López Obrador’s Rise to Power: What Does It Hold for Labor?

The Elections’ Immediate Impact

The 2018 elections mark the collapse of Mexico’s existing party regime and the terminal dissolution of the PRI (or Partido Revolucionario Institucional), once considered a timeless “dinosaur” heading a “perfect” dictablanda (soft dictatorship) of its own contrivance. Whereas throughout the 1990s it had near unanimous control of the Senate and roughly 75 to 90 percent of the lower chamber, today it has only a tenth of Senate seats and lower chamber representation. The right-wing PAN (Partido Acción Nacional), which in 2000 stood to dominate a new era of liberal politics is also tumbling, holding barely half of its former congressional seats. Meanwhile, the PRD (or Partido de la Revolución Democrática), the left-leaning former party of AMLO, has shriveled into oblivion, with around 5 percent of parliamentary seats.

By contrast, MORENA cleaned house, reaching 189 or nearly two-fifths of lower house seats. Starting with only thirty-five representatives, it now heads an alliance that took 306, close to a super-majority. Founded in 2011 as a non-profit, MORENA, which also means “dark-skinned,” was designed to back AMLO from outside the PRD leadership with which he continually feuded. By then, AMLO was ready to ditch the PRD, which viewed his populist rise with suspicion and soon afterward joined the other leading parties in the Pacto por México, a pledge to back the disastrous anti-narco war and a series of pro-business reforms, including a bid to privatize the national petroleum industry, PEMEX. ¹ With the main parties discredited, an anemic economy, and drug violence intensifying, Mexican voters were ready for a change.

The Backdrop to the AMLO Tsunami

AMLO’s populist campaign responded to the litany of grievances that amassed over three decades of the dismantling of the corporatist state erected following the 1910 to 1919 revolution, which took control of the labor movement from above and incorporated unions into the new ruling party and the state. MORENA committed to reduce violence and redirect resources toward social programs by combatting corruption and the proliferation of trafficking organizations. Similarly, AMLO and the new party stood for restoring the state’s role in regulating markets and in key industries such as oil and energy, strengthening public governance, job creation, and tax revenue. In short, AMLO promised to address the very havoc that the PRI-PAN-PRD neoliberal consensus had wreaked on Mexican society.

. . . AMLO and the new party stood for restoring the state’s role in regulating markets and in key industries such as oil and energy, strengthening public governance, job creation, and tax revenue.

The market liberalization, privatization, and austerity that took hold in the 1990s were, according to the PRI, intended to reverse the devastating impacts of the prior decade’s debt crisis. This free-market “solution,” of which open capital markets and the North American Free Trade Agreement (NAFTA) were key components, aimed at generating employment by attracting investment and boosting productivity, while protectionism and public spending were faulted for growing inflation, deficits, and debt. But rather than a rising tide of material benefits and security, Mexico has been plagued by crisis-punctuated stagnation, broad disparities, and the unprecedented explosion of narco-terrorism, eviscerating the country’s institutional fabric.

The Political Economy of Insecurity

The instant effect of opening markets and trade in the 1990s was a devastating crash, the so-called Tequila Crisis, that wiped out 8 percent of the Mexican economy. Working-class Mexicans felt the squeeze immediately as the unemployment rate doubled to nearly 7 percent in 1995, a year after NAFTA’s adoption. Since then, joblessness has averaged 5 percent, compared to the near-full employment of the 1960s and early 1970s. This figure also hides the rampant precarity of many who are counted as employed. According to the Economic Commission for Latin America, roughly half of urban workers toil in the informal sector. The “self-employed”—those who lack formal jobs with rights and legal standards—amount to one fifth of all laborers in cities and towns; between 1995 and 2010, the number of informal workers rose from 9 million to 12 million. Today, a full one in seven economically active Mexicans get by on less than the minimum wage which for most of the country sits at $5 per day! ² The average hourly wage remains stuck at under $2.50.

During these years, the labor movement, already quiescent, became ever more unrepresentative. If before liberalization it at least used its access to the state to win steady gains for its limited membership, since the 1990s it became known almost exclusively for its corrupt dealings with neoliberal state officials and prostrate business unionism. The massive growth of the Coordinadora Nacional de Trabajadores de la Educación (CNTE), organized by dissident teachers to challenge the state-controlled education unions never democratized the labor movement, and attempts to resurrect an independent labor pole, the Frente Auténtico del Trabajo (FAT), floundered. Unsurprisingly, most workers today are unprotected, with low levels of union representation and even weaker collective advocacy of their interests. Since 2008, although 17 percent of Mexican wage employees are unionized, only 11 percent of all workers are organized, with roughly half actually represented in bargaining. ³ Labor reform under PRI president Peña Nieto, a key part of the “pact” with the PRD and PAN, although formalizing some employees, exacerbated the informal conditions under which a majority of Mexicans work. ⁴

Free trade has sunk the agrarian economy, which had thrived under state-supported development. This crisis is best captured in the fate of corn production and prices. In the early 1990s, corn produced mostly for the domestic market sold for $800 to $900 per ton. Roughly 4 million producers cultivated Mexico’s famed milpa (traditional cyclical crop-growing system). By the end of the decade, prices had dropped to under $500 per ton, as the influx of cheaply produced U.S. corn flooded the market. In 1993, under 500 metric tons of American corn imports reached Mexico; the following year, the figure shot up to over 6,000 metric tons and by this decade has surpassed 8,000 metric tons. U.S.-based agribusiness earned growing profits, as corn export revenue neared $3 billion. Overall Mexican agribusiness trade grew to $67 billion in 2014, while exports of primary and processed agricultural goods reached $11 and $16 billion, respectively (from $4 and $2.2 in 1990 ⁵ ). Meanwhile, unable to cover production costs, nearly half of the Mexican small and communal farmers abandoned agriculture, or at least legal crops. ⁶

. . . [N]arco organizations have become so powerful they have branched into other billion-dollar industries and often take over local and regional governments . . .

As liberalization disrupted industries and job sources established by the state-centered development model, opportunities for formal employment dwindled. Following the 1996 to 1997 post-Tequila rebound, output failed to expand fast enough to absorb workers displaced by market turmoil. While manufacturing and exports have steadily improved, average annual growth since 2000 has failed to reach even 1 percent. In 2013, Mexican president Peña Nieto pushed through a substantial energy reform package, designed to revitalize oil and gas production by eliminating PEMEX’s monopoly on exploration, production, and transportation of hydrocarbons and by removing constitutional barriers to private investment in the sector. Nonetheless, crude oil production, which peaked at 3.5 million barrels per day (mbd) in 2005 has been cut in half, shrinking to its current 1.7 mbd. ⁷ Loosening restrictions on business investment and hiring has unsurprisingly produced virtually no improvements for popular sectors. Indigence and poverty stood at 21.5 and 53 percent, respectively, in 1992; in 2014, the rates were still at 20.5 and 53 percent.

While the formal economy stagnated, the narco-economy and its concurrent bloodletting expanded relentlessly, burrowing through Mexico’s governance institutions. Trafficking and drug violence expanded as federal coordination of the cartels’ trade and territory broke down with the disintegration of the corporatist state. Supplying a U.S. drug market worth over $100 billion, Mexican cartels now export from $40 to $65 billion in drugs, reaping yearly profits estimated to reach $30 billion. ⁸ While the drug economy has absorbed large chunks of workers and peasants, its expansion has come at unthinkable cost. Since the start of the twenty-first century, over a quarter of a million people have been murdered in Mexico, most homicides occurring after President Calderón declared war on drug-traffickers in 2006. Cartel expansion no longer takes place in the clandestine backrooms of power—narco organizations have become so powerful they have branched into other billion-dollar industries and often take over local and regional governments for their own ends. The result is the collapse of basic guarantees for ordinary Mexicans and a deterioration of institutional life that is threatening major business interests. ⁹

When the agrarian economy plunged and local industry was privatized, . . . tens of thousands of young men enlisted as foot soldiers of the cartels . . .

The declaration of war on traffickers only exacerbated the violence. In going after the increasingly audacious drug organizations, the state unintentionally intensified and dispersed narco-feuds. Although concentrated in key cities and rural areas along trafficking circuits, violence is widespread and increasingly indiscriminate. With few checks on traffickers, violence has escalated, even at the risk of hurting uninvolved bystanders. The case of the forty-three disappeared Ayotzinapa Rural Teachers’ College students in 2014—still unresolved, despite AMLO’s campaign promises—is just the most dramatic example. Experts estimate that roughly 50,000 Mexicans have been abducted and buried in mass graves since the drug war began.

Facilitated by the collapse of corporatist governance, drug violence was fueled by an abundant supply of labor that had been, at best, relegated to the precarity of informal work. When the agrarian economy plunged and local industry was privatized, streamlined, or eliminated altogether, tens of thousands of young men enlisted as foot soldiers of the cartels that moved into depressed rural areas to establish new routes and cultivate drug plantations. ¹⁰ In this context, the cartels flexed their muscles, bullying their way into legal industries such as oil production and transport ¹¹ and taking over ruling institutions. In short, the neoliberal narco political economy, while offering high-risk livelihoods for hundreds of thousands, threatens broad sectors across the Mexican social spectrum.

The Social Forces behind AMLO

The bulk of AMLO’s followers are the vast numbers of urban and rural working poor who have experienced zero material progress since market liberalization and who have been victimized by institutional decomposition and violence generated by the drug economy. However, this upsurge in popular support, while massive, is mostly diffuse. Mexican social movements are fragmented, local and weakly institutionalized. Protest explodes periodically, often with pent-up, volatile force, but popular organization remains feeble, dependent on patronage, and mired in local rivalries and squabbles. Some social organizations even expressed hostility toward the AMLO campaign. ¹² Another reason for this organizational thinness comes from the campaign itself. Formed in the old PRI, AMLO is a true populist who prefers campaigning in unmediated spaces between himself and “the people.” His resistance to incorporating organized movements into his electoral insurgency reflects in part the growing rift with the PRD, which continues to have influence among grassroots organizations. Nonetheless, AMLO and MORENA will count on popular approval to consolidate their positions. Even as poor and working people’s support is amorphous and uncoordinated, it holds significant potential leverage over AMLO’s policymaking.

At the same time, AMLO steadily won over support from the business community, ¹³ and as the campaign wore on, economic elites expressed increasing tolerance for his presidency. Hysterical condemnations of the “Tabascan Chávez,” as AMLO was derided by right-wing intellectuals and the business press did not reflect a consensus business position, as corporate elites gradually warmed to the ‘tropical messiah.’ ¹⁴ Throughout, they coupled their doubts about AMLO’s ability to create a business-friendly environment with a newfound willingness to cooperate, propelled in part by growing concern over Mexico’s adverse investment climate. During the 1980s and 1990s, investment in non-financial assets dwindled and has yet to recover. Whereas during the 1970s, yearly outlays amounted to roughly 3 percent of gross domestic product (GDP), today they are stuck at levels below 1 percent. ¹⁵ As a result, Mexico’s real capital formation rates have lagged far behind other regional economies. ¹⁶ Almost two decades after the PRI lost its supremacy, capital was searching for and open to alternative political authorities who might paradoxically guarantee profitability.

Even as poor and working people’s support is amorphous and uncoordinated, it holds [real] leverage over AMLO’s policymaking.

Concerned in the immediate term with achieving investment stability, business leaders sought favorable accommodation which they could tweak and perfect. Having learned from their experience in the 1990s, navigating the shift from PRI supremacy to the PRI-PAN-PRD triumvirate, they knew better than to exacerbate the country’s multiple crises by disregarding the politician most beloved by the masses since Lázaro Cárdenas, the 1930s reformer who nationalized the oil industry. Instead, they reached an understanding whereby the “incoming administration would respect the autonomy of the central bank and maintain fiscal discipline” and the lucrative investments in energy would be respected. ¹⁷

AMLO’s new pact with business was brokered by the elite professionals that managed his campaign and who are looking for a viable way out of Mexico’s current economic dead end. While individually they pursue middle-class and professional preferences for market-linked social justice improvements, they also exemplify the channels of communication that AMLO opened to top corporate leaders. While during the campaign, media attention focused on MORENA’s alliance with an evangelical party, the Encuentro Social (Social Encounter), ¹⁸ the real conservatizing pressure came from AMLO’s less visible ties with powerful heads of the business community. Alfonso Romo, a Monterrey aristocrat and billionaire financier, is an example. Initially, an ardent AMLO opponent, he realized that big business needed reform for its own sake, and as early as 2012 got behind the candidate’s drive for “national re-foundation,” which promised to deliver more broad-based development.

While during the campaign, much was made of MORENA’s alliance with an evangelical party, . . . the real conservatizing pressure came from AMLO’s less visible ties with powerful heads of the business community.

AMLO’s first months in office thus reflect the tension between plans for state-led growth and the compulsion to secure profits for its corporate patrons. Much has been made of his cancelation of an airport megaproject that would have been a boon for private investors and construction groups. In reality, however, it reflects an attempt to achieve a delicate balance between his program’s nationalist and pro-poor aims and ubiquitous business demands.

PEMEX: “Balancing” Planned Development and Profits

Despite concerns about the country’s continued reliance on fossil-fuel production, AMLO remains committed to reversing PEMEX’s decline and restoring it as an engine of growth. He has gone after institutionalized theft from the country’s network of pipelines that for years thrived beyond the reach of state disciplinary capacity. The practice, known as huachinol, drained up to $3 billion each year, and according to AMLO’s team, was often coordinated by top officials of the publicly owned enterprise. ¹⁹ AMLO deployed federal police and the military to retake control of the pipelines. It is estimated that after 4,000 managers and employees were sacked and illegal taps were closed by force, illicit crude and gas flows fell by 90 percent.

Despite concerns about the country’s continued reliance on fossil-fuel production, AMLO remains committed to reversing PEMEX’s decline and restoring it as an engine of growth.

The sieve-like quality of PEMEX’s pipeline network had not only led to historic output lows, it more recently resulted in a punishing ratings downgrade. To counteract all this, AMLO last year sought $23 billion in new public outlays along with the construction of a giant refining complex. ²⁰ Although he has had to scale back these plans, his 2020 budget allots nearly $4.5 billion in new supports. ²¹ Ironically, revitalization of PEMEX called for private sector cooperation to boost the production needed to cover higher allocations, just as finance and the business press cast doubt on the state’s ability to raise the necessary oil revenues. Indications that AMLO is conceding to business pressures are indisputable. In addition to retaining the contracts handed out to private energy companies under Peña Nieto, he recently acceded to a costly deal with private natural gas operators, ²² signaling a weakening of his aggressive bargaining stance. ²³

For the moment, business appears to have gained the upper hand in the recasting of business-state relations. Its ascendance is evident in the creeping fiscal conservatism of economic policy. On top of tempering optimistic growth projections after raising interest rates, this year’s budget projects a primary surplus of 1.3 percent. ²⁴ The most striking indication of growing corporate influence was the July resignation of economy minister Carlos Urzúa, a University of Wisconsin-trained economist who is thought to have been concerned by the threat to the government’s popular commitments posed by reconstituted forms of oligarchic graft.

Corruption and Violence: Overstretching Compromised Institutions

To be sure, although AMLO’s rhetoric was pro-national development and anti-elite, his campaign for Mexico’s “fourth re-foundation” never threatened to encroach seriously on capitalist prerogatives. Rather, his pro-poor pledges were predicated on moralistic measures for public accountability and frugality—a program he initiated by slashing his own salary by 60 percent and selling the presidential plane.

In pure accounting terms, government measures have been successful. Whereas public servants previously earned salaries shamefully disproportional to average wages and parlayed their positions into additional opportunities for enrichment, AMLO has been effective in pushing down extravagant salaries and imposing transparency on mid-level bureaucrats. Experts estimate that these reductions have earned the state roughly $7 billion, with $6 billion saved in government procurement. ²⁵ Savings have been redirected toward PEMEX revitalization, and improvements, however modest, in social spending.

For the moment, business appears to have gained the upper hand in the recasting of business-state relations.

Although surplus spending cuts have not decreased total welfare spending, they have served to fragment already weak welfare coverage. A full $5 billion was carved out of public employee insurance and retirement plans. While these private plans were undeniable privileges for select sectors, slashed benefits have not been replaced by more universal and egalitarian social provisions. Freed-up resources now directly target more vulnerable and elderly groups, often in the form of vouchers. Although the administration touts these transfers as freeing beneficiaries to make autonomous spending decisions, the net effect has been to further erode publicly guaranteed welfare. Ironically, AMLO’s real commitment to the poor masses that backed him has translated into an expansion of less regulated, less standardized and more decentralized social provision.

To address his other key plank, Mexico’s spiraling narco-economy violence, AMLO proposed a new, single security apparatus to dampen cartel violence as well as extensive state-led economic development to pull people away from trafficking and mercenary work. Whether AMLO’s business-friendly development plans will revitalize the countryside and create enough formal jobs remains to be assessed. But the government admits that its vague strategy of containing violence in more humane, less militaristic ways—abrazos, no balazos (with “hugs, not bullets”)—has failed thus far. The spiral of narco-homicides continues and at current rates will exceed last year’s killings. In fact, the first half of 2019 was the deadliest since the beginning of the drug war. ²⁶

AMLO’s inability to stem drug violence and offer security to vast swathes of the population raises serious questions. Will it provoke outright resistance from corporate elites who entrusted the new president with guaranteeing reliable conditions for profits? Will it disillusion exhausted popular sectors and even turn them against MORENA, perhaps toward a future tough-on-crime demagogue? An inevitable concern is the possibility that the new government might seek to restore some form of state-organized coordination with the cartels. What is certain is that AMLO’s strategy to deliver safety for his poor backers by eclipsing the narco-economy with extensive services and formal sector jobs is floundering.

Seesawing State Policy Toward Mobilized Labor

Immediately after his inauguration, AMLO’s commitments to labor were tested by striking teachers in Southern Mexico. In 2015, he had encouraged disruptive mobilizations by the militant chapter of the dissident teachers’ federation, the Coordinadora Nacional de Trabajdores de la Educación (CNTE), in Oaxaca. ²⁷ Once in office, he chastised the work stoppage by the CNTE Michoacán chapter, lashing out to say that he would not be “held hostage” by their demands. Months later, his position hardened. Rather than negotiate with educators who marched on Mexico City in May, AMLO doubled down, ratifying new education legislation that, according to mobilized teachers, left too many of the prior law’s performance-based evaluations in place.

AMLO’s reaction to the teachers appears to confirm his “capture” by business elites. Yet there are signs of efforts to promote his social justice platform and to defend working-class interests. In May, for instance, he ratified legislation formalizing domestic work and, at least on paper, guaranteeing protections and benefits to the over 2 million women in this sector. ²⁸

More surprisingly, measures that have favored Mexico’s working class unexpectedly emerged from the NAFTA renegotiations which AMLO signed onto before his inauguration under pressure from Washington. Both to fulfill a pledge to increase the minimum wage and to move toward enhanced labor standards in the new U.S.-Mexico–Canada Agreement (USMCA), AMLO announced a two-tiered federal wage hike: an increase of 16 percent nationwide (to roughly $5.50 per day), and of 50 percent in industry along the northern border. ²⁹

The effect was a huge strike wave in Mexico’s northern border maquiladora (assembly plant) corridor, triggered by the fact that pay and bonuses are indexed to minimum rates in most maquiladora contracts. When workers in Matamoros then demanded the corresponding adjustments including 20 percent raises and 32,000-peso bonuses, employers balked and union officials demurred. ³⁰ In response, maquila employees took matters into their own hands, walking out of their plants, forming militant picket lines and protesting in local squares. Since the walkout began, around 50,000 Matamoros workers have struck and similar actions have spread to other maquila border towns, turning the “20/32” movement into the largest labor protests since NAFTA. Union authorities had no choice but to back it, and, grudgingly, employers relented, with an estimated 70,000 workers from nearly 100 plants winning pay increases. ³¹ In many other workplaces, strikes were averted when employers preemptively conceded raises during bargaining. Walmart, Mexico’s largest private employer, for instance, negotiated a 5.5 percent raise and additional productivity incentives. ³²

Besides the immediate gains won by workers’ direct action, the maquiladora strike wave opens a route to substantially recalibrating labor’s relations with business and the state. For the first time in decades, labor has forced significant chunks of entire branches of industry to conduct genuine bargaining. For years employers largely ignored bargained standards and protections, finding refuge in so-called “protection contracts,” reminiscent of the worst of concessionary U.S. business-unionism. These pro-industry practices were facilitated once the more militant maquila workers and leaders were persecuted and defeated in 1992 in order to install labor peace as a prelude to NAFTA. ³³ The forty-hour-week that was won in the 1982 negotiations became a mere vestige and wages were continually eroded from their $16 peak in the 1970s. ³⁴ Unions such as the Sindicato de Jornaleros y Obreros Industriales y de la Industria Maquiladora (Day Laborers, Industrial Workers, and Maquila Industries Union, SJOIIM), belonging to the long-quiescent Confederación de Trabajadores de México (Mexican Workers Confederation), facilitated these sweetheart deals. Today, although the vast majority of Mexico’s 6,000 assembly firms, which employ over 2.5 million workers, avoided negotiations, Consejo Nacional de la Industria Maquiladora y Manufacturera de Exportación (INDEX), the maquila employers’ federation was put on notice. At least in Matamoros, INDEX had to contend with worker demands and actions in a coordinated fashion. In short, the maquila strike wave not only showed that employees can win concessions if they mobilize, it resurrected the prospects of industrywide bargaining. A return to genuine sectoral negotiations would dramatically transform class relations in Mexico, not only by elevating minimum guarantees for formal sector employees in major industries, but more important by strengthening the general bargaining position of private-sector workers.

Although this development has so far involved only a portion of assembly workers, the redrawing of labor-management relations was enabled by what appears to be a change in how the AMLO-led state deals with mobilized labor. Whereas the neoliberal turn shifted labor from incorporation into the ruling party and the state to marginalizing labor and deregulating work, the new government’s reaction to the wildcat wave suggests a willingness to tolerate certain types of labor insurgency. Still far from delivering on the primero los pobres (“poor first”) principle, in deciding to double the minimum wage along the maquila corridor and triggering a round of sectoral renegotiations, the AMLO administration has departed from the overwhelmingly pro-business bias of the past three decades of labor affairs.

. . . [T]he new government’s reaction to the wildcat wave suggests a willingness to tolerate certain types of labor insurgency.

The fact that the administration stood aside once the strike actions gained momentum, even as they technically broke the law, suggests that workers will be given more autonomy, and might even be encouraged to organize independently and make serious demands. Toward that purpose, AMLO’s majority pushed through new labor legislation that weakens the country’s longstanding business unionism, gives workers more autonomy in choosing leaders and affiliations, guarantees more transparency and democracy, and makes mandatory the renegotiation of bargaining agreements at least every four years. ³⁵

The Significance of the Maquila Strikes

As the rise of informality created formidable barriers to organizing, Mexican union leaders used their positions to block rank-and-file activity and broker the interests of business. In this context, resistance to neoliberalism in Mexico typically surfaced among popular sectors organized outside of industrial conflict. Besides regular teacher revolts and occasional strife in agriculture, episodes of labor resistance were usually defensive actions against the rising power of capital—such as power utility mobilizations, urban transit struggles, and mining battles—ending in defeat. The mantle of popular fight-back was taken up by guerrilla peasants in southern Mexico, students in the capital, and community groups throughout the country. The ability of the maquila workers to take a narrow federal reform and translate it into a winning fight in a key export sector is significant. While AMLO clearly has no desire to prod an independent workers movement into action, to the extent that he remains committed to national development, he understands the importance of a counterweight to business influence. Such a counterweight may well emerge from worksites across the country. Without it, AMLO will find himself stuck in the same pattern of ineffective reform as his predecessors.

While the ramifications of AMLO’s labor reform remain unclear, it offers rights and liberties that escape the domination of the old union oligarchs. As such, it opens the door to a transformation of Mexico’s labor regime that allows for freedom to organize, to choose genuine representation, and to bargain with employers in earnest. If new forms of organizing take hold, the return of labor onto the scene could reconfigure Mexican politics and society. What is evident is that in some form, the unorganized, beaten, and scattered giant—the working poor battered by decades of neoliberal violence and insecurity—has begun an awakening. AMLO’s campaign and minimal initial reforms helped raise it from its slumber and the new president knows it cannot easily be put back to sleep.