[Congressional Record Volume 141, Number 9 (Tuesday, January 17, 1995)]
[House]
[Pages H274-H277]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                       MONETARY CRISIS IN MEXICO

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 4, 1995, the gentleman from Michigan [Mr. Bonior] is recognized 
for 30 minutes as the minority whip.
  Mr. BONIOR. Mr. Speaker, the crisis in Mexico today is very serious 
and has a direct effect on the United States. But if the American 
people are going to be asked to guarantee billions, up to $40 billion 
in loans in Mexico, we have a right to demand that Mexico meet certain 
conditions in return.
  The primary question we have got to answer is simply this: How can we 
address the problem in Mexico in such a way that ensures that working 
families on both sides of the border are helped and not hurt by this 
deal? The Mexican system is riddled with deep structural, political, 
and economic problems. If allowed to continue to go unchecked, these 
problems will not only continue to hurt Mexican workers, they will also 
continue to have a direct impact on the jobs and the wages and the 
living standards of American workers.
  The last time Mexico experienced a similar crisis in the early 
1980's, they responded by cutting wages in half for Mexican workers. 
That was their response, even though Mexican manufacturing profits went 
through the roof.
  In effect it created a situation where Mexico had a boom in 
billionaires. Members heard me right, billionaires, not millionaires. 
Yet American workers were forced to compete with Mexican workers who 
were earning 58 cents an hour. We lost over a half million jobs as a 
result of that policy, 500,000 American jobs. And all indications today 
are that Mexico is reading from that exact same playbook, even though 
Mexican wages are already too low. The devaluation of the peso has 
driven down their purchasing power by another 40 percent. Yet rather 
than pledging to raise the standard of living, President Zedillo's 
economic plan calls for a freeze on wages.
  At this rate Mexico is never going to be able to afford to buy the 
products that we make, and of course that has been the great success of 
America, that we built a middle class with the purchasing power to 
purchase.
  We have got to find a way to export products to Mexico, not just our 
jobs and our capital. We had a chance to address this problem when we 
negotiated the NAFTA agreement. We had a chance to tie wages to 
productivity and give the Mexican workers more power to bargain for 
better wages, but NAFTA was a missed opportunity to make real reform. I 
do not think we can afford to miss that opportunity again.
  I would suggest that before we ask American taxpayers to send a dime 
to Mexico, we should insist that Mexico meet five specific conditions. 
Let me enumerate them for my colleagues this afternoon.
  First, we should insist that Mexico agree to tie wages to 
productivity. Now what do I mean by that?

                              {time}  1230

  In the past decade, Mexican workers have not, and I repeat they have 
not, reaped the rewards of their hard work, and they do work hard. They 
are very productive workers. Their productivity increased by 64 percent 
since 1980.
  What happened to their wages? Their wages actually dropped by 31 
percent. Prior to the devaluation of the peso over the last several 
weeks, the wage of a Mexican worker was 69 percent--69 percent--of what 
it was back in 1980. It was not even worth the value of what it was in 
1980.
  Former President Salinas recognized this problem when he pledged to 
tie wages to productivity 2 years ago during the negotiations within 
his own country, and the debate over NAFTA. But that link has not 
materialized, and we, I think, should insist that it does.
  Now, second, we should insist that the Mexican Government extend 
fundamental rights to the workers that 
[[Page H275]] they do not have now: the right to organize 
independently--and I emphasize the word ``independently''--the right to 
bargain collectively, and the right to strike. These basic worker 
rights help propel a middle class in this country and elsewhere in the 
Western world, and again, the reason we negotiated a labor side 
agreement on NAFTA was that there was a recognition that structural 
problems existed, but the side agreement left out the most fundamental 
reforms, so nothing will go further toward developing a Mexican middle 
class that can afford to buy our products that we will make, and we 
should insist on these reforms.
  Now, third, we should insist that Mexico make more of an effort to 
buy American. Since NAFTA went into effect, Mexico has increasingly 
looked to Japan and Europe first. While Mexican exports to the United 
States have gone up, their imports from Europe and Japan have exploded. 
At the same time our trade surplus with Mexico has decreased by 60 
percent in the past 2 years, 60 percent reduction in the surplus that 
we had with Mexico.
  If American taxpayers are going to be asked to guarantee billions in 
a bailout of Mexico, I think we need to demand that Mexico make more of 
an effort to buy American products.
  Now, fourth, we should insist that Mexico not only continue 
democratic reform but that it renew its
 pledge to resolve the uprising in Chiapas in a just and in a peaceful 
way. The situation in Chiapas today is a proving ground for the 
Government of Mexico and how they go about resolving the crisis in 
Chiapas will go a along way toward determining the depth of their 
commitment to democratic reforms in human rights.

  Recently there have been reports that President Zeddillo was under 
immense pressure to take decisive military actions in Chiapas. I would 
suggest that cracking heads and sending in tanks is no way to 
demonstrate a commitment to human rights. The American people do not 
want their tax dollars backing up a military operation against Mexico's 
own people. The only way to resolve the situation in Chiapas is to 
address the underlying structural and economic problems which caused 
the crisis in the first place, and that is why we must insist upon 
economic reforms, not military ones.
  Fifth, before we pass an aid package to Mexico, we should pass an 
American workers' aid package to help American families who lose their 
jobs as the result of the crisis in Mexico. Now, with the devaluation 
of the peso, the price of American products in Mexico has soared up to 
40 percent. In the weeks to come, as exports increase, many Americans 
will lose their jobs.
  We cannot afford to turn our backs on our own working families who 
are affected by the problems in Mexico. I would suggest there are two 
things we can do immediately to help.
  First, we can pass the lifetime job training program that was 
proposed by the President in his middle-class bill of rights. This bill 
will make available up to $3,000 for each person who loses their job 
and can be used to help them get training, the training that they need 
to find a new job, so they will have an account, their own account with 
their own name on it, that they can draw from to pay for training to 
upgrade their skills so that they can reenter the labor market.
  Second, we should immediately pass the $10,000 tax deduction for 
tuition and other educational expenses. Many of the people who lose 
their jobs have kids trying to further their education, and there is no 
reason why children should be denied that chance because of the crisis 
in Mexico today.
  Now, again, if the American people are going to be asked to send 
billions to Mexico or potentially underwrite billions to Mexico, we 
have a right to ask certain conditions be met in return. Before we send 
a dime, we should insist that these five conditions be met.
  We missed a very historic, real opportunity last year to address the 
serious underlying economic and political problems in Mexico today, and 
we cannot afford to miss that opportunity again. We are not merely 
sending money to Mexico to prop up a nation with the fastest growing 
number of billionaires in the world, we are sending money with the 
hopes that by helping the working people of Mexico we will help build a 
Mexican middle class that can afford to buy the products that our 
workers make and that can stop competing against each other.
  In the end, I think that is going to help both of us, and after all, 
I think that is what free trade is supposed to be all about anyway.
  I yield to my friend who was here first, the gentleman from West 
Virginia [Mr. Wise], and then the gentleman from California [Mr. 
Miller], and then my friend, the gentleman from Ohio [Mr. Brown].
  Mr. WISE. Mr. Speaker, I will be brief.
  Thank you for taking this special order.
  It is my understanding that very shortly, perhaps by the end of this 
week, there will be a package on the floor authorizing and approving 
perhaps as much as a $40 billion loan guarantee program, yes, I stress 
the word ``guarantee,'' but it means the taxpayers can be on the hook 
potentially for that amount.
  To my recollection that may be the largest amount taxpayers have been 
asked to be even potentially liable for since the S&L situation in 
setting up the Resolution Trust Corporation.
  There are several questions that need to be answered on this that I 
have not been able to get answers to that I have been asking.
  How much are we talking about? We started at $9 billion, then we went 
to 18, the Treasury a couple days ago was saying 25, and today it is 
$40 to $45 billion.
  Second, it is my understanding there is already an existing line of 
credit. Has any of this been drawn down yet? It is my understanding 
probably some has already.
  Mr. BONIOR. It is my understanding there was $9 billion that has been 
drawn.
  Mr. WISE. There is a guarantee of that. In sum, they have already 
gone out, because of meeting the default provisions or whatever. These 
are questions that need to be answered.
  We have been expressing concerns over bills that basically we all 
agree with on the floor, not coming to the floor with a hearing, for 
instance, unfunded mandates will be on the floor, the Congressional 
Accountability Act just passed. This is something extremely serious. 
All taxpayers are going to be living with it for a long time.
  Third, I have got trouble, I say to the whip, explaining at home why 
it is that in a couple of weeks on the floor of the House there will 
probably be a rescission package. The appropriation bills will try, for 
instance, to take out the Economic Development Administration which 
basically does nothing but help create jobs. There will be language to 
take out highway projects, road projects, bridges, airports, water and 
sewer.
  I was in a town just Saturday, where they are $300,000 short on a 
$1.4 million project to build a sewer which is mandated in which they 
can actually create jobs if that sewer line is built. Nobody will give 
them a loan guarantee.
  I wonder if we are going to have to put this legislation out, whether 
or not it would be possible to join with the loan guarantee program for 
perhaps American citizens, American workers, as the gentleman suggests, 
with a lifetime job training act, something that says to the American 
taxpayer, ``We understand, and we hear you as well.''
  I think that there needs to be great questions raised about this 
before this House willy-nilly embarks on such a large package. 
Otherwise, I think this is something that is going to be coming home to 
roost for many, many years.
  Mr. BONIOR. I thank my colleague for his comments.
  While I recognize his concern with regard to time, I am perplexed by 
the speed at which we hear that the Republicans want to move on this 
package. They are talking about bringing this to the floor on Friday, 
if you can imagine that, without any hearings, without any discussion.
  We understand the tenderness and the sensitivity this issue will have 
with respect to markets and other Latin and so-called second tier 
nations as well as some developed nations, but it seems to me that if 
we are going to be asked in a responsible way to come cast our votes on 
this issue that we really need to know what is in it, the effects it 
will 
[[Page H276]] have, the probability of success or the possibility of 
failure, and what is in it for the American worker. I mean, is the 
American worker going to be affected by all of this if the peso has 
fallen 40 percent and Mexican imports of American products drop off in 
large numbers, which I expect will happen? I mean we have already lost 
60 percent of our trade surplus with Mexico just over the last 2 years. 
We can expect more of a drop, it seems to me, as a result of this.
  What is going to happen to those workers who are producing those 
products for Mexico? Why are we not addressing that piece of it as 
well?
  I yield to my friend, the gentleman from California.
                              {time}  1240

  I yield to my friend from California.
  Mr. MILLER of California. I thank my friend for yielding and taking 
this time to discuss this issue.
  On the point that the gentleman raised on what is going to happen to 
United States workers with the Mexican economic crisis is a very 
important question. Just a few short months ago, the administration and 
others came to the well of the House and to the Senate and told us that 
the NAFTA Agreement was a win-win situation for American workers and 
that not only would the jobs that are lost to Mexico be recreated in 
new industries in this country, but the broad power to open up the 
country of Mexico to United States exports would create additional jobs 
in this country so that we would be a net winner. And when those of us 
raised concerns about the disparity between the wages in Mexico and the 
United States, we were told that was not a factor, that in fact the 
peso was strong, that things were going well, and they presented Mexico 
as a First World country in terms of economics. That has turned out not 
to be true. Not only has it turned not to be true now, but it turned 
out to not true quite a while ago. But between the Governments of the 
United States and Mexico, they kept up the facade that Mexico was 
strong, Mexico was ready to participate in First World economics, and 
that was done to get past the Mexican presidential elections and also 
to get past the vote on NAFTA on the floor of the House of 
Representatives and in the Senate.
  What was then presented as a win-win situation, we are now 
confronting our constituents, the American workers, with a lose-lose 
situation. Not only will their wages be now less competitive with 
manufacturing and other occupations in Mexico, but we see the fact that 
those wages are going to be discounted by perhaps 30 percent. At the 
same time, the same Federal Reserve Board that is coming in here and 
asking us to support the economy of Mexico, to make these concessions 
and to put taxpayer dollars at risk, is talking about jacking up 
interest rates for the seventh time, interest rates that have the 
potential of closing off the economic recovery, of taking the newly 
hired people and putting them on layoffs, of dampening the appetite of 
American manufacturing to engage in expansion of new plants and 
facilities and job creations.
  So the American worker is put at a disadvantage because of the 
Mexican economic crisis and then he is put at a second disadvantage 
because his or her job is threatened or the potential for a job is 
threatened because the same Federal Reserve Board is going to hike 
interest rates in the American economy.
  We have already seen the National Association of Manufacturers and 
others state, ``Don't do this, because it precludes the kind of growth 
that is necessary in durable goods, in automobiles, home 
construction,'' those things that drive the fundamental job makeup in 
this country.
  So we have Mexican goods coming in cheaper than ever before, Mexican 
labor being cheaper than ever before, and the comparative advantage of 
Mexican workers at a much greater level than ever before.
  Then you put on top of that the willingness of the Mexican Government 
to thwart any attempts by Mexican workers to organize so they can 
better their standard of living, so that they can participate in a 
decent standard of living, and a decent workplace so that all of a 
sudden we do start to get some comparables. Then we have the use of 
troops to keep unionization from happening, keep workers from 
organizing, and what you really have now is the same old group of 
people in Mexico, the very wealthy families, the new billionaires 
sitting on top of the shoulders of the Mexican workers and telling them 
if they want a job they are going to have to be unorganized and they 
are going to have to work at historically low wages so that they can 
send their cheap goods into the United States and displace American 
workers.
  The gentleman from Michigan [Mr. Bonior] is asking exactly the right 
question, and that is what the Republican leadership and others have 
got to respond to: What does this do for American workers?
  You promised us one thing a few months ago and did not deliver on 
that promise, and the situation is far worse than you ever represented 
to the American workers it would be, and now you are telling us to 
trust you again, trust you and the Federal Reserve. They seem to have a 
real problem with Americans going to work. Every time we get 
unemployment down to 6 percent, they want to close off the recovery and 
say, ``That is all the jobs, folks. Everybody will have to wait until 
the next time around, everybody else will not be able to provide for 
their family.'' I think this bailout of the Mexican economy to put 
money into
 this system--you know, if you were in Las Vegas, they would tell you 
not to do this because this is called putting good money after bad. As 
was pointed out already, we already have billions and billions of 
dollars' worth of pesos sitting in Fort Knox. We have no more gold in 
Fort Knox, there is only the Mexican peso. We have to think of what the 
ramifications of that are for the American workers.

  I thank the gentleman for raising this issue.
  Mr. BONIOR. I thank my friend for his comments on this issue as well 
and for recapping for us some of the history of this.
  You know, we have been told time and time again how this was going to 
work for the American workers, how it was going to work for this 
country, how it was going to work for certain industries in this 
country. I am speaking about the NAFTA deal today. Also, how this was 
going to be a win-win for both countries.
  Well, the fact of the matter is that it is a win-win for nobody. What 
we have got, if you look at what happened in the tomato industry in 
Florida, those people are just about busted and out of work while the 
American automobile industry is doing very well today because of the 
pent-up demand and the real effort on their part to get their act 
together, which they have done very, very well.
  The fact of the matter is that while we have shipped close to 25,000 
cars to Mexico during the first year of NAFTA, they have shipped to the 
United States over a quarter of a million cars, about 260,000 cars.
  So I mean we have got some real problems ahead of us in the future, 
and we have to be cognizant of the fact that American workers in the 
future have a real stake at what we do with respect to this loan 
guarantee.
  I yield to my friend from Ohio, who has been such a champion on the 
issue of worker rights.
  Mr. BROWN of Ohio. I thank the gentleman from yielding.
  The Republican leadership says this is not a bailout, this $40 
billion; they say it is a line of credit. But if history is any 
indication, that line of credit will fairly quickly turn into a loan 
and that loan will fairly quickly evolve into a forgiven loan, and that 
forgiven loan will evolve very quickly, if history is any indication, 
into a $40 billion aid package.
  I have sent a letter to Speaker Gingrich this morning calling for 
hearings, that we need to slow down, that if we are going to consider 
this $40 billion aid package, that we as a Congress need the input of 
the American people, that we as a Congress need to understand better 
some of the issues involved in this $40 billion foreign aid package.
  I have outlined to Speaker Gingrich about a dozen questions that I 
would like to briefly mention, information that I think the American 
people need and this Congress needs before we can 
[[Page H277]] make a decision on this $40 billion foreign aid bailout 
for Mexico and Mexican wealthy investors.
  First, what is the precise amount of the loan guarantee? I do not 
think we know that yet. What is the precise amount of the loan 
guarantee?
  What is the risk that Mexico will actually default on the loans? What 
is the historical record of repayment, as the gentleman from Michigan 
alluded to earlier, to United States taxpayers on other loan 
agreements, whether it was Mexico a dozen years ago or other loan 
agreements over the years that this country has generously offered to 
other nations that are facing fiscal and economic problems?
  What is the collateral for the loans? For instance, will Mexico 
pledge oil receipts, proceeds from the auction of container terminals 
or other assets? This is clearly a sensitive issue in Mexico, with 
Mexican public opinion not so wild about turning over some of their 
Mexican oil company receipts--a government oil company--to the 
Americans as collateral.
  Next, what conditions should we attach to the loan guarantees? Should 
one of those conditions, as the gentleman implied or suggested earlier, 
involve immigration control, immigration controls, rights of Mexican 
workers, or other social issues?
  Sixth or seventh, given the many commentators, including Federal 
Reserve officials and even members of the Zedillo administration in 
Mexico, have raised question concerning the handling of the currency 
crisis, should we demand as a condition of the loans an investigation 
into the performances, as the gentleman from California mentioned, the 
performance of the Mexican Government, including the role of the 
Salinas government, in order to prevent a repeat of the situation?
  Also, why are other nations, particularly those in our hemisphere, 
not contributing, not rushing to come forward in this bailout in the 
same manner and magnitude as is the United States?
  Also, is the Mexican economic crisis relevant to a discussion of the 
balanced budget amendment in the United States which proposes to cut 
drastically appropriations for the International Monetary Fund? That 
begs the question of where are the deficit hawks on this $40 billion, 
from both sides of the aisle? Those are the people who talked about the 
balanced budget amendment--I support the balanced budget amendment--how 
are we going to do that if we are going to provide a $40 billion aid 
bailout package to the Mexicans?
  Also, what provisions are there to insure that the large numbers of 
billionaires in Mexico do not unduly profit from the bailout? Mexico is 
fourth in the number of billionaires; the United States first; Japan 
second; Saudi Arabia third; Mexico fourth. And they are there at the 
expense of the middle class in Mexico, some very, very wealthy families 
as talked about a couple of summers ago discussing NAFTA, and lots and 
lots of very, very poor Mexicans, and a small middle class.
  Mr. BONIOR. As the gentleman will recall, what happened in the early 
1980's when they hit the same type of situation, the wealthy went in 
and gobbled everything up and they became extremely wealthy. And, of 
course, they had the Government help them divvy up the spoils at a 
further point in the process.
  The question is where are they now? What sacrifices are they making? 
There are rumors to the effect that they have all liquidated their 
national currency and got their assets in dollars now and really have 
not had to face this crisis.
  That ought to be looked at to see if in fact that is a factor or if 
it is not.
  Mr. BROWN of Ohio. And coupled with that, what about American 
corporations that have benefited from NAFTA, have built plants in 
Mexico, have seen economic problems as a result of the peso 
devaluation? Are we rushing forward, in part, to bail out those 
investors? Are they going to be part of a plan in this economic 
liberalization, will they participate financially in the bailout in the 
same sense that Congressman Gephardt suggested they help finance NAFTA, 
with across-the-border transaction fees? That is something that we need 
to address.
  Last, thinking the unthinkable, what happens, what steps should we be 
prepared to take in the event the bailout package fails to stop the 
hemorrhaging of confidence in the Mexican Government and in the Mexican 
economy?
  The issues here, Mr. Speaker, is to slow down, to have extensive 
hearings, not to delay for 3 to 4 months. We do not need to do that, 
but there is no reason to rush into this. Investors around the world, 
the international finance community do not expect the U.S. Congress to 
address this this week. We need to slow down, we need to have extensive 
hearings, we need to discuss these questions, explore these answers, 
and find out what in fact is the situation all around this $40 billion 
bailout.
  I again say I hope, Mr. Speaker, that Speaker Gingrich makes the 
decision to slow down, particularly for all the new Members of the new 
Congress, some 85 new Members that are not really familiar with this 
issue. We cannot be spending American taxpayer dollars the way we have 
so profligately in the past, we have to slow down and look at this so 
that all of us can understand it better.
                              {time}  1250

  Mr. BONIOR. Mr. Speaker, I was a new Member of this institution, and 
I was being asked in the first 30 days of my service to the country as 
a Member of Congress. I, sure as heck, would want to know the ins and 
outs of this, especially given the disastrous effect of this country 
with respect to the savings and loan situation. I would want to know 
just exactly what we were buying with regards to this package, and 
second, I would demand to know what effect it will have on the fellow 
who is working at the car company in my town, or the fellow or woman 
who might be working in a facility in my district whose job is tied to 
products that are sent down to Mexico for export purposes. You know, 
what is going to happen to those folks? I have got people working the 
automobile industry that will be affected by this, and no doubt in my 
mind; I mean the automobile industry likes to say that, you know, we 
are proud that we are shipping more cars down to Mexico now. What they 
do not say is that we may have shipped 30,000 automobiles to Mexico in 
the first year of NAFTA. The Mexicans, as I said just a second ago, 
ship back here about 260,000 cars. So, there is a big difference, but 
nonetheless they are proud of the increase that they have had in the 
number of cars that they have shipped to Mexico. That undoubtedly is 
going to be affected drastically by the peso devaluation.
   I say, if you're a middle-income family or working family in Mexico, 
you can just picture yourself, the value of your dollar being 30 
percent less that what it was about a month ago, and that's what they 
are facing down there. So, everything is 30 percent more to them.
  Mr. BROWN of Ohio. I drive a Thunderbird, a car that is made in my 
district.
  Mr. BONIOR. Congratulations. Glad to hear it.
  Mr. BROWN of Ohio. Good car, and, if they talk about selling 
Thunderbirds in Mexico, if it cost $14,000 today in Mexico, 3 weeks ago 
in Mexico, today it will cost about $4,000 more than that, and people--
think about it yourself. I say to my colleague, you are not going to 
buy a car where the price has gone up $4,000, and the relatively few 
cars we are selling in Mexico that are made in America, that number is 
going to shrink. Going the other way it is going to increase with the 
way prices have shifted because of peso devaluation, and I think, as 
the gentleman from California says, it's a lose, lose, lose situation 
where not only are we losing American jobs, not only are we losing jobs 
before the peso devaluation, it is getting worse with devaluation, and 
they are asking for taxpayers dollars to bail them out.
  We have got to examine this question much more carefully.
  Mr. BONIOR. Mr. Speaker, I thank the gentleman from Ohio [Mr. Brown] 
for joining me this afternoon.

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