Mar 14, 2012

Mexico Politics: A Requiem for Public Control in Mexico

In the uphill climb that is combating transnational criminal organizations, Mexico faces the need to reform many of its institutions, from the penal system to the banking system, among others. But behind reforms and projects that are aimed at both the drug war and other problems in Mexico, there are political and economic interests jockeying for influence. This opinion piece by Mexico's leading expert on corruption, Irma Erendira Sandoval, outlines an important (and perhaps pernicious) development in how these reforms and projects will come to pass, with a special focus on the omnipotent presence of private business.

La Jornada: By Irma Eréndira Sandoval. "The ominous proposal of the Green Party to privatize jails and prisons has become part of the rentier and predatory logic of public services that has left the national economy in ruin over the last 30 years. The horrible daily reality that is lived in penitentiaries, which was cruelly manifested in the recent prison break and massacre in Apodaca, Nuevo León, isn’t a result of bad public stewardship. Rather, it is the fault of the federal and local governments that have abdicated the administration of these facilities and left them to the control of private actors and powerful factions. It demonstrates that private prisons tend to be more violent and corrupt than public ones and that they are operated with poorly trained personnel with low salaries and a high turnover rate. These factors lead to more abuses of the prisoners’ most basic human rights.

This type of “initiative” has found its utmost expression in the Law of Public-Private Associations (LAPP is its Spanish acronym), signed by Felipe Calderon on January 16th. This law is part of the neoliberal agenda that has governed the country through corrupt and inefficient privatizations— a type of governance that Carlos Salinas used in the 1990s to give power to his friends, monopolize markets, and destroy the competency and competitiveness of the economy. Today the LAPP demonstrates that, beyond any temporary election season disputes, the PRI and PAN have shared an agenda of national mismanagement.

The LAPP constitutes the absolute subordination of the public interest to the directives of financial intermediaries and means the institutionalization of debt, illegality and corruption. The reform establishes long-term contracts (up to 50 years or more) with private national and international companies that would directly control the infrastructure and provision of areas strategic for the country’s development. These services include healthcare, public security, communication, infrastructure, education, etc.

The precedent was a series of laws called the Project for the Provision of Services (PPS in its Spanish initials) through which the Secretary of Housing, taking advantage of legal loopholes, began to illegally privatize wide sectors of government services. Since 2003 the government has privatized highways, hydroelectric infrastructure, bridges, hospitals, education centers, and even penitentiaries throughout the country. But this system still wasn’t enough for the monopolies, which felt compelled to push for control of granting licenses, permits, and other kinds of authorizations.

The LAPP isn’t about more “concessions” but rather more “joint-ventures” which will mean even less obligations and commitments to the public interest. The new law asserts that public projects are no longer subject to the Law of Acquisitions, the Public Sector Leasing Act, the Public Works Act, nor related laws that were designed to provide for a level of transparency and to avoid conflicts of interest. All of that will be gone and buried.

Before, the public sector was responsible for determining the necessity of carrying out investment projects. Starting today it will be the private sector that will detect the “necessities” and present motu proprio its proposals. In this way, projects with financial-mercantilist motivations, which are financed by public resources, will be placed above public priorities defined in legislation like the Plan for National Development.
The new “joint-venture” contracts can also be “transferred (in whole or in part) or guaranteed in favor of third parties.” In other words, crucial areas of national development will literally be gambled on the financial and speculative adventures of private investors.

LAPP will not foment more private investment in public services; in fact, it will lead to the contrary. Under the new scheme, the state could finance up to 100% of the new investments and then issue expropriation decrees to domestic and international private companies. All of these entails regressive reforms to the Expropriation Law, the General Law of National Goods, the Federal Civil Code, and others. At the same time, the payment of debt occurred by way of these new projects will be prioritized and obligatory every year, violating the power of the House of Representatives to direct funds to areas of more pressing need and to the public interest.

Another worrisome procedural “innovation” is related to the process of valuation. In the past, the Institute of the Valuation and Administration of National Goods was the only entity that could give authorized appraisals. With the passage of the LAPP, private banks which are almost completely controlled by foreign firms, will now be able to give estimates. Without a doubt, these estimates will favor private interests at the expense of bleeding the public budget even more.

Calderon is delighted because, with the speech of looking at how to balance risks between the state and private agents, he has succeeded in strengthening the ever-present neoliberal project by privatizing gains and socializing losses. I urge that Mexicans stop the embezzlement caused by this law that puts the power of the state and national development in risk." Spanish original      

Translation: Mikael Rojas, Americas Program  

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