based Center for the Study of the Americas, "is to become a Third World social democracy. After all, it’s still a lot better than most of the Third World."
While Congressman Torricelli vows to continue to "wreak havoc in Cuba," the balance of U.S. elite opinion has shifted against the embargo. When that shift and the business interests it represents translate into political force, as they will, the embargo will begin to erode, and U.S. Fortune 500 companies will again be vying with European competitors for pieces of a potentially lucrative Cuban market.
by Peter Rosset
HAVANA - Times are changing in the Cuban countryside. Since September 1993, all state farms, which once occupied 80 percent of the nation’s farmland, have been privatized. They are now employee-owned shareholder enterprises. Farmers’ markets - an experiment in free-market pricing that was initiated and then quickly abandoned in the 1980s - have been re-opened to rave reviews from the populace. And, suddenly organic farming has become the norm in a country that prided itself on the most industrialized, chemical-intensive agricultural sector in Latin America.
The driving force in these changes has been economic crisis. Since the 1989 collapse of trading relations with the former socialist bloc, imports of agrochemicals have dropped by more than 80 percent. Tractors are idle for lack of spare parts and petroleum, and the government is searching desperately for ways to provide incentives so that farmers will up their food production in the face of these difficulties. Yet in the midst of crisis, something is happening with positive implications that reach far beyond Cuban shores.
Cuban Agriculture in Perspective
From the Cuban revolution in 1959 through the collapse of trading relations with the socialist bloc at the end of the 1980s, Cuba’s economic development was characterized by rapid modernization, a high degree of social welfare and equity, and strong external dependency. While it ranked high on most quality of life indicators, Cuba depended upon its socialist trading partners for petroleum, industrial equipment and supplies, agricultural inputs such as fertilizer and pesticides, and foodstuffs. Possibly as much as 57 percent of the total calories consumed by the population came from foreign suppliers.
Cuban agriculture was based on large-scale, capital-intensive mono-culture, more similar in many ways to the Central Valley of California than to the typical Latin American small-scale farm. More than 90 percent of fertilizers and pesticides, or the ingredients to make them, were imported from abroad. This demonstrates the degree of dependency exhibited by this style of farming, and the vulnerability of the island’s economy to international market forces. When trade relations with the socialist bloc collapsed, pesticides and fertilizers virtually disappeared, and the availability of petroleum for agriculture dropped by half. Food imports also fell by more than a half. Suddenly, an agricultural system almost as modern and industrialized as that of California was faced with a three-pronged challenge: to essentially double food production while more than halving inputs - and at the same time maintaining export crop production so as not to further erode the country’s desperate foreign exchange position.
The result is that Cuba is currently undergoing a conversion from modern conventional agriculture to organic or semi-organic farming. The government has adopted a strategy of mobilizing Cuba’s substantial scientific infrastructure - both physical plant and human resources - to substitute native technology for the no longer available inputs. Thus, farmers are combining what the Cubans call biopesticides and biofertilizers (Cuban- made microbial pesticides and fertilizers that are non-toxic to humans) with earthworm culture, waste recycling, biological pest control, composting and other ecologically rational practices in an attempt to avert a catastrophic shortfall of food availability for the population. At the same time, government planners are creating the smaller scale management units that are essential for effective organic farming, and providing ownership incentives to farmers. Government officials hope that in combination with the freeing of prices, these steps will lead to higher yields and less diversion to the black market.
A new model
In some ways, Cuba was uniquely prepared to face this challenge. With only 2 percent of Latin America’s population but 11 percent of its scientists and a well-developed research infrastructure, the government was able to call for "knowledge-intensive" technological innovation to substitute for the now unavailable inputs. Luckily, an "alternative agriculture" movement had taken hold among Cuban researchers as early as 1982, and many promising research results - which had previously remained relatively unused - were available for immediate and widespread implementation.
Planning authorities within the Cuban Agriculture Ministry speak of what they call the "Alternative Model," which they contrast with the "Classical Model" of conventional modern agriculture. They say that the Classical Model was always inappropriate for Cuban conditions, having been imposed by European socialist bloc advisers. In this conceptual framework, the Classical Model is based on extensive monoculture of foreign crop species, primarily grown for export. It is highly mechanized, and requires a continuous supply of imported technology and inputs. It promotes dependence on international markets and, through mechanization, drives people from rural areas to the city. Finally, it rapidly degrades the basis for continued productivity, through the erosion, compaction and salinization of soils, and the development of pesticide resistance among insect pests and crop diseases.
The Alternative Model, on the other hand, seeks to promote ecologically sustainable production by replacing the dependence on heavy farm machinery and chemical inputs with animal traction, crop and pasture rotation, soil conservation, organic soil inputs, biological pest control, and biofertilizers and biopesticides. The Alternative Model requires the reincorporation of rural populations into agriculture - through both their labor as well as their knowledge of traditional farming techniques and their active participation in the generation of new, more appropriate technologies. This model is designed to stem the rural-urban flood of migrants, and to provide food security for the nation’s population. It is virtually identical to alternatives proposed in the United States, Latin America, Europe and elsewhere - differing only in one key respect. While it represents a utopian vision elsewhere in the world, it is now government policy and increasingly agricultural practice in Cuba.
What is happening in Cuba is the largest conversion in world history from conventional agriculture to organic or semi-organic farming. Empirical evidence from the United States and elsewhere demonstrates that it can take anywhere from three to seven years from the initiation of the conversion process to achieve the levels of productivity that prevailed beforehand. That is because it takes time to restore lost soil fertility and to re-establish natural controls of insect and disease populations. Yet Cuba does not have three to seven years - its population must be fed in the short term. Cuban scientists and planners are therefore attempting to shorten this process by bringing sophisticated biotechnology to bear on the development of new organic farming practices.
In the United States, biotechnology is often associated with the release of genetically engineered organisms into the environment, posing ecological and public health risks that are not consistent with the goals of organic farming. What the Cubans are doing is different. They have collected locally occurring strains of microorganisms that perform useful functions in natural ecosystems. These range from disease microbes that are specific to certain crop pests, and thus non-toxic to other forms of life, to other microorganisms that fix atmospheric nitrogen and make it available to crop plants or that aid in normal processes of nutrient cycling. These are then reproduced massively to be used as biopesticides and biofertilizers in agroecosystems. Some such products are available commercially in the United States as well, but Cuba is way ahead in terms of the diversity of such biological preparations that are in widespread use.
A total of 222 artisanal biotechnology centers located on agricultural cooperatives produce these products of cutting-edge technology for local use. They are typically produced by people in their twenties, born on the cooperative, who have received some university-level training. While industrial production of these biopesticides will soon be under way for use in larger scale farming operations that produce for export, it remains most remarkable that the sons and daughters of campesinos can make the products of biotechnology in remote rural areas. In this sense, Cuba is demystifying biotechnology for developing countries - showing that it does not have to rely on multi- million dollar infrastructure and super-specialized scientists, but rather can be grasped and put into production even on peasant cooperatives.
Cuba is like the United States in that both countries face labor shortages in agriculture, yet both are experiencing booms in organic farming, which is normally very labor intensive. Eighty percent of the Cuban population lives in urban areas and only 20 percent is rural, (the U.S. figure for urbanization is in the high 90s). Cuba and the United States thus need more labor-saving technology for organic farming than does a country like China, where the vast majority of the population continues to live in the countryside; hence the emphasis on biotechnology in Cuba.
Cuba’s shift to organic agriculture is not taking place without controversy. There is a dynamic debate underway inside the country, a debate which cuts across the agricultural sector, from government ministries, universities and research centers, to production units and associations of producers. One common point of view holds that what is taking place is not a process of conversion, but rather a temporary substitution during a period of crisis. This viewpoint holds that once trade conditions change, agrochemical inputs should once again be used vigorously. The opposite point of view, put forth by the Cuban Association for Organic Farming, a non-governmental organization, holds that the previous model was too import-dependent and environmentally damaging to be sustainable, that the present change is long overdue and that further transformations are needed to develop truly rational production systems. One can find people who hold each viewpoint in virtually any setting, and one can hear discussion of these issues almost anywhere.
As soils are progressively eroded from exposure to the elements, compacted by heavy machinery, salinized by excessive irrigation and sterilized with methyl bromide, and as pests become ever more resistant to pesticides, crop yields decline and aquifers and estuaries become contaminated with agrochemical run-off. Cuba offers the very first large- scale test of more sustainable alternatives, perhaps the only chance to see what works and what doesn’t, before environmental realities mandate the rest of the world embark on a sudden, wholesale switch to organic agriculture.
An interview with Patricia O’Donovan
Patricia O’Donovan is assistant general secretary of the Irish Congress of Trade Unions (ICTU). A barrister, she has worked with the Irish trade union movement for 17 years, first as European affairs officer and then as legislative and equality officer before being appointed to her current position. She has been the workers’ delegate from Ireland to the annual International Labor Conference of the International Labor Organization and has represented ICTU on various committees of the European Trade Union Confederation.
She is currently on a year’s leave of absence from her job, studying for a Master of Laws degree at Harvard Law School.
Multinational Monitor: What is the level of union membership in Ireland?
Patricia O’Donovan: Trade unions in Ireland represent about 55 percent of the workforce, which is strong, even by European standards. It has, in fact, gone up slightly in recent years. We haven’t suffered the kind of major fallout that has happened, for example, in the British trade unions. One of the reasons for this is our industrial structure. We didn’t have the massive, heavy industries which suffered in the 1970s and the 1980s. Basically, Ireland did not experience the industrial revolution of the late nineteenth century, so we weren’t that badly affected by the restructuring and demise of the heavy industries associated with the industrial revolution in the U.K. and throughout the rest of Europe.
MM: What are the top three issues facing workers in Ireland?
O’Donovan: Unemployment is the number one issue. The unemployment level is around 18 percent registered unemployed, which means we are probably well over 20 percent if you take into account the unregistered unemployed. That determines the whole structure of the economy, including our tax system, our social security system and our public services. For the working person, the value of their take- home wage is very much influenced by the fact that unemployment is such a huge burden on the economy.
At the more local level, I think the biggest issue that we are now facing is the reorganization which is taking place within the workplace, the transition to team working, to total quality management and other new forms of work organization. This type of reorganization is happening throughout the production side of industry. Ireland, as I said, was not part of the original industrial revolution. We don’t have the old chimney stack industries. We have "new" industries mainly from the 1960s, 1970s and the 1980s, and they are relatively modern production plants. A lot of the work is skilled work and these plants are using new production methods. What is the role of the union going to be and are we going to participate and be part of this transformation of the workplace? By and large, these new methods mean working harder. But our members have responded positively because it usually gives them more control over their work situation. How, then, do we influence that development in a way where we’re supportive of what workers themselves want, but nevertheless ensure that workers share the benefits and have a real say in what happens?
The other issue would be wages and pay. Our aim is to ensure that workers continue to enjoy an improved standard of living. We’ve been successful in doing that. Even at a time when unemployment is extremely high, at a time when the right-wing economists are saying that there should be wage freezes, we have successfully argued that you have got to maintain, and indeed improve, the take-home wages of workers to stimulate the economy.
MM: What sort of protections exist for the unemployed?
O’Donovan: The social security system is reasonably good. It gives people a very basic income. But it’s not enough for unemployed people to have a decent living on or to stay out of poverty. It is a very basic safety net.
Trade unions have played a key role in trying to ensure that every year, social security benefits are increased at least in line with inflation. We see protecting the interests of unemployed people as part of our job. It’s part of the package; we actually bring their interests to the bargaining table at the national level.
Within the trade union movement, we have a comprehensive network of unemployed resource centers around the country. We support and fund resource centers which encourage unemployed people to get involved in their community. They provide facilities for education, training and job seeking services.
The trade union movement provides the most structured response to unemployment. We have integrated unemployed people into our system and into our structure. We encourage unions to maintain them in membership when they become unemployed. We involve them in all our conferences and seminars. They’re not outsiders.
However, that does raise problems within the trade union movement. There is a sense in which working people will say, "We’re all concerned about unemployed people, but what about our jobs? What about our pay? We’re the people that pay the dues here. We want to hear more about what you’re doing for us." We have to maintain a delicate balance between our employed members and fighting for their interests, and at the same time trying to promote the interests of unemployed people.
Unemployed people are also looking for an independent voice. Because we have such a substantial number of people unemployed, the unemployed have become quite a well organized force in society. Some unemployed organizations who say, "We can speak for ourselves. We don’t need the trade union movement to speak for us. They can’t really represent us and represent workers."
So it would be misleading if I were to give you the impression that this is a wonderful, happy alliance. It’s a complex alliance, and there are tensions within it.
MM: How frequent are strikes and other kinds of work actions?
O’Donovan: Ireland had a relatively high level of strikes and other forms of industrial action in the 1960s and 1970s, coinciding with periods of "free" collective bargaining.
Now, however, our system of national bargaining substantially reduces industrial conflict. It basically takes pay off the agenda at the local level. We agree on a national wage increase which is applied to all workers. Employers automatically concede it; they are bound as part of this national agreement to grant that pay increase, unless they are in very severe economic difficulties.
If you take pay off the agenda, the scope for conflict is substantially reduced, especially because we don’t have the elaborate benefit structure associated with the collective agreements in the United States. Health care is publicly funded. Pensions are part of the workplace package, but they are not a major source of conflict in terms of negotiation.
Some of the most bitter strikes over the last year were related to restructuring, where there were layoffs, changes in work practices, efforts by some of the industries to become more competitive, changing the work rules. The main resistance to these changes came from our traditional craft sector, which opposed these new methods of working.
The other strikes are usually about organization and recognition. These tend to be very protracted and difficult to resolve. In Ireland, if a union wishes to organize a workplace, the union goes in, tries to get a number of workers to join the union, and when they feel they have a sufficient number - they don’t have to have a majority - they ask the employer to recognize them. Some employers don’t go along with that, and the only action the union can take is to strike. There is no mechanism or law to force the employer to recognize and negotiate with the union. Unlike the United States, it is a voluntary system. Even with a majority of workers, you really are relying on your economic power.
Because Ireland is a small country, these kinds of strikes tend to get a lot of community support. The political ethos is: workers should be treated fairly. There’s general acceptance that workers have the right to join a union and a sense that unions play an important role and make a positive contribution to economic and social progress.
MM: Could you describe how the national bargaining process works?
O’Donovan: First of all, it’s not a permanent structure. There are periods when we have what we call ‘free’ collective bargaining, where unions bargain on a plant- by-plant basis. That usually happens when the economy is doing well, because unions think they can get more out of the companies that are doing well. Through the national bargaining process, we try to do something for low-paid workers, who are essentially unorganized workers. We try to get other kind of issues onto the table, so in some ways we’re trading pay for other issues. At the local level, you don’t get that kind of trade-off. By and large, pay dominates the agenda.
We are now nine years into this centralized bargaining system, our third straight three-year agreement. But prior to that we had an open bargaining situation. It’s a question of strategy on our part, not ideology. Essentially, we look at the economic climate. We look at what’s happening on the ground. We get a feel for the mood among our workers to see what they’re interested in. And before the ICTU as the negotiating body can open negotiations at a national level, we convene a convention of our unions, which will either give or refuse us a mandate.
Once we have a mandate from our unions, we enter the negotiations with the national representative body of the employers and the government. The farming organizations, which are also part of what we call the social partner arrangement, are also involved. We enter the negotiations with our own comprehensive agenda. Pay is obviously a key element, but we also put on the table a whole range of issues in relation to industrial and economic policy, taxes, public policy on health, education, social security, people with disabilities, equal opportunity and reform of labor legislation. Employers will have their own agenda, usually more geared toward pay, but also about deregulation, investment in the economy and flexibility in the labor market.
Government chairs the discussion between the employers and the unions on these issues. But when it comes to pay, the government also sits as an employer on the employer’s side of the table. So it’s a complex structure operating at a number of different levels.
At the conclusion of the negotiations, which usually take two to three months, we take the package back to our unions at a convention. It’s discussed and it’s thrashed out; we’re chastised for not doing well on some issues, or praised for doing well on others. We usually do well for low-paid workers because we get a flat rate increase which benefits them. And usually women do well because the flat rate particularly benefits them, and we will usually get some concessions on child care, training and other equality related matters. We try to bring on board the different interests within the trade union movement, including unemployed people. The whole package is debated, and that convention will vote the agreement up or down.
If they agree to it, it then goes out to ballot and each individual union member gets a vote. In the intervening period, there will be meetings at the workplace. Depending on the policy of their union, union officials and organizers try either to sell it or to campaign against it. And then it comes back finally to a convention, where people bring back the mandate from the members. This last time, the agreement went through 80 to 20 percent. It’s a real debate, with nothing taken for granted. We can’t go off and do deals. The bottom line is: can we sell it to the members?
This arrangement has served Irish workers well during difficult economic periods. As some commentators have said, it allows us to put our feet under the table with government. We have an opportunity to influence them about issues. What the employers and government want out of it is a pay deal. That’s all they want. In return for that, we get a say in national policy on major economic and social developments.
There has been some criticism that the unions have been given too much power. The right-wing economists complain that the unions are playing too much of a role. There’s also been criticism that to some extent this kind of national economic and social agreement with the social partners undermines the Parliament.
So it’s not a kind of set formula which we just go through. It’s controversial. It’s politically controversial and it’s controversial within the trade union movement as well.
MM: Is there a sacrifice of militancy in this more removed national bargaining?
O’Donovan: That would be one of the concerns about the system. I don’t think this has been borne out. Some union officials, the full-time people for the union on the ground, say, "If the members don’t see us bargaining on pay, we seem like wishy-washy types talking about health and safety or gender equality." This isn’t the hard kind of nuts and bolts of trade unionism, a kind of macho-type thing, and to some extent they feel sidelined.
In our last agreement and in this agreement, we tried to overcome this by providing for some local bargaining on pay. So we have a two-tier structure which allows for a basic wage increase, and then some element of local bargaining in return for reorganization, productivity, whatever the union can deal at the local level, with a ceiling. It might be 2 or 3 percent.
But I do think the shop steward, the local representative probably feel that the real bargaining takes place away from them. That is something that we need to be concerned about.
MM: Does labor have an economic program to grapple with the unemployment problem?
O’Donovan: Yes. The gist of it has been to have the government play a fairly interventionist role in terms of stimulating investment in the private and public sectors. Ireland gets a substantial amount of funds from the European Union which are directed at economic development, especially infrastructural development. Our strategy has been to say to the government, "That money must be spent on projects which have a large employment dimension to them."
We have a large commercial state sector. We have had a long debate about privatization, and we have been successful in preventing full-scale privatization. We have argued that the state can stimulate these companies to compete internationally and that options other than privatization, for example joint ventures, should be pursued.
The other prong of our economic program has been to try and do something specifically for the long-term unemployed. There’s a major section in the nationally negotiated program about training, retraining, job placement and job experience - in other words, getting the government to agree to intervene in the labor market, put programs in place which will either give subsidies to employers to take on unemployed people, or expand the training programs and try to integrate people back into the workforce.
We have identified key sectors of the economy which we believe have potential for growth and employment: the agricultural sector, forestry, the food processing industry. These are natural resource-based industries, based on our own natural resources rather than relying on major outside investment.
MM: How significant is foreign investment in the Irish economy?
O’Donovan: It is very significant. Starting in the 1960s, when Ireland opened it’s economy, we have had a substantial amount of foreign investment, mainly American investment. More recently, Japanese and Korean investment has come in. Ireland has been very successful in selling itself as a good location for foreign investment. Our industrial development agency offers very attractive packages, with tax incentives and grants, as well as emphasizing the high level of skills in our workforce.
But we have become much more selective. In the 1960s and the 1970s, we experienced large-scale investment of very low-skilled, assembly-type production in areas like electronics, chemicals, health products and textiles. These firms paid good wages relative to Irish wages. But many of these companies just packed up in the 1970s and took themselves off to the developing countries because they were cheaper. We’ve learned from that experience.
Now, when companies like Merrill, Dow or Intel want to come in, there is a major debate about the quality of the employment that they bring, whether they bring their research and development with them, and their environmental impact.
We have good environmental protection regulations, but it was in response to mistakes in the past that these regulations were introduced.
So it’s not foreign investment at any price. We’ve done that, and it didn’t work. I think there’s a much more sophisticated approach now. While we still rely a lot on foreign investment, we want to attract industry which gives quality employment, which invests in research and development and which makes a long-term commitment to the Irish economy.
MM: In what ways is Ireland more selective now? Are there any limitations on the kinds of companies that can come in?
O’Donovan: There’s no limitation on what kind can come in, but the political climate is such that dirty industries cannot come in any more. Chemical companies, say, are welcome, provided they are prepared to comply with the environmental standards and accept the need for monitoring.
I would say the other key thing is jobs. Because of our unemployment situation, we don’t want massive capital investment which doesn’t bring many jobs. When our industrial authority wants to announce a new investment company, there has to be a substantial jobs figure associated with it.
MM: Could you comment more on how the foreign companies relate to trade unions and workers?
O’Donovan: Essentially, I would break it down into the American companies and the others. Our experience has been that many American companies coming to Ireland are hostile toward trade unions. Their attitude basically is, "We don’t want anything to do with unions. We don’t deal with them unless we have to, and we’ll only give in after a fight." We have been unsuccessful, by and large, in organizing the big American subsidiaries in Ireland.
MM: Could you name some of those companies?
O’Donovan: Digital remained unorganized for many years. It folded last year, devastating the local economy in Galway. The unions had been unsuccessful in organizing the employees in the plant.
Intel has come in in the last two years, employing about 2,000 people. When the Intel plant was being built, it was a totally unionized operation because of the role of the construction unions and the health and safety laws which require worker representatives to monitor safety. But the actual production workforce has been screened totally in terms of nonunion people.
IBM is no longer as significant as it was, but it remains nonunion.
We had a very bitter strike over unionization with McDonald’s in the 1970s. The strike was won, but the war was lost; because of the turnover of workers, you just kept losing your unionized workers.
We’ve had discussions with our own industrial development authority about this. We have agreed with them that they provide information on the industrial relations process, including the role of unions and advise that there’s a constitutional right to join a trade union in Ireland and that there is a voluntary system of industrial relations. So they try to disabuse these people of their preconceived ideas as to what a union is. But it hasn’t been very successful.
Our experience with the other foreign companies, like the Japanese and the Koreans, is that they tend to have much more of an approach where they say, "What happens here? If unions are part of the system, then they’re part of the system." Most of them just take us on board and deal with us. In other words, they are much more respectful and accepting of the industrial relations culture that they come into.
I don’t think the American companies have gained anything out of their attitude, because to maintain a nonunion environment, they have had to keep ahead of the unions in terms of wages, benefits and conditions. And even the American companies have to follow the national agreements. They can’t hang out and not agree to the minimum increases. Their workers expect them to come on board.
We see the American attitude as a problem, because the American subsidiaries tend to be very large employers in the Irish context. The majority of indigenous companies employ less than 100 people. The American subsidiaries come in with 1,000 or 1,500 jobs.
MM: How has membership in the European Union affected the Irish economy?
O’Donovan: It has fundamentally changed the Irish economy. Until we joined the European Union in 1973, we had a very closed economy. We hadn’t geared up for competition in terms of either European or world markets. The trade unions opposed membership of the European Union, primarily on those grounds. We saw that a lot of employment in our small traditional industries would be threatened by membership and would close down. Unfortunately, that’s what happened.
Membership in the Union was determined by a referendum of the people because it required an amendment to our Constitution. There was an overwhelming vote in favor of membership. There were huge advantages for the farming community because of the Common Agricultural Policy. They swung a big vote. We in the trade union movement didn’t convince our own members. The trade unions and the Left, which were the only groups against membership in the European Union, lost that debate.
Membership has changed the economy radically. The footwear, clothing and other traditional industries slowly died. But our view in the trade union movement is that it also opened up doors. Ireland became an attractive location for foreign investment and began to compete effectively on European and world markets. We are an export-oriented country - we export a substantial portion of everything we make. We depend on trade. Our home market is so small, with a population of just three and a half million. Membership opened up export opportunities. Now we have a totally open economy, and our industries are competing successfully at a world level.
Membership has also changed the social structure. When we signed the Treaty of Rome, we signed on for all of the directives in the area of social legislation and labor legislation. Our equality legislation dealing with equal pay and equal opportunities, for example, is directly derived from the European directive on equal pay and equal opportunities. Up until then the unions had not been successful in getting equal pay legislation. A lot of our labor legislation relating to protection in insolvency situations, mass dismissals, redundancies and health and safety resulted from European directives.
When the Maastricht Treaty was submitted to a referendum two years ago, the trade unions campaigned for ratification and getting more involved in Europe. That was somewhat controversial, because we were separating from the traditional Left, which was still against Maastricht. We emphasized: that worker rights were part of the European agenda and the Social Charter; that the Maastricht Treaty contains a specific policymaking role for the social partners; and that it did away with the veto which Thatcher had maintained on worker rights by abolishing the requirement that there be a unanimous vote at the European Council level on any issue affecting workers’ rights. It also strengthened the framework in which Irish workers could work more closely with other workers throughout the European Union.
MM: Are you concerned about the relative inability of Irish trade unions to influence what goes on at the EU level?
O’Donovan: Our approach has been to influence our government before it goes to Brussels. We secure commitments from the government on the position it will take. Our essential strength is not relating to Europe and the European institutions; our essential strength is the influence we have at the national level.
In contrast, the British trade unions are excluded at the national level, and so they tend to use the European process more. Some European unions have offices in Brussels to relate to the EU institutions. We don’t do that.
MM: What’s been the effect of aid from the EU?
O’Donovan: Because the Irish economy is a small economy, any kind of injection of outside resources is important to us. Per capita, we’ve had the highest allocation of EU Structural Funds. Our roads have been practically re-built by European Structural Funds money! The ports, the regional airports have also been granted fairly substantial aid. We also get a lot of money for training; 60 percent of the funding for our national training system comes from the European Union.
These Funds are a significant contribution to the Irish economy. All of Ireland, including Northern Ireland, is designated as a development region within the European Union, meaning projects throughout the country are eligible for European funding. That’s unlike other countries where only certain areas are designated as underdeveloped.
At the moment, our per capita GNP is about 65 percent of the European Union average. These Funds are designed to bring us up to a threshold of 72 percent. Then we may no longer be eligible for this kind of aid. This raises the old problem about any kind of aid: it creates a dependency which governments are very reluctant to give up, even though their economy begins to grow. They still feel the need for this intravenous injection of funds.
MM: How strong are the links between European unions, and have you been able to coordinate actions?
O’Donovan: There has been a lot of progress in the last five to 10 years. The trade unions themselves have become much more effective at industry-level organization on a European-wide scale, such as the European Metal Workers Union, the European Building Workers Union. There has been a growing number of industry-wide agreements across the European Union on issues such as European Works Council and Training.
That kind of activity has been further stimulated by the European Union itself through the social dialogue process, a process that brings together employers and unions and their representative organizations at European levels. All of the main European trade union centers are affiliated with the European Trade Union Confederation; UNICE is the equivalent employers’ body. With meetings chaired by the European Commission, the two sides have sat down together and formulated policy positions on the economic strategy of the European Union, training, equality and new technologies.
Under the Maastricht Treaty, there is an opening for the unions and employers at the European level to make an agreement between themselves, which can then be given the force of law by the European Council. This is potentially a very powerful mechanism for unions and employers to begin to work together. So far, I would say the unions have been on the winning side of this process. The employers tend to be very divided. There is much more unity on the union side.
And even though there is not a formal structure for coordination of collective bargaining strategies between European unions, there is a lot more interaction and informal connections. We are a lot more familiar with wage settlements in other European countries; we watch what’s happening on the campaign for the 35-hour week. We introduce these items into our own agenda.
It is an exciting time at the European level. There are a lot of things happening which may set a framework for a very different industrial relations structure in Europe in the next century.
by Roger Moody
The Vancouver Stock Exchange (VSE) has long enjoyed a reputation as the "Wild West" of mining funds. Despite attempts to refurbish its tarnished image, a January 1994 report by James Matkin of the Vancouver Stock Exchange & Securities Regulation Commission found the VSE a hotbed of "shams, swindles and market manipulations." Scores of junior companies and entrepreneurs regarded as too high-risk, or flatly unacceptable in New York and London have flocked to the VSE. Of these, none has been more welcomed in the Canadian markets than gold mine financier Robert M. Friedland, a Canadian whose Venezuelan Goldfields (Vengold ) in 1993 made the biggest float in VSE history - $31 million.
However, no one’s track record casts more doubt on the integrity of Canadian money markets than that of Friedland, a man who admits he was attracted to the VSE because "it is one of the freest and most underregulated venture capital markets in the world."
Friedland’s grounded rocket
A 43-year-old Chicago native (he became a Canadian citizen in the late 1980s), Friedland first emerged from relative obscurity in 1985, with a VSE shell company called Galactic Resources . Notwithstanding the hubristic title, for a while the sky indeed seemed the limit: "Galactic’s stock performed like a rocket," comments John Wood, editor of the Vancouver-based financial news service, Stockwatch. Friedland had soon formed joint ventures with the world’s biggest mining corporation, RTZ , at Ridgeway, South Carolina, and opened up the Ivanhoe gold joint venture on Nevada’s Carlin Belt.
Along the way, he sold off Galactic’s 30 percent share in the Philippine Far South East Gold project to CRA (RTZ’s Australian associate), having persuaded the World Bank’s International Finance Corporation (IFC) to package the deal. And though in 1987 he failed - along with T. Boone Pickens, the notorious Texas corporate raider - to gain control of Newmont Mining, a year later he conviced Homestake Mining (second only to Newmont in the U.S. gold stakes) to buy shares in Galactic.
Friedland’s golden apple was undoubtedly the Summitville mine in Colorado. Its $222 million costs were bankrolled mainly by European (especially Swiss and British) investors, although the Bank of America also came through with $30 million, after the world’s biggest civil engineering company, Bechtel, agreed to take on design and engineering of the mine. By the decade’s end, Friedland had become a darling among North America’s smart-monied sets. Rick Young and Dan Noyes of the New York Times observed, "Industry executives filled conference rooms to hear him speak on innovative ways to finance mining operations."
But the bitter reality was that Friedland had savagely cut corners, as well as costs, to bring Summitville on-stream in almost record time. "People were willing to go along with his assumptions," declares John Dobra, a Washington Gold Institute consultant. "The problem was, his assumptions were usually wrong."
Friedland’s major, catastrophically false assumption was that the recently developed heap-leach system (virtually the cheapest and fastest way to extract gold from ore) would work on a vast scale (spread over 50 acres) and halfway up an icebound mountain. In heap-leach mining, ore is crushed and stacked on huge liners. Cyanide is then dumped on the heap and the liners are supposed to collect the cyanide, gold and other metals which leach out. Within days of Summitville’s opening in 1986, the cyanide solution used to dissolve gold from the 127-foot high ore heap began leaking through its stretched and rupturing liner.
Kenneth Gooding, mining editor of the London Financial Times, describes what happened over the next three years: "More water flowed into the heap than flowed out or evaporated. ... Acid water began to flow from the waste pile." Cyanide started to leak into a nearby creek, and from there into the ground water. When the company tried to pump the leaking water back into the heap, this simply "raised the [water] level at an alarming rate." Soon there were spills of water "laced with cyanide and heavy metals," says Gooding, while contaminants, crammed into a mere five-acre disposal site, overflowed into other nearby streams, feeding the rivers below.
The Colorado state authorities turned an unseeing eye on the disaster for many months, "worried about the loss of jobs and taxes," according to Gooding. Eventually, they moved to close down the site, but it was far too late. "Contaminated water was not only flowing from the land disposal operations but also from nine other unauthorized discharges." Colorado Department of Health Inspector Jim Horn commented, "Literally, there was 1,000 to 2,000 pounds of heavy metals [daily] leaving the site in dissolved form. It was like adding half a Buick a day to the Whiteman Fork that flows into the Alamosa. There was no life in the river for 17 miles."
Summitville suspended operations in 1991. It had become "the Exxon Valdez of the American mining industry," declares Thomas Hilliard, formerly of the Washington, D.C.-based Mineral Policy Center. "Overambitious management, botched construction, reckless mining and weak state government regulation combined to create one of the biggest scandals in recent mining history," concludes Gooding. In early 1994, Summitville cost the Environmental Protection Agency (EPA) roughly $50,000 a day, just to contain cyanide, sulfuric acid and heavy metals threatening nearby waterways. It is estimated that a reclamation plan will cost at least another $60 million.
The EPA first became involved in September 1990, when an anonymous telephone caller sent agency officials rushing to the scene. Within two months, EPA and Galactic drew up a containment plan which would have cost around $20 million to implement. By then, however, the company was virtually broke. On December 15, 1992, Galactic filed for bankruptcy.
Conveniently, just six weeks earlier, Friedland had freed himself from any liability for the disaster, by suddenly resigning all his positions at the company. He was, as U.S. Interior Secretary Bruce Babbitt later put it, "stealing away in the middle of the night." Stockwatch Editor John Wood says, "Friedland is able to say with a perfectly straight face, with those mesmerizing eyes, that [Summitville] wasn’t his problem; he relied on other people. ... He doesn’t say [that he resigned] the very day the EPA came knocking on the door."
Once he washed his hands of Summitville and Galactic, Friedland began regenerating his main investment front, VSE-registered Ivanhoe Capital Corp. Together with brother Eric, Friedland predicted a gilded future well away from the shores of North America, specifically in the huge South American Guiana Shield, which covers Guyana , Venezuela , French Guiana , Suriname and part of Brazil . "What Chile is to copper, the Guiana shield will be to gold," Friedland said. Using Ivanhoe’s investments in South American Goldfields Inc. , Friedland bought his way into a struggling Canadian junior mining company called Golden Star Resources , in which he became the largest single shareholder. As well as digging its way into French Guiana and Suriname, the company now operates Guyana’s Omal mine, the first corporate gold mine in the heart of the Guyanese rainforest and one of the biggest mines in South America. According to Friedland, Star was "a bird with a broken wing, and I helped it mend."
Since then, the hawk has truly taken flight. This year - much to the alarm of Amerindian communities in western Guyana - Golden Star is doing airborne surveys of more than a million hectares in the Upper Mazaruni rainforest, after concluding a very favorable deal with the avowedly leftist Jagan government for the choicest deposits it finds. While the region has been plagued by privately-owned "missile dredges," - huge, remote-controlled vacuum cleaners which pump water into alluvial deposits and suck them up to process out the minerals, ripping out the river banks and choking marine sytems - the area has so far been spared any large corporate mines. Friedland’s prospecting may soon change that.
Using Ivanhoe Capital as his main financing vehicle, Friedland controls several other outfits, of which Vengold is the most important. This company owns the potentially lucrative Oro Uno concession in Venezuela’s Bolivar state, along with several other "properties."
Friedland has also sealed joint venture deals with Carson Gold , Queenstake Resources and Philip Resources in the same area, and has acquired a minority stake in Bolivar Goldfields. In cahoots with a shady Venezuelan national, Charles Brewer Carlas, he has been fishing for gold along the Orinoco river. In Namibia, Ivanhoe controls the deep-sea miner, Diamond Field Resources, while in the Papua New Guinea highlands, it has negotiated a share of the Mt. Kare prospect, ironically surrendered by CRA after landowners threatened an armed attack in 1993.
But once again, everything is not going according to Friedland’s plan. Venezuelan environmental groups and politicians have publicly condemned his operations in Bolivar, while 5,000 indigenous people recently mobilized to protest invasions of their land by Friedland and other Canadian corporations. "The genocide of our peoples continues ... the land is sold off without taking into account our concerns," protested indigenous leader Jose Luis Gonsalez. The chief Venezuelan agency for such misappropriation has been the CVG , a state corporation which supposedly regulates the transfer of mining rights from private landowners to foreigners and also maintains its own mining operations. Friedland’s skill at taking over disputed claims hints at an inside track to the CVG. In any case, Venezuela’s "structural adjustment" program will likely put CVG’s mining operations on the private market - and Friedland has expressed interest in buying.
Surprisingly few people in Venezuelan government seem aware of Friedland. Last year, when asked by the Financial Times for his opinion of the man, Oswaldo del Castillo, Venezuela’s mining expert on the National Council for Investment Promotion, commented, "It’s a relief to us that Mr. Friedland is not involved in mining in Venezuela." Yet by then, the Canadian entrepreneur was the second biggest owner of mining claims in Bolivar.
In late 1994, Ivanhoe began major base metals prospecting in Burma , despite longstanding calls from the Burmese democratic movement for a ban on all foreign investment until democracy is reestablished in the country.
Today, the Big Guns of the mining industry desperately need to convince a growing body of skeptics that its practices are safe and ecologically sound. Michael Brown, vice president of the Gold Institute, has damned Robert Friedland as the "mining industry’s Charles Keating" - a reference to the former savings and loan executive who came to symbolize the deregulated excesses of that industry in the 1980s.
One might conclude that no respectable miner would now touch the wily Canadian with a dragline. But over the past 18 months, as the full extent of the Summitville Horror has registered and Friedland has plundered ever southwards, one company has cordially negotiated with the pariah. Britain’s RTZ, corporate mining’s leading power and self- appointed advocate, will team up with Vengold to hold 40 percent of Papua New Guinea’s massive Lihir project - the biggest untapped gold deposit outside of South Africa.
by John Summa
MEXICO CITY - Mexico’s vaunted experiment with neoliberal economic policies has transformed this country of 86 million profoundly. From automated bank machines to the newly privatized TV Azteca, a joint venture with NBC , Mexico is not the country it was just six years ago, when outgoing President Carlos Salinas de Gortari began turning Mexico inside-out as head of the autocratic ruling Institutional Revolutionary Party (PRI).
"The opening of the Mexican economy has turned the country into one of the main destinations for investment around the world, one of the best [U.S.] commercial partners and one of the most appreciated stock issuers within the international value markets," boasts a September 30, 17-page, we-are-open-for-business advertisement paid for by the Mexican government in USA Today. But like other countries in Latin America forced to swallow the bitter pill of structural adjustment and privatization, the prophesized free- market miracles have not materialized. With slow economic growth, falling real wages and growing inequality, the vendors of invisible hand tonic have some answering to do.
Even while touting its economic achievements, the Mexican government acknowledges the contradiction. The "benefits are yet to be distributed evenly across Mexican society," the USA Today advertisement admits. "The number of citizens living below the poverty line has increased from 13 million in 1990 to 24 million in 1994."
Although the average real minimum wage has continued to fall - having dropped 58.9 percent in the last 12 years - Mexico’s free market plunge is stuffing the pockets of a new super-rich class of Mexican capitalists. Forbes magazine listed 24 Mexicans in its 1994 annual report on the "swelling roster of global billionaires." Mexico boasted only one billionaire in 1987, when the magazine began compiling the list. The total reached 13 in 1993, and nearly doubled over the next year. Together, Mexico’s new super-rich today possess a fortune worth approximately $44 billion, according to Forbes.
Where is all this increase in wealth coming from? Part of the answer lies in redistribution of income via reduced wages; the rest in sweetheart privatization deals and other benefits conferred on a select group of private investors with close ties to the PRI.
The new billionaires owe a giant debt to the structural adjustment program implemented by the government following the Mexico debt crisis of 1982, and particularly the wage controls imposed by the government. Over the past decade, wages have consistently failed to keep up with price increases, eroding real income. As a result, the ranks of the poor have swelled, while businesses, particularly large employers, benefited from depressed workers’ wages. Between 1989 and 1992, says Carlos Salas, a Mexican economist at the National University of Mexico in Mexico City, "The mean income of families within the lowest levels of income fell by almost 7 percent, while the income of the families at the top of the income pyramid grew by 11.3 percent." Today, nearly half of the Mexican population lives at poverty income levels, Salas points out, with 54 percent of the families struggling on a monthly income lower than the minimum wage for a single worker (about $135).
The main source of the rapid rise in the number of billionaires has been Mexico’s privatization scheme, which so far has reduced the number of state enterprises from 1,155 to 200. Privatization, in general, has occurred on very generous terms for investors, who have seen the value of their total equity skyrocket in Mexico’s stock-market boom of the 1990s. This is where Mexican business leaders are making their huge fortunes.
According to research done by Edur Velasco Arregui of the National Autonomous University of Azcapotzalco in Mexico City, Mexico experienced a strong capital influx in the early 1990s. In 1990 and 1991 alone, the Bank of Mexico estimates that $21 billion was invested in the country, with a large share ending up in the stock market and other financial investments. This speculative capital from Wall Street "generated a frightening rise in asset values," says Arregui.
Some of Mexico’s billionaires started with plenty in the bank, notes Salas. For example, Emilio Azcárraga, the TV mogul who owns Televisa, a national network with more programming hours than ABC, NBC and CBS combined, and the Monterrey-based Sadas family, which controls the second largest industrial group in Mexico, the giant conglomerate known as Alfa, have long been known to be super rich. But most of the rest are the "nouveau riche," says Salas.
Even some of capitalism’s most ardent defenders find the sudden accumulation of wealth a bit extreme. Economist David Barkin, professor of economics at the Metropolitan Autonomous University in Mexico City and author of the 1991 Distorted Development: Mexico in the World Economy, notes that Forbes "itself laments the creation of so many multibillionaires so rapidly [because it] reflects badly on the capitalist process." It is unlikely that so many could become so rich so quickly with legitimate capitalist enterprises, says Barkin, and that may make some a little concerned. He says, "The privatization of Mexico’s government holdings was systematically channeled to President Salinas’ ‘cronies,’ to use Business Week’s expression, in a cynical abuse of the process in which it is rumored that the President himself is a major participant enjoying enormous wealth as a result of his private holdings." Unfortunately, the tremendous inflow of foreign capital has not gone into productive investments. According to Barkin, investments "go into short-term speculative holdings rather than into directly productive investments, which hurts the prospects for long-term economic growth."
Speculation and government giveaways
In case after case, billionaires rode to fortune on the same government- and speculation- fed racehorse. One common bond among the billionaires, for instance, is owning shares in Banacci, which was formerly the Bank of Mexico. The privatization of banks in 1992 led to a sharp rise in the value of bank stocks and a corresponding rise in the personal valuation of Banacci’s large shareholders.
A newcomer to this scramble for profits, with an estimated worth of $6.6 billion, is Carlos Slim Helú. Slim purchased the cob-webbed Mexican state-run telephone company, Teléfonos de Mexico (Telmex) in 1990 and ambitiously sought to bring it into the new world of fiber optics and reliable service. (It is still difficult to find working payphones in Mexico City.) Faced with an explosion of cellular phone use, and with unhappy customers who filed 114,000 complaints with Mexico’s consumer protection agency last year, Slim is not completely out of the woods. But Telmex has seen its profits soar, topping all telecommunications firms worldwide. With its astounding 44 percent operating margins, and a 7.5 percent per-year real earnings growth projected through the year 2000, Slim’s Telmex has justly been labeled "a gold mine" by the liberal Mexican weekly Processo. The company is reportedly responsible for over one-quarter of the total stock market value of the Mexican Stock Exchange, accounting for 23 percent of daily stock exchange volume, according to conservative monthly magazine Mexico Business. And according to the Bank of New York, the company has placed stock issues on the New York Stock Exchange totaling 78.6 percent of all Mexican firm offerings.
The speculative stock market boom of the 1990s combined with privatizations to produce a nice sum for Moises and Antonio Cosió Ariño. The two brothers began acquiring shares in Mexico’s newly privatized Telmex and the Bank of Mexico and watched their fortunes steadily rise. They bought 5 percent of preferred stock (voting shares worth $50 million) in Mexico’s privatized phone company in 1991. Today, that stock is worth $400 million, according to Forbes. Married into aristocratic and elite banking families, the two have diversified into leading Mexican firms (and subsidiaries of such multinationals as Kimberly Clark and John Deere).
Like most of Mexico’s super-rich, Jorge Larrea Ortega is a big backer of the ruling Institutional Revolutionary Party. Ortega parlayed a small fortune made in construction into one of Mexico’s largest mining companies (including joint ventures with U.S.-based Asarco and Belgium’s Union Minière) which extracts 90 percent of the country’s copper, gold, silver and zinc. Like many of the superwealthy, Ortega secured his fortune by buying government property at giveaway prices. His purchase of government-owned mines, in fact, kicked off President Salinas’ privatization scheme. Worth about $1.1 billion, Ortega is also one of the Mexican investors who got a piece of the action in Bank of Mexico in 1992.
Privatized television has been a bonanza as well. Household appliance magnate Ricardo Salinas Pliego (no relation to the departing PRI president), owner of the Elektra chain of retail stores, purchased the formerly state-run Television Azteca, with its two national networks, for $645 million. Salinas Pliego’s undercapitalized bid for part of the national airwaves, and lucrative advertising market, is being aided by a joint venture announced in June with General Electric ’s NBC. NBC will supply TV Azteca with a steady supply of programming, which "gives the Mexican network access to news, sports, made-for-TV movies, teen-programming, miniseries and other NBC offerings, including the network’s cable business channel, CNBC," according to Mexican Business. Salinas Pliego’s family worth is estimated at $1.2 billion.
In what may be just the tip of the iceberg, a recent scandal involving a major banking group is shedding light on the PRI’s cozy relationship with the very rich. In September 1994, Mexico’s Finance Minister Pedro Aspe announced the government takeover of the Cremi-Union financial conglomerate, owned by super-billionaire Carlos Cabal Peniche, and the fifth largest financial group in Mexico. "Cabal Peniche had used the banks’ deposits as his piggy bank. He had borrowed from Banco Union [one of the two banks in the conglomerate] in a huge way, often through paper companies, to assemble a business empire," according to London-based Latin American Weekly Report. Cabal reportedly saw his wealth increase from near zero to $2 billion between 1980 and 1994. Aspe declared Cabal’s actions illegal and a warrant has been issued for Cabal’s arrest.
Even though he had been named in several previous criminal investigations, including the BCCI scandal, in Mexico, there seemed no cause for concern on his part. This is perhaps due to Cabal’s excellent connections. According to Mexican press accounts, Cabal’s partners at Cremi-Union include Federico de la Madrid, son of former president Miguel de la Madrid, Carlos Hank Gonzales, the political head of the Zedillo campaign and Salinas’ Secretary of Agriculture, among other PRI officials.
Salinas’ selective favoritism will have a long-term structural effect on the Mexican economy, says Denise Dresser, a visiting fellow at the Washington, D.C.-based Inter- American Dialogue. "Salinas’ decision to gamble on a select group of entrepreneurs has fostered a kind of business Darwinism," she says. This policy, which was geared toward modernizing key sectors of the economy, has "led to an enormous concentration of wealth in assets in the hands of a few conglomerates," says Dresser. Mexico’s leading business magazine, Expansion, reported recently that 10 conglomerates now account for 55 percent of all sales in Mexico and 56 percent of business credit.
With the outcome of Mexico’s August 21 presidential elections assuring a continuation of the same neoliberal model now in place (the PRI took 51 percent of the vote in elections marred by charges of fraud), this orgy of privatization and fortune "building" is sure to continue. And Mexico’s super-rich couldn’t have a better person to guarantee business as usual when the PRI baton will be passed for another six years in December. President- elect Zedillo showed his commitment to the status quo following the 1982 bank crisis as one of the key PRI men responsible for the government-led rescue of debt-saddled companies.
There exists only one apparent potential check on further entrenchment of the neoliberal project: the social discontent simmering in both cities and the countryside. If it reaches boiling point, the entire Mexican political and economic situation could change. Already, the stock market boom of the early 1990s has turned into a rollercoaster ride driven by fear of renewed fighting between Zapatista rebels and the Mexican army. With Mexico’s experiment in neoliberalism built on the shaky ground of speculative finance capital, the months ahead may witness a rupture in this model, and with it the PRI itself.
The PRI Soldier
Imagine if CBS, NBC and ABC were all controlled by one man. Worse, a man who used his media muscle to advance the interests of a single political party.
This is roughly the media power controlled by Mexican businessman Emilio Azcárraga Milmo, billionaire owner of media giant Televisa and Latin America’s richest man, according to Forbes magazine.
Grupo Televisa, larger than the three U.S.-based television networks combined, runs three national networks, owns 200 affiliates and airs 42,000 hours of programming a year.
When the chips were down for the ruling Institutional Revolutionary Party (PRI) in the months leading up to the elections, Televisa played fast and loose with the truth in helping to restore public confidence in the PRI through unabashedly one-sided coverage.
"Televisa cameras [favorably] follow Zedillo’s campaign in minute detail," observed the conservative monthly magazine Mexico Business during the campaign, while "those of Cárdenas and Fernandez rarely see coverage, unless it’s a political blunder showing them in a less than positive light." Cuauhtémoc Cárdenas heads the left-of-center Democratic Revolutionary Party (PRD) and Diego Fernandez de Cevallos the conservative National Action Party (PAN).
Throughout Latin America, Emilio Azcárraga has earned the title "PRI soldier." His media empire, which functions as an unofficial PR arm of the PRI, controls an astounding 90 percent of the Mexican advertising market and has a viewing audience estimated at 80 million. His power, however, extends well beyond national hegemony on the airwaves. He is also the largest publisher of Spanish-language periodicals worldwide. And with Televisa’s joint ventures, including a deal with the QVC shopping channel, Azcárraga is without a doubt a major player in the global telecommunications market.
The experience of the San Francisco-based Global Exchange, which sent observer teams to Mexico for the national elections, is instructive. Televisa’s news program "24 Hours" covered Global Exchange’s post-election press conference, but aired only the group’s discussion of what went well on election day. When Global Exchange’s representatives turned to their criticisms of the election process, Televisa cut away.
Global Exchange held a demonstration on August 23 in front of Televisa’s offices to demand a correction of the record. Televisa officials finally relented, agreeing to take a statement from the group and to air it on a subsequent broadcast. But, according Global Exchange, the criticisms never appeared.
David Brooks, New York correspondent with Mexico’s independent daily La Jornada, says, "Televisa has provoked a pubic reaction so strong, there are always demonstrations in front of its offices in Mexico City. It is seen as one of the villains."
Azcárraga’s power may be curbed by a new kid on the block, a sort of Mexican Ted Turner, who has launched TV Azteca, a private network associated with NBC. TV Azteca is owned by another of Mexico’s billionaires, Ricardo Salinas Pliego. Pliego, who also heads the retail chain Grupo Elektra, entered the television business after purchasing two national networks from the Mexican government in 1993 for $645 million. With NBC supplying TV Azteca with high-quality programming - news, sports, made-for-television movies, and even CNBC - Pliego might force Televisa to be less heavy handed. Few Mexicans, though, are holding their breath.
Global Dreams: Imperial Corporations
and the New World Order
By Richard J. Barnet and John Cavanagh
New York: Simon & Schuster, 1994
480 pp., $25.00
Reviewed by Robert Weissman
THAT WE NOW LIVE IN A GLOBAL ECONOMY is a sentiment repeated so often these days that it has become cliché. Global corporations, global competition, global interdependence and global thinking: these have become the economic buzzwords of the day.
But what does it all mean? What does globalization mean for everyday working people? What do global corporations do that distinguishes them from big corporations of days gone by? Who are the global thinkers, and what are their plans and visions? These are the questions that Global Dreams, the 20-years-later follow-up to the groundbreaking Global Reach, seeks to answer.
Authors Richard Barnet and John Cavanagh look for answers in the history, experiences and strategies of five companies - Sony , Bertelsmann , Philip Morris , Ford and Citibank - and in the world views of their executives. Case studies of the five corporations form the core of profiles of the global entertainment industry, the worldwide consumer products industry, workplaces in a globalized economy and the international finance system.
Global Dreams’ profile of Sony, and its shrewd and strong-minded founder, Akio Morita, reveals a Japanese company with a uniquely cosmopolitan outlook. Sony self-consciously tries to maintain a global identity and to fit into local cultures where it produces or sells - rather than trying to adjust those cultures to fit its own needs, as so many U.S.-based companies do. At the same time, Sony’s dynamic innovation in electronic gadgetry has greatly affected popular culture the world over, with the Walkman and its endless permutations providing the best illustration of this influence.
Ultimately, however, the processes of globalization took a toll on Sony, and it found itself in the mid-1980s confronted by Korean companies Samsung and Goldstar and others that were able to copy its ideas and products and sell them below Sony’s price in fast order, sometimes only months after Sony introduced a new item. Now presided over by Norio Ohga (Morita remains the company’s chair), Sony has developed a four-pronged strategy to address the new global challenges; not surprisingly, it relies heavily on a further globalization of the company.
First, Sony is diversifying its product base. Second, in an effort to cut labor costs, it is locating its production abroad in low-wage countries - outside of Japan as well as the United States and other countries which provide its major markets. Barnet and Cavanagh report that in the 1970s, Sony had resisted the growing trend of shifting factories in pursuit of ever lower wage rates. Instead, the company maintained most of its operations in Japan; and it selected sites for its factories abroad with an eye to market access, overcoming trade barriers and preempting potential adverse political moves against the company. Third, the corporation is pursuing what Morita calls a strategy of "global localization." "The basic idea," the authors write, "has been to decentralize authority and to adapt working arrangements, product lines and promotion ideas to local conditions, but all within the context of a coherent global strategy." Finally, Sony has entered the global entertainment software industry, most notably with its purchases of Columbia Pictures and CBS Records.
Globalization is presenting challenges and opportunities to the other corporations profiled in Global Dreams that are both similar and different to those facing Sony. The companies do not have a uniform vision of globalization.
Like Sony, Bertelsmann, the German publishing and recording industry giant, places a heavy emphasis on decentralization in its managerial structure. But it draws on the German concept of codetermination and employee involvement in a way that differs from the Japanese labor relations schemes. And as a media company, it is a global company with local or regional products; unlike Sony and its Walkman, Bertelsmann cannot sell the same product around the world.
Philip Morris is an aggressive, image-driven, advertising-reliant company looking to international markets to make up for lost sales in the increasingly health-conscious United States. It has relied heavily on the U.S. government, under the Reagan and Bush administrations, to work on the company’s behalf in prying open foreign markets.
Ford, the company which gave its name to a sociological designation of assembly- line, mass-production industrial organization, found global competition an enormous threat. It responded by moving away from Fordist forms of organization, and toward the just-in-time and team concept approaches made famous by the Japanese auto makers.
Citibank has sought to position itself as the leading global consumer lender by creating a worldwide private banking network. (Its success has facilitated capital flight from the very Latin American countries whose economies Citibank helped debilitate through irresponsible loans to corrupt, military governments in the 1970s.) The Citibank approach is targeted at serving the emerging elite 10 or 20 percent of the world population. In entering the Indian market, Citibank’s head of global consumer operations said in a 1990 interview, "Forget about 90 percent of the people and focus on the top 10 percent. That’s 80 million people, larger than West Germany, and if you look at their standard of living, it’s higher than the average German’s."
The overarching concern of Global Dreams is that "as economies are drawn closer, nations, cities and neighborhoods are being pulled apart. The processes of global economic integration are stimulating political and social disintegration." But in its extensive description of emerging corporate strategies, the book fails to develop this crucial theme adequately. It devotes relatively little attention to how globalization is pulling communities apart, or to the communities themselves. The book does contain several chapters which critically assess trends in the industry areas it profiles, but these chapters consist of scattershot (though provocative) observations, rather than fleshed-out analysis.
Appropriately, the book bemoans the fact that the heads of global corporations, caught up in the day-to-day challenges of running a huge enterprise, do not have the luxury of thinking about the social or environmental consequences of their actions. Meanwhile, national and local government officials, who ostensibly should have such a perspective, are increasingly without the tools to control corporate behavior. But there is a disconnect between the book’s focus on corporations’ individual strategies, and these larger themes; the book does not succeed in explaining how the corporate strategies it so carefully describes are contributing to the destructive social and environmental harms to which it alludes.
For a book written by critical commentators as sophisticated and insightful as Barnet and Cavanagh, there are too many other significant sources of disappointment in Global Dreams. It spends only a few pages discussing the environmental consequences of globalized corporate activity, and these are rather cautious.
The book also gives short shrift to citizen efforts to constrain corporate power. It makes brief mention of the anti-smoking movement, discusses the environmental movement in a few short passages and devotes only a few pages to labor (including an inappropriately dismissive reference to United Auto Worker dissidents for failing to offer an alternative to their union’s cooperation with Ford and the other two major U.S. auto companies).
A book focused on a topic as large as the growth of global corporations will inevitably leave some things out; the range of implicated issues is too big to be completely captured in a single work. But the failure to include any meaningful discussion of citizen opposition is particularly problematic. Popular opposition - from the labor movement, environmentalists, community-based campaigns, consumer organizations - is a major concern of global corporations, and an essential element of the story is missing if this opposition is left out.
Even more disturbingly, ignoring countervailing citizen movements contributes to the impression left by Global Dreams that the destructive activities of giant corporations are inevitable and unstoppable. Only in the area of finance do the authors even discuss serious proposals for reform. Global Dreams does end with two pages calling for the development of a "global consciousness" among business and government leaders which would sensitize them to the social and ecological effects of their actions, placing hope for the inspiration of such a consciousness in the political energy generated by "globalization from below" - the rapid proliferation and networking of local citizens’ movements and alternative institutions across the planet. But the final pages’ assertion that "one can imagine different global dreams that inspire the development of sustainable economies and less brutal social systems" is not convincing in the absence of any serious discussion of those alternatives, or the forces that may bring them into being.
Polybutylene is a resin product manufactured by Shell Oil that the company promoted as a durable material for manufacturing plumbing pipes beginning in the 1970s. Celanese and DuPont worked with Shell, developing and producing resins that were utilized in manufacturing fittings for the pipes. None of the companies told consumers, however, that the pipes and fittings would corrode and ultimately leak when exposed to chemicals found in common drinking water in much of the United States.
In September 1993, after learning that pipes and pipe fittings were leaking throughout the country, causing millions of dollars of property damage, Trial Lawyers for Public Justice, a Washington, D.C.-based public interest group, filed a national class action suit.
The proposed settlement, filed in District Court in Harris County, Texas, creates a potentially unlimited fund to provide full compensation for the key types of damage caused by the leaking pipes. Consumers will be notified every three years, and class members can obtain compensation, even if their pipes were installed or the leaks took place as far back as 1978.
"This is a landmark achievement in consumer protection," says TLPJ Foundation President Mary A. Parker of Nashville’s Parker & Allen. "It will benefit millions of Americans who have houses, mobile homes, apartments or other properties with inherently defective polybutylene plumbing systems."
"Abuse of Discretion: NRC’s Non-Enforcement Policy" finds that as early as 1985, NRC staff knew that regional administrators were allowing nuclear reactors to violate the terms of their licenses. Rather than requiring utilities to abide by the law and seek license amendments, the NRC created a policy of non-enforcement of the violations, the report found. The evolution of this policy, which has affected 110 nuclear reactors in 34 states, is still unclear due to selective withholding of information by the NRC, according to Critical Mass.
According to the report, the NRC has honored all of the industry’s last 100 requests for non-enforcement of regulations requiring nuclear shut-down.
"Nuclear reactors should not be allowed to split atoms unless and until they meet all safety requirements," says James Riccio, staff attorney for Critical Mass and author of the report. "This NRC policy attempts to maintain the financial viability of the nuclear industry by ignoring violations of safety regulations."
Shutting down a nuclear reactor can cost a utility as much as $1 million a day. A high-ranking NRC official reported to the NRC’s Inspector General that "such a shutdown to enforce a technical compliance issue regarding a plant’s technical specification’s would be very costly."
The NRC Inspector General is currently conducting an audit and investigation of the NRC’s policy.
Most of the pesticide PAC cash has gone to members of Congress who have co- sponsored the pesticide industry’s bill to weaken federal pesticide law, the group charges.
In the first 18 months of the outgoing Congress, representatives and senators accepted over $3.1 million in contributions from 44 pesticide PACs that are associated with companies belonging to the American Crop Protection Association, the main pesticide trade association. That is nearly twice as much campaign cash as those same PACs contributed in comparable 18-month periods in each of the last two Congresses. In total, since 1989, the pesticide PACs have given representatives and senators over $8.2 million.
"The pesticide industry suffered a major court loss in 1992 and is fighting to have Congress overturn it," asserts Kelsey Wirth, principal author of the study. "The dramatic doubling of pesticide PAC contributions is clearly part of the industry’s strategy with Congress. Unfortunately, it’s working."
Over half of the House of Representatives - 224 members - now co-sponsor the pesticide industry bill and 17 senators sponsor the measure.
In 1992, the Natural Resources Defense Council (NRDC) and other public interest groups won a court case that forced the Environmental Protection Agency (EPA) to enforce the so-called Delaney Clause, a law that prohibits the use of carcinogenic pesticides when they concentrate in processed foods. After the U.S. Supreme Court refused to review the case, chemical companies turned to Congress to repeal the Delaney Clause and otherwise weaken federal pesticide law.
In October 1994, the EPA and NRDC announced a settlement of the lawsuit that will phase out the uses of dozens of cancer-causing pesticides. The settlement will only bring more industry pressure to bear on Congress to keep dangerous pesticides on the market, the report speculates.
"We’re not saying that the pesticide industry is buying votes in Congress," says EWG president Ken Cook. "Why buy when you can rator.
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The Cuba Reader
Edited by Philip Brenner, Wiliam M. LeoGrande, Donna Rich and Daniel Siegel
New York: Grove Press, 1989
From Managing Socialism to
By Frank T. Fitzgerald
New York: Monthly Review Press, 1994
Options for U.S. Policy
By Gillian Gunn
Twentieth Century Fund Press, 1993
By Linda Fuller
Temple University Press, 1992
By Marc Frank
International Publishers, 1993
Mexico in the World Economy
By David Barkin
San Francisco: Westview Press, 1991
Mines, People and land: A Global Battleground
By Roger Moody
London: Minewatch, 1992
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