Mexico’s Utility Union Bust Reveals Flaws in NAFTA

At midnight on Octover 10, President Felipe Calderon issued an executive decree to liquidate the company and its union, the Mexican Electrical Workers Union (Sindicato Mexicano de Electricistas—SME), one of the strongest and most vocal independent unions in the nation. Ironically, the current economic crisis provided the Calderon Administration its strategic opportunity to cut the underfunded company and malign the union.


Article Source: Americas Program

Fernando Lopez woke up on a Sunday morning out of a job. For the electrical worker, the feeling was terrifying 

"From one day to the next, they left us with no job—nothing," Lopez said, as he marched alongside some 200,000 fellow workers and their supporters in downtown Mexico City on October 15.


On the night of Saturday, October 10, thousands of soldiers and federal police moved into position in the darkness. After cutting fences and forcing out the workers, they occupied over 50 installations of the state-owned utility company, Central Light and Power (Luz y Fuerza), awaiting the administrative blow that would follow. At midnight, President Felipe Calderon issued an executive decree to liquidate the company and its union, the Mexican Electrical Workers Union (Sindicato Mexicano de Electricistas—SME), one of the strongest and most vocal independent unions in the nation. 

The move had been carefully prepared by the government. Troop movements throughout the central part of the country serviced by Central Light went unnoticed under cover of the massive mobilization of security forces fighting the militarized drug war. 

The decree follows a union conflict that the government fueled and then took advantage of to eliminate the company and its union. Union elections last June were contested amid rumors that the federal government was actively fomenting division. In a warning sign, on October 5 Secretary of Labor Javier Lozano rejected registration of the new union leadership without waiting for a decision from the labor tribunal. The "Sabadazo," or Saturday Offensive, took place when the union and the government were still in talks.


Electrical Worker at the Oct. 15 march.

NAFTA and the Battle Over Who Will Pay for the Crisis

I talked to Lopez because of the simple poignancy of the bright green sign he carried: "President Calderon—Your children eat well. Mine don’t." 

Similar signs read, "And now what do I do? What will my family eat?" Marchers revealed that the political issues of privatization and opposition to the Calderon government are prominent in the movement but above all, workers feel that their very survival is under attack.

The ravenous right has set out to prove that it’s not the rich who will pay for the crisis. One of the arguments for eliminating Central Light and its union was that it employed too many people, making it "inefficient." For the Calderon government, offering decent employment to more than 40,000 families is a crime in a year when unemployment has doubled and nearly 800,000 Mexican workers have lost jobs due to the crisis.

The Mexican economy is at a crossroads as it faces a multi-billion dollar deficit this year. Due to its heavy dependency on the U.S. economy under NAFTA, it is the hardest-hit country in Latin America and predicts a 7.5% drop in gross domestic product (GDP) for 2009. The number of poor has increased above pre-NAFTA levels, leaving millions more families in poverty, while the unemployment rate has doubled.

The congressional leader of Calderon’s National Action Party, Mario Alberto Becerra, estimated that even after doling out severance pay, the government will save money through the reduced costs of operating Central Light. The government plans to use some of that money for hand-out programs for the poor, a model it considers preferable to maintaining unionized workers in jobs. Treasury Secretary Agustin Carstens announced that the 42,000 SME workers will be replaced with 10,000 new hires. He didn’t say any would be hired back; the message was clear—union members need not apply.


Police face protesters on Oct. 8.

Obama promised a renegotiation of NAFTA to incorporate the toothless labor side agreement into the text and integrate core International Labor Organization principles in defense of workers’ rights. At the recent Summit of North American Leaders he said that the promise has been placed on the back burner. But that burner seems to be turned off. At an October 19 meeting between trade representatives of the three NAFTA nations, they reaffirmed their commitment to the trade agreement with no mention of renegotiation. 


Unionized workers are not the only ones who suffer. NAFTA has displaced some two million Mexican small farmers in the countryside due to competition with U.S. agricultural imports. A recent ruling of a NAFTA tribunal delivered a record ruling of $77.3 million to Cargill Incorporated to compensate the company for a government program that blocked the use of corn syrup to save Mexico’s sugar industry—an industry heavily protected in the United States. NAFTA’s investment provisions (known as "Chapter 11") allow corporations to sue governments under special tribunals as one of the many privileges offered transnational corporations under the agreement. This obscene ruling to one of the world’s wealthiest agro-businesses illustrates the priorities of NAFTA and the constant erosion of worker’s rights and livelihoods.

When NAFTA was being negotiated in the early 90s, many U.S. unions still considered Mexican workers the enemy of their members as unfair competition in an increasingly globalized workforce. That attitude has now changed. 

An October 15 declaration of the AFL-CIO states: 

"On behalf of over 11 million working women and men of the United States, the AFL-CIO condemns this unilateral action by the Mexican authorities, which effectively destroys the SME and the trade union rights of the Luz y Fuerza workers. Regrettably, the Mexican government has employed similar acts of intervention and repression against the Mexican Miners and Metalworkers Union. 

"The AFL-CIO supports the following demands of the SME and of the Luz y Fuerza workers to reverse this egregious act of union-busting and violation of internationally recognized standards of freedom of association and collective bargaining: 1) a revocation of the government decree unilaterally liquidating the company; 2) an end to the occupation of the power plants by the Federal Police; 3) the implementation of good-faith negotiations between the Mexican government and the union on the relevant financial and administrative issues."


The crucification of the Light and Power Co.

The Road to Privatization 

Studies have revealed that the Central Light Company hasn’t been funded for years, in preparation to make the case that it’s nonfunctional. A 2005 report showed that the company had not installed new generating capacity since 1974. 

Privatization of the parastate company lurks behind the liquidation on October 10. Marchers carried signs that warned "Today it’s us—tomorrow PEMEX [the national oil company] and SEP [the education system]," and "No to privatization." 

The Central Light Company leases over a thousand kilometers of fiber optic cable in its electrical network that it planned to offer to consumers in a "triple play" package. This combined service of electricity, telephone, internet, and cable threatened existing economic interests and lucrative future contracts in the private sector. 

Although the Calderon administration has said it isn’t privatizing the state-owned enterprise, SME Leader Martin Esparza revealed that two former secretaries of Energy, Fernando Canales Clarion and Ernesto Martens, have formed a private company to use the publicly funded LFC fiber-optic network for internet and voice services, called WL Communications. Esparza reports that the businessmen have already negotiated government discounts and subsidies for the lucrative enterprise.


A sewer cover bears the Light and Power Co logo.

For now, Central Light has been fused with the Federal Electricity Commission that manages services in the rest of the country. The suspicion is that the consolidated state-owned utility, stripped of a feisty union that rejected both privatization and the erosion of worker rights, will eventually be privatized. Pressures to privatize state-owned enterprises, including the oil company PEMEX and aspects of the education system, have characterized the Calderon administration and those of his predecessors from the PAN political party. The pattern is familiar—the majority of Mexico’s billionaires made their initial fortunes off state privatizations under scandalous terms during the Salinas administration and since then they have formed a powerful lobby for further privatizations, along with international finance institutions like the World Bank.


Representatives from Atenco at the Oct 15 march.

SME member Juan Carlos Saucedo notes that the struggle to regain the company and the union "is just beginning." But it will be an uphill battle. The union has demanded a legal review of the measure and insisted that it violates the Mexican Constitution. It is currently working with other unions to possibly call a general strike. Following the mega-march, the federal government agreed to open up dialogue with the union, but the talks were broken off on October 19. The government discarded any future possibility for negotiations on reversing the presidential decree and the union declared the dialogue a "farce," since for them preserving their jobs is the top priority.

ImageAs SME member Apolinar Romero stated at the march, the issue at hand goes beyond income for workers and rests on "what kind of future we will leave our children." A unilateral move to eliminate a union and a state-owned company sets a terrible precedent for union-busting in the nation.

Interviews in the Mexican press with government officials reveal that the obliteration of the union was carefully planned for over six months. The Calderon government was just looking for the chance. Ironically, it was the profound economic crisis in Mexico that provided the Calderon administration with its opportunity. Over the past months, 76,000 businesses have closed their doors. The Mexican daily La Jornada reports that 2.8 million workers have lost their jobs in the Calderon administration. For families living on the edge, the blow against the union places them between a rock and a hard place.

Members of the National Association of Democratic Lawyers and the Latin American Association of Labor Lawyers stated in a press conference on October 18 that the decree violates 25 clauses of the Mexican Constitution, and urged workers to file injunctions against the measure instead of accepting severance pay. But each day that passes with no wages sees more workers accepting the government’s severance offer.

The administration has launched a campaign to malign the union, implying that the union members had manipulated cushy jobs at the expense of consumers. Consumers know the administrative problems of Central Light, with unexplained charges in light bills and impossible bureaucracies. These administrative problems could easily have been solved long ago, but by analyzing administrative faults and revamping systems—not liquidating the company and its union. Official statistics show that union members made an average of around $500 a month, and 20,000 members earn below this level, hardly a princely wage. What the union did manage to achieve for its members in democratic processes and benefits was an example for Mexican unions.

ImageThe real question is who will pay for the crisis. The Calderon administration tried to force through a tax on basic foods and medicines in the federal budget—another move to make the poor pay for the inordinate wealth and privilege of the elite in a vastly unequal nation. It was blocked at the last minute.

The U.S. government, instead of helping to provide jobs and labor protections as Mexico sinks into the deepest crisis in recent history, has concentrated aid in the Merida Initiative to corrupt Mexican Armed Forces and police through the war on drugs. It also continues to support NAFTA’s skewed terms. 

It’s time to develop a more integral and humane binational relationship and renegotiate NAFTA. The long-term effects of allowing this crisis to erode labor rights and further impoverish an already stricken nation will only lead to instability throughout the region.

Laura Carlsen (lcarlsen(a) is the director of the Americas Program ( for the Center for International Policy in Mexico City.