Categories
Economy

Colombia and Mexico: Cartels and Competition

CEMEX’s Cement Pricing and Country Profitability

Cement Price Index (USD/ton, 2011 = 100); Country EBITDA/Revenue includes all company activities such as cement, aggregates and ready-mix concrete

In December of 2017, Colombia’s competition authority fined Argos, CEMEX and Holcim the equivalent of 66 MM USD after conducting a four-year investigation that found that the firms—accounting for 96% of cement supply to the country—had broken the law by forming a cartel to significantly increase the price of their product between the years of 2010 and 2013.

In the years after 2013, CEMEX has more than halved the price of cement it sells in Colombia (see graph above). As it stands today, CEMEX’s cement in Cali, Colombia retails for the equivalent of 116 USD/ton (image below) excluding the applicable 19% value-added tax (VAT) when purchased at Sodimac’s home improvement stores.

3,907 COP/USD; advertised price includes 19%

A key contributing factor to the competitive dynamic improving consumer welfare in the Colombian market is the entry of several local players new to the cement industry such as San Marcos (2012), Ultracem and Fortecem (both in 2013), Patriota (2014), Vallenato (2016) and ALIÓN (2019).

The situation in Mexico, however, is radically different from that in Colombia. The high level of cement prices in Mexico is evidenced by the fact that CEMEX’s product in Mexicali, Mexico currently retails at The Home Depot for 317 USD/ton (image below) excluding the 8% VAT applicable in the border region.

19.61 MXN/USD; advertised price includes 8% VAT

Both CEMEX and the The Home Depot have been subjects of investigation on the part of Mexico’s competition authority. The construction materials company was found guilty of improper behavior in an effort to boicot the importation of cement into the Mexican market and the retailing giant was charged with strong-arming vendors to prevent them from supplying a competitor (Lowe’s).

It is impossible to explain the price differential of cement between Mexico and Colombia on the basis of cost (a brutal 201 USD/ton separates its retail price in Mexicali vs. Cali). In order to understand what is happening, one must look for evidence that explains what is really going on: an exercise in market power with the objective of extracting significant economic rents. It is more than obvious that the Mexican State should aggressively pursue the implementation of policy that encourages intense competition in the cement sector.

Mexicans are the victims of economic predators in far to many sectors of activity, including not only cement but also telecommunications and retail financial services. This politico-economic system has produced an enormous accumulation of wealth in the hands of a few and the immiseration of tens of millions, which makes for an increasingly volatile and potentially explosive social situation.

Categories
Economy

Algo está Gravemente Mal en la Economía Mexicana

Compensación al Personal en la Industria Manufacturera

Desde la entrada en vigor del TLCAN en 1994, el saldo favorable de la balanza comercial de México con Estados Unidos y Canadá en bienes manufacturados se ha disparado. En los 25 años transcurridos entre 1993 y 2018, el superávit manufacturero del país con sus socios de bloque comercial pasó de 0.3 a 166.7 mil millones de dólares.

No obstante ello, durante el mismo período de tiempo, México logró aumentar su PIB per cápita a una miserable tasa de tan solo 1% anual.

Posterior a la creación del TLCAN, los salarios en México apenas si han mejorado a pesar de que el país “exportó” mano de obra excedente en la forma de 4.1 millones de inmigrantes indocumentados a los Estados Unidos en el período comprendido entre 1995 y 2007.

El patético desempeño económico de México en las últimas cuatro décadas exige un urgente y vigoroso debate sobre la economía política del país.

Categories
Health Policy

Envenenando Mexicanos por Dinero

Tasa de Mortalidad

La diabetes mellitus es una enfermedad que cobró la vida de 1,777,544 mexicanos entre los años 1999 y 2020. Se trata de un número de defunciones superior al total de la población que actualmente reside en el estado de Zacatecas.  El Asesino Silencioso, como comúnmente se conoce a la enfermedad, ha más que triplicado su  número anual de víctimas mortales en las últimas dos décadas.  La pandemia diabética ha llegado al punto que en 2020 dicho padecimiento fue la causa de muerte de más de 150,000 mexicanos.

Una medida de la gravedad de la crisis de salud pública que enfrenta México con respecto a la diabetes es el hecho de que la tasa de mortalidad de la enfermedad en el país se encuentra en un nivel que supera la tasa de mortalidad combinada por sobredosis de drogas, suicidios, homicidios, accidentes de transporte y diabetes como causas de muerte en los Estados Unidos.

Además de ser una de las principales causas de muerte, la diabetes ha llevado a un número aún mayor de mexicanos a sufrir discapacidades permanentes al provocar ceguera, insuficiencia renal y daño al sistema nervioso y circulatorio que requiere amputaciones.

Es un hecho establecido y bien conocido que las bebidas con azúcares añadidos (SSBs, por sus siglas en inglés) representan una fuente importante de azúcares de rápida digestión que conducen al padecimiento de diabetes tipo 2 y enfermedades cardiovasculares.

México, con una población que bebe anualmente 176 litros per cápita de productos Coca-Cola (frente a 95 en los Estados Unidos y 22 a nivel mundial), es líder mundial en el consumo de bebidas azucaradas en la forma de refrescos carbonatados.

Se ha calculado que la mortalidad atribuible a las SSBs en el país es del orden de 40,842 muertes anuales, principalmente porque son la fuente del 70% del azúcar agregado en la dieta de los mexicanos.

Debido a que las bebidas azucaradas juegan un papel causal muy importante en el acelerado apocalipsis diabético que está destruyendo a enormes cantidades de familias mexicanas, es hora de que el gobierno tome medidas mucho más enérgicas para hacer que la industria rinda cuentas por sus externalidades negativas.

Los azúcares en las bebidas de Coca-Cola, al igual que la nicotina en los cigarrillos Marlboro y la oxicodona en las pastillas Oxycontin, son sustancias altamente adictivas que se ofrecen a millones de consumidores con la ayuda de gigantescos presupuestos de marketing y esfuerzos de cabildeo inimaginables diseñados para evitar la regulación gubernamental.

Acciones como aquellas recomendadas por la OMS (Organización Mundial de la Salud), OCDE (organización para la Cooperación y Desarrollo Económico) y la AMA (American Medical Association) —incremento en precios de al menos 20% en las bebidas con azucares añadidos por la vía a impuestos especiales, restricciones a la publicidad y eliminación de opciones de compra— están justificadas y son necesarias para frenar el consumo de SSBs en México dada la carga tan pesada que imponen al desarrollo del país y la amenaza que representan para la estabilidad de su sistema de salud pública.

Categories
Economy

Carlos Slim and Mexico’s Sociopathic Power Elite

Telcel: Price Discrimination in Prepaid Mobile Service

A 20 MXN Telcel mobile prepaid refill accrues a 20% credit bonus, whilst a 200 MXN refill accrues a 100% credit bonus. Telcel does not include voice service without cost in the use of WhatsApp or Facebook Messenger apps.

Who is more dangerous: El Chapo or Carlos Slim?

Michael Massing, a former executive editor of the Columbia Journalism Review and co-founder of the Committee to Protect Journalists, ponders the question in an opinion column published by The Guardian in January 2019. The subheading on the column reads: “While attention focuses on a mafia boss on trial in Brooklyn, the billionaire [Slim] heads a power elite preserving inequality in Mexico“.

In exploring the question, Massing writes: “The group is dominated by a dozen or so oligarchs and their families, who have a lock on such key economic sectors as telecommunications, media, mining and banking. Repeated forecasts of rapid development for Mexico have come to naught due to the suffocating hold that this small circle of super-connected individuals continues to have over its economy; by eliminating competition, they can keep prices high and profits surging… At the center of the power elite is Carlos Slim.”

Slim has amassed a fortune currently estimated by Forbes to be in the amount of 62.8 billion USD. Previously the same publication had placed him as the world’s richest person for the four years running from 2010 to 2013 and by the accounting of Branko Milanovic—former lead economist in the World Bank’s research department—Carlos Slim is the richest person to ever have existed in the history of humankind.

At the root of Slim’s fortune is his longtime domination of Mexico’s telecommunication industry via Telmex and Telcel, companies that hold extremely high market shares in the fixed, mobile and broadband sectors. Slim’s companies have parlayed a privatized concession of public goods (rights of way and electromagnetic spectrum), taken advantage of network effects, engaged in anti-competitive behavior and delayed regulatory decisions by the abuse of amparos (legal injunctions) in order to overcharge Mexicans billions of dollars and underinvest in infrastructure.

In 2012, the OECD issued a report (OECD Review of Telecommunication Policy and Regulation in Mexico) which states that “Consumer welfare loss in the Mexican telecommunication sector over the period 2005-2009 is estimated at USD 129.2 billion, or an average of USD PPP 25.8 billion per year. The latter amount is equivalent to 1.8% of Mexican GDP per year (or USD PPP 240 per capita). Given the very skewed distribution of income in Mexico the burden of this loss in consumer surplus weighs significantly on a large segment of Mexico’s population.”

Evidence of Carlos Slim’s continuing role in creating an even more unequal Mexican society can be found in the structure of Telcel’s prepaid mobile service pricing. As shown in the images above, smaller mobile prepaid refills result in much higher prices for Telcel’s customers. If one were to buy 200 MXN in 20 MXN refill installments, total credit would amount to 240 MXN. If, however, the consumer were to plunk down 200 MXN at the counter of the convenience store to buy airtime, the amount credited for service would be 400 MXN.

It is important to keep in mind that, as of today, 81% of mobile lines in Mexico prepay for service (vs. 27% in the US) and that Telcel’s decision to discriminate in price against lower-ticket purchases of airtime bears no relation to the cost of service and is purely predatory in nature. It is therefore heartbreaking, for anyone possessing a conscience and informed of the situation, to see Mexicans—restaurant waiters, hotel maids, cab drivers, construction workers, gardeners—lined up at cash registers ponying up their hard-earned pesos, 20 MXN bills at a time, to further enrich Mexico’s preeminent billionaire robber baron: Carlos Slim.

Sociopathy is a mental health disorder characterized by disregard for other people. The term clearly applies to Carlos Slim and other members of Mexico’s power elite such as:

Categories
Health Policy

Poisoning Mexicans for Profit

Fatality Rate

Diabetes mellitus is a disease that claimed the lives of 1,777,544 Mexicans between the years of 1999 and 2020. This is a number of deaths greater than the total population currently residing in the state of Zacatecas. The Silent Killer, as the disease is commonly referred to, has more than tripled its annual gruesome toll over the past two decades. It has come to the point that in 2020, diabetes was the cause of death of more than 150,000 Mexican nationals.

A measure of how severe of a public health crisis Mexico comparatively faces with regards to diabetes is the fact that the diseases’ fatality rate in the country is at a level that exceeds the combined fatality rate of drug overdose, intentional self-harm, homicide, transport accident AND diabetes as causes of death in the United States.

In addition to being a leading cause of death, diabetes has resulted in the permanent disability of even more Mexicans due to blindness, nerve damage that requires amputations and kidney failure.

It is an established and well-known fact that sugar-sweetened beverages (SSBs) represent a major source of rapidly digestible and high-volume sugars leading to type-2 diabetes and cardiovascular disease.

Mexico is the worldwide leader in SSB consumption in the form of carbonated soft drinks, with its population annually guzzling 176 liters/capita of Coca-Cola products (vs. 95 in the US and 22 globally).

In Mexico, mortality attributable to SSBs has been calculated to be in the order of 40,842 yearly deaths, mainly because they are the source of 70% of added sugar in the country’s diet.

With SSBs playing a most important causal role in the accelerating diabetes apocalypse destroying Mexican families, it is high-time that government take further action to make industry accountable for its negative externalities.

Sugar in Coca-Cola beverages, similarly to nicotine in Marlboro cigarettes and oxycodone in Oxycontin pills, is a highly addictive substance pushed to millions of consumers with the help of gigantic marketing budgets and untold lobbying efforts designed to avoid government regulation.

Actions such as those advocated by the OECD and AMA—increased excise taxes, restrictions on advertising, and the removal of options to purchase—are warranted and necessary in order to curb SSB consumption in Mexico given the very heavy burden it imposes on the country’s development and the threat it represents to the stability of its public health care system.

Categories
Fiscal Policy

Mexico, Land of Oligarchs

Tax Revenue Sources

Goods and Services: taxes levied on the production, extraction, sale, transfer, leasing or delivery of goods, and the rendering of services (mainly VAT and sales taxes). Property: recurrent and non-recurrent taxes on the use, ownership or transfer of property.

“The central goal of an establishment is to insure that the system works so that the country will in the long run be successful. An establishment is self-confident that if the system works and if their country does well, they will personally do well. Being self-confident they don’t have to make their own immediate self-interest paramount when they influence public decisions.

In contrast an oligarchy is a group of insecure individuals who amass funds in secret Swiss bank accounts. Because they think that they must always look out for their own immediate self-interest, they aren’t interested in taking the time to improve their country’s long-run prospects. They aren’t confident that if the country is successful, they will be successful.” — Thurow, Lester C. (1989), An Establishment or an Oligarchy?, National Tax Journal, 42:4, pp. 405-11

Categories
Health Policy

La Vida no Vale Nada

Mortality in Mexico by Age, Gender and Health Condition

Morbid population includes individuals with hypertension, obesity, diabetes, smoking, asthma, cardiovascular disease, kidney failure and/or immunosuppression. Line shows mortality rate (upper axis) and bar length is equivalent to number of persons per age group with red for deceased and green for alive (lower axis). Data up to January 22nd.

As Mexico enters the darkest days of the COVID-19 pandemic, it is only appropriate that a debate take place regarding the public health preconditions that have fueled a crisis bringing death and suffering to the country’s population.

Mexico’s federal authorities publish daily detailed data on the health conditions of persons tested for COVID-19. As of last week, the dataset included records for over 4.3 million individuals. Out of this population sample, 35% were reported as having much higher mortality rates in connection with at least one of the following morbitidies: hypertension, obesity, diabetes, smoking, asthma, cardiovascular disease, kidney failure and immunosuppression.

With obesity diminishing life expectancy in the country by an average of 4.2 years and reducing economic output to the tune of 5.3% per year, it is imperative that Mexico take urgent measures—as recommended by the OECD—to improve the diet of a population sickened by ultra-processed and unhealthy products.

In this most important battle for public health, Mexico—where the population gulps Coca-Cola products at a world-record rate of 225 liters/capita/year—must confront the extremely powerful interests of the sugary beverage industry. As a measure of the industry’s economic power, consider that the market capitalization of two of the world’s largest Coca-Cola’s bottlers—Mexican-controlled Coca-Cola FEMSA and Arca Continental— is equivalent to 1.59% of Mexico’s GDP whereas The Coca-Cola Company’s own market capitalization stands at only 1.00% of US GDP.

A variety of efforts have been made on behalf of the ultra-processed and soda industry’s interests. These include non-stop lobbying of the executive and legislative branches, massive advertising campaigns and even the deployment of the Mexican government’s surveillance capabilities against public health researchers and activists working in support of a tax on sugary beverages.

In spite of the industry’s efforts to counter measures to improve public health via a better diet, there are reasons for hope. One such reason is Mexico’s recent implementation of one of the world’s most advanced front-of-the-package labeling laws.

Categories
COVID-19

Caribbean Shipwreck

Monthly Passenger Traffic on the Mexican Caribbean

Cozumel is the world’s most popular cruise ship destination. In 2019, the island welcomed in excess of 4.5 million passengers. With the COVID-19 pandemic spreading across the globe, the cruise industry ran hard aground in mid-March of last year putting total registered cruise arrivals of passengers to Cozumel at only 1.1 million in 2020, a 75% YoY decrease.

In the case of air travel, passenger traffic to and from vacation destinations such as Cancun rebounded in the second half of the year (in December 2020, CUN airport utilization stood 36% below its level a year earlier). For cruise ship ports, however, the crisis continues unabated, with not a single ship mooring to docks on the Mexican Caribbean over the last 10 months.

Categories
Finance

Compartamos: Minting Money Off of the Poor

164% Annual Compound Interest Rate

Crédito Comerciante Compartamos loan cash flow (2010)

With over 2.2 million customers in Mexico, Compartamos Banco is Latin America’s largest microfinance institution. Its corporate parent, Gentera, has similar operations in Perú and Guatemala (Compartamos Financiera and Compartamos with 693 and 103 thousand customers respectively).

Compartamos traces its origins to 1990 when it was started as an NGO aimed at alleviating poverty by providing loans to women operating small businesses in the model of Muhammad Yunus’ Nobel Peace prizewinning microfinance initiative, Grameen Bank.

By 2007, however, Compartamos had become a profit-driven entity that went public in a highly controversial secondary offering IPO which made eye-popping returns of roughly 100% a year compounded over eight years for the selling shareholders and turned its founders—Carlos Labarthe and Carlos Danel—into multimillionaires.

Michael Chu, who now lectures at Harvard Business School, has boasted that the returns realized by ACCION on its investment in Compartamos were superior to those achieved by any private equity project in which he was previously involved as an executive and limited partner at Kohlberg Kravis Roberts & Co.

Compartamos has received scathing criticism from Yunus himself, who characterized the institution as one “raking in money off poor people desperate for cash“, a description also applicable to individuals and organizations involved in loan sharking.

With Compartamos charging customers sky-high interest rates for the benefit of its shareholders, one can only conclude that the institution has made a major contribution towards increasing inequality in Mexico.

Crédito Comerciante loan terms and amortization schedule

Muhammad Yunus

“When you are maximizing your profit you are not looking at whether poor people are getting out of poverty, you are always looking into your bottom line, how much money we are making out of this business with the poor people.”

“Just because they are willing to pay, I don’t think that is a justification if you call it microcredit. Because microcredit has a philosophy. Microcredit has a purpose. It’s purpose is to help people get out of poverty.

When I run a microcredit program I can choose whatever interest rate I will choose and people will borrow because they are in a desperate situation. That is how moneylenders flourish everywhere, in every country.

There is no justification whatsoever to charge 100%. Only justification is we want to make money. That part they have to forget. Compartamos has to forget that we are here to make money.”

“I wouldn’t mind any investor coming coming from anywhere wanting a microcredit program provided they understand microcredit is a social business, non-dividend business. The moment they want to make it a profit-making opportunity then of course I will say you are on the moneylender’s side. Because your aim is the moneylending aim. Your thinking is the moneylending thinking. So I don’t associate with you. I want to battle with you and to fight you.”

“Some people are saying that Compartamos is the future. I always say that Compartamos is the past. This is what we want to say goodbye to. I hope this will disappear very soon. We should create a world where nobody should be a poor person, as fast as we can.”

Categories
COVID-19

Nuevo Léon, Mexico: 62% Less Death

Total Confirmed COVID-19 Deaths per Million Residents

Over the last month and a half, the COVID-19 pandemic has wreaked havoc in South Texas. The county of Hidalgo, whose seat of government is located just 160 miles from Monterrey, Nuevo Léon (pop. 4.7 million), has seen 999 deaths attributable to COVID-19 thru August 18th.

On a per capita basis, Hidalgo County, TX has accumulated 1,134 deaths per million residents. This metric is at a level 3.5 times of the one observed in the state of Nuevo León, Mexico.

The comparison in death rates is quite unfavorable to the US if one additionally considers that Mexico has a GDP of 20,703 USD/capita, 32% of the 65,127 USD/capita estimated by the OECD for its neighbor to the north.