WHY MEXICO, CHAPTER 6

Why is it so difficult to succeed in Mexico with just your own effort?

   Mexico has a population of around 120 million, and 55 million are in poverty, that is, almost half of Mexicans do not have access to enough: nutrition, education, water, housing, medical care, security, or electricity. In some cases, they do not have access to services that are now considered basic (phone, radio, TV, internet, fuel for heating or cooking).

   Low income Mexicans are alienated from prosperous México.

   They are present in the plans of politicians only when they need them to vote.

   Most poor Mexicans have been poor for generations and the poor population has grown because opportunities have been growing at a lower rate than the population.

   Organized crime can recruit helpers among the poor because, in addition to the lack of opportunities, over the past thirty years, salaries for legal activities have grown less than the cost of living.

   Very few fall into temptation, most continue with the only life they know, many instead of joining illegal activities prefer to migrate to the United States where they are treated as criminals despite being necessary and very productive.

   The only possibility of improving the life of this Mexicans is to end what is causing insecurity, unemployment and migration.

CAUSE NUM. 1

DIFFICULTY TO ACHIEVE SUCCESS ONLY WITH PERSONAL MERITS

   People start a business and get frustrated when they go bankrupt and lose job, money and dreams. When the reason for such a catastrophe is the way the government works, people face a reason to lose social commitment and respect for government and law. That is the seed of the most dangerous threat to any Nation.

   All kind of menaces come together to destroy productive projects, from cumbersome bureaucratic procedures to marches and tolerated disturbances that impede the free flow of customers and employees.

   The list of aggressions against productive activities is endless; it includes bribes to become a government vendor, receive payments, get a permit to operate, get a permit to build, or be saved from the discretionary application of the law.

   Many have suffer from these calamities, others have not, but know of one or more of them.

   Another thing that adds difficulties for Mexicans to succeed based solely on their effort and abilities, is the way in which politicians understand and promote foreign investment. They worship foreign capital as a panacea and it seems that they believe that the salvation of the country will come from abroad, so they give foreign investors everything they ask for and then more.

   Politicians announce the amount of investments from abroad as an achievement, but they do not say that such investments activate the economy of the country of origin more than the Mexican economy.

   Foreign investors, when building, contracting and training, buy overseas without import taxes, all pre-operational supplies, such as construction materials, furniture, machinery, tools, instruments, computers, software and, often, office supplies. Only the wages of construction workers remain in Mexico.

   Once in operation, these companies import the production inventory free of taxes, provided they export the final assembly.   

   In general, salaries for floor employees are low. The positions for supervisors and superiors are mostly occupied by expatriates.

   Domestic and foreign investments in industry and agriculture benefit macroeconomics, however, if they do not benefit microeconomics, the country will collapse in the long term.

   In Mexico most agriculture investments are having a negative effect on microeconomics.

   Transnational investments in agriculture compete with national production or introduce new products that replace traditional ones; they have the advantage of their technology to reduce the labor required and increase productivity. Small local farmers can not compete and have to sell or rent their land or stop working and migrate to large cities in México or elsewhere.

   Foreign investments are an excellent tool to improve people’s well-being, however, negotiations must guarantee equity, and Mexican politicians have demonstrated their lack of sensibility and skills to achieve “win-win” agreements.

   Some Mexicans receive excellent salaries when they work for transnational corporations, but they are so few that they do not change the figures of the economy. On the other hand, this privileged employees are influenced by a transculturation that makes them spend their money on imported products distributed by transnational franchises, so most of their money is not driving the local economy.

   Taxation is the same for Mexican and transnational corporations. Both foreign and local investors take advantage of any possibility, including abuse, to pay less taxes. Government officials grant more flexibility to transnational corporations.

   All above limits the healthy growth of industry and agriculture, creating difficulties for Mexicans to succeed.

   The Mexican economy faces another big problem. The credit and payment practices are designed to destroy the vendors’ finances.

   Vendors are a natural source of credit, yet, it is not their role to replace banks as financial institutions. In México they are forced to do it.

   The government and large corporations (national and transnational), follow inadequate credit and payment practices. They impose payment due dates, request bribes to expedite payments, and do not respect expiration dates.

   This unhealthy symbiosis of corporations and their suppliers comes from the inefficiency of financial institutions.

   Banks offer loans at rates of not less than 25%. In an economy where the most optimistic forecasts mentions a growth rate of 4%, it is difficult to imagine that any business can produce enough profits to pay interest, please shareholders, and grow. In such a situation, vendors become a less expensive source of credit.

   The solution to all the above requires decisions that politicians are not willing to make, because such decisions affect the “comfort zone” of the politicians themselves.

   For the government to respect the suppliers, the Political Class must change its attitude; banks are unlikely to align with more responsible credit practices; it is unthinkable that the buyers decide for themselves to be more empathetic with the vendors (I find it mandatory to mention that there are exceptions). The regulation of all this must be done by law.

   Politicians do not see or do not want to see that they are causing so many problems with their apathy and lack of commitment, so they do not feel that they have any responsibility for the increase in insecurity, unemployment and migration rates.

   Next we will see the second most important cause of Mexico's problems.

ABUSIVE CREDIT POLICIES OF BANKS AND LARGE STORES.