Thread: Mexico, Heal Thyself

Mexico, heal thyself
By Jason Lee Steorts

Sunday, July 9, 2006

If there is a leitmotif in the immigration debate to vex a conservative soul, it is the idea that border enforcement is anti-Mexican. This idea is vexatious because it ascribes the worst possible motives to border-enforcement advocates while disregarding the substance of their position.

But it is also vexatious for the simpler reason that it isn't true. Reasonable people can disagree about whether the social and economic effects of illegal immigration on the United States are positive or negative; and reasonable people can plausibly claim that Mexico benefits from the remittances that illegal immigrants send home.

What is considerably less plausible is the notion that Mexico's long-term interests are advanced by the exodus of 10 percent or more of its population.

"It's easier to blame other people than to blame yourself," says Fredo Arias-King, who served as a foreign-policy adviser to Mexican President Vicente Fox during his 2000 campaign. "You can export your problems to the unwitting United States. But it's not good for Mexico when American politicians don't stand up for their own dignity. Instead they just say, 'Yes, of course, we should help the (illegal) Mexicans.'"

Those Mexicans leave their country for a simple reason: They are poor and the opportunities they lack at home can be found here.

Their poverty in turn has its own causes -- structural problems that have afflicted the Mexican economy for generations because no political force has the will and the means to solve them.

While doing so would probably be hard under any circumstances, it is much harder when millions of the poorest Mexicans -- those who have the most reason to demand reform -- quit their country altogether. Mexico's politicians have, in effect, deported their most dissatisfied constituency.

Norman Bailey, a former special assistant to Ronald Reagan for international economic affairs, explains that "Mexico has a safety valve which most other countries don't have. Most countries either collapse or they do the necessary thing.

"Mexico has never been in the position of being forced to do the necessary thing."

That may be the best way of explaining what Arias-King experienced as an adviser to Fox. In a paper forthcoming from the Center for Immigration Studies, he writes that meetings with the candidate involved far less discussion about "tak(ing) tough decisions to reform Mexico" than about "get(ting) more concessions from the United States." And that is of course the strategy that Fox -- through his vigorous advocacy of the Bush guest-worker-cum-amnesty plan -- has pursued.

The most important message America can send to Fox's successor is: Heal thyself.

Try this

The answer, distilled to its essence, is freer markets. Despite Mexico's entry into NAFTA and the privatization push of former President Carlos Salinas, huge sectors of the Mexican economy are still dominated by monopolies and oligarchies.

This is, in part, because the privatization of state enterprises was botched by Russian-style cronyism, most notoriously in the case of Telmex, the Mexican phone company. It was bought by a group of investors whose principal was Carlos Slim, a friend and supporter of Salinas.

The deal turned a public monopoly into a private one, to the benefit of almost no one but Slim, who now is the world's third-richest man. Similarly anti-competitive structures exist in other sectors.

Even more damaging to the Mexican economy, however, is the state-owned energy monopoly. Only two countries in the world forbid foreign investment in oil exploration. One is North Korea; the other is Mexico. State ownership of energy resources was enshrined in the Mexican Constitution with the nationalization of the oil industry in 1938.

Not surprisingly, the public sector is failing where the private would succeed. Mexico is the fifth-largest oil producer in the world, but Pemex, the state oil company, is going broke. That's because the government takes almost all of its profits to fill state coffers.

The Mexican tax system is rife with corruption and evasion. According to a recent study, 40 percent of businesses and 70 percent of professionals and small-business owners either cheat on their taxes or pay nothing at all -- so the government leans on Pemex to make up the difference. It contributes fully a third of state revenue.

Despite high oil prices, Pemex is in debt by $85 billion and lacks the capital to invest in new exploration and development. More than half of its oil comes from a single field that is running dry; industry analysts predict that all of Mexico's proven reserves could be exhausted in 10 to 12 years.

That might not be a problem if Pemex had the money and technology to sink new wells in the Gulf of Mexico but it has neither.

And the one obvious solution -- calling in foreign investors, as even Fidel Castro's Cuba has done -- is forbidden. Mexico's statism has also made it an importer of natural gas and gasoline since Pemex lacks the money to build refineries or to tap the country's huge natural-gas reserves.

Perhaps even more relevant to migration patterns are Mexico's socialistic farming practices. The government expropriated large farms -- and, later, mid-sized and small ones -- and redistributed them in tiny plots to farmers within larger collectives. By the time the program was discontinued in 1992, the size of the new plots being given out had shrunk to a mere 1.4 hectares (just under 3.5 acres).

Such small tracts are incapable of growing crops at competitive prices. The government only made things worse by subsidizing the farmers' production and then subsidizing the harvested crops a second time at market. Meanwhile, the ejidatarios were denied property rights. They could neither sell nor rent their land. They could bequeath it to only one heir (though many subdivided it illegally, with the result that large numbers of peasants now work land to which they have no legal claim).

Neither could they pledge it as a loan guarantee, making it impossible for them to secure private credit. A constitutional amendment in 1992 allowed ejidatarios to obtain full property rights but officials whose power depends on the ejido system have blocked the amendment's implementation so successfully that, after 10 years, only 1 percent of the land had been privatized.

Even as the rural poor have stayed poor, the industrialized northern cities -- which flourished under NAFTA in the 1990s -- are seeing their competitiveness eroded.

Much of Mexico's export growth in the '90s was fueled by its maquiladora plants, which specialized in the assembly of manufactured goods -- a low-skill, low-cost activity. But China's accession to the WTO undermined Mexico's privileged access to the U.S. market and offered comparable labor at significantly lower costs.

At the same time, Mexico has done little to create a business climate more favorable to investors or to make its workers more competitive in higher-skill, higher-wage sectors.

Improving the business climate would require, principally, a combination of labor reform and tax reform. And starting a business in Mexico can be a bureaucratic nightmare. All of this gives pause to potential investors.

The solutions aren't especially complicated. So why does nothing change? Arias-King thinks the problem lies in Mexico's political culture, which has traditionally been dominated by the oligarchic elite. "We don't have economic problems; our problems are really political in nature," he says.

What this probably means is that a great many Mexicans will remain much poorer than is needful for much longer than is excusable. It is right to feel sympathy for them. But precisely this sympathy compels us to say: The fault, dear Mexico, lies not in your stars, but in yourself.

Jason Lee Steorts is deputy managing editor of National Review magazine, where a longer version of this commentary appears in the July 17 issue. Copyright 2006 by National Review Inc., 215 Lexington Avenue, New York, NY 10016. Reprinted by permission.






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Good post Richard, I am afraid that as long as Mexico can get billions of dollars by sending their poor over here to work they will never try to make their country any better, talk about a lazy country, if they were any more laid back about helping their they would be dead!It is just so much easier to let their people come here to work.