Now the responsibility lies with the individuals

Stabilisation and structural adjustment programmes adopted following the foreign debt crisis in 1982 have included the total or partial privatisation of many state companies and activities in various sectors: industrial, financial, agriculture and stock-raising, mining, infrastructure, communications, petro-chemical and even social security. Along with cutbacks in social expenditure associated with trends to privatise public and basic services, the “novelty” lies with the transfer of State responsibility to private companies.

Thepace of privatisations in the country has been as dizzying as the bankruptciescaused by the government. “Out of the 1,115 government-controlled companiesexisting in 1983, ten years later, only 213 remained.”[1]The companies sold included strategic and secondary ones, some generatingprofits and some losing money; many were sold at prices far below their realvalue.

Thesales lacked transparency and the destination of the resources obtained isunclear. Affected workers have suffered because of mass dismissals and changesin collective contracts. Moreover, privatisations have met with scant ornon-existent State regulations to ensure the promotion of the country’seconomic and social development in the medium and long term. The immediateobjective of reducing public expenditure to put finances on a sound footing hastaken priority over objectives of a strategic nature. Irresponsibility?Incapacity? Lack of vision? Corruption? Yes. But above all, privatisation is aconsequence of importing an economic “development,” market-based model thatminimises the State’s economic role and social responsibility to such a degreethat it generates greater inequity, poverty and environmental degradation. Inaddition, when the privatising process touches public services, be thesestrategic or basic, it limits the full enjoyment of fundamental economic, socialand cultural rights (ESCR).

Theprivatising process in the field of public services has taken many forms. In thefirst place, it promoted the dismantling of government institutions andde-regulation of activities to encourage free market play. For example, thedisappearance of the National Commission for Peoples’ Subsistence (CONASUPO) inthe 1990s, which used to look after marketing basic grains and the establishmentof guaranteed prices, has had a negative impact on the human right to food.Secondly, privatisation formally transferred service administration to theprivate sector, as in the case of social security and electricity.

Socialsecurity at the disposal of private capital

Throughthe legislative reform of 1991, the government of Salinas de Gortari establisheda system of Savings for Retirement (SAR), which converted pension fundsadministered by the State into privately capitalised and privately administeredfunds. Subsequently the Zedillo government promoted the new Law for SocialSecurity[2] whereby the management ofindividualised accounts for each worker was handed over to the Retirement FundsAdministrators (AFORE), converting the country’s most important social fundsinto financial funds placed at the disposal of the major national and foreignfinancial groups. The reform also affected medical services, workers’compensation, childcare centres and other benefits, by promoting subrogation, orhiring of services within the private sector, and by restricting social benefitsby transferring them to childcare insurance.[3]

Asstated in the Alternative Report on the Situation of Economic, Social andCultural Rights in Mexico, the Mexican government tied the development of thesocial security sector to the interests of private capital, transforming itssupportive essence of intergenerational assistance, public sharing and subsidyinto an open market and ignoring social rights guaranteed both by ourConstitution[4]and by the International Covenant on ESCR.[5]

Theconsequences of this reform “would seem to make up a zero sum up game, wherethe government and the financial sector win, while most of those insured andrightful claimants, particularly those in lower income levels with lessprotection, run a high risk of losing.”[6]This is a regressive measure since it has caused the loss of acquired humanrights, for example by increasing the number of weeks of contributions necessaryto obtain an old-age pension.

Thepresent administration has not addressed the need to widen social securitycoverage or improve the quality of services, and has continued cutting back onpublic expenditure in this sector. Entry into social security continues to bethrough participation in the formal work market.[7]

Yethealth sector authorities stress that it is essential to have a social securityreform project which will halt the deterioration of public institutions causedby underfunding, in the face of an increase in life expectancy and a sharpageing process. Little is said about deterioration of salaries, unemployment andcutbacks in social expenditure that also put pressure on the sector’sfinancial system. Santiago Levy, director of the Mexican Institute for SocialSecurity (IMSS), has pointed out that the social security system “will loseits capacity for operation within the next ten years because all the resourceswill be allocated to paying pensions and we will not have the money to pay fordrugs, children’s day-care centres or any other additional programmes.”[8]As for proposals, he has suggested the need to reduce certain benefits “insome way”, increase “gradually and prudently the minimum age of retirementof workers” or “carefully” explore the option of co-insurance orco-payment.[9]

Thegradual and silent process of health service privatisation in Mexico is set inthis framework, as part of the structural reforms dictated by the internationalfinancial institutions. The modalities of this privatisation are: 1) fees forpublic services; 2) the subrogation of auxiliary services; 3) managerialadministration and funding methods; and 4) the sale of assets or services. Themost important modality in our country is “medical care covered by privateinsurance. The central objective is to solve health problems in the most radicalway, offering private initiative a profitable and guaranteed market.”[10]What drives this process is “de-capitalisation and deterioration of socialsecurity and the offer of an individualised solution.”[11]

De-capitalisationof the sector has been taking place with the decrease in the budget for certainlines of healthcare and cutback of social expenditure due to the fall in oilprices. According to figures of the Finance Ministry, in 1999 cutbacks to theIMSS were MXP 1.693 million (USD 178.72 million) and MXP 97 million (USD 10.24million) to the ISSSTE. In 2000 cutbacks were MXP 100 million (USD 10.11million) to the Health Ministry, MXP 700 million (USD 70.80 million) to the IMSSand MXP 300 million (USD 30.34 million) to the ISSSTE. During 2002, cutbacks tothe IMSS were MXP 2.5 billion (USD 245.94 million).

Furthermore,the Under-Secretariat for Disbursements of the Secretariat for Finance andPublic Credit maintains that over the next years “it will be difficult formore public resources to be available for the health sector.”[12]However, this lack of resources is only a myth; it is enough to see thegovernment’s priorities in the disbursement budget of the Federation. Forexample, resources for the prevention and control of HIV/AIDS do not evenrepresent one percent of what the government has invested in rescuing privatebanking since 1995.[13]Nevertheless, the health budget was cut again in 2002, and amidst this scenario,the Health Secretary, Julio Frenk, has on several occasions mentioned thepossibility of establishing a generalised “peoples’ insurance” which wouldrely on the ability of families to pay. The government’s proposal, though notyet laid out in detail, is worrisome since it would not expand coverage of thepresent public service, but rather would transfer costs to individuals. That is,the peoples’ insurance would not be a right but a commodity to be purchased bythose who can pay for it. In a context of poverty and extreme poverty, such asthe one experienced in Mexico, families do not have “surplus” to pay forsuch insurance.

Electricitydecapitalised

Since1995 in the World Bank (WB) Country Assistance Strategy (CAS) the privatisationof the national electric industry has been advocated. Technical assistance forthe privatisation of infrastructure was considered a key strategic area and USD30 million were allocated for this project in 1995. In the 1998 CAS ProgressReport, the WB called on the Mexican government to privatise the electricity andoil sectors as a condition for international economic aid and WB-guaranteedsupport for private investment in the country.[14]The 1999 CAS underscored that privatisation of some sectors, such aselectricity, was still on the agenda.

Furthermore,in the Letter of Intent and the Memorandum of Economic and Financial Policies ofthe Mexican government sent to the IMF in June 1999, it was specified (paragraph9) that “the government will contribute to increasing investment through itsplans to expand basic infrastructure, including co-investment with the privatesector and with the participation of this sector in areas that were previouslyreserved to the State, such as the generation of electricity… This is thereason for the Government having sent a bill to Congress to allow competition onthe electricity market and attract private investment to the electricindustry.”[15]

Widesocial and trade union opposition successfully halted this initiative. However,the present government maintains its intentions, and although inside the countryPresident Vicente Fox promises that the electric industry will not beprivatised, the offer has been reiterated to foreign investors on variousoccasions. The possible consequences of greater private investment in thissector are an increase in electricity rates, compromise of labour rights, andloss of control over an industry that is strategic for the development of thecountry. Additionally, as maintained by experts in this issue, the MexicanElectricians Union (SME) and democratic sectors of the General Trade Union ofElectricity Workers of the Mexican Republic (SUTERM), this sector is not incrisis therefore privatisation is not necessary. In fact, in the last few yearsthe government has been decapitalising it with systematic cutbacks on publicexpenditure. It is worth noting that over the last 50 years this nationalindustry has consistently grown, demonstrating capacity and efficiency.

Conclusion

TheMexican State continues to ignore social protection, which it is obliged toprovide under the terms of economic, social and cultural rights agreements,while the process of impoverishment of the population advances and disparitiesincrease. In 1995 official figures showed that 42% (40 million people) of theMexican population lived in poverty; in 2000, the poor increased to 53.7%,[16]representing 45.9% of the total number of Mexican homes. Of these, 60.7% arelocated in rural areas and 37.4% in urban zones. In just five years the numberof poor increased by over 10 million people.

Table1.- Proportion of the poor population in Mexico, 2000(% oftotal population)

Source:Under-Secretariat for Planning and Assessment of the Secretariat for SocialDevelopment

Facedby this alarming situation, what is President Fox’s government doing? It isnot redefining the economic policy, but rather emphasizing structuraladjustments, including cutbacks on social expenditure associated withprivatising public and basic services. It is reducing social policy to a singlestrategy and programme against poverty, maintaining the compensatory, narrowlyfocussed assistance approach used by the previous administration. Finally, thereis a “new” ingredient, added by the president of the Republic himself: thepromotion of human – but not social – development by transferring Stateresponsibility to private companies, using a “telethon” scheme of promotingthe philanthropic work of private foundations to satisfy basic needs instead ofdesigning and applying appropriate public policies.