Wall Street Journal supporting Mexican left?

Mexicans with drive, ambition and a willingness to take risks sneak across the border to the U.S. But they don’t just come for jobs. They also come for the capital. When these immigrants arrive they don’t just sell their labor, many start small businesses in the food, construction, maintenance and landscaping trades. When those businesses are launched, illegal Mexican immigrants hire other illegal Mexican immigrants. A great deal of Mexico’s job creation takes place inside the U.S.

So writes Joel Kurtzman in a source I very seldom quote – the Wall Street Journal. I agree with much of Kurtzman’s analysis of the problem, the impossibility of obtaining credit and capital for investment :

Mexico’s financial and economic structures fail at providing entrepreneurs with the capital they need to create jobs. The economy is too concentrated, with nearly half of it controlled by a single family — that of the billionaire Carlos Slim. A handful of other families own the bulk of Mexico’s remaining wealth. Mexico’s legal and business structures effectively fence off from competition whole sectors of the economy. In telecommunications, petroleum and much of the real-estate and tourism sectors, real competition is restricted. Mexico could jumpstart its job-creation engine by opening these sectors of its economy to real competition.

…

Mexico’s financial system is to entrepreneurship what sharks are to a swimmer’s beach. Banking, which is conservative and risk-averse, dominates Mexico’s financial system, accounting for about 55% of all financial assets, compared with just 24% of all financial assets in the U.S. In the U.S., the capital markets and a diverse array of funds provide most of the capital. If that weren’t enough, Mexico’s top three banks control 60% of all banking assets. If entrepreneurs are turned down by the first bank, they really have only two more places to apply. For a country its size, Mexico’s stock and bond markets are hugely underdeveloped when measured as a percentage of GDP.

Household credit is also scarce in Mexico and amounts to only about 5% of GDP, versus 65% in the U.S. Without access to credit, Mexico’s consumer and retail sectors have not grown sufficiently. These sectors could be vibrant job-creation engines if Mexicans had wider access to credit.

I disagree with his solution – allowing foreigners access to PEMEX, and markets. It’s exactly what the Fox and Calderón administrations have been trying to do, and what NAFTA was supposed to do, during which time emigration has skyrocketed.

Kurtzman complains that Mexican businesses are too concentrated. Agreed, but this was in the Wall Street Journal, after all. You get the sense that his idea of competition is Exxon v PEMEX or WalMart v Grupo Electra, not “Aborotes El Toro” v “Aborotes Guadalupe”. One thing he fails to note is that the emigrant remittances are largely responsible for those real competitive businesses. Remittances largely go either to education or to financing those very changaros and “biznes” ventures that create jobs and build a stable middle class.

It’s not that the giant businesses don’t have their uses. The U.S. press paid attention when Wal Mart de Mexico started offering banking services, though Grupo Electra’s Banco Azteca and chain-store banks throughout Latin America have been around for years.

Sure, I agree – monopolistic practices are under scrutiny now. Telecommunications will change in the next few years after the Supreme Court cleared the way for broader access to the airwaves. Mexico City’s investment in district-wide WiFi access is going to shake up the computer industry.

Ironically, it is the left that’s pushing the Calderón administration to start talking about correcting the monopolistic practices of the past and about changing the laws to make credit more widely available. Of course, access to credit means coming up with money. But, there’s no reason to suppose the investments must come from the usual foreign sources. Argentina’s president just in Mexico last week with an important trade agreement on automotive parts. Brazil’s Lula da Silva on a sales trip this week, peddling Brazilian ethanol. Lula is reported NOT discussing Mercosur, saying Mexico tied itself to North America, but there too, the left’s proposal to renegotiate NAFTA, and the recognition that some ties outside Mercosur (most likely through Banco del Sur).

I see more and more that the Mexican left ‘s prescriptions for economic improvement – expanded ties to South America, more credit for small business and a focus on internal markets — are what is likely to be followed.