[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.
____________________