The front page of the April 21st New York Times carried a long investigative report detailing allegations of widespread bribery at Wal-Mart’s Mexican subsidiary. According to documents obtained by the Times, Wal-Mart de Mexico orchestrated a multi-year campaign of bribery to win market dominance, paying off officials in “virtually every corner of the country” in its rush to build stores. After being alerted of the pattern of wrongdoing in 2005, reports the Times, Wal-Mart’s leaders ordered that the internal investigation be shut down. The Times characterizes the entire affair as a prolonged struggle at Wal-Mart’s highest levels, pitting “the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.”
With the company now in full damage control mode and watching its stock price fall, it’s worth reflecting on the origins of Wal-Mart’s expansion into Mexico, currently home to one in five Wal-Mart stores. In the text below, excerpted from her 2009 book To Serve God and Wal-Mart: The Making of Christian Free Enterprise, Bethany Moreton details the crucial role that the company’s expansion into Mexico played in the U.S. debate over the North American Free Trade Agreement (NAFTA). “For a brief but decisive moment in U.S. politics,” she writes, “the key to imagining free trade was Wal-Mart in Mexico.” What follows is an early ’90s story of globalization, market deregulation, and what’s now alleged to be systematic law-breaking, with cameos from the likes of the Clintons, Ross Perot, Al Gore, and Newt Gingrich.
In 1965, Mexico had begun experimenting with export-oriented maquiladoras [manufacturing operations] along its northern border, where some areas enjoyed duty-free status to entice manufacturers. Such efforts, however, did not attract much attention initially, nor were they meant to: Mexican policy from the 1940s to the 1980s remained committed to developing native industry for domestic consumption behind protective tariff walls, just as the United States and Britain had done in the nineteenth century.
Between 1940 and 1980, this strategy produced annual growth rates of over 6 percent and a steady rise in real wages. But the “Mexican Miracle” came at a price, one increasingly met through high-interest loans from American banks. In 1982, the Mexican finance minister was forced to go to Washington, hat in hand: the country could not honor its foreign payment schedule. In return for emergency loans, Mexico submitted to free-market restructuring, cutting social services, privatizing hundreds of state-owned enterprises, and joining the Uruguay Round of the General Agreement on Tariffs and Trade. The buying power of the Mexican minimum wage dropped by almost 70 percent between 1982 and 1991. Industrial wages fell by almost half; per capita basic food consumption dropped 30 percent.
In early 1991, following announcements of negotiations for NAFTA, American investment in Mexico jumped to two and a half times its previous rate. In this context, then, Wal-Mart’s decision to enter Mexico’s retail market represented part of a larger shift underway to realign the post–Cold War global geography from NATO and the Warsaw Pact into competing free-trade areas. President George H. W. Bush negotiated the agreement with the help of the business-heavy Advisory Committee for Trade Policy and Negotiations. A business coalition of more than 500 corporations—“a virtual lobbying Who’s Who”—helped the administration secure Congressional approval for fast-tracking the treaty, or requiring an up-or-down vote without the possibility of amendments. The constitutional division of labor that had often stymied free traders—commercial regulation to Congress, but foreign policy to the executive branch—could thus be short-circuited: It was to be the trade agreement hammered out by President Bush, or no trade agreement at all.
But the old Cold Warrior was not the visionary who could see it through to ratification. That job fell to Arkansan Bill Clinton, whose wife resigned from Wal-Mart’s board to help her husband’s presidential campaign in 1992. Despite his party’s resolution against NAFTA in 1991 and his own ambivalence toward it during the campaign, the new president threw his support to the treaty in 1993. The key for business under the new administration was now to see the trade agreement through a scheduled vote in the House in mid-November. If they lost, and a new round of negotiations opened up, it might be years before they could muster the political will to pass another version, what with the recession and climbing unemployment.
The Business Roundtable swung into action. It organized 2,300 corporations into USA-NAFTA and assigned state captaincies to Roundtable members. The captains—all but four of whom had participated in the treaty negotiations through seats on the Bush-era advisory boards— mobilized unprecedented business unity in campaigning for public opinion through every conceivable media outlet, from op-eds to talking heads. “You may also want to consider involving employees in a company-wide letter-writing campaign,” suggested the Illinois NAFTA Coalition in a July 1993 memo to its members. Procter & Gamble, a major Wal-Mart vendor, promoted the treaty’s potential to double the company’s export market in a quarterly report to its 170,000 stockholders. Wal-Mart made early appearances as a symbol for this export potential. “Here’s a country with 86 million people, trying to grow and needing access to the kind of products we have here,” said a USA-NAFTA council member. “I’ve been told by the leadership of Wal-Mart that they can’t get enough American-made product into their stores they are now building in Mexico.”