The Mexicans Are Not What Is Wrong with Mexico

Gerardo on the left; me in the middle; and Jenny in the right lower corner.  Photo by Jeanette (who you can just barely see in the mirror over Gerardo’s shoulder).

 

In downtown Cancun we dined at a wonderful restaurant called Labná.  The food was authentic, varied, and delicious.  The service, from Gerardo (above) was attentive and replete with gracious good-will. 

The restaurant itself was an oasis of order in a milieu of disorder and decay.

As one tours Mexico, one has the sense of an enormous waste of human time and talent.  The incentive to act and the ability to get things done, is sucked away by an enormous cadre of parasitical rent-seeking hangers-on, who are either part of the government or who are privileged by government rules and regulations.

When the roof of our home in Nebraska was damaged by hail several years ago, it was replaced by a crew of Mexican workers. 

Our retired neighbor Howard had the habit of carefully monitoring all of our outdoor contractors.  Old, reliable, helpful, curmudgeony Howard (may he rest in peace) was much more likely to offer complaint than praise.  But Howard told me, with genuine respect and admiration in his voice, how impressed he was with how hard the Mexican crew had worked, especially through the oppressive heat of the summer days. 

The Mexicans are not what is wrong with Mexico.  What is wrong with Mexico is the Mexican government. 

In most areas of government activity, the Mexicans would benefit from a lot more of what Edmund Burke called "salutary neglect."

 

(Note:  Leonard Liggio reminded me of the wonderful phrase "salutary neglect" at the April 2007 meetings of the Association of Private Enterprise Education in Cancun.)

(Another note: The address of the Labná restaurant is Margaritas 29.  It is near a run-down park, where I purchased an OK cup of flan from a vendor for 10 pesos–the best flan I ever had for less than a dollar!)


Chichen Itza May Have Lasted Longer than Other Mayan City-States Because of Its Free Trade

 

  The guide told us that this area of pillars at Chichen Itza, in the Yucatan of Mexico, is thought to have been a market area.  (Photo taken by me on April 8, 2007, at the excursion to Chichen Itza arranged for the Association of Private Enterprise Education.)

 

Usually we think of the Catholic Church’s great damage to knowledge being its persecution of Galileo and attempted suppression of heliocentricism.  But the suppression quickly failed and nothing permanent was lost.

A greater harm to knowledge may have been done when, in the name of the inquisition, countless Mayan manuscripts were burned by the Spanish conquistadors.

Evidence was destroyed that likely would have helped us understand how the Mayan society worked.

For example, we were told on our visit to Chichen Itza that one hypothesis has it that Chichen Itza lasted 300 years longer than all other Mayan city-states because it was the only city-state dominated by cosmopolitan merchant and entrepreneur culture–an hypothesis that I find highly congenial.

Unfortunately, much of the evidence that might have confirmed, elaborated, or refuted this hypothesis, was destroyed forever.

 

Mexican Federal Taxi “Charters” Increase Taxi Prices

 

     A non-federally-chartered taxi leaves the Cancun Hilton, headed for the Cancun airport, charging $23.  An identical, but federally-chartered cab, making the reverse trip, charges $40.  (Photo by Art Diamond.)

 

When we arrived at the Cancun airport we faced a chaotic environment where many Mexicans were yelling at us to buy taxi tickets.  After buying a ticket for $40, someone escorted us to a crowded, chaotic place to wait for a cab.  We waited and waited in the noise and the heat.  At some point, my daughter Jenny commented, "These people need to get organized."

Yes, Jenny they sure do!  And you might think that what they need in order to get organized, is for the government to come in to organize them.

But it turns out that the government has already come in.  Only federally charged taxis are allowed to take passengers from the airport to the hotel zone.  The price is fixed at $40.  On the other hand, any taxi may take passengers back to the airport, from the hotel zone.  The base price for a return trip was $23 .  (I added a $2 tip out of sympathy for the cabbie not driving a federally anointed cab.)

So, yes, these people need to get organized, and the best way to do that is to get their government out of their way, so that they can organize themselves through the free market.

 

Note:  relevant guide book passage:  "[Returning to the airport] the rate will be much less for the trip from the airport.  (Only federally chartered taxis may take fared from the airport, but any taxi may bring passengers to the airport.)"  (p. 78)

Note:  italics in original; bracketed phrase added.

 

Source:   

Baird, David, and Lynne Bairstow.  Frommer’s Cancun, Cozumel  &  the Yucatan 2007.  Hoboken, NJ:  Wiley Publishing, Inc., 2006.

 

Wal-Mart Improves Life in Mexico

   Source of graphic:  online version of the WSJ article cited below.

 

(p. A1)  JUCHITÁN, Mexico — For as long as anyone can remember, shopping for many items in this Zapotec Indian town meant lousy selection and high prices. Most families live on less than $4,000 a year. Little wonder that this provincial corner of Oaxaca, historically famous for keeping outsiders at bay, welcomed the arrival of Wal-Mart.

Back home in the U.S., Wal-Mart Stores Inc. is known not only for its relentless focus on low prices but also for its many critics, who assail it for everything from the wages it pays to its role in homogenizing American culture. But while its growth in the U.S. is slowing, Wal-Mart is striking gold south of the border, largely free from all the criticism. Like Wal-Mart fans in less affluent parts of America, most shoppers in developing countries are much more concerned about the cost of medicine and microwaves than the cultural incursions of a multinational corporation.

That fact is making Wal-Mart a dominant force in Latin America. Wal-Mart de México SAB, a publicly traded subsidiary, is not only the biggest private employer in Mexico — it’s the biggest single retailer in Latin America. Sales at Wal-Mex, as the Mexican unit is called, are forecast to rise 16% to $21 billion this year, representing a quarter of Wal-Mart’s foreign revenue. International revenue soared 30% to $77.1 billion, accounting for 22% of Wal-Mart’s sales, in the fiscal year ended Jan. 31. Wal-Mex profits are forecast to grow 20% to $1.3 billion this year.

. . .

(p. A14)  In Mexico, Wal-Mart has been a counterweight to the powers that control commerce. One of the most closed economies in the world until the late 1980s, Mexico was dominated for decades by a handful of big grocers and retailers. All were members of a national retailing association called ANTAD, and cutthroat competition was taboo. At the local level, towns are still hostage to local bosses, known here as caciques, the Indian word for local strongmen who control politics and commerce.

. . .

In recent months, as rising prices for U.S. corn pushed up the price of Mexico’s corn tortilla, a staple for millions of poor, Wal-Mart could keep tortilla prices largely steady because of its long-term contracts with corn-flour suppliers. The crisis turned into free advertising for Wal-Mart, as new shoppers lined up for the cheaper tortillas.

Wal-Mart also overcame a Juchitán cacique, or local boss: Héctor Matus, a trained doctor who goes by La Garnacha, the name for a fried tortilla snack popular in town. Dr. Matus, 55, owns six pharmacies, stationery stores and general stores. He has also held an array of political posts, including Juchitán mayor and state health minister. As town mayor from 2002 to 2004, he says he blocked a national medical-testing chain from opening in town because it meant low-price competition to local businessmen doing blood work.

But Dr. Matus couldn’t persuade local and state officials to block Wal-Mart, and he is feeling the pinch. Sales are off 15% at his stores since Wal-Mart arrived, and he is now lowering prices in response. Even so, he’s still more expensive. A box of Losec stomach medicine costs 80 pesos ($7.30) at one of Dr. Matus’s stores, marked down from 86 pesos. The price at Wal-Mart is 77 pesos ($7.20).

Dr. Matus isn’t happy about the competition. "I could still kick them out of town, because I know how to mobilize people," he said, sitting in his living room surrounded by pictures of him with leading Mexican politicians dating back to the 1970s. Despite his bravado, town officials say Wal-Mart is staying. "The ones who have benefited the most [from Wal-Mart] are the poorest," says Feliciano Santiago, the deputy mayor. "I hope another one comes."

. . .

Gisela López, the 31-year-old head of billing at the Juchitán store, benefited from the retailer’s system of promoting from within. Raised by her uneducated, Zapotec-speaking grandparents, Ms. López earned a computer degree at Juchitán’s small technical college and then left for the booming northern city of Monterrey in search of opportunity.

Lacking connections, she couldn’t find the office job she dreamed about, and took a job at one of Wal-Mart’s stores. After three months, Ms. López made cashier supervisor, and later moved over to the billing department. When Wal-Mart opened a store in Juchitán, Ms. López jumped at the chance to move home — and was promoted to billing chief in the process.

"It’s a very different place to work, because you can succeed by your own effort," says Ms. López, whose $12,000-a-year salary now puts her in Mexico’s middle class.

Ms. López’s story of economic mobility is a rare one. Most of her childhood friends don’t have steady jobs, she said. The success stories are friends who inherited jobs from their parents at the state oil company’s big refinery in Salina Cruz, about an hour away.

 

For the full story, see:

JOHN LYONS.  "SOUTHERN HOSPITALITY; In Mexico, Wal-Mart Is Defying Its Critics; Low Prices Boost Its Sales and Popularity In Developing Markets."   The Wall Street Journal  (Mon., March 5, 2007):  A1 & A14. 

(Note:  ellipses added.)

 

WalMartJuchitanMap.gif MatusHector.gif LopezGisela.gif Source of map and images:  online version of the WSJ article cited above.

 

Illegal Immigration Reduces Wages for High School Dropouts by Only 3.6%

ImmigrantEffectOnWages.jpg  Source of graphic:  online version of the NYT article cited below.

 

As Congress debates an overhaul of the nation’s immigration laws, several economists and news media pundits have sounded the alarm, contending that illegal immigrants are causing harm to Americans in the competition for jobs.

Yet a more careful examination of the economic data suggests that the argument is, at the very least, overstated.  There is scant evidence that illegal immigrants have caused any significant damage to the wages of American workers.

The number that has been getting the most attention lately was produced by George J. Borjas and Lawrence F. Katz, two Harvard economists, in a paper published last year.  They estimated that the wave of illegal Mexican immigrants who arrived from 1980 to 2000 had reduced the wages of high school dropouts in the United States by 8.2 percent. But the economists acknowledge that the number does not consider other economic forces, such as the fact that certain businesses would not exist in the United States without cheap immigrant labor. If it had accounted for such things, immigration’s impact would be likely to look less than half as big.

. . .

. . . , as businesses and other economic agents have adjusted to immigration, they have made changes that have muted much of immigration’s impact on American workers.

For instance, the availability of foreign workers at low wages in the Nebraska poultry industry made companies realize that they had the personnel to expand.  So they invested in new equipment, generating jobs that would not otherwise be there.  In California’s strawberry patches, illegal immigrants are not competing against native workers; they are competing against pickers in Michoacán, Mexico.  If the immigrant pickers did not come north across the border, the strawberries would.

"Immigrants come in and the industries that use this type of labor grow," said David Card, an economist at the University of California, Berkeley.  "Taking all into account, the effects of immigration are much, much lower."

In a study published last year that compared cities that have lots of less educated immigrants with cities that have very few, Mr. Card found no wage differences that could be attributed to the presence of immigrants.

. . .

When Mr. Borjas and Mr. Katz assumed that businesses reacted to the extra workers with a corresponding increase in investment — as has happened in Nebraska — their estimate of the decline in wages of high school dropouts attributed to illegal immigrants was shaved to 4.8 percent. And they have since downgraded that number, acknowledging that the original analysis used some statistically flimsy data.

Assuming a jump in capital investment, they found that the surge in illegal immigration reduced the wages of high school dropouts by just 3.6 percent.

 

For the full commentary, see:

EDUARDO PORTER.  "ECONOMIC VIEW; Cost of Illegal Immigration May Be Less Than Meets the Eye."  The New York Times, Section 3  (Sunday, April 16, 2006):  3.