The Chase Manhattan Memo -Feb 9, 1995

[ Follow Ups ] [ Post Followup ] [ NEW STUFF ] [ FAQ ]

Posted by rdom on February 09, 1998 at 10:28:56:

The Chase Manhattan Memo

This is the memo that you weren't supposed to read. This was written by an analyst for
Chase Manhattan Bank. You'll read in it that the author is recommending eliminating the
Zapatistas (!) and fixing elections - anything to protect investments. Even
killing people. It's a truly disturbing document. It should have brought indictments
down upon the author and the bank. But instead, the media let this past almost unacknowledged.
Read and learn how corporations think about the rest of the world, in
purely economic terms, to the detriment of the native peoples' interests.

The following file contains a leaked internal memo from Manhattan Chase Bank;
the bank does not deny the memo, but does
deny endorsing the contents. To confirm the authenticity of this story,
you can contact

Counterpunch Institute for Policy Studies
1601 Conneticut Avenue Northwest Washington DC 20009
(202) 986-3665 FAX: (202) 387-7915

The following three phone numbers can get you confirmation and more info.

Paul Houle (607)255-6455
Ken Silversee (202)986-3665 (Counterpunch)
Steve Routenberg (212)552-4505 (PR/Chase bank)
Paul Houle 119 Prospect St Ithaca NY 14850



[By] Riordan Roett


The greatest threat to political stability in Mexico today,
we believe, is the current monetary crisis. Until the administration of
President Ernesto Zedillo identifies the appropriate policies to
stabilize the peso and avoid uncontrolled inflation, it will be
almost impossible to address issues such as Chiapas and judicial
and electoral reform.Moreover, a prolongation of the crisis,
with its negative impact on living standards, raises the issue
of labor unrest, specifically, and societal discontent, in general.


The inauguration of Ernesto Zedillo on December 1, 1994 as president of
Mexico appeared to open a new chapter in the effort to modernize national
politics. In his inaugural address, Zedillo stressed the
Importance of resolving outstanding political
scandals such as the assassinations of 1994; as a guarantee
of transparency and he appointed as Attorney General a member
of the opposition National Action Party (PAN). The new president
called for judicial and electoral reform and for a peaceful
resolution of the year-old insurgency in the southern state of Chiapas.
He stressed the need for transparency in government and
the need to educate and train the Mexican people. Zedillo's cabinet,
drawn from the same pool as that of his, predecessor,
Carlos Salinas de Gortari, gave the impression of competence
and commitment.

On December 20, Finance Minister Jaime Serra Puehe, the successful
negotiator of the NAFTA during the Salinas years,
suddenly announced the devaluation of the peso. In the
fall out from that decision, not shared with the international financial
community or foreign investors, Serra Puche resigned and
was replaced by Guillermo Ortiz. Ortiz had been number two in the
Finance Ministry in the Salinas government and had been appointed
as the Secretary of Communications and Transport by

Ortiz is now in charge of the government's recovery strategy.
In our opinion, until the government is successful in stabilizing
the peso, avoiding a sharp increase in inflation, and regaining
investor confidence, it will be difficult for Zedillo to address the
agenda of reforms identified on December 1. There are three areas
in which the current monetary crisis can undermine political
stability in Mexico. The first is Chiapas; the second in the
upcoming state elections; and the third is the role of the labor unions,
their relationship to the government and the governing PRI.


The uprising in the southern state of Chiapas is now one-year old and,
apparently, no nearer to resolution. The leader, or
spokesman, of the movement, sub-commandante Marcos, remains
adamant in his demand that the incumbent PRI governor
resign and be replaced by the PRD candidate who, Marcos argues,
was deprived of victory by government fraud in the recent
election. Marcos continues to lobby for widespread social and
economic reform in the state. Incidents continue between the
local police and military authorities and those sympathetic to
the Zapatista movement, as the insurgency is called, and local
peasant groups who are sympathetic to Marcos and his cronies.

While Zedillo is committed to a diplomatic and political solution
the stand-off in Chiapas, it is difficult to imagine that the
current environment will yield a peaceful solution. Moreover,
to the degree that the monetary crisis limits the resources
available to the government for social and economic reforms,
it may prove difficult to win popular support for the Zedillo
administration's plans for Chiapas. More relevant, Marcos and
his supporters may decide to embarrass the government with
an increase in local violence and force the administration to
cede to Zapatista demands and accept an embarrassing political
defeat. The alternative is a military offensive to defeat the
insurgency which would create an international outcry over the use of
violence and the suppression of indigenous rights.

While Chiapas, in our opinion, does not pose a fundamental threat
to Mexican political stability, it is perceived to be so by
many in the investment community. The government will need to
eliminate the Zapatistas to demonstrate their effective control
of the national territory and of security policy.


President Zedillo, in his inaugural address, restated his
commitment to opening the electoral system to opposition parties.
This has been a principal issue between the PRI-dominated government
and the PAN and the PRD in recent years. The more
conservative wing of the PRI has opposed political
liberalization while the Zedillo group has argued that
an opening is both inevitable and justified. The current
monetary crisis opens the question of whether or not Zedillo
and the reformers will have the capacity to honor the outcome
of local elections in 1995. The conservatives will argue that
the crisis justifies the continued one-party rule even if it must
be maintained by fraud. The opposition, which generally contests
PRI electoral victories regardless of the validity of PRD claims,
will be emboldened to continue to do so. Zedillo will be faced
with a difficult situation in which he will need to neutralize the
conservative members of his own party while maintaining his commitment
to allow the opposition to win when they do so legitimately.

Elections will be held this year in the states of Jalisco, Guanajuato,
Yucatan, Michoacan, and Baja California. three will hold
both state congressional and gubernatorial elections. Michoacan
will vote only for a state congress and Guanajuato only for a
governor. In all of the states, the opposition is historically
strong and has a history of reacting strongly to electoral fraud, real or

The government's electoral strategy in 1994 was based on
holding together core PRI supporters with the prospects of
employment, an increase in real wages, and more spending on
public works. The monetary crisis makes it highly unlikely that
the PRI can adapt that strategy to the 1995 electoral cycle.
Moreover, while the PRI probably won over some opposition
votes with its perceived economic success story in 1994,
it is unlikely that they will gain any opposition ballots
in 1995. The Zedillo administration will need to consider
carefully whether or not to allow opposition victories if
fairly won at the ballot box. To deny legitimate electoral
victories by the opposition will be a serious setback in the
President's electoral strategy. But a
failure to retain PRI control runs the risk of splitting
the governing party. We believe that the ability of the
Zedillo administration to resolve the inherent conflicts
in the 1995 electoral agenda will be instrumental in
determining whether or not the government
will be able to fulfill its pledge to liberalize
Mexican politics.


The labor movement has been the backbone of the PRI for decades.
The willingness of labor leadership to take its cues from
the PRI has been a fundamental part of the stability in
Mexico since the 1930s. The current monetary crisis threatens to
undermine that support because of the negative impact on
living standards and wages. The fall in value of the peso
severely under cuts the capacity of the average Mexican
worker to purchase the bare necessities of life each day.

In preparing the emergency economic program announced by
President Zedillo on January 3, 1995, the most difficult
negotiations were apparently with the labor unions who
feared the impact on their membership of the hardships
required if the program is to be successful. In September
1994, the unions had signed an agreement with the government
and business that allowed a seven percent wage increase
for 1995. That agreement also included income-tax credits
for the lowest-paid workers and some productivity bonuses in contracts.

The seven percent wage package was considered a fair deal then because
the government estimated that inflation would be
only four percent in 1995. With the loss of purchasing
power and rises in prices resulting from the peso's devaluation,
government economists now think inflation might reach fifteen
percent in 1995, and some economists say it will exceed twenty

Mexican workers still have not recovered the standard of
living they had in 1980, now three devaluations ago. The new
agreement signed January 3, 1995 retains the seven percent
wage increase. In exchange, the government pledged to minimize
price increases and keep inflation from spiraling. Under the
agreement, the lowest-paid workers will get a tax credit equal to as
much as three percent of income. The government has promised
to expand to 700,000 people government-funded
scholarships for worker training.

In our opinion prolonged continuation of the current crisis
will result in pressures to reopen the agreement and compensate
Mexican workers for their loss of purchasing power prolonged
continuation of the current crisis will result in pressures to
reopen the agreement and compensate Mexican workers for their
loss of purchasing power. The first indication of this occured
on January 11, when the Mexican Confederation of Labor called
on its affiliates to demand an immediate 15.3 percent salary
increase for January and a 56 percent increase for the rest of
1995. The strong corporatist links between government and
unions have weakened in recent years. While the administration
still retains influence, it does not have total control. If
the crisis continues, the Zedillo administration may be faced
with the options of either rejecting worker demands for higher
wages and facing the possibility of demonstrations or yielding
to worker demands which will further aggravate the economic situation.


The Mexican monetary crisis has overshadowed the commitment of
the Zedillo administration to a new wave of political
reforms that include political negotiations to resolve the
Chiapas crisis and to guarantee fair elections at the state
and municipal levels. It also raises the issue of whether or not
the Mexican working class will accept a prolonged period of wage
losses and diminished living standards. These social and political
questions, which are of high priority to the President, will inevitably be
postponed until the economic situation is clarified. To the degree
that the Zedillo government is unable to stabilize the peso and
avoid inflation, in our opinion, it runs the risk of social and
political uncertainty.

Follow Ups:

Post a Followup




Optional Link URL:
Link Title:
Optional Image URL:

[ Follow Ups ] [ Post Followup ] [ NEW STUFF ] [ FAQ ]