 Thesis Appendices
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This thesis concerns itself fundamentally with an argument about power, and the ways in which labor unions are able to translate power over their constituencies into visible expressions of strength that will influence government policy-making. Yet instead of focusing on the process by which unions react to and exert their influence over government policies, this argument attempts to clarify the decision-making process at the government level regarding privatization policy. Union strength admittedly cannot account for the full variation in the privatization process outside of the traditional realms of the debt imperative and modernization imperative arguments, but its role in influencing the reform process is uncontested. Ramamurti (1996) and Petrazzini (1995) place labor unions at the forefront of the privatization process in Mexico and Argentina, but little work has been done which explores the degree by which government leaders in Mexico and Argentina took the demands and strengths of labor unions to heart in their calculations surrounding the privatization process. This argument explores this question by varying the labor power argument in two ways. The first, a comparison within Mexico, looks at the role that union concentration played in the Mexican government’s evaluation of labor strength. The divergence in outcome between Teléfonos de México and Luz y Fuerza despite the relatively high labor union density of each points to the relevance of another indicator of union strength—concentration. The impact of labor union concentration on Mexican government privatization decisions is then applied to the broader privatization record, and a moderate correlation is found between the date of privatization and union concentration. The second facet of this argument holds this union concentration variable constant, and compares labor power across a variation of union-state relations (corporatism) between Mexico and Argentina. This corporatist argument finds that despite the somewhat lower level of unionization densities and concentrations among state industries in Argentina, much less correlation exists between union strength (as defined by concentration) and the actual privatization record than is true in Mexico. Collier and Collier’s analysis of corporatism in Mexico and Argentina argues for similar combinations of inducements and constraints in 1945 Argentina and 1931 Mexico. This network has faded considerably in both countries over the years of fiscal austerity and state reform of the 1980’s, but these findings argue that Mexican government’s level of state corporatism remains considerably more intact than in Argentina. This is relevant to the larger thesis since the impact of union concentration on state decisions will be smaller in a less corporatist state. The limitations on a work that attempts to measure union strength and its impact on government decision-making are large. Extensive labor union data is very difficult to come across in both Mexico and Argentina, and those sources that do exist from the labor unions themselves often portray exaggerated or unrealistic accounts of their union numbers, bargaining power, and relative strength in the overall industry. The numbers utilized in this argument come from a range of years and a variety of different sources, often disagreeing with one another on some of the statistics used as the foundation for this argument. One of the more controversial assumptions in this thesis is the discrepancy in representation between union density and concentration in Teléfonos de México itself. Though unions other than the STRM did represent workers at the many subsidiaries of Telmex, the STRM was the primary participant in the official negotiations surrounding the firm’s sale. Accordingly, the full impact of the many subsidiaries of Telmex and their representative unions on the privatization process is unclear. A more thorough analysis of the impact of labor strength on government decision-making would make use of firm-level data on a broader spectrum of industries to place the case of the telecommunications and electricity industries in Mexico and Argentina within the larger context of the privatization process. This argument about labor strength utilizes primarily union density and concentration numbers and then assumes that they correlate with strength, but in fact union strength is a broad and superfluous concept that cannot be measured solely by numbers. Interviews with union leaders, government officials, and key decision-makers within the Carlos Salinas and Carlos Menem administrations would provide a better grounding for the labor strength argument. Moreover, this analysis pays little attention to the role of political parties or union confederation affiliations in the labor strength argument. A statistical regression that made use of dummy variables for political coalitions and other factors from the political contexts within Mexico and Argentina would more accurately assess the actual strength that union leaders may have possessed. In order to compare these findings on labor within the contexts of the debt and modernization imperatives, case industries from the infrastructure sector were chosen that would be highly attractive under the modernization imperative, and high-value industries were chosen that would equally be essential under the debt imperative argument. The telecommunications and electricity industries in Mexico and Argentina fit both of these claims, but likewise vary somewhat by the relative strength of labor unions within each sector and country. Tables 7.1 and 7.2 summarize the competing claims of the labor union strength and the debt imperative arguments for Mexico and Argentina. Each table ranks industries from low to high labor union concentration on the left hand side of the chart, then re-ranks those industries on the right-hand side according to their sale price. Within Mexico, the date of privatization strongly correlates with labor union concentration, with firms with more concentrated unions being sold later in the process. In terms of a comparison between union concentration and whether a firm was sold at all, this trend still roughly holds—the three most concentrated firms, Pemex, CFE, and Luz y Fuerza, were not privatized under Salinas’ term. The debt imperative argument holds less ground under this analysis, at least before 1990 when Salinas began the process of privatizing large scale state sectors. After 1990, a purely debt-imperative argument would call for the sale of Pemex to lead off the process—something which never occurred. However, Telmex was a very dominant source of revenue for the state, second only to Pemex in potential revenue for the state.
In Argentina, the union strength argument holds up less well when compared against date of privatization; only a small statistical correlation is found between the two, but is more significant once ENTel is removed from the analysis. Admittedly, union concentration levels within Argentina are somewhat lower than in the Mexican case, yet this finding suggests that union concentration may play a significantly smaller role in a nation with less of a developed corporatist system. This may be true because in a less corporatist state, the government will have lesser control over the labor union than in a more corporatist state—regardless of its level of concentration. The debt imperative argument, however, ranks as perhaps the strongest single explanation behind variation in the Argentine privatization record. The sales of YPF, ENTel, and the state electricity company were all announced in 1990, just after Menem took office and devoted himself to correcting the nation’s fiscal deficit and negative economic growth.
The importance of the modernization imperative in Mexico and Argentina is somewhat more difficult to predict. Because of the close link between a nation’s infrastructure and its long-term economic growth, it is safe to assume that the modernization imperative was an important component that ranked with the labor strength and debt imperative arguments. However, unlike these other two factors, expected welfare gains from the privatization process are not easily estimated nor were readily accessible to policy-makers at the time. Borrowing from Chapter 6’s analysis of the modernization imperative argument, a feasible estimation of expected gains in efficiency from the privatization process can be taken from Chile’s divestiture process—outlined in Table 7.3.
Chile’s program was completed several years before Mexico and Argentina started their major divestiture efforts, and information about these welfare gains would have been available to policy-makers in both Mexico and Argentina. In fact, compared to rather meager gains in Chile’s electricity sector, the telecommunications sector jumped nearly 145% in domestic net welfare. Though this expectation wildly exceeded actual domestic gains of 6.6% in Mexico and 3.4% in Argentina several years later, Chile’s case provides a strong foundation for the ranking of industries beneath the modernization imperative argument in Mexico and Argentina. (IADB 1996: 182) Both countries accordingly placed telecommunications at the forefront of their divestiture scheme, while electricity played a much less dominant role. Mexico did not sell its electricity company at all, while in Argentina it was not privatized until two years later. Though the modernization imperative does help explain this result in the two case industries and the overall importance of the infrastructure industry as a whole, its relevance in discerning among other infrastructure industries in the privatization record cannot further be determined within the constraints of this thesis. A study of the relevance of labor union strength in explaining variation in the privatization decision behind Teléfonos de México provides an important contribution to the changing relationship between the state and domestic actors in Mexico. Collier and Collier (1979) ‘disaggregate’ corporatism through an extensive analysis of Latin American labor law in order to better gauge the power relationship in existence between the state and organized labor. Their conclusion is that corporatism consists of a combination of inducements and constraints extended to unions that serve as "mechanisms … to influence behavior." (Collier and Collier 1979: 969) Yet these corporatist arrangements are not produced in a vacuum—labor unions play an important role in shaping the agenda and policy options available to the state and ruling party. This thesis serves to determine the impact that labor unions in Mexico had on the state during a period of great internal change for the traditional corporatism model. The Sindicato de Telefonistas de la República Mexicana (STRM) was one of the more influential and vocal labor unions among Mexico’s state-owned public enterprises, but compromised its opposition to the privatization process in exchange for employment and benefits guarantees from the government. Luz y Fuerza de México (electricity company) and its labor union the SME (Sindicato Mexicano de Electristas) provide an important lens from which to view the Telmex case, since they illustrates how strong labor opposition can play an important role in withstanding the reform process in an industry like electricity which is ideal for privatization under the debt imperative and modernization imperative arguments. This thesis helps to relate the impact of labor strength—measured along union concentration and different corporatist models—on the privatization process and accordingly to predict the changing role of state-labor relations in Mexico. |
