Guest Commentary by Karl Reiner: The World’s Richest Man Is a Symptom of Mexico’s Shortcomings

A number of business
publications recently carried reports regarding Carlos Slim. With a
fortune estimated at $60 billion, the Mexican businessman has become
the world’s richest man.  Slim replaced Bill Gates of the
United States who held the top spot for a number of years.  According
to the reports, Slim’s family business holdings in Mexico
account for an astounding 5 percent of the country’s gross
domestic product.  The companies controlled by Slim have a massive
impact on the Mexican economy.  They comprise 35 percent of the value
of the Mexican stock market.  Slim holds a dominant position in the
telecommunications industry and is a major player in the automotive,
retailing, and banking sectors.

The Mexican government
has followed an imprudent policy of opening some markets to
privatization and limited competition, while at the same time doing
little to regulate them.  Slim and other shrewd business operators
have taken advantage of the situation and have become billionaires in
the process. One of the sad consequences of this policy has been the
stifling of competitiveness and innovation in the Mexican economy.
The government has allowed a colossal concentration of economic power
to develop in a country desperately in need of real competition and
the new investment needed to spur economic growth.  According to
Mexico’s Finance Ministry, the country has recorded an
atrocious zero percent increase in productivity during the last 25
years. 

Mexico could be said to
be on the road to becoming a plutocracy – a government of, by and for
the rich.   As economic power concentrates and the economy
languishes, the 7 percent annual economic growth rate needed to
improve education, create jobs and trim down the country’s
staggering poverty level has become unachievable.  Those unfortunate
enough to be caught at the stagnant bottom end of Mexico’s
economic spectrum have little choice but to trek north, to search for
work on the U.S. side of the border. 

Carlos Slim can’t
be faulted for taking advantage of the irresolute regulatory
situation prevailing in Mexico.  With his business acumen, he would
have also found success in a more structured commercial environment.
His triumph does, however, highlight the need for the Mexican
government to make the changes needed to foster true competition,
implement the rule of law, attract investment and deter corruption.
Given the power of the entrenched interests with a stake in
maintaining the status quo, it is going to be a difficult process.
The reformers in Mexico are going to need all the outside support
they can get. With the immigration situation the U.S. faces as a
consequence of Mexico’s flagging economy, it is high time we
acted.  President Bush didn’t press the matter in talks with
Mexican President Calderon at the Summit of the Americas meeting held
on August 20-21 in Quebec.  Being the former governor of a border
state, one would have assumed he would have been willing to put a
great deal more emphasis on the subject.

What would have been
the result if Congress decided 15 years ago that national security
considerations required our government to support Mexico in getting
its sputtering economy up to snuff?  What would the relationship be
like today?  There probably would not be a crisis on the
Arizona-Mexico border and a large number of additional jobs would
have been created in Arizona as a consequence of the growing Mexican
market.  The fact that the problem has been ignored in the past by
lawmakers, doesn’t excuse continued inaction.  Arizona’s
congressional delegation needs to take a stand and start pushing the
subject in Washington.  The issue can’t continue to be ignored
because it affects Arizona’s security and long-term economic
welfare.

If Mexico’s
south, which is economically lagging and hemorrhaging people, got
into a development mode, things would be a lot better on both sides
of the border.  If we adjusted our policies to support the effort,
the North American Free Trade Agreement could actually turn out to be
a remarkable arrangement between three countries (Canada, the United
States and Mexico) with similar standards of living.  Our total
merchandise trade (exports & imports) with Mexico totaled $332.3
billion in 2006, continuing the upward trend of the past several
years.  Our support of economic reform in Mexico would guarantee the
upward trend will continue.

Karl Reiner is a friend of this site and an active voice for a
fact-based approach to the issue of immigration from Mexico. He asked
me to post this commentary here on BlogForArizona.com. This blog
published previous articles by Karl on the failure of the immigration bill considered by Congress this year and the economic underpinnings of Mexican immigration, as well as the transcript of an erudite lecture Karl gave on that subject.

Karl managed international trade and economic policy analysis at
the U.S. Department of Commerce in Washington, DC. He served as an
acting deputy assistant secretary during the first Bush and Clinton
administrations. A Vietnam veteran, he is a graduate of the Ohio State
University and holds a MS degree from the Garvin School of
International Management. After retiring from government service in
1994, he did consulting and authored a novel, "Sgt. Bellnapp’s Secret", published in 2001, and a collection of historical essays, "Remembering Fairfax County, Virginia," last year.