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PPP: Plan Puebla Panama, or Private Plans for Profit?

A Primer on the Development Plan that Would Turn the Region from Southern Mexico to Panama into a Giant Export Zone
by Miguel PickardSpecial to CorpWatch
September 19th, 2002

Maquiladora in Guererro, Mexico. Photo: Institute of Latin American Studies/UNC
Maquiladora in Guererro, Mexico. Institute of Latin American Studies/UNC

There is a currently a multi-billion development scheme underway that would turn southern Mexico and all of Central America into a massive free trade zone, competing in the world wide race to the bottom of wages, working conditions, lax environmental regulation and disregard for human rights.

Known as the Plan Puebla Panama, or PPP, it is the brainchild of Mexican, President, and former Coca-Cola executive, Vicente Fox who announced the Plan soon after his election in July, 2000. The PPP has drawn fire from environmentalists, labor leaders and human rights advocates throughout the region. Yet few people outside of Mexico and Central America, including many opponents of corporate globalization, are aware of the Plan.

The thrust of the PPP is to "develop" a relatively poor piece of geography in the Americas, namely nine Mexican states running south to southeast of Mexico City, and the seven Central American republics, long neglected by private and public capital, and beset with some of the worst socioeconomic indicators west of Haiti.1

The PPP proposed by Fox is not a new agenda, but rather an ersatz "conceptual umbrella" for a number of development plans that have been on the drawing board for years.2 Fox's proposal links Mexico's development plans to those of its Central American neighbors and also pushes the region further down the road of corporate globalization.

Overview

Fox set priorities early in his administration when he stated: "my government is by entrepreneurs, for entrepreneurs." Not surprisingly then, the PPP emerges not as a strategy to end endemic poverty, as the government maintains, but as an ingenious ruse to channel massive public funds into infrastructure projects that will, hopefully, induce private investment.

It is also a Plan to turn over control of the area's vast natural resources - including water, oil, minerals, timber and biodiversity -- to the private sector, particularly multinational corporations. In spite of 20 years of relentless neoliberal privatization policies, many resources in the region are still controlled collectively by indigenous campesinos (peasants), or entrusted to the state.

But it's not simply a matter of inviting in corporate investment. Under the current "rules" of corporate globalization, governments have an important role to play. But their role is limited to increasing the potential for corporate profits by making sure that:

  • infrastructure requirements are in place
  • all legal safeguards for private capital are in place (repatriation of profits, no local content requirements, etc.)
  • people have been properly trained with at least some minimal educational skills
  • people have been properly "tamed" of desires to retain ancestral lands, defend labor rights, and preserve others social values

Precisely in these aspects the Mexican and the Central American governments have been historically remiss. For centuries the PPP area has languished economically and socially, for numerous reasons. One reason is that the area's natural resources were, up to recently, of limited interest to private investment capital. Seen as a backwater by the private sector, elite-based governments followed suit, and ignored the economic needs of the region, except those linked to export crops, such as coffee, sugar, cotton, and bananas. Human development was neglected or forgotten.

Today, the backwardness is evident: infrastructure is deficient or nonexistent, socioeconomic indicators rival Africa's, and, not surprisingly, the region is rife with ongoing social conflicts, often punctuated by armed movements demanding reform or revolution.

Rather than an altruistic design to bring the region "into the 21st century" as Fox maintains, it is multinational corporations' changing perception of the profitability of the area's natural resource base that has fueled the PPP.

For example, within the past decade, the importance of water as a strategic resource has increased enormously. The PPP region has extraordinarily abundant water reserves. The state of Chiapas alone receives 50% of Mexico's watershed. Energy needs, particularly those of the United States, can be profitably supplied by hydroelectric dams built in an area with plentiful rainfall.3 Further, the increasing price of petroleum has made rich, but deeply buried oil deposits profitable to exploit.

The region's geography -it is the narrowest part of the Americas -- is doubtlessly strategic, as East-West trade is set to skyrocket with the entrance of China into world markets. The new field of biotechnology has spurred keen interest in this area, one of the richest in biological diversity in the world. And the region's numerous Mayan archeological sites, pristine beaches and (still) relatively unpolluted Caribbean waters are being packaged to rake in tourist dollars.

These and other factors have led corporations to take a fresh look at Mexico and Central America. And it is corporate interests, with the region's neo-liberal governments at their beck and call, and the backing of multilateral banks, that have brought the PPP into fruition.

The PPP at a Glance

The PPP's main components call for massive state investments in infrastructure projects. Close to 84% of the funds initially appropriated are for highway construction and improvement along two axes: the Pacific and Gulf Coast corridors. The latter reaches beyond the PPP's geographical confines and stretches 1,745 km from Central America's Caribbean coast to the Mexican border with Texas. The Pacific Corridor will run 3,150 km from central Mexico to Panama City. Both projects, together with feeder roads, will cost over US$3.5 billion. Other projects include:

  • Upgrading and linking the electrical grids of Central America and Mexico
  • Supplying electricity into the ravenous US market
  • Constructing 25 dams throughout the PPP area for hydroelectric generation
  • Improving or building or new ports, airports and bridges
  • Upgrading telecommunications facilities, including a fiber-optic network, already well underway
  • Integrating protected wildlife reserves into "corridors", ostensibly to protect diverse species, but also facilitating bioprospecting by seed, chemical and pharmaceutical companies
  • Improving tourist facilities and infrastructure

Energy

One of the main projects currently in progress is SIEPAC (Electrical Integration System for the Central American Countries) a US$405 million venture that will improve electrical generating and transmission capabilities. By 2004 the electrical grids of Central America and Mexico will be compatible and interconnected, in essence linking the region's considerable hydroelectric generating capacity to the electrical grid of the United States.

The plan fits neatly into other activities, such as Fox's desperate attempt to ram legislation through the Mexican congress that would open the publicly held Federal Electricity Commission to private investment. Another component of the Plan is dam construction. Twenty-five dams of all sizes are planned for the PPP area, 18 in the Mexican state of Chiapas alone.4

In the near future, electricity generated in the region will be sold to the United States. And some will undoubtedly be channeled to the maquiladoras that are opening in the southeast of Mexico and Central America almost daily. The maquiladoras are assembly plants identical to the ones that have operated on Mexico's northern border since the 1960s. They are manufacturing enclaves that exclusively serve the demands of multinational corporations, and are divorced from the economic needs of the host country, save the minimal wage paid to the largely unskilled labor force.

Chiapas historian Andrs Aubry has compared the exploitive nature of modern maquiladoras to the old-time fincas or plantations, that are still common in rural Mexico and Central America. He says that fincas are being replaced by sweatshops fostered by the Plan Puebla Panama.

"The main difference is their flexibility, " according to Aubry. "In the old finca system, the land came first, forcing the finca owner to seek and attract manual labor...[Now, maquiladora] owners can easily pack up the light machinery and move it to another peripheral zone, situate themselves in the first depressed area they find, and capture the benefits of unemployment sown by the blows of the economy."5

Maquiladoras are expected to absorb part of the rural labor displaced by major PPP projects, such as dams, and the biological corridors cleared of human inhabitants. They are also touted as alternatives for peasants forced from their land by "free-trade" policies that permit the dumping of heavily subsidized corn, beans and other basic foods from the United States into the Mexican and Central American markets.

"Corn growing has basically collapsed in Mexico," stated Carlos Heredia, economist and former legislator in Mexico's congress, in a recent speech to an American audience. "The flood of imports of basic grains has ravaged the countryside, so the corn growers are here [in the US] instead of working in the fields." 6

"Dry Canals" and Super-Highways

With the Panama Canal saturated by traffic and too small to handle large oil tankers, the PPP region has long attracted attention as a site for new shortcuts for east-west trade. State-of-the-art water canals have been proposed for Nicaragua, Honduras and the Isthmus of Tehuantepec in Mexico, but until technical and financial considerations make them a reality, "dry canals" or "land bridges" are in vogue.

Projects are already underway in Tehuantepec. Plans call for upgrading the two major ports on each side of the Isthmus (Coatzacoalcos on the Gulf, Salina Cruz on the Pacific), linking them by high-speed trains and highways, thereby allowing corporations to transship hundreds of thousands of cargo containers per year. Similar projects are also proposed for Nicaragua.

Who Pays?

Who is footing the bill for this gigantic public-works project that will benefit private transnational capital, and help assure the profitability of corporate investments? To an overwhelming degree, it is the people of the eight PPP countries who will pick up the tab through their taxes.

Although some private investment in infrastructure investment is likely, most of the US$10 billion that the PPP will cost will come from direct government payments, or from loans granted by the Inter-American Development Bank. In any event, taxpayers pay, either this year through government disbursements for PPP projects, or for years into the future, as the IDB loans are added to already staggering debt burdens.

Who Profits?

Which American corporations appear interested in the regional scheme? In the energy sector, Applied Energy Services of Virginia, Harkin Energy Corporation of Texas; in ports and transportation, Eagle Marine, Maya Kin Superferries of Texas, Prescott Follet and Associates; in railroads, Genessee and Wyoming Inc., Santa Fe Corporation, Illinois Railroad, Kansas City Southern Railway, Mi-Jack Products of Illinois, Anacostia and Pacific Railroad, CSX Transportation Incorporated, Union Pacific-Southern; in forest plantations and paper products, International Paper, Temple Inland; in petrochemicals, Exxon, Mobil, Dow Chemical of Mexico, Union Carbide; in bioprospecting, Monsanto; in fishing and canning, Ocean Garden.7

This is only a partial list of the companies that have been attracted to the PPP. At a PPP trade show in Yucatn, Mexico in July of this year, 780 companies of all sizes sent representatives seeking information.8

Speaking recently of the PPP's highway initiative, Costa Rica's Commissioner for the PPP said, "This highway network will serve as a catalyst for new investments in the region. High-capacity, high-speed and safe corridors will open the doors to other projects, such as the improvement and expansion of ports, airports and cargo services. Its impact will be felt in other areas of the economy, such as tourism and agro-industry."9

In general all the major infrastructure projects require large amounts of land. This is particularly the case of dam construction, where flood plains are expected to displace hundreds of thousands of people. It is also true for new airports, roads, agro-export plantations, and the biological corridors. The latter is currently an especially contentious issue.

In the state of Chiapas, Conservation International has appealed to federal and state authorities to remove Zapatista indigenous communities within the Montes Azules ecological reserve. CI would seem to be pushing a radical "no people" agenda for wildlife preserves. Interestingly, though, its board of directors is controlled by CEOs of large corporations, some with direct interests in bioprospecting. The policy seems evident: clear the people from the land in advance of corporate penetration.10

Grassroots Resistance

Defense of the natural resource base and of land itself has become the linchpin in the grassroots opposition to the PPP and the basis for alternative development plans. In a year and a half, three regional forums have been held on the PPP, drawing civil and social organizations from throughout Mexico and Central America to discuss alternatives to the corporate-led PPP.

The latest gathering in July 2002 in Managua, Nicaragua, drew over 1,200 delegates and observers, representing more than 350 grassroots organizations. One of the agreements reached: A series of coordinated protest activities will be held throughout the eight-country region, and in the United States, on October 12, 2002.

The final declaration in Managua was clear and to the point. "We have agreed to a total rejection of the Plan Puebla Panama, the FTAA and the free trade agreements, because we are convinced that they are contrary to the sustainable development of our people, ruin biodiversity, deepen poverty and increase the debt. Likewise [these plans and agreements] are an expression of the interests of the US government, which is intent on building a free trade zone at its service and that of the multinational corporations, to the detriment of our most fundamental rights."11(emphasis in original)

But the Managua encounter was just one of dozens of similar meetings throughout the region held to discuss the PPP, and even its component parts. Grassroots activists have held forums to discuss dams, maquiladoras, biodiversity, agro-toxins, highways, the free-trade agreements, the Free Trade Area of the Americas, and the building of people-centered alternatives.

National and international coalitions are uniting throughout the region. Several meetings have already been held between Mexican campesinos from Chiapas and their Guatemalan counterparts from Petn, to hammer out joint activities to prevent dams from being built on the Usumacinta River that separates the two countries.

Although formally outside the PPP area, peasants in the Texcoco area just northeast of Mexico City, who staged a nine-month, machete-wielding uprising over the expropriation of farmlands for the capital's new airport, are emblematic of what is at stake: an indigenous and campesino struggle to maintain and control natural resources, in the face of government and corporate attempts to wrest them away.

On August 1st, 2002, following violent confrontations that left one peasant dead and scores injured, the Fox government announced it was withdrawing the expropriation order, thus conceding an enormous victory to the Texcoco campesinos. Enjoying the festivities that followed, Francisco Morales perhaps best summed up the feeling in Mexico and Latin America.

"I am an ejidatario (communal land owner) from La Magdalena, Morales explained. "I'm 75 years old and have been working my plot for 50 years, since my father passed away. Our people have preferred a handful of earth to a wad of bills. Money disappears (but) we will have our lands forever. Our land is our life. Our land allows us to look people in the eye, as equals."12



Footnotes

  1. The Mexican states are Puebla, Veracruz, Guerrero, Oaxaca, Chiapas, Tabasco, Campeche, Yucatán, and Quintana Roo. The Central American countries are Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica and Panama.

  2. For historical background of the PPP via World Bank and ECLAC documents, see "Los peligros del Plan Puebla Panamá" by Andrés Barreda, in Mesoamérica-los ríos profundos, Armando Bartra (edit.), Instituto Maya, A.C., Mexico City, 2001.

  3. "Mexico has been selling California some 50MW of energy around the clock since the state's first power shortages began at the start of (2001). The interconnection capacity between Mexico and California is 400MW, and is slated to increase to 2,000MW by the end-2002". Financial Times, June 21, 2001.

  4. See CIEPAC's "Chiapas Today" bulletins nos. 301 and 303 at www.ciepac.org

  5. "The PPP's new plantations-Chiapas: From banana republic to maquiladora republic", by Andrés Aubry, December 2001, translated from Spanish by Jennifer Struna, and available on Global Exchange's web site: www.globalexchange.org.

  6. Tim Weiner, "In Corn's Cradle, US Imports Bury Family Farms", New York Times, February 26,2002.

  7. Information compiled by Grupo de Trabajo Colectivo del Istmo, Matías Romero, Oaxaca, México, www.mesoamericaresiste.org.

  8. Financial Times, July 1, 2002, Mexico joins plans for regional development, by Sara Silver.

  9. Inter-American Development Bank press release, September 17, 2002. www.iadb.org/exr/PRENSA/2002/cp20002e.htm

  10. See "Deconstructing Conservation International", by Irlandesa, available by contacting chiapas95-lite@eco.utexas.edu

  11. Declaración Política del III Foro Mesoamericano "Frente al Plan Puebla Panamá el Movimiento Mesoamericano por la Integración Popular", Managua, Nicaragua, July 2002.

  12. La Jornada, Aún hay reticencias entre ejidatarios para echar campanas al vuelo; quieren certezas, August 3, 2002, by María Rivera.

Miguel Pickard is an Investigator for CIEPAC, A.C. (Centro de Investigaciones Econmicas y Polticas de Accin Comunitaria), a research center focusing on political economy and grassroots action in San Cristbal de Las Casas, Chiapas, Mexico.