Labor Law Reform – a Key Battle for Mexican Unions Today

Changing Mexico’s labor law threatens the lives of millions of workers. It would cement the power of a group of industrialists who have been on the political offensive for decades, and who now control Mexico’s presidency and national government. “Labor law reform will only benefit the country’s oligarchs,” claims Andres Manuel Lopez Obrador, who most Mexicans think won the last presidential election in 2006, as candidate of the left-wing Party of the Democratic Revolution. Napoleon Gomez Urrutia, head of the miner’s union who was forced into exile in Canada in 2006, says Mexico’s old governing party, the Party of the Institutionalized Revolution (PRI), which lost control of the presidency in 2000, “is trying to assure its return by making this gift to big business, putting an end to labor rights.”

In part, the change is drastic because on paper, at least, the rights of Mexican workers are extensive, deriving from the Revolution that ended in 1920. At a time when workers in the U.S. still had no law that recognized the legality of unions, Article 123 of the Mexican Constitution spelled out labor rights. Workers have the right to jobs and permanent status once they’re hired. If they’re laid off, they have the right to severance pay. They have rights to housing, health care, and training. In a legal strike, they can string flags across the doors of a factory or workplace, and even the owner can’t enter until the dispute is settled. Strikebreaking is prohibited.

A new labor law would change most of that.

Companies would be able to hire workers in a six-month probationary status, and then fire them at the end without penalty. Even firing workers with 20 or 30 years on the job would suddenly become much easier and cheaper, by limiting the penalty for unjust termination to one year’s severance pay. “That’s an open invitation to employers,” according to Arturo Alcalde, Mexico’s most respected labor lawyer and past president of the National Association of Democratic Lawyers. “The bosses themselves say the PRI reform is the road to a ‘paradise of firings.’ It will make it much cheaper for companies to terminate workers.”

The justification, of course, is that by reducing the number of workers at a worksite, while requiring those remaining to work harder, productivity increases and profits go up. For workers, though, a permanent job and stable income become a dream, while the fear of firing grows, hours get longer, and work gets faster, harder and more dangerous.

The PRI labor law reform proposal deepens those changes. The 40-hour workweek was written into the Federal Labor Law, which codified the rights in Article 123. That limit would end. Even the current 7-peso/hour minimum wage ($5/day) would be undermined, as employers would gain the unilateral right to set wages. The independent review of safe working conditions would be heavily restricted.

Mexican workers aren’t passive and organize work stoppages and protests much more frequently than do workers in the U.S. Greater activity by angry workers, therefore, wouldn’t be hard to predict. So the labor law reform takes this into account as well.

Even in union workplaces with a collective agreement setting wages and conditions, an employer could force workers to sign individual agreements with fewer rights or lower wages. Companies could subcontract work with no limit, giving employers the ability to find low-cost contractors with no union to replace unionized, higher-wage employees. And it would become much more difficult to go on strike.

The proposed labor law reform is the fourth in a series of basic changes in Mexico’s economic, legal and political framework over the last decade. A fiscal reform began the process of privatizing the country’s pension system, much like the Social Security privatization plans proposed for the U.S. Teachers charge that Mexican education reform is intended to remove their influence over the curriculum, which still espouses values that would seem very progressive in a U.S. classroom. In many cases, they say, it will remove them from their jobs also. Current Mexican President Felipe Calderon of the National Action Party (PAN) proposed an energy reform aimed at privatizing the national oil company, Pemex. Fierce opposition, however, was able to restrict it to some degree.

All the reforms have been part of a program of economic liberalization opening Mexico to private, domestic, and especially foreign capital. Lopez Obrador calls the labor law reform “part of a series imposed on Mexico from outside over the last two decades, including the energy reform, fiscal reform and education reform.” The World Bank pressured Mexico to adopt an earlier labor law reform after the PRI lost the presidency in 2000, and Calderon’s predecessor, Coca-Cola executive Vicente Fox, won it. The two labor law reform proposals are very similar. Both reflect the surging power of corporate employers in Mexico, and the way the PRI and PAN often trade places, pursuing the same political and economic agenda.

“At the same time,” Lopez Obrador notes, “the fight against inequality and poverty is not on the national agenda.” Mexican poverty contradicts claims by its leaders, who insist its economic growth merits a seat in the “first world.” Changing labor law would make poverty more permanent, however, as well as rendering unions more impotent to challenge it. Juan Manuel Sandoval, a leader of the Mexican Action Network Against Free Trade, predicts, “We will become part of the first world – the back yard.”

In 2010 Mexico had 53 million people living in poverty, according to the Monterrey Institute of Technology. The CIA says half the country’s population lives in poverty, and almost 20% in extreme poverty. The government’s unemployment figures are low – 5-6% — but a huge number of working-age Mexicans are part of the informal economy, selling articles on the street or working in jobs where the employer doesn’t pay into the official funds (the basis for counting employed workers.) Some estimate that there are more workers in the informal sector than in the formal one.

Even formal jobs don’t pay a wage capable of supporting a family. According to the Bank of Mexico, 95% of the 800,000 jobs created in 2010 paid only $10 a day. Yet when a maquiladora worker buys a gallon of milk in a Tijuana or Juarez supermarket, she pays even more than she would on the U.S. side. Prices are a little lower further south, but not much. The price of milk used to be fixed and subsidized, along with tortillas, bus fare and other basic necessities. Previous waves of economic reforms decontrolled prices and ended consumer subsidies, as Mexico was pressured to create more favorable conditions for private investment.

Investors have done very well. In one of the recent diplomatic cables published by Wikileaks, the U.S. government admits “The net wealth of the 10 richest people in Mexico — a country where more than 40 percent of the population lives in poverty — represents roughly 10 percent of the country’s gross domestic product.” Carlos Slim became the world’s richest man when a previous PRI President, Carlos Salinas de Gortari, privatized the national telephone company and sold it to him. Ricardo Salinas Pliego, who owns TV Azteca, is now worth $8 billion, and Emilio Azcárraga Jean, who owns Televisa, is worth $2.3 billion. Both helped current Mexican President Felipe Calderon get elected in 2006.

German Larrea and his company Grupo Mexico got concessions to operate some of the world’s largest copper mines. Grupo Mexico was accused of industrial homicide by miners’ union president Gomez Urrutia after 65 people (many of them contract workers) died in an explosion at the Pasta de Conchos coal mine in February 2006. Since June 2007 the Grupo Mexico copper mine in Cananea has been on strike. Last year Larrea and the Mexican government cooperated in using armed force to open its gates and bring in strikebreakers.

Much of the PRI’s labor law reform is already the reality on the ground in Cananea, at other mines, and among maquiladora workers near the U.S. Mexico border. For years the rights of workers in northern Mexico, even the rule of law itself, have been undermined by the growing power of corporations.

The corporate transformation of the Mexican economy began long ago, moving the country away from nationalist ideas about development, which were dominant from the end of the Mexican Revolution through the 1970s. Nationalists advocated an economic system in which oil fields, copper mines, railroads, the telephone system, great tracts of land, and other key economic resources would be controlled by Mexicans and used for their benefit.

Under President Lazaro Cardenas in the late 1930s, Mexico established a corporatist system in which one political party, the PRI, controlled the main sectors of Mexican society – workers, farmers, the military and the “popular” sector. PRI governments administered a network of social services, providing healthcare and housing, at least for people in those organized sectors. Cardenas also nationalized Mexico’s most important resource – oil – in a popular campaign.

National ownership of oil, and later electrical generation, was written into the Constitution. Land redistribution and nationalization had a political as well as economic purpose – the creation of a section of workers and farmers who would defend the government and its political party, into which their unions and producer organizations were incorporated.

After World War Two, Mexico officially adopted a policy of industrialization through import substitution. Factories produced products for the domestic market, while imports of those products were restricted. The purpose was to develop a national industrial base, provide jobs, and increase the domestic market. Large state-owned enterprises eventually employed hundreds of thousands of Mexican industrial workers in mines, mills, transportation and other strategic industries. Unions had their greatest strength in the public sector. Foreign investment was limited.

Enrique Davalos, professor and teachers’ union activist at San Diego City College, calls the system “nationalism in rhetoric, selling out the country in practice.” Under successive PRI administrations a vast gulf widened between the political and economic elite, who managed the state’s assets and controlled government policy in their own interest, and workers and farmers, especially those not in the formal sector. To protect this elite, the country’s political system became increasingly repressive.

In the 1970s, to finance growth while the price of oil was high, Mexico opened up its financial system to foreign capital (mostly from the U.S.), and the country’s foreign debt soared. Managers of state enterprises, like the oil company, ran private businesses on the side, along with politically connected union officials. Rackets and corruption proliferated while labor and campesino leaders who challenged the system were imprisoned or worse.

The debt and the hold it gave to foreign financial interests spelled the end of nationalist development. Oil prices fell, the U.S. Treasury jacked up interest rates, and in 1982 the system collapsed when Mexico could no longer make debt payments. The government devalued the peso in what is still infamously remembered as the great “peso shock.”

In the Constitution Mexicans still had the right to housing, healthcare, employment and education, but millions of people went hungry, had no homes, were sick and unemployed, and couldn’t read. The anger and cynicism felt by many Mexicans toward their political system is in great part a product of the contradiction between the constitutional promises of the revolution a century ago, plus the nationalist rhetoric that followed, and the reality of life for most people.

In a desperate attempt to generate jobs and revenue for debt payments, the government encouraged the growth of maquiladoras, the foreign-owned factories on the northern border. By 2005 over 3000 border plants employed over 2 million workers making products for shoppers from Los Angeles to New York. In 1992 they already accounted for over half of Mexican exports, and in the NAFTA era, became the main sector of the economy producing employment growth.

Maquiladora development undermined the legal rights of workers in the border area, and any laws viewed as discouraging investment. The government had a growing interest in keeping wages low as an attraction to foreign corporations, instead of high enough that people could buy what they were making. The old official unions, including the Confederation of Mexican Workers (CTM), controlled restive workers rather than organizing them to win better conditions.

ONE of the most important methods of control is the protection contract. Cooperative unions sign agreements with factory owners, who pay “dues” for workers who often have no idea that the union and contract even exist. They find out quickly, however, when they try to organize any independent effort to raise wages or improve conditions. The company and official union claim a contract is already in place. If workers try to protest, they’re forced into a process before “tripartite” labor boards dominated by business owners, politicians dependent on them, and the official unions.

Labor history in Mexico for decades has been dominated by valiant battles fought by workers to organize independent unions and rid themselves of protection contracts. Thousands have been fired, and some even killed. Despite defeats, organizations like the Coalition for Justice in the Maquiladoras (CJM), the Border Committee of Women Workers (CFO), Enlace, and the Workers Support Committee (CAT), have helped workers challenge this system. Some of these battles, fought together with independent unions like the Authentic Labor Front (FAT), have won union contracts, slowly building an independent and progressive sector of Mexican labor.

The FAT and the National Union of Workers, to which it belongs, have made their own proposals for labor law reform. They’ve suggested making all contracts public to let workers know what union they belong to, and to shine a light on the corruption of the present system. They see the tripartite labor boards as so compromised that they’d do away with them, while removing some of the government controls used to punish independent unions.

The PRI proposal would not make protection contracts public or limit them, nor would it change the labor boards or enhance union rights. Instead, it takes direct aim at those independent unions, some of which have been organized in fierce fights against shutdowns and privatization, like the recent one at the government-owned Mexicana Airline. New private businesses don’t want to see these unions spread, organizing their workers. A new private airline, Volaris, for instance, recently started service to the U.S. Now that the government has forced Mexicana into bankruptcy and laid off its workers, Volaris hopes to take over the old airline’s routes, and perhaps even its assets. What it doesn’t want is the Mexicana union.

The PRI labor law reform would restrict unions to the one company or enterprise where they began. Industrial, or even craft, unions, representing workers at many employers, would become impossible to organize. New private businesses, like Volaris, would face no challenge by a union seeking to set a base wage for a particular industry. Unions would have much greater difficulty in organizing solidarity among workers, in any effort like the ones that led to the large industrial unions in the U.S. and Mexico.

Progressive unions in Mexico today are fighting for their survival. The state institutions that enforce Mexican labor law are already heavily stacked against them. PRI’s reforms would turn the struggle for survival into a desperate labor war.

David Bacon is a California writer and photojournalist. His latest book is Illegal People: How Globalization Creates Migration and Criminalizes Immigrants.

The Institute for Transnational Social Change (ITSC) is a hub for cross-border collaboration among key worker-led organizations (independent unions, worker centers, NGOs, and academics) in Mexico and the United States. The institute seeks to address the needs of a low-wage workforce that is often hard-to-reach – migrant workers, women in the garment industry, farm workers, miners, and other workers in industries dominated by highly mobile transnational corporations — and to increase opportunities for cross-border collaboration. The present report is part of a series of publications sponsored by ITSC. For more information about the ITSC, contact Gaspar Rivera-Salgado at UCLA, [email protected].

To read the previous installment, The Hidden History of Mexico/U.S. Labor Solidarity, click here.