From iatp@igc.apc.orgSat Oct 7 10:57:46 1995 Date: Fri, 06 Oct 1995 13:47:46 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 106- NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy October 6, 1995 Volume 2, Number 26 __________________________________________ Headlines: - FAST TRACK UPDATE - U.S. LIFTS WHEAT RESTRICTIONS - CHANGES IN ANDEAN PACT AGREED - MEXICAN TELECOM PRIVATIZATION MOVES AHEAD - MEXICAN RAIL, PORT PRIVATIZATION UNDERWAY - PESO DEVALUATION HITS AUTO INDUSTRY - ENERGY: NATIONALISM AND INTERNATIONALISM - RURAL COALITION CROSSES BORDERS __________________________________________ FAST TRACK UPDATE Republicans on the House Ways and Means Committee added six years of fast-track negotiating authority to the budget reconciliation bill, but excluded workers' rights and environmental issues from the fast-track authority. Any agreements on workers' rights and environmental issues would have to be submitted to Congress separately, and would be subject to amendment. Even the Clinton administration and Democrats generally supporting extension of NAFTA are opposed to this particular fast track provision. Republican members of the Ways and Means Committee retracted a previous threat to end all training and assistance for U.S. workers displaced by trade agreements (TAA), agreeing instead to extend TAA to October 2000, while cutting its funding by $519 million. The budget reconciliation bill must still be approved by the House Rules Committee and then by full House of Representatives. A Senate version of the budget reconciliation bill will probably not contain the fast track provisions. Both Senate and House versions must be combined in a conference committee, and then passed by both houses. Fast track authorization and TAA may be kept in or eliminated at any of these stages. Robert S. Greenberger and Nancy Keates, "'Fast-Track' Bill on Trade Agreements is Backed by Key Committee in House," WALL STREET JOURNAL, 9/22/95; Lori Wallach, "Sneak Attack," PUBLIC CITIZEN, 9/22/95; John Maggs, "Key House Democrats Set Out Terms for Supporting Fast-Track," JOURNAL OF COMMERCE, September 12, 1995. U.S. LIFTS WHEAT RESTRICTIONS In part, because of an increase in worldwide wheat prices, the Clinton administration has lifted restrictions on imports of Canadian wheat. The one-year quota, which expired September 12, was also vulnerable to challenge under the Uruguay Round pact. U.S. Trade Representative Micky Kantor said the United States would monitor imports of Canadian wheat for another year while seeking implementation of recommendations of an independent commission that studied the wheat dispute between the two countries. U.S. wheat farmers were skeptical about the efficacy of the commission recommendations, noting that they did not include a mechanism for protecting U.S. domestic markets from surges of Canadian grain imports. Increased worldwide demand has led Canadian producers to export more to other markets, easing pressure that U.S. wheat farmers felt last year from Canadian exports. International and U.S. grain reserves have decreased to the lowest levels in 20 years, and weather problems have also trimmed the U.S. harvest. Citing decreasing supplies, the American Bakers Association has asked the U.S. Department of Agriculture to suspend the Export Enhancement Program (EEP) for wheat this year. John Maggs, "US Lifts Restrictions on Wheat From Canada," JOURNAL OF COMMERCE, September 13, 1995; "U.S., Canada trade officials seek to defuse wheat dispute," MILLING & BAKING NEWS, September 3, 1995; Scott Kilman, "Grain Reserves Dwindle to 20-year Low," July 11, 1995; "Bakers Ask U.S.D.A. to Suspend Use of Export Enhancement," MILLING & BAKING NEWS, July 4, 1995; Juan Miguel Pedraza, "Will There Be Another Canadian Grain Tidal Wave?" AGWEEK, September 18, 1995; Ian Elliott, "U.S.-Canadian Grain Pact Allowed to Expire," FEEDSTUFFS, September 18, 1995. CHANGES IN ANDEAN PACT AGREED At the Quito, Ecuador summit of the Rio Group in early September, the Andean Pact nations agreed to make significant changes in the structure of the Andean Pact and in its integration strategy. The Andean Pact countries -- Bolivia, Colombia, Ecuador, Peru and Venezuela -- agreed to abandon the goal of creating a single market of developing countries trying to protect themselves from the rest of the world, but still plan to strengthen their joint market while moving toward integration with other subregional blocs. Political aspects of integration were signalled by a name change to the Andean System of Integration, and greater authority will be vested in the presidents acting together. Abraham Lama, "Quito Summit Produces Major Reforms in Andean Pact," INTERPRESS SERVICE, September 6, 1995. MEXICAN TELECOM PRIVATIZATION MOVES AHEAD United States-based MCI Communications and Banamex-Accival (Banacci), Mexico's largest financial group, won the first government license to compete in Mexico's long-distance market. Several other concessions are expected in the near future. Other applicants include GTE, teamed with Bancomer, Mexico's second-largest financial group; Bell Atlantic, teamed with Iusacell, a Mexican cellular phone company; and AT&T, teamed with Grupo Alfa, a large corporation with diverse interests in steel, prepared food, and chemicals. Mexico's $4 billion long-distance market will be opened to competition on January 1, 1997. As applications are approved, the groups are expected to begin direct negotiations with Telefonos de Mexico (Telmex) the current telephone monopoly. The MCI-Banacci joint venture, called Avantel, plans to invest $1.8 billion over the next six years to build and operate a fiber-optic network. Leslie Crawford, "Mexico Kickstarts $7bn Telecom Opening," FINANCIAL TIMES, September 8, 1995; Daniel Dombey and Leslie Crawford, "Getting in Touch With Subscribers," FINANCIAL TIMES, September 8, 1995; Anthony DePalma, "MCI Wins Mexican Long-Distance License," NEW YORK TIMES, September 7, 1995. MEXICAN RAIL, PORT PRIVATIZATION UNDERWAY Mexico is expected to begin the concessionaire sale of its national railway in November, with sales expected to bring in up to $10 billion. Ferrocarriles Nacionales de Mexico (FNM) will be sold under terms requiring 51 percent Mexican ownership. The system will be divided into two primary north-south lines one serving the Gulf Coast and one serving the Pacific Coast, and a number of feeder lines. Mexico will still own the existing rails and the land beneath them, but may sell the right-of-way for fiber optic telecommunications lines or other utilities. FNM now owns microwave and land stations for satellite communications. Labor settlements with FNM workers may slow the process, as buyers try to slash payrolls. Buyers will also need to upgrade much of the rail system to standardize it with the U.S. system. Pricing adjustments to enable rail transportation to compete with trucking are also expected. U.S. and Canadian railroads are interested in FNM, as is Transportacisn Marmtima Mexicana, Mexico's largest ocean carrier, which also operates a railway from Corpus Christi to Laredo, Texas, as well as ocean and land services in 35 other countries in North America, Latin America, Asia and Europe. Transportacisn Marmtima has a joint venture with J.B. Hunt, a U.S. trucking company. Kansas City Southern Industries, which operates a 2,800 mile railroad in the United States, announced in September that it will purchase 49 percent of the Texas Mexican Railway in a joint venture with Transportacion Maritima. The purchase will enable creation of a new, single-line route between Laredo and Kansas City, giving Canadian and eastern U.S. shippers another route into the heart of Mexico. Last year Mexico decentralized its port management structure, and this July it awarded concessions for container terminal operation. Companies awarded concessions for private port terminals in 1993-94 have largely failed to build terminals to date, though some say they still intend to do so and are just waiting to see the shape and impact of rail privatization. Charles Thurston and Lisa Bono, "Sale of the Century," TWIN PLANT NEWS, September, 1995; Kevin G. Hall, "Few Terminal Projects Emerge From Privatization," JOURNAL OF COMMERCE, August 31, 1995; "Kansas City Southern in Deal With Mexican Rail Operator," NEW YORK TIMES, September 6, 1995; Rip Watson and Kevin G. Hall, "Rail Partnership Would Bolster US-Mexico Links," JOURNAL OF COMMERCE, September 6, 1995. CAR MAKERS HIT HARD BY PESO CRISIS Although automobile exports from Mexico increased by 25 percent through June of this year, compared to last year, auto manufacturing in Mexico is in trouble. The five major auto makers -- Chrysler, Ford, General Motors, Nissan and Volkswagen -- had expected a thriving internal market. Instead, domestic sales dropped by 74 percent in the first half of 1995, compared to the same period in 1994. The big companies have felt the Mexican economic crisis through the travails of their dealers in Mexico. Even with interest rates heading back down, Mexicans simply cannot afford to buy new cars. Ford has extended generous terms to its 136 dealers, losing money in order to keep its distributor network relatively intact. Despite extending below-market rate credit to its 150 dealers, Chrysler has seen 20 of them go out of business. Chrysler's Mexican dealers have complained about relations with Chrysler de Mexico and demanded a meeting with Chrysler officials in Detroit. Mexico's national automobile manufacturers association has asked the federal government for tax and regulatory relief to help them compensate for drastic sales declines, including relief from the increase in the value-added tax (IVA) from 10 percent to 15 percent. Exports of car parts from Mexico have increased this year. A Goodyear Tire plant at Tultitlan moved from producing mostly for the domestic market to exporting more than half its production to the United States, South America, and Europe, and has actually increased production. Workers complain about the decrease in purchasing power due to the peso devaluation. Goodyear management claims that workers at the Tultitlan plan average $10.50 per hour in wages and benefits, compared to $17 per hour in wages alone the United States, but workers say they earn far less. Auto workers, hard-hit by the peso devaluation and ensuing inflation, struck the Ford Motor Company plant in Nuevo Laredo, Tamaulipas in July. Workers took control of the factory when they were told on July 17 that the CTM union leadership has signed an agreement with Ford accepting a 7 percent salary increase for the year, instead of the 30 percent that workers had demanded. The CTM union leaders, however, had negotiated a 30 percent increase for themselves. After a four-day wildcat strike, Ford agreed to new union elections and a 30 percent bonus, to be paid in coupons redeemable at major stores rather than in cash. Kevin G. Hall, "Mexico's Ailing Carmakers Ask Government for Help," JOURNAL OF COMMERCE, July 27, 1995; Julia Preston, "Mexican Peso Fall Leads to Auto-Sales Standstill," NEW YORK TIMES, August 10, 1995; Kevin G. Hall, "Mexican Industry Seeks Answers to Economic Turmoil," JOURNAL OF COMMERCE, August 17, 1995; "Ford Workers Strike for a Living Wage," CJM NEWSLETTER, Summer, 1995; Allen R. Myerson, "Out of Crisis, An Opportunity," NEW YORK TIMES, September 26, 1995; "Mexican Chrysler Dealers Irate," ASSOCIATED PRESS, August 24, 1995; Mark Stevenson, "Too Many Luxury Cars," EL FINANCIERO INTERNATIONAL, September 18-24, 1995. ENERGY: NATIONALISM AND INTERNATIONALISM North American and European energy companies are investing in a network of natural gas pipelines across the continent, planning to take advantage of both vast untapped natural-gas fields and growing Latin American needs for new, clean fuel supplies. Argentina, Peru and Bolivia are rich in natural gas, while Chile and Brazil, with comparatively little gas of their own, have fast-growing economies that offer markets for gas. U.S. electric companies also plan to build power plants in Chile in the near future. The Bolivian government has begun a privatization process that will double the net worth of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), the state-owned oil firm, and transfer its administration and half of its share to a private investor. No private Bolivian firm will be able to compete, since the Bolivian government demands that bidders have a net worth of at least $500 million. YPFB and the Brazilian Petrobras are negotiating final details of a sale of Bolivian gas to supply the industrial market of Sao Paulo, including construction of a 2,200 kilometer pipeline that will cost more than $2 billion. So far, the bidders for YPFB include U.S., Argentine, Brazilian, Canadian, Dutch, Spanish, and French firms, and the Brazilian branch of British Gas. Argentina and the United Kingdom have reached a tentative agreement on oil exploration and exploitation in disputed waters around the Falkland Islands. Britain and Argentina fought a 10-week war over the Falkland Islands, called the Malvinas by Argentina, in 1982. Argentina still claims the territory, but has put aside its claim of sovereignty to work out business arrangements. The framework agreement on oil will allow Argentine companies to participate in joint ventures in the disputed waters, but the Argentine government will draw no royalties from the explorations. Revenue from the oil activity in the so-called Cooperation Zone will be split equally between Britain and Argentina, which will require modification to the Argentine hydrocarbons law. According to some experts, the Falklands could have as much oil as the North Sea. "Untapped Latin Gas Fields Lure N. American, European Investors," REUTERS (in JOURNAL OF COMMERCE), September 15, 1995; Juan Carlos Rocha, "Oil-Bolivia: Privatisation Process Seduces International Giants," INTERPRESS SERVICE, August 23, 1995; David Pilling and Jimmy Burns, "Oil Cash for Argentina," FINANCIAL TIMES, September 20, 1995; "UK and Argentina, One-Time Enemies, Draft Falklands Pact," REUTERS (in JOURNAL OF COMMERCE), September 18, 1995. RURAL COALITION CROSSES BORDERS The Rural Coalition, active since 1978 in promoting sustainable development and long-term viability in rural communities through community organizing and development of cooperatives and credit unions, expanded beyond the United States into Mexico through a 1993 alliance with the Chihuahua-based Frente Democratico Campesino (FDC). Two cross-border projects -- one focusing on rural cooperative marketing and the other on health and environment -- have begun. The alternative marketing project will offer information on marketing networks and training in cooperative and credit union structures and government programs. It may also facilitate projects that eliminate intermediaries, thus increasing profit for farmers. One such project, in the planning stages, will market Chihuahuan blue corn directly to Spanish-speaking communities in the United States and another will market organic coffee from Oaxaca. The marketing will involve a cooperative relationship between the U.S. Federation of Southern Coops/Land Assistance Fund and the FDC. The environmental health assessment project, which involves identifying and monitoring pesticide use, documenting related health hazards, and training farm workers, began with a May training session for representatives of the FDC, the El Paso- based Union de Trabajadores Agrmcolas Fronterizos, and farm workers associations in Florida and New Jersey. Loretta Picciano-Hanson and Carlos Marentes, "Rural Coalition Develops Alternatives to Globalization," BORDERLINES, July, 1995. RESOURCES/EVENTS Bittersweet Harvests for Global Supermarkets by Lori Ann Thrupp with Gilles Bergeron and William F. Waters, World Resources Institute, Baltimore, MD: 1995. 202 pp. Order from WRI Publications, P.O. Box 4852, Hampden Station, Baltimore, MD 21211. Telephone 800/822-0504 or 410/516-6963, email WendyW@WRI.ORG. $19.95 + $3.50 s&h. Analyzes key characteristics and challenges in diversification of agricultural exports in developing countries, with particular emphasis on non-traditional, high-value fruits, vegetables, flowers in Latin America. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy and edited by Mary C. Turck. Electronic mail versions are available free of charge for subscribers. For information about fax subscriptions contact: IATP, 1313 Fifth Street SE, Suite 303, Minneapolis, MN 55414. For information on subscribing to this and other IATP news bulletins, send e-mail to: iatp- info@iatp.org. IATP provides contract research services to a wide range of corporate and not-for-profit organizations. For more information, contact Dale Wiehoff at 612-379-5980, or send email to: dwiehoff@iatp.org.