From
[email protected] Jan 2 20:10:28 1995
Date: Mon, 02 Jan 1995 05:59:16 -0800 (PST)
From: IATP <
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To: Recipients of conference <
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Subject: NAFTA & Inter-Am Monitor 1/2/95
Produced by the Institute for Agriculture and Trade Policy
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NAFTA and Inter-American Trade Monitor, vol. 2, #1
January 2, 1995
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HEADLINES
POPO AND THE PESO
COFFEE PRODUCERS TRY TO BOOST PRICES
BANANA UPDATE
RESOURCES/EVENTS
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POPO AND THE PESO
As smoking Popocatepetl's new rumblings sent tens of thousands
of people fleeing from their homes, the international
reverberations of Mexican President Zedillo's devaluation of the
peso sent investors scrambling for safety. The crisis began on
December 20 when, after months of denying rumors of
devaluation, the government lowered the bottom of the band
within which the peso was allowed to trade against the dollar. As
the peso immediately plunged and investors panicked, the
government abolished the band and let the peso float. By the time
that the government finally announced an emergency stabilization
plan, more than a week later, the peso had lost more than a third
of its value. Despite government insistence on a 60-day price
freeze, prices of such staple items as rice, beans, chicken, and
Mexican-made cigarettes shot up by as much as 40 percent by
December 24.
In Latin America, investor confidence appeared shaky, with the
Argentine stock market dropping by eight percent and the
Brazilian market dropping by six percent on December 20-21.
Foreign investment makes up an increasingly large share of all
investment in Mexico and the rest of Latin America. Foreign
investors had $75 billion invested in Mexican securities before the
crisis. The value of such investments dropped along with the peso.
Mexican depository receipts traded on the New York Stock
Exchange also dropped sharply.
The government initially blamed the faltering peso on renewed
unrest in Chiapas and the Zapatista guerrilla announcement of an
end to the 11-month ceasefire. A more plausible explanation lay
in the country's booming trade deficit, estimated at $30 billion at
the end of 1994. Devaluation will cut the trade deficit, possibly by
half, in the coming year. With the peso worth less, Mexican
exports will be more attractive to foreign consumers and imported
goods more expensive to Mexicans.
While manufacturers who export to Mexico, such as United States
auto makers, will be hurt by the devaluation, businesses that
manufacture goods in Mexico for export may benefit. They will
pay less in dollar terms for both inputs purchased in Mexico and
for Mexican labor.
Greater sacrifices by labor and government austerity were two key
elements of President Zedillo's emergency plan. Unions will be
asked to accept wage increases substantially lower than the 15-20
percent inflation rate predicted in 1995. According to government
figures, inflation was 6.9 percent in 1994. Government spending,
now at about 10 percent of the gross domestic product, will be cut
by 20-30 percent. Mexico will also use an international aid
package that includes a $6 billion line of credit from the United
States, $1 billion from Canada, and up to $8 billion from other
countries and foreign banks. Privatization will be accelerated.
Finance Minister Jaime Serra Puche, a key figure in NAFTA
negotiations under former President Salinas, was dismissed on
December 29. Investors and stockbrokers denounced Serra Puche
for his failure to warn them about the devaluation, and for his
failure to produce an immediate public plan to rescue the peso.
His replacement will be Guillermo Ortiz Martinez, a Stanford-
educated economist who has been under-secretary of finance for
six years. Ortiz is a new face who cannot be blamed for the
precipitous devaluation, and who appears to have good connections
with the international business and finance community.
Source: Anthony DePalma, "Casualty of the Peso: Investor
Confidence;" NEW YORK TIMES, 12/27/94; Craig Torres and Paul B.
Carroll, "Mexico Reverses Currency Policy; Peso Falls 12.7%," WALL
STREET JOURNAL, 12/21/94; Anthony DePalma, "Mexico's Leader,
Breaking Silence, Outlines A Rescue;" Tim Golden, "A Quick Fall for
Mexico's Rising Star," NEW YORK TIMES, 12/30/94; Tim Golden,
"With Peso's Devaluation, Political Problems Loom," NEW YORK
TIMES, 12/25/94; Craig Torres, "Mexico's Devaluation Stuns Latin
America -- And U.S. Investors," WALL STREET JOURNAL,
12/22/94; Tim Golden, "Boom Shows Its Dark Side," Anthony
DePalma, "With Peso Freed, Mexican Currency Drops 20% More,"
James Bennet, "Mexican Shock for U.S. Concerns," Kenneth N. Gilpin,
"Investors Weigh a Market's Safety," NEW YORK TIMES, 12/23/94;
Stephen Fidler and Ted Bardacke, "Nerves Over Deficit and
Dissidence," FINANCIAL TIMES, 12/21/94; Eduardo Molina y
Vedia, "Peso Devalued 15 Percent Against the Dollar," INTERPRESS
SERVICE, 12/20/94; Anthony DePalma, "Dogged Doctor for Mexico's
Morass," NEW YORK TIMES, 12/31/94; Paul Lewis, "Awaiting
Mexico's Plan to Revive Peso," NEW YORK TIMES, 1/1/95.
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COFFEE PRODUCERS TRY TO BOOST PRICES
Latin American coffee producers meeting in Guatemala on
December 21 agreed to reintroduce a coffee retention program,
beginning in January. They will hold back 20 percent of exports
until prices reach $1.90 per pound, and will re-evaluate the plan
when that goal is achieved, or at their next meeting on February
28.
After the implementation of a coffee retention plan from October,
1993-January, 1994, and after two severe frosts and a drought
damaged Brazil's 1994-95 and 1995-96 coffee crops, coffee prices
nearly tripled. More recently, prices have seesawed dramatically.
During December, London coffee prices ranged from $2,870 per ton
for January coffee to $3,523 per ton.
The Brazilian government reported a total of 15.17 million sacks of
60 kilograms each on hand in early December, despite poor
harvests last year. Each sack is worth approximately $130 dollars,
for a total of nearly two billion dollars. The government releases
its coffee stocks from time to time to keep domestic coffee prices
stable.
Central American producers, who sold coffee early and missed
much of the benefit of 1994's price increases, pushed for the
retention scheme. Coffee futures prices in London and New York
rose in reaction to the announcement.
Coffee futures prices affect government coffee sales and large
traders. Small growers and farm workers see less profit from
increased prices. Guatemalan workers typically pick 100 pounds
of coffee daily to earn two dollars. The gourmet coffee that they
pick sells for nine dollars or more per pound at retail.
Source: Andi Spicer, "Latin Americans Restart Coffee Retention
Scheme," INTERPRESS SERVICE, 12/22/94; Andi Spicer, "Price Hits
Floor Before Reversing Slide," INTERPRESS SERVICE, 12/16/94;
"Over 15 Million Sacks of Coffee in Reserve," INTERPRESS SERVICE,
12/8/94; "Central American Growers to Discuss Coffee Alliance,"
JOURNAL OF COMMERCE, 12/14/94; Carol Richardson, "Starbucks
Coffee and Guatemala Workers," 50 CALLS A WEEK NETWORK,
12/5/94.
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BANANA UPDATE
Caribbean banana producers and the United States government
discussed their differences at the Summit of the Americas, after
the former won a major victory at a GATT meeting, with two-
thirds of the member countries voting to continue preferential
treatment for Caricom banana producers. The U.S. has now agreed
to back the Lome Convention preferences until 2002.
The new agreement seems to avert the threat of U.S. trade
sanctions under Section 301. The sanctions were requested by two
U.S. companies, Chiquita Brands International and the Hawaii
Banana Producer Association. The Section 301 investigation
technically continues. Latin American producers also charge that
the Lome Convention preferences unfairly discriminate against
them in favor of smaller Caribbean nations.
Source: Bert Wilkinson, "Caribbean, U.S. Agree to Skin Banana
Differences," INTERPRESS SERVICE, 12/10/94; Debra Percival,
"Germany to Renew Attack on EU Import Rules," INTERPRESS
SERVICE, 12/9/94; Scott West, "Temporary Truce in Banana War,"
INTERPRESS SERVICE, 12/14/94.
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RESOURCES/EVENTS
"Structural Adjustment and Inequality in Latin America: How IMF
and World Bank Policies Have Failed the Poor." Oxfam UK and
Ireland Policy Department, September 1994. Oxfam, 274 Banbury
Road, Oxford, England, OX2 7DZ. 24 pages.
Challenging a recent World Bank report praising market-oriented
reforms, Oxfam charges that "the free-market revolution of
privatisation, fiscal discipline, and deregulation, which has swept
Latin America, has done little to improve most people's lives.
Rather, IMF and World Bank policies are encouraging a pattern of
economic growth based on social exclusion. Growth has bypassed
the poor and most people are even poorer than they were in
1980."
"NAFTA: Reflections on the First Year and Visions for the Future."
Symposium at the University of Arizona, February 22-24, 1995.
Co-sponsored by Arizona Journal of International and Comparative
Law, National Law Center for Inter-American Free Trade,
International Law Society of the University of Arizona, and
Arizona Department of Commerce. Topics include environmental
issues, banking and credit issues, trade and customs issues, and
labor issues. Call 602/621-5593 or write Arizona Journal of
International and Comparative Law, University of Arizona College
of Law, Tucson, AZ 85721. $225 per person before 1/15/95, $275
after 1/15/95.
"The Impact of Trade Policy and the Flow of Global Finances on
Sustainable Development." Conference in Ecuador on April 25-27,
1995. Sponsored by Ecuadorian Foundation for Environmentally
Sustainable Development in the Energy Sector (Fundacin
Ecuatoriana para el Desarrollo Medio-Ambiental Sostenible de los
Sectores Productivos (o de Servicio) Energticas Nacionales).
Themes include Trade and Sustainable Development, External
Indebtedness and Finance, Macroeconomic Policy for the
Environment and Development (including privatization and
environmental accounting), and Environmental Sustainability.
Papers invited. Fax Eduardo Aguiar, President at 011-5932-
330534.
"A Giant Spraying Sound," by Esther Schrader. Article in MOTHER
JONES, January/February 1995. 5 pages. Examines agricultural
pesticide use in Mexico, focusing on impact on worker safety and
health.
"Rural Latin America: Wrestling With the Global Economy," NACLA
REPORT ON THE AMERICAS, November/December 1994. North
American Congress on Latin America, 475 Riverside Drive, Suite
454, New York, NY 10115. Telephone 212/870-3146. 48 pages.
$4.75 for single issue, $27 one year. Articles in this special issue
include: "The Legacy of Latin American Land Reform" by Solon L.
Barraclough; "New Harvests, Old Problems: Feeding the Global
Supermarket" by Lori Ann Thrupp; "Will Central America's
Farmers Survive the Export Boom?" by Edelberto Torres Escobar;
"Interviews With Three Campesino Activists" by Marc Edelman;
"Rural Upheaval and the Survival of the Maya" by Edgar Gutirrez;
and "The Greening of Cuba" by Peter Rosset.
"Chiapas and the Crisis of Mexican Agriculture" by Roger Burbach
and Peter Rosset. December 1994. Institute for Food and
Development Policy. To order, write Subterranean Company
(distributor), Box 160, 265 S. 5th Street, Monroe, OR 97456. Fax
503/847-6018. $4 plus s&h. Original title was "Land, Liberty &
Food in Chiapas."
Argues that the profound agricultural crisis of Chiapas is
"symptomatic of a larger malaise affecting the entire country."
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The NAFTA and Inter-American Trade Monitor is available in
both English and Spanish on Association for Progressive
Communications (APC) computer networks on the conference
eai.news. It can also be faxed or sent via mail on request. We
welcome your comments and contributions.
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For more information about the Institute for Agriculture and
Trade Policy, send email to
[email protected].
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Produced by: Mary C. Turck, Institute for Agriculture & Trade
Policy, 1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414-
1546 USA
Tel: (612) 379-5980, Fax: (612) 379-5982, email:
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