Business-Government Relations in Mexico: The Case of the Sugar Industry

Author(s): Susan Kaufman Purcell

Source: Comparative Politics, Vol. 13, No. 2 (Jan., 1981), pp. 211-233
Published by: Ph.D. Program in Political Science of the City University of New York
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 Business-Government Relations in Mexico

The Case of the Sugar Industry

Susan KaufimanPurcell*

Unlike many developing countries, Mexico has managedto avoid both mili-
tary rule and chronic political instability. A partial, although significant,
explanation for Mexico's unique record is the relationshipbetween politics
and the market. Whereas it is undoubtedly true that there has been, and
continues to be, an "alliance for profits"' between the government and the
private sector in Mexico, the alliance is conditional rather than absolute.
When its political costs become so high as to constitutea threatto the existing
political order, the political elites alterthe terms of the alliance by increasing
their regulation of the economic activities of the private sector. To state it
somewhat differently, political stability in Mexico has been maintainedbe-
cause of a willingness and ability on the part of political leaders to give
priorityto politicalover economic considerationsin times of perceivedcrisis.
In orderto maintainthe priorityof the political, however, Mexican political
elites have had to ensurethatthe state avoid becoming the captive of any class
or set of organizedinterestsin the society. The relative autonomyof the state
from its social bases has thereforebeen a necessary condition for continued
political stability in Mexico. If Mexican political elites had to respondto all
the demandsmade upon them, or even only to those emanatingfrom powerful
economic interests, the state would lack the flexibility requiredto restabilize
the political system in times of crisis. For this reason, even duringperiods of
relative calm, Mexican political elites are busy creatingmechanismsthat can
be used to regulate the behavior of their various constituencies when such
regulationis deemed necessary to maintainor restore political order.
Existing studies of the Mexican political system have tended to emphasize
the mechanismsfor state regulationand control of lower-class groups, a fact

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@ 1981 The City University of New York 211

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ComparativePolitics January 1981

that has served to reinforce the authoritarianimage of the political system.2

What has not been sufficiently examined or documentedis the way in which
the state regulates and controls private economic interests.3This gap in the
literatureis partially the result of a line of thought that assumes that the
business groups, because they have prosperedand possess impressive eco-
nomic resources, have essentially been immune to significant regulationand
control by the government. A more extreme version of this argumentis that
the political and economic elites constitute a single ruling class and it there-
fore makes little sense to expect or seek examples of strong regulation and
control of the Mexican private sector.
Both characterizationsof the relationshipbetween businessand government
in Mexico, however, fail to capturethe complexities and subtleties of their
interaction.While the "alliance for profits" provides the private sector with
considerably more freedom of action than is enjoyed by other classes or
groups in Mexico, business groups also are ultimately subject to state-
imposed reductions or limitations of their privileges and options when the
political elites determinethat such limitations are politically expedient. The
fact that state regulation often does not cause economic hardship for the
private sector does not underminethe argument.The government-regulated
business groups may indeed continue to reap handsomeprofits even as their
political influence over particularareas of the economy is being whittled
away. The issue is statepower ratherthanprivateeconomic wealth. Allowing
continued profit making by the private sector in returnfor preservedor re-
stored political flexibility on the part of the state can be viewed as a small
price to pay for the maintenanceof the political status quo.
The sugar industryconstitutesan interestingcase study of the relationship
between business and governmentin Mexico. More specifically, it illustrates
the way in which political concerns are given priorityover economic consid-
erations when the state's goals of economic growth and political stability
come into conflict. The sugarcase is not typical, and perhapsthere is no such
thing as a typical case of business-governmentrelations. It does, however,
nicely show how and why an initially lucrative and cooperative partnership
between the governmentand the private mill owners was eventually under-
mined when the government's need to put throughpolicies aimed at main-
taining the quiescence of the urbanand ruralpoor came into conflict with the
originaltermsof the alliance between the privatemill owners and the govern-
ment.
The magnitudeof the transformationof the relationshipbetween business
and governmentin the sugarindustrycan be readily appreciatedby reference
to basic data regardingthe industry. As recently as the 1930s, the sugar
industrywas 90 percentprivatelyowned.4 By the end of the administrationof
PresidentLuis EcheverriaAlvarez (1970-1976), thirtyof the country's sixty-

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 Susan KaufmanPurcell

five sugar mills were owned or operatedby the government, with the public
sector mills accounting for more than 50 percent of Mexico's total sugar
output.5The governmentwas also in charge of financing, distribution,and
commercializationof sugar, activities that a short time before had been con-
trolled by the private sugar interests. The history of the sugar industry is
thereforeone of steady encroachmentof the governmentinto what was once a
private domain.
In part, increasing government involvement in the industry can be ex-
plained by economic factors. Sugar has for some time been an important
source of foreign exchange for Mexico. In the early 1970s, Mexico was the
third-largestproducerof sugar in Latin America and earned $233.5 million
from sugarexports,6 while the value of sugarexports averagedapproximately
6 percent of the value of all exports.' The sugar industryemploys more than
12 percent of the economically active population and generates a similar
percentage of the gross domestic product.8 Almost two million Mexicans
depend directly or indirectlyon the industry,9and sugaris also a basic staple
food in the diets of most Mexicans. Failureto producesufficient sugarto meet
domestic consumptionand export needs has had potentiallyserious economic
implications.
The political implicationsof poor performanceby the sugar industryhave
been even more important. Today, for example, the industry employs ap-
proximately 300,000 heads of families and uses nearly 600,000 hectares of
land scatteredthroughoutfifteen different states of the Republic.1oThe clos-
ing of a mill thereforeimplies, as it has always implied, the loss of a liveli-
hood for hundreds,and sometimes thousands, of workersand peasants. Fur-
thermore,the image of the sugarindustryis firmly linked in the minds of most
Mexicans with political radicalism. The origins of the Mexican Revolution
and of "Zapatismo" in particularcan both be traced directly to problems in
the sugarindustry,which caused the mobilizationof the peasantsin the sugar
zones of central Mexico." More recently, it has produced the closing of
Mexico's largest mill by 6,000 peasants, 3,000 of whom were armed.12
Since the Mexican Revolution, the sugar industryhas passed throughthree
phases, each of which may be characterizedby a different relationshipbe-
tween the government and the private sector, or, between politics and the
market. In the first phase, lasting approximatelyinto the late 1950s, the
governmentin essence licensed a system of oligopoly capitalism, combined
with a system that utilized the mill owners as middlemenor caciques for the
control of their dependentpeasant populations. In the second period, lasting
from approximately1958 until 1970, the governmentwas obliged to increase
its involvementin the industryin orderto mitigate some of the harmfuleffects
of unregulatedoligopoly capitalism on the economy in general and particu-
larly on the poor. During this period a "political price" ratherthan a market

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ComparativePolitics January 1981

price came to characterizesugar sales. The increasedgovernmentregulation

made the industryrelativelyunattractivefor continuedprivateinvestment. As
the mill owners proceeded to withdrawtheir capital from the industry, the
governmentwas faced with the need to redefine and reconstructthe existing
system of political control linkages. The third phase, therefore, from 1970
until the present, is characterizedby creeping nationalizationof the industry,
the involvementof the governmentat both the nationaland local levels of the
industry,and the constructionof new mechanismsto link the peasantsdirectly
to the governmentdue to the withdrawalof the privatesectorcacique element
from the industry.
In the pages that follow, we will examine in greater detail this complex
interplaybetween business and government in the sugar industry that pro-
duced progressivelyhigher levels of governmentregulationof the privatemill
owners. We will also explore the extent to which lower-class interestsconsti-
tute a constrainton business-governmentinteraction.Finally, we will attempt
to assess the relativeautonomyof the statefrom both business and lower-class
interestsin the policymakingprocess, as well as the mechanismsand behavior
by means of which such relative autonomyis preservedor enhanced.

The Mexican Revolution of 1910 had a major impact on the sugar industry.
Priorto the Revolution, the industryresembledthose of othercapitalistcoun-
tries, in thatownershipof the sugar-processingmill and the surroundinglands
was vested in a single individualor family, frequentlyof foreign citizenship.
The Revolutionradicallychangedthis situation.The greed of the sugarbarons
prior to the Revolution had led them to defraudthe peasant villages of their
lands. When the governmentof Porfirio Diaz failed to redress the peasants'
grievances and insteadsupportedthe sugarcapitalists, the peasants, underthe
leadership of Emiliano Zapata, rose up in revolt. They were demobilized
during the administrationof President Lazaro Cirdenas (1934-1940), by
means of an extensive agrarianreform programthat confiscated the sugar
lands (and some of the mills) from theirprivateowners and redistributedthem
among the peasants to be farmed collectively under a form of ownership
known as the ejido system.
The agrarianreformprogramthereforehad two effects on the sugarindus-
try. First, it separatedownership of the sugar lands from ownership of the
sugar mills. Second, and as a result of the first, it drove foreign capital from
the industry, since foreigners were loathe to get involved in the volatile
peasant politics that characterizedMexico in the 1930s.
While the agrarianreform programhelped solve the peasant problem, at
least temporarily,the problem of how to keep the mills supplied with cane,

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 Susan KaufmanPurcell

and therebyensure adequatelevels of sugar production,remained.The gov-

ernmenthad several options at the time. One was to allow the marketmech-
anism to functionso thatan equilibriumbetween supply anddemandwould be
reached. Anotherpossibility was to guaranteean adequateincome to all cane
producers.The governmentchose neitherof these alternatives,however, and
instead opted for a solution that would requirepeasantsfarming lands in the
area of an existing sugarmill to produceonly sugarand to sell it to the local
mill. In theory, under the 1943 decree that set up these so-called zonas de
abastecimiento (supply zones), the Ministry of Agriculturewas to designate
which lands were to supply which mills; but in practice,the mill owners made
the decision, choosing "the best lands of nearbyejidos and small properties
for this purpose.''13
The 1943 decree was followed by anotherdecree one year laterthat tied the
caiieros (cane growers) even more closely to the mill owners, in that it made
the price paid to the caiieros depend on the wholesale price of refined sugar
(set by the mill owners) and the average yield of the refineries. It also made
the peasantsdependenton the mills for creditsfor sowing and cultivation, and
for fertilizers, irrigation,and transportation.14
The mill owners to whom the governmenttied the peasantshad by this time
organized themselves, with the aid and blessing of the federal government,
into a producers'association. Originally named SA in 1932 when it
was created, it was laterrenamedUNPASA. The Aztdcar
impetusfor the formationof
the association had come from a revolutionarygeneral, Aar6n Saenz, who
was serving as minister of industry and who at the time had substantial
economic interestsof his own in the sugar industry.The rationalebehind the
formationof the association was to eliminate the ruinouscompetition among
the mill owners that was bankruptingmany of them and causing substantial
economic losses for others. Such competition was particularlysevere when
the world marketprice for sugarwas low. This was the situationthatprevailed
in years immediately following the depression, when Azuicar SA was
formed.15 The initial role of the association was the stabilization of sugar
prices, which was achieved by fixing a productionquotafor each refinery. By
the early 1940s, however, UNPASA's functionshad expanded. In additionto
being the sole supplierof refined sugarfrom the mills, it also had become the
sole supplierof refined sugarto the domestic marketat a price authorizedby
the federal government. UNPASA also became an importantsource of credit
for the mill owners. Its credit functions were complementedby an industrial
sugarfinanciera (credit institution)known as FINASA (FinancieraNacional
AzucareraS.A.), which the government had allowed the members of UN-
PASA to set up in 1943.
The government had urged and supported the organization of the mill
owners principallyfor economic reasons. There was a danger, of course, that

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ComparativePolitics January 1981

their organization could increase their economic leverage beyond a point

considered to be desirable by the political elites. Beginning in the 1940s,
therefore, the governmentbegan to provide itself with a numberof mecha-
nisms and policies that would enable it to regulate the behavior of the mill
owners, should such regulationprove necessary. Although the government
allowed UNPASA to be the sole supplier of refined sugar to the domestic
market, it retainedfor itself the authorityto set the price at which the sugar
was to be sold on the domestic market.Initially, this price was adjustedevery
two years in order to reflect government-authorizedwage increases.1eThe
government also could exert substantialleverage over the industrialistsby
virtueof its controlover the issuance of exportpermits.The amountof money
that could be earned from sugar exports was also controlled through the
establishmentof the "Fondo de Estabilizacirnpara el Precio de Liquidacion
del Azzicar," or FEPLA, a fund that appropriatedmonies derived from a tax
on 90 percentof the differencebetweenthe internationalprice of sugarandthe
domesticpurchaseprice. The sums capturedby the FEPLAwere to be used to
stabilize the income of the sugar industrialistsand cane producers,although
there is some question whether the FEPLA ever really played its projected
role.17 Finally, the governmentenhancedits controlover the sugar industrial-
ists by graduallyincreasingtheir dependenceon governmentcredits.
The fact remained,however, the UNPASA enjoyed extraordinarypower in
the sugar marketby virtue of its role as the sole buyer and seller of refined
sugar. It was therefore highly visible, and the issue of its control began to
awake great public interest. In order to allay suspicion and fear that UN-
PASA's profits were gained at the expense of the poor, the government
decided to increase its role in the organizationitself. In 1948, after a pro-
longed struggle, the governmentsucceeded in rewritingthe statutes of UN-
PASA, giving itself control of the executive council.18
Despite the availabilityof these regulatorymechanisms,however, the gov-
ernment initially made little use of them for purposes of mollifying the be-
haviorof the sugarindustrialists.One possible explanationis that the govern-
ment was unable to do so. The sugar industrialistswere well organized and
exercised great control over both the commercializationand distributionof
sugar. In addition, Aar6n Saenz, the revolutionarygeneral who headed UN-
PASA duringits first thirty-fouryears of existence, was an original member
of the ruling coalition that came to power in the aftermathof the Revolution,
as well as an unsuccessfulpresidentialcandidatein the early years of the new
government. It can be argued that the sugar industry was, in a sense, his
personal"fiefdom," or sector of the economy-his rewardfor having been a
leader of the winning side in the revolutionarystruggle.
Another possible explanation, which does not necessarily invalidate the

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first one, is that the governmenthad, in effect, enteredinto a kind of pact or

bargain with the sugar industrialists.The presidentialdecrees of 1943 and
1944 that had tied the peasantsto the mill owners representedone side of the
bargain.The sugar industrialistswere to do the dirty work of controllingthe
peasant sugar cane growers for the government. In return, the government
would allow the sugarindustrialiststo organizeand basically controlthe sugar
market, thereby providing them with substantial opportunities to make
money. And untilthe late 1950s, this was indeedthe situationthatprevailedin
the industry.The dependenceof the peasantson the mill owners for creditand
other necessaryinputs kept them producingcane for the mills, often at prices
that did not even guaranteethem a subsistence wage. Attemptsto bettertheir
economic situationultimately failed owing to the efforts of the mill owners,
often in cooperationwith representativesof the government-controlledpeas-
ant organizations,to keep the cafierosdivided and weak. The mill owners, on
the other hand, were able to reap generous profits, which some of them
displayed ostentatiously despite the fact that the mills were inefficient and
were becoming increasinglyobsolete.
The original idea of using the mill owners for purposesof political control
of the peasantryno doubt representeda pragmaticresponse to the political
realities of the time. The political system created in the aftermathof the
Revolution was still extremely weak by the early 1940s. The official political
party, first createdin 1929, had been reorganizedalong functionalor sectoral
lines only in 1938. It was therefore far from institutionalized, as further
witnessed by the fact that it was again to be reorganizedin 1946. It could
thereforebe arguedthat the nationalpolitical elites were in no position in the
early 1940s to exercise effective control over the peasantryat the local level.
The mill owners, on the other hand, were much better able to control the
peasants. This had been their prerevolutionaryrole, and in many cases the
Revolution had not erased prerevolutionaryideas and patternsof behavior.
The mill owners were used to controlling "their" peasants. The Revolution
had deprived them of their lands and of control over the peasants that had
worked them. Initially, therefore, the sugar industrialistswere not charitably
disposed either to the new governmentor to its agrarianreform program.By
enabling the mill owners to continueto deal directly with, and to regulatethe
behaviorof, the cafieros, therefore,the governmentwas able to reestablishat
least a modicum of good will with the sugar industrialistsand, at the same
time, achieve its goal of control over a recently demobilized peasantry.
The informal bargain between the national political elites and the sugar
industrialistswas thereforea good deal from the point of view of the two main
partiesto it. In returnfor providingthe sugarindustrialistswith ample oppor-
tunities to make money (as well as to play their old role vis-h-vis the peas-

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ComparativePolitics January 1981

ants), the sugar industrialistsenabled the governmentto attain its economic

goal of expanded sugar production and its political goal of a quiescent
peasantry.

II

By the late 1950s, the costs of the bargainwith the sugar industrialistswere
becoming more apparentto the government.In 1954, Mexico had been forced
to devalue the peso, and the governmenthad attemptedto control the ensuing
inflationarypressuresin part by refusing demands from organized labor for
higherwages. Althoughthe co-optedlaborleaderswere able to implementthe
government's wage policy in the years immediately following the devalua-
tion, by the late 1950s the rank-and-filemembers of some of the stronger
unions rebelled. Accusing their leadersof having sold out to the government,
they replacedthem with leaderswho were more responsiveto their needs and
called a series of strikes during 1957 and 1958.
That the governmentwas alreadyconcerned about the increasing signs of
labor unrest is evident from the fact that it chose Adolfo L6pez Mateos, the
labor minister, to be the official party's candidatein the presidentialelection
of 1958. This representedan importantdeparturefrom recruitmenttradition,
since all previousMexican presidentshad served either as ministerof defense
or minister of the interior prior to their nomination and election. L6pez
Mateos had been a popular and successful minister of labor. He quickly
became an unpopularpresident, however, as he dealt with the mobilized
workers by breakingtheir strikes, imprisoningtheir leaders, and reasserting
governmentcontrol over the breakawayunions. This was, however, only a
short-termsolution to the problem. It was followed shortly thereafterby a
series of prolaborreformsof the constitutionand the LaborLaw, as well as by
a decision to mitigatethe effects of governmentcontrol of wages by freezing
the prices of a series of basic commoditiesthat were staples in the diets of the
poor. Sugar was one of these basic commodities.
The decision to freeze the price of sugar on the domestic markethad been
underdiscussion for some time. While ministerof labor, L6pez Mateos had
apparentlyfavored raising sugar prices in view of an increase in labor costs.
Once president, however, he became convinced that sugar productionwas
high enough to enable the mill owners not only to satisfy the domestic demand
but also to earn sufficient profits throughexport of the surplus sugar.'9
The 1958 price freeze remainedin effect until 1970 and became an impor-
tant element of the government'sdevelopmentstrategyof "stabilizing devel-
opment" (desarrollo estabilizador). Briefly, desarrollo estabilizadorimplied
a focus on economic growth that emphasized control of inflation (achieved
principallyby freezing wages as well as the prices of basic commodities and

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 Susan KaufmanPurcell

inputs for industry), low taxes, and few constraints on the movement of
capital-all of which were supposed to enhance the investmentclimate and
encourage high levels of investmentand reinvestmentby both domestic and
foreign capitalists.Identifiedin Mexico with TreasuryMinisterAntonio Ortiz
Mena, it representedan essentially conservative strategyof economic devel-
opment.
Althoughthe anti-inflationcomponentof the strategyrequiredfrozen prices
on selected commodities and industrialinputs, sugar ultimately was singled
out as the object of a more long-lastingprice freeze than othercommoditiesor
inputswere. Therewere several reasons for this. First, sugarwas both a basic
commodityand an industrialinput. It was thereforevulnerableon two counts.
Second, the cancellationof the Cubansugarquota in the United States in the
aftermathof the Cuban Revolution was followed by successful lobbying ef-
forts by Mexico to increase its quota in the United States.20 The expanded
Mexican access to the U.S. market, combined with generally high interna-
tional prices for sugar in the early 1960s, strengthenedthe government's
conviction that investment in the sugar industry would remain sufficiently
attractivedespite a continued freeze of the price of sugar on the domestic
market. In fact, the governmentcounted heavily on the continuationof high
world marketprices for sugarin orderto maintainthe domestic price at a fixed
level.
The governmentwas also constrainedfrom raising the price of sugar as a
result of its previous behavior. Because the governmenthad been involved in
regulatingthe domestic price of sugar for some time, the price of sugar had
been converted into a political issue with symbolic overtones. This had sub-
stantiallyreducedthe government'sflexibility with regardto pricing sugaron
the domestic market.This is reflected nicely in the words of a mill owner to
the effect that "there is something about sugar that every time the price is
raised, it becomes a nationalscandal."21The fact that individualsboth inside
and outside the governmentbelieved that a majorityof the mill owners fit the
image of the worst kind of privatebusinessman-an entrepreneurlacking in
entrepreneurialspiritand pride in his work and interestedonly in easy profits
at the expense of his workersand of the public-added furtherto the difficulty
of raising sugar prices.
Despite the government's view that the price freeze should not affect the
mill owners' propensityto invest, privateinvestmentin the industrydeclined.
In part this reflected the mill owners' uncertaintiesregarding the govern-
ment's intentions for the sugar industry. But even more significant was the
fact that world sugar prices had begun to decline in the mid-1960s, and the
combinationof declining world prices and a fixed price for sugarled the mill
owners to pressurethe governmentfor an increase in the domestic price of
sugar. Withinthe government,a price increasewas supportedby the minister

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ComparativePolitics January 1981

of the treasury,who arguedthatthe decontrolof sugarprices was necessaryin

orderto increase Mexico's productionof sugar. A continued freeze of sugar
prices was advocated by the ministerof industryand commerce as a way of
avoiding inflation and improvingthe living standardsof the poor. Also rele-
vant, of course, was the fact that sugar was a majorinput in the manufacture
of soft drinksand processed foods, both industriesthat were constituenciesof
the Ministryof Industryand Commerce.22
Given the fact that the governmentrelied so heavily on the mill owners for
political control of the peasantsat the local level, some kind of a solution that
would prevent their exit from the industrywas imperative.The original bar-
gain between the governmentand the sugarindustrialists,wherebythe former
allowed the latter to enjoy a privileged economic position in returnfor their
assuring a docile peasant population, was no longer feasible. The economic
and political realities of Mexico had changed. The governmentrequiredever
higher levels of sugar production, both to meet the internaldemand and to
take advantageof opportunitiesto earnforeignexchange neededfor continued
industrialization.On the other hand, the political constraintsalready noted
made it difficult, if not impossible, for the governmentto raise the domestic
price of sugar.
The solution was a compromisethat received only lukewarmsupportfrom
the individualswho were partiesto it. Its essence was a programof extensive
credits to the mill owners, with the money ostensibly to be used for the
much-neededmodernizationof the mills and the expansion of existing pro-
cessing capacity. This solution obviously entailed the risk that the credits
would leak out of the industry,since sugarwas by the mid-1960s a much less
attractiveinvestment opportunitythan other alternativepossibilities. On the
other hand, the credit solution allowed the governmentto continueto pamper
and rewardthe mill owners for theirpolitical services at the local level, while
avoiding inflation and improvingthe living standardsof the poor. Also rele-
vant, of course, was the fact that sugar was a majorinput in the manufacture
of soft drinksand processed foods, both industriesthat were constituenciesof
the Ministry of Industryand Commerce.22
Events took their more predictablecourse. Most of the mill owners eagerly
took advantage of the generous credits made available to them. But their
perceptionsof the situationandtheirprioritieswere differentfrom those of the
nationalgovernment.The mill owners repeatedlystatedthateven with the aid
of credits, the continuedfreeze on the domestic price of sugarmade it unprof-
itable for them to stay in the industry.They also affirmedthat if the price of
sugarremainedfrozen they would not be able to continueto service, let alone
amortize, their outstandingdebts. And their rapidly increasing indebtedness
made many of them feel extremely vulnerable.
The mill owners were also disturbedby the increasing incursions of the

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 Susan KaufinanPurcell

governmentinto their domain. The price freeze and the credit programwere
only two examples of the government'sexpandedinfluence over the industry.
In the 1960s, the governmentalso began interveningdirectly in the affairs of
the Executive Council of UNPASA; and in 1966, the governmentsucceeded
in acquiring Finasa, the sugar credit institution, from the mill owners; the
latter ultimately sold their shares because they no longer felt that the capital
they had invested in Finasa was producingan adequatereturn. In addition,
some believed that failure to sell their shares to the government might de-
crease their access to governmentcredits at a future date.24
Perhapswhat was particularlyunsettlingto the mill owners, however, was
the fact that the government's intentions regarding the sugar industry re-
mained unclear. The expanded government role in the industry could be
interpretedas a reflection of a covert policy decision to nationalizethe indus-
try gradually. On the other hand, the government's behavior could just as
reasonably be interpretedas a series of ad hoc responses to particulareco-
nomic and political problems.If this was the case, it reflectedtheabsence of a
policy towardthe industry-a situationthat was also disturbingsince it made
continued investmentin the sugar industryrisky.
By the late 1960s, the situation became more clearly defined. From the
government'spoint of view, the credit programhad become too costly, and it
was not at all clear that the majorityof mill owners were using the funds for
the purposeof upgradingandexpandingtheirmills. It was widely believed, in
fact, that they were decapitalizingtheir mills and investing the money loaned
them by the governmentin other industriesand in urbanreal estate.25As one
disillusioned government official summarizedthe impact of the credit pro-
gram:

It is truethatmanyof themillownerswerebadempresarios(entrepreneurs)
to
startwith. However,we strangledthemby not allowingpriceincreasesand
convertedthemfrombadempresariosintothieves.26

The worst fears of the governmentwere realized when some of the loans
fell due, around 1968, and a significant numberof mill owners claimed an
inability to repay their debts. In the more promising cases, the government
was willing to renegotiatethe debt, but in others, it decided that the situation
was hopeless and took over the failing mills.27 The hard line taken by the
governmentagainst some of the sugar industrialists,which caused the gov-
ernmentto increase its ownershipof formerlyprivatemills, also encouraged
othermill owners to decide that the time had arrivedto make an exit from the
sugar industry.They thereforeoffered to sell their mills to the government.
In a sense, these were offers the governmentcould not refuse. This was not
because they representedeconomic bargains.Rather, in most cases, the mills

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were either obsolete or had been so decapitalizedthat a major investment

would be requiredin orderto makethem efficient processorsof sugar. Rather,
the governmenthad to take the mills over for economic and political reasons,
since the closing of even a single mill would put thousands of peasants,
workers, and their families out of work and would destroythe economic base
of entire ruralcommunities.
As the decade of the 1960s drew to a close, therefore, the government
found itself faced with serious and growing economic as well as political
problemsinvolving the sugar industry.Economically, by 1969 it had come to
control eighteen sugar mills that accountedfor approximately30 percent of
total sugarproduction.28Trainedpersonnelas well as substantialgovernment
investment were requiredto ensure that these mills would not constitute a
permanentdrainon the public treasury.In more generalterms, steps had to be
taken to raise the efficiency of the entire industry.It was generally conceded
that whatever increases in sugar productionthat had occurred in recent de-
cades were attributablealmostexclusively to the expansion of the areasunder
cane cultivation, and not to higher cane yields per hectareor increasedeffi-
ciency of the mills.29
In addition,the rapidlygrowing population,combinedwith the frozen price
of sugar on the domestic market, produceda situation in which sugar con-
sumptionwas increasingconsiderablyfaster than sugarproduction.This was
because the low domestic price encouragedpoor people in particularto sub-
stitute sugar for other more expensive sources of calories. By the 1970s,
therefore, Mexico's rate of sugar consumptionwas one of the highest in the
world, with Mexicans consuming more than 40 kilos of sugar per capita
monthly-far over the world averageof 18 kilos per capita.30The comparison
was put more graphicallyby a governmentofficial who statedthat 60 million
Mexicans consume more sugar than 800 million Chinese.31If consumption
were to continueto increasefasterthanproduction,within a few years Mexico
would be consuming its exportable surplus. Indeed, this was what some
studentsof the industryhad already begun to predict.32Since sugar was an
importantsource of foreign exchange, this was a disturbingpossibility. The
thought, and possibility, thatMexico ultimatelywould have to importsugarin
order to satisfy the internal demand was even more alarming, given the
country's large and rapidly growing foreign debt.
Politically, the withdrawalof a number of private mill owners from the
industryimplied the breakdownof the mechanismsfor political control of a
substantialportion of the peasantry. Since private ownership was being re-
placed by public ownership, this meant that new methods for linking the
peasantryto the governmentin order to ensure its continued demobilization
would have to be discovered. The original bargainbetween the government
and the private mill owners was in a process of disintegration.The fact that

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1976 was a presidentialelection year meant that the governmentwould have

to respond quickly to the changing situationin the sugar industry.
The fundamentalweakness of the bargainwas the assumptionof an endur-
ing complementaritybetween the interestsof the governmentand the interests
of the sugar industrialists.In the beginning, it had indeed been feasible to
allow the industrialiststo dominatethe sugarmarketat all levels in returnfor
their help in ensuring the continued demobilization of the peasantry. But
economic and political problemsat the nationallevel obliged the government
to increase its control over the mill owners. The governmentthoughtthat the
alliance could still work, as long as it limited its interferenceto the national
level and allowed the mill owners to remain the political and economic
strongmen at the local level. The problem was, however, that the sugar
industrialistscould only be relied on to play theirpolitical controlfunctionif it
did not adverselyaffect their ability to earn good money. The growing regula-
tion of the sugarindustryby the governmentwas perceived as a threatto their
continuedability to do so, with the resultthatthey began to leave the industry.
Again in 1970, as in the 1930s and early 1940s, the governmentwas faced
with the problemof what to do with a potentiallydestabilizingpeasantry.This
time, however, it no longer had the option of indirectcontrol via the private
sector but instead would have to deal directly with the peasants.

III

The advent of a new sexenio (six-year presidentialterm) in Mexico usually

results in a series of major policy innovations. The new administrationof
President Luis EcheverriaAlvarez (1970-1976) proved no exception to the
rule. Within weeks of his accession to power, he began to restructurethe
sugar industry.
The 1970 reformsrepresentedan effort to come to grips with the fact that
althoughthe governmentwas now involved in all aspects of the sugar indus-
try, its capabilitiesfor formulatingand implementingcoherentpolicies were
very low. One problemwas that the government-ownedor government-man-
aged mills were administeredby a variety of public institutionsthat included
Nacional Financiera,Finasa, and the Banco Ejidal, each of these institutions
having somewhat different managementcriteria.33Also problematicwas the
fact that differentinstitutionshad overlappingfunctionsthat sometimes led to
wasteful competition. Finally, because of the unplannedway in which the
governmenthad increasedits involvementin the sugar industry,there was no
hierarchyof commandand, hence, no organizationspecifically chargedwith
controlling or coordinatinggovernment agencies or institutions involved in
the sugar industry.
The 1970 reforms, therefore, created a new institution,the Comisi6n Na-

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cional de la IndustriaAzucarera,and gave it responsibilityfor directingand

coordinatingthe sugar industry. All government-ownedor government-man-
aged mills were placed underthe directionof ONISA (OperadoraNacional de
Ingenios SA), a new agency created for this purpose. Finally, the private
sector's interests in UNPASA were bought out by the government, and its
financing powers were transferredto Finasa, which was now to have sole
responsibilityfor the financial aspects of the industry. UNPASA's function
was reduced to what it had been when the private sector had created it four
decades earlier-the marketingand distributionof sugar and its derivatives,
inside and outside the country.34
Sugar prices, which had been frozen on the domestic marketfor the past
twelve years, were also increased to a level that the government believed
would allow the mills to operate at a profit. The price increase would indi-
rectly benefit the peasantcane producers,since their income had been based
on a percentageof the price paid for sugar. In fact, the cane producershad
suffered from the frozen price for sugar considerably more than the mill
owners had. The latter, at least, had had access to ample credits, with which
many of them did as they pleased. The cane producershad not had a compara-
ble sourceof compensation,and a majorityof them had become chronicallyin
debt to the mill owners as a result.35They had dealt with their declining
economic situation in the best way they could. This mainly involved their
refusing to plant only cane in the zonas de abastecimiento and their turning
insteadto more lucrativecrops. The problemhad become particularlyacute in
irrigated sugar zones, such as the state of Sinaloa, where production was
declining so rapidlythat the governorstatedin the early 1970s that the indus-
try was in danger of disappearingfrom the state.36 The 1970 price increase
was thereforeto restore an economic incentive for productionof cane to the
peasant and small producer.
The Echeverriaadministrationalso embarkedon a big constructioneffort in
orderto expand Mexico's sugarproduction.The constructionof new govern-
ment-owned mills was not the only available solution to the problem, since
most of the existing mills were operatingconsiderably below capacity. By
utilizing governmentmonies for the modernizationof the mills and the instal-
lation of irrigationsystems, the governmentcould probablyhave achievedthe
same goal. But the modernizationoption would have been an exclusively
economic solution, and the problems were also political. By the 1970s the
situationin the countrysidehad become worrisome, as the numberof landless
peasantsas well as the numberof land invasions had increasedsubstantially.37
The constructionof new mills could help amelioratethese problems, as they
would provide new employment for thousandsof peasant families. It is no
accident that the majorityof new mills were to be built in areas-principally
the southeasternpartof the country-that were not ideally suited for growing

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cane but that did have very large numbersof landless and unemployedpeas-
ants.38
The government's concern about the potentially destabilizing situation in
the countrysideis also evidenced by several additionalreforms. Includedin
this category are the creation of trust funds for financing the installationof
electricity, potable water, and schools in cane communities, for constructing
housing and union stores for the relatively well-organizedmill workers, and
for improvinghealth and sanitationfacilities for the cane cutters.39
If the government'srole in the sugarindustrypriorto 1970 had encouraged
privatemill owners to leave the industry,the 1970 reforms served to acceler-
ate the process. Between 1969 and 1975, an additionalthirteen mills were
added to the public sector, bringingthe total numberof mills under govern-
ment control to thirty-one.Togetherthey accountedfor 50.5 percentof total
sugarproduction.40 To a certainextent, the government'sbehaviorhad served
to concentrateprivatemill ownershipin the hands of the most efficient, and
perhaps most dedicated, producers.Nevertheless, it was not clear when the
limits of theirtolerancewould be reached, causing them too to withdrawfrom
the industry. In the meantime, the remainingprivate owners had adopted a
wait-and-seeattitude.No new sugarmills had been built by the privatesector
since 1966,41 and government efforts to get the private sector to become
co-owners of the new mills being built met with repeatedfailure. Even gov-
ernment offers to turn some of the new mills over to the private sector
produceda negative response.42
There were also growing signs that public ownershipof the sugar mills not
only had not solved problemsof inefficient production,but may, in fact, have
exacerbatedthem. Sugar productionactually declined between the 1973/74
and 1974/75 harvest seasons. The sugar content of the cane also decreased
during the 1970-1975 period, in relation to the preceding five-year period.
The numberof working hours wasted rose, and there was evidence that the
mills were able to take advantageof a smaller proportionof their installed
capacities.43In terms of all these indicators, the performanceof the govern-
ment mills was noticeably inferior, particularlywith respect to the use of
installed capacity and the amount of working hours that were wasted.
The relatively poor performanceof the governmentmills can be partially
explainedby the fact thatthe mills the governmenttook over from the private
sector were in the poorestcondition. More than half, for example, were more
than thirty years old.44 Also relevant is the fact that the governmentdid not
have at its disposal a corps of technicianstrainedand experiencedin running
sugar mills.45The absence of such a corps made the governmentparticularly
vulnerable to political pressures. In many cases, therefore, the individuals
selected to run the government mills received the appointmentbecause of
valuable political services performedor because they had good political con-

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nections or considerablepersonalpower on the local level in their own right.

Finally, the corruptionthat is endemic to the entire Mexican political system
quickly permeatedthe governmentmills as well, thereby contributingto the
poor performancestatistics of the public sector sugar mills.
The other part of the explanation for the declining productivity of the
governmentmills is related to the fact that the 1970 reforms were primarily
concerned with restructuringthe government sugar bureaucracy, not with
increasing productivitythroughoutthe industry. The productivityissue was
dealt with indirectly, in the sense that the government believed that by
rationalizingand centralizingthe sugar bureaucracyin the public sector, its
ability to plan, coordinate and implement policy efficiently would be en-
hanced. Nevertheless, low productivity was also related to the absence of
marketstimuli for the productionof sugar, coupled with a fixed government
price for sugar that made the cultivation of cane increasingly unattractivein
economic terms. Although the 1970 reforms raised the price of sugar, the
effort proved to be merely a short-termpalliative, since within two years it
was below the equilibriumpoint on the U.S. and world markets.46
As a result of the low fixed price for sugar, therefore, the cane producers
lacked sufficienteconomic incentives to continueproducingcane. The private
mill owners, concernedprimarilywith having theirincome exceed theircosts,
were willing and able to exert pressureon the peasants, via the withholdingof
credits, machinery,or whatever, in order to make them cooperate. This was
not the case in the governmentmills. There, the administratorof the mill was
more interestedin avoiding political problems than in earning profits. This
was because he was well aware of the fact that in the Mexican political
system, keeping political order brought often great rewards, while making
public sector enterpriseseconomically profitable was of lesser importance,
especially if it had to be achieved at the expense of political order. The
administratorof the governmentmill, therefore, was much more willing, and
able, to tolerateinefficient production.As a result, performanceof the public
sector mills declined more rapidlythan that of the private mills.47
While productivitydeclined, or grew at a very slow pace, sugarconsump-
tion continued to increase rapidly. Between 1970 and 1975, internal con-
sumption grew 30.9 percent while production increased by only 15.4 per-
cent.48
By the mid-1970s, therefore, a furtherrestructuringof the sugar industry
was in order. Additionaleconomic incentives were necessary in orderto halt
the reductionin efficiency and productivity.Furthermore,the withdrawalof a
large numberof mill owners from the industrybetween 1969 and 1975, and
the high probabilitythat such desertion from the industry would continue,
given the uncertaintysurroundingthe futureof the industry, made it impera-
tive that the government restructurethe mechanisms for the control of the

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peasantry.No longer could the governmentrely on the privatemill owners to

serve as intermediaries.The peasantswould now have to be linked directlyto
the government via a system that was more effective than the bureaucratic
apparatuscreated by the 1970 reforms.
The anticipated "restructuringof the restructuring"occurred in 1975.49
The economic aspects of the reform package raised the price paid to the
cafierosfor their sugarcane by 50 percentover the 1970 figure. Althoughthe
price of cane was still not to be determinedby the market, it was tied to the
price paid for competitive crops such as maize, frijol, rice, sorghum, and
soybeans. In addition,the price paid for cane no longer was to be based on its
weight, but ratheron its sucrose content. By means of these reforms, the
governmenthoped to deprive the peasantsof the economic incentive to plant
crops otherthan sugarcane and to encouragethem to be more concernedwith
the quality, as opposed to the quantity, of the cane they produced.
The 1975 legislation also spoke of the government's intention to create
agro-industrialunits that were to be farmed collectively. This provision was
intendedto resolve the problemendemic to the sugarindustry-the division of
the ejido lands into thousandsof small plots thatwere individuallyfarmed. By
groupingall these plots together, they could be worked more efficiently. But
once again economic priorities were sacrificed to political ones. Perhaps
because it feared the political pressurethat a unified cafieropopulationcould
exert on it, the governmentunderminedits own proposalwith anotherprovi-
sion to the effect that each peasant, ratherthan the agro-industrialunit as a
whole, was to contractthe terms of the sale of his cane individuallywith the
mill. Under such conditions, the collective structureenvisioned in the legisla-
tion could not help but remain a mere formality.
Politically, the 1975 reforms broke the linkage mechanism that had here-
tofore tied the peasantproducersto the mill owners. This was done in several
ways. First, credit for the cafieroswas no longer to be channeledthroughthe
mill owners but, rather,was to be given to the cane producersdirectly by the
governmentthroughFinasa. The governmentwas also to set up a trustfund to
enable the peasants to purchaseneeded machineryand other inputs. Prior to
the 1975 reforms, such funds, or the machineryitself, had been providedby
the mill owners. Second, peasants living in the area surroundinga mill were
no longer requiredto produce cane to sell it exclusively to the mill in their
zone. Thus, a second link between the cafieros and the mill owners was
severed.
The new legislationthatbroketies between the cafierosand the mill owners
simultaneouslycreated a new mechanism to link the cafieros directly to the
government.These were the so-calledComisionesde Planeacidn y Operacion
de Zafra (Commissionsfor Planningand Overseeingthe SugarHarvest), one
of which was to be located in each area where there was a sugar mill. The

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commissions were to be tripartitein structure, with representativesof the

government, the mill owners, and the cane producersas members. For the
first time, therefore,the peasantswere to be involved in the decision-making
process of the sugar industry.
The participationof the peasantshowever, was to be more formal or sym-
bolic than real. Their representativesto the various commissions were to be
elected by the members of the various cafiero organizations. Since recent
Mexican history is replete with examples of government manipulationof
peasant electoral processes, it remaineda moot question whether such elec-
tions would really reflect the preferences of the peasants. In addition, the
tripartitestructureof the commissions could effectively nullify the power of
the peasant representativein the majorityof the cases. This was because in
1975, fifty-six of the sixty-two mills in the countrywere owned or managed
by the government,which meantthaton fifty-six of the commissions, both the
governmentand mill representativecould representthe views of the National
Sugar Cane Commission, thereby outvoting the peasant representative.
By 1980, it was already apparentthat the 1975 reforms had not attained
their economic goals. The public sector controllednearly 70 percentof sugar
production.51Subsidies to the sugar industrytotaled 21 billion pesos, which
was twenty-onetimes greaterthan the subsidythe industryreceived in 1976.52
Sugarexports disappearedbetween 1976 and 1978, and by 1980 Mexico was
importingbetween 600,000 and 800,000 tons of sugar.53In response to this
situation, the governmentannouncedstill another series of reforms in June
1980. Old mills were to be renovated, many existing mills were to be ex-
panded, and seven new mills were to be constructed. And despite repeated
assertions by government spokesmen throughout the late 1970s that the
domestic price of sugarwould not be increased,the June reformsraised sugar
prices 60 percentover their previous level.54Whetherthese new reformswill
resolve the problemsof the sugar industryremainsto be seen.

IV

Perhaps the most striking conclusion to be drawn from the analysis of

business-governmentrelationsin the sugarindustryis that the individualmill
owners prosperedeconomically despite the fact that their economic position
as a groupdeteriorated.Althoughthe internalprice of sugarremainedfrozen,
they were able to reap handsomeprofits from export sales when world sugar
prices were high. When internationalsugarprices fell, the governmentgener-
ously provided the mill owner with credits to facilitate privateinvestmentin
the industry. The uncertaintyregardingthe future of the sugar industryen-
couragedmany mill owners to abandonthe industryand transfertheir capital
to more lucrative sectors of the economy. Here, the "alliance for profits"
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worked to transformmany mill owners into urban-basedenterpreneurswith-

out great economic sacrifice on their part.
This cannot be said of the Mexican government, the other partnerto the
alliance for profits. Although the governmentincreasedits capital assets, the
expansion of the state into the sugar industrysimultaneouslyincreased gov-
ernmentexpenses to the extent that the industrytoday receives government
subsidies totaling 21 billion pesos. An alliance for profits that saddles one of
the partnerswith controlof an industrythat requiresa 21 billion peso subsidy
is hardly a capitalist's dream.
The high economic costs that the governmenthad to pay as a result of its
alliance with the privatesectorcould lead to the conclusion thatbusiness is by
far the dominantmemberof the alliance. The problemwith this conceptuali-
zation, however, is that it assumes that the ability to make money equals
political power. In fact, when we review the major decisions made with
regardto the sugar industry, there is little evidence of business power. The
mill owners resisted the increasing incursions of the government into their
domain and fought against the frozen domestic price of sugar, both to no
avail. In a very real sense the mill owners were actually driven from the
industry because of a series of decisions by the Mexican governmentover
which they had little or no control. Where the mill owners had once enjoyed
significant decision-making power over both the peasantry and the central
government,they were ultimatelydeprivedof both and providedwith money
and new economic opportunitiesas compensationfor their loss.
A review of the major decisions made in the sugar industry leaves little
doubt about where the initiative lay. The government consistently took the
lead in restructuringthe sugar industry. Its decisions rarelycould be directly
attributedto demandsemanatingfrom the mill owners. Nor could they usually
be accounted for by specific demands made by the peasant producers, who
called for higher sugar prices, increased economic benefits, and more
decision-makingauthority.
The initiating role played by the government, however, does not in itself
constitutestrongevidence of state autonomyover organizedinterestsin Mexi-
can society. This is because most of the decisions made by the government
were in response to a situation over which it had little control. There is no
doubt, for example, that had the governmentbeen free to expand or not to
expand its involvement in the sugar industryit would have chosen the latter
option. That the governmentwas ultimately obligated to pursue a course of
action not entirely to its liking (and opposed by the private sector) can be
attributedprincipallyto the diffuse, but nonetheless real, political constraints
exerted upon it by lower-class groups. The government had to expand its
involvementin the sugarindustryin orderto avoid widespreaddisaffectionof
the peasantryand the urbanpoor.
In economic terms, the expansion of the state into the sugar industry in
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ComparativePolitics January 1981

order to avoid populardiscontent was extremely costly on two counts. The

encroachmentof the state into what was originallya privatedomainmade the
industryless attractiveto privatecapital. Desiring only to regulate,ratherthan
displace, private capital from the sugar industry, the governmentwas led to
adopt a costly credit scheme to slow the flight of private capital from the
industry-a flight that increasedgovernmentregulationproduced. When the
credit scheme failed to achieve its objective, the governmentthen hadto offset
the decreasingprivatecapitalin the industrywith public monies, since it could
not allow the industryto collapse.
The picture that emerges, therefore, is of a governmentthat assiduously
guardsits autonomyin the decision-makingprocess, essentially by buying the
cooperationand supportof all affected constituencies. The price that must be
paid for alienating or damaging the interests of any particularconstituency
dependson the ability of a particulargroup to destabilize the political system.
In the case of the privatesector, unpopulargovernmentdecisions can produce
an immediateand potentially serious reaction in the form of massive capital
flight. Lower-classgroups, in contrast,because of the ratherelaboratemech-
anisms that have been createdby the governmentfor their control, have only
the long-term,yet ultimatelymoredevastating,responseof mass mobilization
should they wish to moderatesignificantlythe government'sbehaviortoward
them.
The government's ability to manipulateand control lower-class behavior
enables the governmentto focus its "payoff" system on the private sector,
which is less amenableto controlandcan cause more damagein the shortrun.
In contrast,the dissatisfactionof the lower classes, because they cannoteasily
generate a rapid and effective response to objectional governmentbehavior,
does not have to be attended to immediately. This explains why various
alliances that the government has established with constituent groups to
maintain its decision-making autonomy do not produce equal rewards for
these groups. More concretely, the alliance between the governmentand the
private sector benefits business groups more than the alliance between the
governmentand the lower-class groups benefits the urban-ruralpoor.

NOTES

*I particularlywould like to thankJohn F.H. Purcell for his excellent suggestions and ideas. I
have also profited greatly from the comments of RichardE. Baum, David Becker, Patriciade
Leonardo,Fred Estevez, William P. Glade, Jane S. Jaquette,Stephen Krasner,Paul M. Sacks,
ArthurA. Stein, and EzraN. Suleiman. This articleis based on researchthat involved nearly200
interviewswith individualsin the Mexican government,the privatesector, and academic institu-
tions. The researchwas carriedout in Mexico between September 1975 and October 1976 and
was supportedby a fellowship from the Joint Committee of the American Council of Learned
Societies and the Social Science ResearchCouncil. Many of the ideas in this paper were devel-
oped while I was a Fellow at the Woodrow Wilson InternationalCenterfor Scholars, Washing-

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 Susan KaufmanPurcell

ton, D.C., between November 1976 and August 1977, and a Visiting Fellow at the Overseas
DevelopmentCouncil, Washington,D.C., between September1979 andJanuary1980. Finally, I
am gratefulto the Academic Senate of the Universityof California,Los Angeles, and the Council
on Foreign Relations, New York, for their financial support.
1. The term is from ClarkW. Reynolds, The MexicanEconomy:Twentieth-Century Structure
and Growth (New Haven, 1970), p. 186.
2. Examples of works that emphasize state regulation and control of lower-class groups in-
clude: David Ronfeldt, Atencingo: The Politics of Agrarian Struggle in a Mexican Ejido (Stan-
ford, 1973); Roger Bartraet al., Caciquismoy Poder Politico en el Mixico Rural (Mexico: Siglo
XXI Editores, 1978); Susan Eckstein, The Poverty of Revolution:The State and the UrbanPoor
in Mexico (Princeton, 1977); and Judith Adler Hellman, Crisis in Mexico (New York, 1978).
Books that offer general analyses of the authoritarianaspects of the Mexican political system
include:Jos6 Luis Reyna and RichardS. Weinert,eds. Authoritarianismin Mexico (Philadelphia,
1977), Evelyn P. Stevens, Protest and Response in Mexico (Cambridge,[Ma.], 1974); Roger D.
Hansen, The Politics of MexicanDevelopment (Baltimore, 1979); FrankBrandenburg,The Mak-
ing of ModernMexico (EnglesideCliffs, [N.J.], 1964); and SusanKaufmanPurcell,TheMexican
Profit-SharingDecision: Politics in an AuthoritarianRegime (Berkeley, 1975).
3. The subjectof governmentregulationof the privatesector is treatedin RaymondVernon's
classic study, The Dilemma of Mexico's Development: The Roles of the Private and Public
Sectors (Cambridge,[Ma.], 1965); Vernon, ed. Public Policy and Private Enterprisein Mexico
(Cambridge,[Ma.], 1964); John F.H. Purcell and Susan KaufmanPurcell, "Mexican Business
and Public Policy" in James M. Malloy, ed. Authoritarianismand Corporatism, in Latin
America (Pittsburgh, 1977), pp. 191-266; Douglas Bennett, Morris J. Blachman and Kenneth
Sharpe, "Mexico and MultinationalCorporations:An Explanationof State Action," in Joseph
Grunwald, ed. Latin America and WorldEconomy: A Changing InternationalOrder (Beverly
Hills, 1978), pp. 257-82; Bennett and Sharpe, "TransnationalCorporationsand The Political
Economy of Export Promotion:The Case of the Mexican Automobile Industry,"International
Organization, 32 (April 1979), 177-201; and Bennett and Sharpe, "Agenda-Setting and Bar-
gaining Power-The Mexican State vs. TransnationalAutomobile Corporations,"WorldPoli-
tics, 32 (October 1979), 57-89.
4. Lic. Aar6n Saenz Couret, "Producci6n Azucareradel Sector Privado," IEPES/PRI(In-
stituto de Estudios Politicos Econ6micos y Sociales/PartidoRevolucionarioInstitucional), Re-
uniones Nacionales, (mimeo, n.d., but during 1976), p. 2.
5. Samuel I. del Villar, "Depresi6n en la IndustriaAzucarera:Frentela Crisis, Demagogia,"
Excelsior, 21 October 1975, p. 6.
6. Finasa (FinancieraNacional AzucareraSA), PlacementMemorandumdated August 1976,
p. 4, and RobertaLajous Vargas, "La Participaci6nde Mexico en el Mercado AzucareroNor-
teamericano," (tesis para optar por el grado de Licendiado en Relaciones Intemacionales, El
Colegio de Mexico, Centrode Estudios Internacionales,Mexico, D.F., 1975), p. 1 of Epilogue,
and Appendix.
7. del Villar, "Depressi6n en la IndustriaAzucareraMexicana," Foro Internacional, 16
(April-June,1976), p. 526. This excellent articleis basic readingon the Mexican sugarindustry.
8. Agustin Pascal Pacheco, "Industria Azucarera," IEPES/PRI, (mimeo, n.d. but during
1976) p. 2, and Excelsior, 14 June 1976, p. 18.
9. Speech by EnriqueOlivares Santana,Presidentof the GranComisi6n of the Senate, upon
approvingthe new sugar legislation of October 24, 1975, (n.d., mimeo).
10. Jose Maria Martinez, "Introducci6n,to the "Reuni6n Nacional sobre IndustriaAzucar-
era," IEPES/PRI,Sinaloa, May 1976, p. 1; del Villar, "Depressi6n en la IndustriaAzucarera
Mexicana," fn. 7, 526, and Excelsior, 14 June 1976, p. 18.
11. For a detailedstudy of Zapataandthe Mexican Revolution, see JohnWomack, Jr.,Zapata
and the Mexican Revolution (New York, 1969).
12. Carlos Bonilla Machorro,CariaAmarga:Ingenio San Crist6bal, 1972-73 (Mexico, D.F.:
PublicidadEditora, 1975), pp. 61, 63.
13. Nora L. Hamilton, "Notes on the Mexican SugarIndustry,"and personalcommunication
with the author.
14. Ibid., and Crist6bal Perdomo Castro, "Control Administrativoy Contable del Finan-

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ComparativePolitics January 1981

ciamientoal Campoen la IndustriaAzucarera," (tesis paraobtenerel titulo de ContadorPuiblico,

UniversidadNacional Aut6nomade Mexico, Escuela Nacional de Comercio y Administraci6n,
Mexico, D.F., 1965), p. 18.
15. Perdomo (fn. 14), and interviews, members of the private sector involved in the sugar
industry,Mexico City, 1976. (All informationmade availableto the authorduring interviewsin
Mexico City was conditionedon a promise by her that the identitiesof the informantswould not
be revealed.)
16. Interview, member of the private sector involved with the sugar industry, Mexico City,
1976.
17. del Villar, in Foro Internacional, fn. 7, 542.
18. Ibid., 541.
19. Interviews, membersof the privatesector and the Mexican governmentinvolved with the
sugar industry,Mexico City, 1976.
20. For a detailed account of these lobbying efforts see Lajous Vargas, fn. 6.
21. Interview, member of the private sector involved with the sugar industry, Mexico City,
1976.
22. Ibid. Approximately41 percent of total sugar consumption in Mexico is by industry,
particularlyproducersof beverages, breadsandcrackers.Felipe PerezZozaya, "Situaci6nActual
de la IndustriaAzucareraNacional y Sus Perspectivas," (unpublishedmanuscript,76 pp. plus
Appendices, September 1975), pp. 29-30.
23. Interviews, membersof the Mexican governmentand of the privatesector involved in the
sugar industry,Mexico City, 1976.
24. Ibid.
25. Interviews, membersof the Mexican governmentinvolved in the sugar industry,Mexico
City, 1976. PresidentEcheverriareinforcedthis view when, in 1975, upon announcinga restruc-
turingthe sugarindustry,he statedthat "a testimonyto the high profitabilityof the sugarindustry
are some very tall buildings on the Paseo de la Reforma. Many fortunes have originatedin the
sugar industry." (del Villar, in Foro Internacional, fn. 7, 533.)
26. Interview, member of the Mexican governmentinvolved in the sugar industry, Mexico
City, 1976.
27. del Villar, in Foro Internacional, fn. 7, 534-35, and interview, member of the private
sector involved in the sugar industry, Mexico City, 1976.
28. Ibid., 550.
29. Ibid., fn. 7, 529.
30. Lic. Enrique Azuara Sales, "Comercializaci6n del Azuicar," IEPES/PRI, Reuniones
Nacionales, (mimeo, n.d., but during 1976).
31. El Universal, 24 April 1976, p. 14. The statementwas made in 1976, but the comparison
between Mexico and Chinawas probablyvalid in 1970 as well, since by then the price of sugaron
the domestic markethad been frozen for twelve years.
32. del Villar, in Foro Internacional, fn. 7, 581.
33. C.P. Oscar Quintanilla Estrada, "Funci6n del Sector Publico en la Produccidn de
Az6icar," IEPES/PRI,Reuniones Nacionales, (mimeo, n.d., but during 1976), pp. 1-2.
34. Speech by EnriqueOlivares Santana, (fn. 9), and interviews, members of the Mexican
governmentand the private sector involved with the sugar industry,Mexico City, 1976.
35. Sergio MaturanaMedina and Ivan RestrepoFernandez,El Azuicar,Problema de Mexico,
(Mexico, D.F.; Centro de InvestigacionesAgrarias, 1970), p. 41.
36. del Villar, in Foro Internacional, fn. 7, p. 561.
37. Estimatesof the numberof landless peasantsin the Mexican countrysiderange between a
low of two million and a high of six million. (interviews, Mexico City, 1976.)
38. Nacionalde IndustriasAzucareray Alcoholera, "Nueva Legislacion Azucarera,"
Carmara
(17 November 1975, mimeo).
39. Perez Zozaya, fn. 22, pp. 25-26.
40. del Villar, in Foro Internacional, fn. 7, 550.
41. Finasa, PlacementMemorandum,fn. 6, p. 8.
42. Interviews, membersof the Mexican governmentand private sector involved in the sugar

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 Susan KaufinanPurcell

industry, Mexico City, 1976. Several informantsstated that the governmentdid not want the
private mill owners to leave the sugar industrybecause they performeduseful functions. First,
there were already too many claims on governmentmoney in the agriculturalsector, and there-
fore, the presenceof privatecapitalhelped mitigatethe problem.Second, the privatesectorcould
be blamed by the governmentfor problems in the sugar industry, thereby taking some of the
political pressureoff the government.
43. del Villar, in Foro Internacional, fn. 7, 556-57.
44. Perez Zozaya, fn. 22, p. 35.
45. As one informantstated, "The managersare appointedcapriciously.A man may go from
being an 'inspectordel campo' [crop inspector]to 'subgerente' [assistantmanager].This is the
equivalent of being promoted from office boy to assistant manager of a firm." (Interview,
member of the private sector involved in the sugar industry,Mexico City, 1976.)
46. del Villar, in Foro Internacional, fn. 7, 547-48.
47. Ibid., 557 and interview, member of the government involved in the sugar industry,
Mexico City, 1976.
48. del Villar, in Foro Internacional, fn. 7.
49. Informationon the 1975 restructuringof the sugar industryis from ibid., 564-65; Camara
Nacional de IndustriasAzucareras,Nueva Legislaci6n Azucarera, (fn. 38), Enrique Olivares
Santana(fn. 9), and Ing. Rodolfo Gonzilez Macias, "La Participaci6ndel Productorde Cafiaen
las Comisiones de Planeaci6n y Operaci6n de Zafra," IEPES/PRI, Reuniones Nacionales,
(mimeo, n.d., but during 1976).
50. del Villar, in Foro Internacional, fn. 7, 573.
51. Excelsior, 14 June 1980, p. 10.
52. Ibid., p. 1; ibid., 12 June 1976, p. 22.
53. Ibid., 14 June 1980, p. 10.
54. El Dia, 14 June 1980, pp. 1, 16; ibid., p. 11.

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