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US companies like Sears department store and Kentucky Fried Chicken have been a part of the Mexican retail picture for decades. Others like Wal-Mart, Domino's Pizza, Burger King, Blockbuster Video--and most recently the specialty coffee shop Starbucks--have taken advantage of the North American Free Trade Agreement (NAFTA) to establish roots in Mexico. These stores, for the most part, have initiated operations throughout Mexico with little or no opposition.

But two US-based multinational corporations, McDonald's fast-food restaurant and discount megastore Costco, have encountered unexpected problems because of their proposal to establish outlets at culturally significant locations.

Oaxaca group opposes McDonald's restaurant on historic plaza

McDonald's created a huge controversy in the city of Oaxaca when it proposed establishing a store on the southeast corner of the historic plaza. The decision appears to be a strategic move by McDonald's to take advantage of the huge influx of middle-class tourists from Mexico, the US, and other countries to the colonial city.

Local residents, led by internationally famous Mexican painter Francisco Toledo, have launched a campaign to stop the project. "This is the center of our city, a place where people meet, talk politics, shop, and spend time," said Toledo, a Oaxaca native. "It's a big influence on art and creativity. And we are drawing the line here against what the arches symbolize."

To make his point, Toledo led hundreds of protestors on a march to the historic square in late August. The protestors, who have formed the organization Pro Defensa y Conservacion del Patrimonio Cultural y Natural del Estado de Oaxaca (PRO-OAX), also made their message known through signs placed at the location of the proposed McDonald's. The signs read, "We do not want McDollars," and "No McZocalo," a play on the word zocalo, the Mexican word for plaza. The protest included a symbolic meal of tamales and atole, two of Mexico's traditional foods.

As part of the campaign, PRO-OAX activists gathered signatures to present to the administration of Mayor Gabino Cue Monteagudo urging him to stop the project. Cue Monteagudo is a member of the Partido Convergencia para la Democracia (PCD), which defeated the center-right Partido Accion Nacional (PAN) in the 2001 municipal elections (see SourceMex, 2001-10- 17). "Civil society...urges you to intervene directly and immediately cancel the permits for this project, which were authorized by your administration," PRO-OAX said in a letter to Cue Monteagudo.

In an opinion piece published a few days after the protest in the Mexico City daily newspaper El Universal, Toledo reinforced the need to preserve Oaxaca's heritage. "Oaxaca's streets and buildings, our symbolic spaces, like the public square, should express the respect we have for our historic origins and traditions," said Toledo, considered by some as Mexico's best-known living artist.

Cue Monteagudo's response to the campaign was mixed. He praised Toledo for his efforts to preserve the history and traditions of Oaxaca but was noncommittal on the proposal to stop the project. He said he also needed to consider his responsibility to promote job creation in the city. As expected, the construction of the McDonald's restaurant on the plaza has support from the local chapter of the Camara Nacional de la Industria Restaurantera (CANIRAC).

Still, the Cue administration has left open the possibility of conducting a referendum on the matter. "Our administration would have no problem with organizing a public consultation," municipal secretary Carlos Aldeco Reyes told El Universal.

Oaxaca's Gov. Jose Murat, meanwhile, called for a compromise, proposing that McDonald's construct its restaurant a block or two from the plaza instead of placing it directly in the central square. "It doesn't have to come down to hamburgers versus tamales," said Murat, a member of the former governing Partido Revolucionario Institucional (PRI).

If McDonald's is allowed to proceed, whether in the central square or nearby, it would be their second restaurant in Oaxaca city. The fast-food chain, which operates 175 outlets throughout Mexico, met no opposition when it constructed its restaurant near a shopping mall on the outskirts of the city. This restaurant is frequented by employees of a local automobile assembly plant.

Costco meets resistance in Cuernavaca

The discount megastore Costco has also met strong opposition to its proposal to construct a facility in the popular tourist destination of Cuernavaca, the capital of Morelos state. The new Costco would be on the site of the former Casino de la Selva, a tree-lined private center that once housed a historic hotel. The structure contains landmark architecture from the 1940s and 1950s and a series of murals by well-known artists.

The government foreclosed on the property several years ago and retained ownership while seeking a private buyer. It was eventually sold to the US retailer and its Mexican partner Comercial Mexicana more than a year ago.

The two partners received a US$50,000 permit this year to convert the site into a shopping complex. Shortly after receiving the permit, Costco and Comercial Mexicana began clearing some of the land at the site, including trees that had been at the location for several decades.

The start of development of the site prompted a major protest by local residents, who organized the Frente Civico Pro Casino de la Selva. The demonstrators held a sit-in at the location and set up blockades on roads leading to the proposed discount store.

Local riot police responded violently to the protests, beating some of the demonstrators and arresting others on charges of rioting, sabotage, and resisting arrest.

Columnist Talli Nauman of the Mexico City English- language daily newspaper The News blamed the violent police reaction on the administrations of Morelos Gov. Sergio Estrada Cajigal and Cuernavaca Mayor Jose Raul Hernandez Avila, both members of President Vicente Fox's pro-business PAN.

"To the environmental damage already caused by tree cutting and destruction of murals in the historic building, officials have now added abuse of authority and human rights violations to their list of wrongdoings," said Nauman.

Nauman pointed out that Estrada and Hernandez were elected because Morelos citizens were fed up with the authoritarian and heavy-handed regimes of the PRI.

"Didn't Morelos Gov. Sergio Estrada Cajigal Ramirez and Cuernavaca Mayor Jose Raul Hernandez remember that the immediate past governor was impeached for high-handedness in confronting a politically active constituency...?" asked Nauman, referring to former Gov. Jorge Carrillo Olea, who was forced to resign because of charges that he condoned and promoted human-rights violations during his term in office (see SourceMex, 2000-03-01).

The Frente Civico has demanded that the city acquire the land and create a park and heritage center at the site. The Hernandez administration has responded by noting that the city lacks the funds for such a purchase. But critics are quick to point out that Cuernavaca sold the site to Costco and Comercial Mexicana at one-sixth its market value.

Costco and Comercial Mexicana, meanwhile, have promised to convert part of the site to a museum for the murals and some park-like areas. But this pledge masks a greater concern among Cuernavaca residents, which is the uncontrolled development of the city, now swollen to 1 million residents.

"Investment by multinational companies, especially from the United States, has reached its limit," said Flora Guerrero Goff, one of the leaders of the Frente Civico. "They have disrespected Mexicans not only because the megastores bring a lifestyle based on brutal consumption, but they are also destroying our customs, our culture, our traditional food."

Some experts suggest the protests against McDonald's and Costco may be part of a national trend to reject the uncontrolled incursion of foreign-based retailers.

"Protesters in all these cases are showing a kind of rejection of foreign things," said economist Macario Schettino at the Mexico City campus of the Instituto Tecnologico Autonomo de Monterrey (ITAM).

Starbucks opens first Mexican store

In the midst of the protests against Costco and McDonald's, another US-based retailer, the specialty coffee shop Starbucks, opened its first store in Mexico in early September. The coffee shop, which will be operated by the Mexican restaurant management company Alsea, is in the Hotel Sheraton in Mexico City. The company says the new store will be the first of 100 Starbucks planned for Mexico during the next five years.

The opening of the new Starbucks elicited mixed reactions in Mexico. The Mexico City store was among the Starbucks locations in 300 cities and eight countries targeted for protests from the Organic Consumers Association (OCA) in mid- September.

The OCA faulted Starbucks for continuing to use genetically modified coffee beans and failing to purchase sufficient amounts of Fair Trade coffee beans. Fair Trade coffee is an international movement that helps businesses buy directly from rural coffee cooperatives, eliminating the corporate wholesaler, and paying farmers double or more the market price. Still, Fair Trade coffee represents only about 2% of the world market.

Starbucks is only a minor player in the global coffee market, compared with multinational food companies Kraft, Sara Lee, Procter & Gamble, Nestle, and Tchibo. In a press conference in Mexico City in mid-September, the British-based international development organization Oxfam said these companies buy almost half the world's green coffee beans at close to US$0.24 per pound and then sell roasted beans at US$3.60 per pound on the world market. The organization timed the press conference in Mexico and the release of its report in 23 countries to coincide with the opening of the five-day meeting of the International Coffee Organization in London.

Still, some in Mexico welcome the recent trend of new specialty coffee shops like Starbucks, where coffee consumption is very low even though the country is one of the world's leading producers of coffee beans. On average, Mexico's per-capita consumption of coffee is about 700 grams per year, mostly the soluble variety that is produced from lower-quality beans. In contrast, per-capita consumption is 4 kg annually in Brazil, 5 kg in the US, and as high as 12 kg in some European countries.

Starbucks will compete against other established coffee shops like the Coffee Station, owned by Grupo Angeles, and The Coffee Factory, property of Grupo Carso. Some coffee-industry sources say these companies are expected to benefit from the presence of Starbucks. "Starbucks will boost consumption by its mere presence in our market," said Arturo Hernandez Fujiyaki, president of Etrusca Comercial.

Etrusca Cafe is a wholesaler of specialty coffee beans that works closely with grower cooperatives like Cafe de la Selva and Cafe de Nuestra Tierra. These cooperatives recently shifted to production of certified organic coffee in the hope of earning premium prices.

Some organizations said they will push for Starbucks and competitors to use Mexican-grown coffee at their stores in Mexico. "We will encourage the increase in coffee consumption, but also promote the use of Mexican-grown beans and the payment of just prices to small-scale producers," said Gabriela Ejea, coordinator of the Red de Consumidores de Cafe. (Sources: The Dallas Morning News, 02/07/02, 09/24/02; Unomasuno, 08/19/02; La Jornada, 08/19/02, 08/21/02, 08/22/02; La Cronica de Hoy, 08/19/02, 08/26/02; CNI en Linea, 08/26/02, 08/27/02; Notimex, 08/01/02, 09/05/02; Associated press, 08/20/02, 08/23-25/02, 09/10/02; El Universal, 08/19/02, 08/20/02, 09/02/02, 09/16/02; PRNewswire, 09/16/02; Spanish news service EFE, 09/16/02; Reuters, 08/19/02, 09/05/02, 09/18/02; The New York Times, 08/24/02, 09/19/02; Milenio Diario, 08/20/02, 08/28/02, 08/30/02, 09/02/02, 09/20/02; The News, 08/19/02, 08/22-24/02, 09/17/02, 09/24/02; Reforma, 08/15/02, 08/19/02, 08/19/02, 08/30/02, 09/03/02, 09/19/02, 09/23/02, 09/25/02)
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Publication:SourceMex Economic News & Analysis on Mexico
Geographic Code:1MEX
Date:Sep 25, 2002

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