Union blue: will Mexico's democracy reach its workers? (Special Report).

On August 8, Fernando Espino, godfather of the capital's subway workers, rallied his gang and shut down two Metro lines. The wildcat strike threw whole delegations of Mexico City into grid locked chaos.

After the mayor threatened to press criminal charges against Espino, the Metro's union chief said he could close the whole subway system and was soon joined by the leaders of the city workers' union, which threatened to shut down the city on the day of the mayor's annual address to the local assembly.

Then, in September, normally routine pay negotiations with government-friendly leaders of the oil workers' union exploded into a political crisis after President Vicente Fox's prosecutors indicted union chiefs on embezzlement charges.

While all the conflicts were resolved without major disruptions, they were the first major fights between unions that back up the Institutional Revolutionary Party's (PRI) old guard and the Fox administration. Were they only blips in Mexico's democratic transition or the specter of greater problems to come?

ALL IN THE FAMILY

A ghetto of union buildings sprawls around the Monument of the Revolution, near the PRI national headquarters on Mexico City's Insurgentes Avenue. Their proximity to the former throne remains an enduring testament to the power of the PRI to co-opt unions into its system of government by patronage.

Some 90% of unions in Mexico are associated with the PRI-affiliated Labor Congress (CT). These unions were headed by PRI-approved leaders who guaranteed their workers' votes in return for economic favors and political positions in a corporativist system that, by and large, kept labor stable and disciplined.

But, after Fox's prosecutors fingered Petroleos Mexicanos (Pemex) union chief Carlos Romero Deschamps as a prime suspect in an investigation into more than $1.65 billion pesos illegally funneled from Pemex through the union and into the PRI's 2000 election coffers, the PRI's political machine began to turn on its old wheels. But this time, it had to move into a defense position against a formerly supportive executive power. Congressmen declared that a political witch-hunt was in progress and repeatedly stormed out of Congress. In the streets, union leaders sent workers to demand a raise nearly three times the year's expected inflation rate, express solidarity with their accused leader, and threaten an economically devastating strike.

But soon the PRI leadership buckled under Fox's insistence on keeping labor and legal issues separate, and PRI President Roberto Madrazo abandoned Carlos Romero Deschamps and his cronies to face the courts on their own.

"First (the PRI leaders) backed them up entirely, but later, and surely after observing the wide popular and institutional support backing the president, they changed their minds and left them hanging," said labor lawyer Luis Manuel Guaida.

In all these conflicts, Guaida sees the attempt of union bosses to hold onto the clout they used to have under the PRI. But the withdrawal of support by PRI leaders shows the party will only go so far to back up its allies.

In the end, Romero was all bark and no bite, the union settled for the company's original offer of a 5.5% wage hike plus a 1.8% increase in benefits. Had Romero called the strike, one of the various dissident groups looking to snatch union leadership could have stepped up to the plate and ousted him, says Ilan Bizberg, a professor at the prestigious Colegio de Mexico.

THE LETTER OF THE LAW

Fresh from his success, Fox lauded the need for strong unions, but ones that are politically independent, transparent and above all democratic.

But how serious is Fox about shaking up the autocratic structures that have allowed Mexico's unions to remain undemocratic mafias and fountains of personal wealth for their leaders?

Fox promised during his campaign to promote a new version of a federal labor law, stalled for over six years, which would both promote democracy and modernize the law to the satisfaction of employers.

While negotiations headed by Fox's conservative Labor Secretary Carlos Abascal began in 2001, his office has yet to submit a proposal.

Abascal said the new labor law would be based on a consensus brokered between the CT, employers' association Coparmex, and the National Union of Workers (UNT), the umbrella organization representing Mexico's democratic unions. But he eventually changed his mind after trying to get everyone to agree. The UNT pulled out of negotiations in March, and labor insiders say the unofficial version of the law that has been hammered out since then represents only private sector interests.

"The proposal leaves the corporativist unions untouchable. It's a project with a notable employer bias, and, in short, it's something that shouldn't prosper," said Nestor de Buen, a labor lawyer who helped broker the labor agreement that accompanied Nafta.

With PRI-controlled unions safe, so is another unsightly labor practice in Mexico, known as "protection contracts." Companies enlist a PRI-backed union to set up their contract, a union leader is named and workers rights established, often even before anyone is hired. New workers sign up with the union when they are hired, often unaware of contract conditions or even the union s existence. De Buen estimates nearly 80% of contracts signed in Mexico are protection contracts, where workers are never directly involved in the deals their "leaders" hatch.

"The problem is that workers don't have a choice," said Eric Quesnel, a labor organizer with the Authentic Labor Front, a small organization of independent unions.

While the new law proposal has left supporters of democratic unions cold, it has made some headway in satisfying employers.

In the drive to attract foreign direct investment (FDI), Mexico needs to change its outdated labor law to allow for more flexible management of human capital, said Guaida. Employers want restrictions on firing workers lightened, and the ability to pay by the hour, rather than by the day as stipulated under the current law.

"While the proposed reforms are not everything that was desired, they at least mark an advance in the process of modernizing the law," said Guiada. "Once the proposal is sent to Congress, hopefully lawmakers will put aside political interests and do what is good for the country."

Even though the PRI front of the CT has nominally backed the reform, its passage is not assured. The Pemex investigation has opened a wider gulf between Fox and the PRI, and the party's support is uncertain. Moreover, as midterm elections for 2003 approach, the PRI will look to the public's reaction to the bill, and will withdraw support if its reception is hostile, said Jorge Garcia, a partner at Diecsa Consultores.

Whatever the outcome of the bill, the leaders of the PRI unions will remain safely entrenched, and there is little possibility Mexico's new democracy will spread as far as its workers.

RELATED ARTICLE: Union wage woes

While the big PRI-run unions were riding on the crest of the postwar economic boom through the 1950s and 1960s, they towed the party line. But steady growth allowed for steady wage increases and happy, if cowed, workers. By the 1970s, an autoworker in Mexico made a third of what a U.S. worker earned. But after the rocky devaluations and bouts of high inflation that shook the 1980s and 1990s, the same worker earned one-twentieth.

Consistently declining inflation over the last four years has allowed workers to recover some of their battered buying power. In 1999 to 2001 , salary hikes averaged 5% above inflation. But this year, due mostly to the recession, wage increases are averaging around 6%, with inflation estimated at 5.5%.

Michael O'Boyle is a freelance writer and a finance reporter far a Mexico City daily.