| | |  Editorials | Opinions | October 2009 
State-Owned Utility Seizure was a Needed Step in Mexico
 Patrick Corcoran - mexidata.info
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October 26, 2009
 |  | One certainly hopes that Calderón does leave a legacy of dismantling Mexico’s clientelist, corporatist economic system. The LyFC was a good first step, but a legacy as a truly historic, modernizing president will require more than just a takeover. |  | | |
On October 12, during the middle of a soccer-frenzied Saturday night, Mexican President Felipe Calderón sent a thousand federal police to the headquarters of the state electric company Central Light and Power (LyFC), laid off the workers, and liquidated the company.
The move was preceded by a conflict between the government and the union that staffed LyFC, the Mexican Electricians Union (SME); Labor Secretary Javier Lozano refused to certify the recent reelection of union president Martín Esparza due to voting irregularities. The SME responded with threats of demonstrations and work stoppages. Both sides refused to budge, until, with the Saturday night takeover (colorfully dubbed the sabadazo), the LyFC ceased to exist.
In the wake of the liquidation, Mexico’s centrist commentators celebrated. El Universal’s Jorge Chabat called it “thus far the most important [decision] of his tenure”. Leo Zuckermann of Excélsior said Calderón “dared to do what no other president had done since the '80s: confront one of the most powerful and radical unions in Mexico, liquidating the most ineffective public company of them all.”
There is certainly a lot to support Calderón’s decision. The president justified it principally in terms of the company’s financial maladies, pointing out that the federal government has allocated more than 40 billion pesos a year (around US$3 billion) to LyFC for the past decade. The company had 44,000 active workers on the payroll (in addition to 22,000 retirees), when independent estimates placed the ideal figure at a mere 8,500. When compared to Federal Electricity Commission (the CFE, which is the other state electric company, and which became the provider of electricity in the zones where the LyFC had operated), the deficiencies of the liquidated company are undeniable: the LyFC had longer delays for connection, more service interruptions, more complaints, more workers per customer, more workers per gigawatt produced, more energy losses, and so on.
Beyond questions of efficiency and financial viability, the LyFC takeover had a broader political and economic motivation, which the above commentators mentioned but Calderón largely ignored in his explanations. The inability of a generation of leaders to undo the clientelist* political and economic model that dominated the twentieth century and crippled Mexico’s growth.
The negative impact of this clientist culture is immeasurable. Mexico’s labor market is stilted, key industries are dominated by monopolies, and genuine competition is no more than an economist’s daydream. Despite that, Mexico’s presidents have largely tiptoed around the most powerful symbols of said culture: union leaders and monopolists. The LyFC episode sends a powerful warning to other union bosses and ossified companies in protected industries: where past presidents have been solicitous and submissive, Calderón seems primed for confrontation.
Nonetheless, said message will in time lose its force unless Calderón follows up on it. Lozano, the labor secretary, said that more liquidations are likely in the offing, but when you begin to ponder what would be the logical next move, the uniqueness of the LyFC situation emerges in stark relief. There were two independent state companies working in the same industry, one competent and the other a wreck. Consequently, there was a proficient, eager replacement for the LyFC (which is staffed by another union), which mitigated the potential danger of strikes.
For the most daunting tangles in the Mexican clientelist landscape – the teacher's union (the SNTE), which has long resisted deep educational reform, and Pemex, the national oil company whose production is plummeting to the degree that its chief called 2008 its worst year ever – the situation is quite different. Unfortunately, Pemex and the SNTE are more powerful entities than the LyFC, and they present far thornier problems. A strike by either the SNTE or the Pemex workers’ union would be devastating to the nation’s immediate economic well-being (in the case of Pemex) and its long-term future (in the case of the SNTE). There’s no CFE waiting in the wings to replace Mexico's teachers, nor could Calderón call Exxon or PetroBras in from the sidelines to replace a liquidated Pemex.
One certainly hopes that Calderón does leave a legacy of dismantling Mexico’s clientelist, corporatist economic system. The LyFC was a good first step, but a legacy as a truly historic, modernizing president will require more than just the sabadazo. The hard work lies ahead.
* Clientelismo, often denoting a "political machine" in Latin American terms, also refers to the practice of gaining electoral votes and/or government posts with promises of patronage and perks.
Patrick Corcoran (corcoran25(at)hotmail.com) is a writer who resides in Torreón, Coahuila. He blogs at Gancho (ganchoblog.blogspot.com/). |
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