Privilege and Poverty – Part I

There’s a mystery down here in Mexico. It’s asked about over and over again.

“Why are so many hardworking Mexicans underpaid? And why is the poverty rate so high, when the country is so full of resources and willing workers?”

The reality is that there are cultural and historical reasons for the levels of poverty here. The question is what can be done about them?


Let’s look briefly at the Mexican economy and how it flips and flops like a jelly bean.

First, Mexico’s central bank reported Mexicans’ remittances from abroad hit a record US$28.7 billion in 2017, despite the loathsome immigration management of the current U.S. administration. Remittances topped oil export income as a contribution to GDP. This, under President Trump’s nose, while he chases and kidnaps kids from their families.

Second, in 2017 Mexico was the second largest exporter of goods to the United States, as well as the second largets importer of goods from United States. That’s a nice place to be with regard to the powerful U.S. economy. So the question of how NAFTA will be renegotiated is anyone’s guess. And if you have a guess – any guess – be kind enough to send it to the current U.S. administration. Because they haven’t a clue.

Third, a whopping 10.6 million travelers visited Mexico during 2018’s first quarter, higher than the same period last year, contributing US$6.22 billion to the states’ coffers. Tourism is as good as gold for Mexico because of the demand for climate-friendly locations that are inexpensive, diverse and exotic. And nobody verbally abuses you if you get the tip wrong.

Fourth, Mexico’s President-elect Andres Manuel Lopez Obrador hopes to implement an economic plan to decriminalize drugs, according to Axios News (a questionable but interesting idea, because it would create a trove of new taxes, although a free drug market may also become more violently competitive).  It would be a curious NAFTA discussion, especially for the “stable genius” in Washington who managed to “denuclearize North Korea.”

Lopez Obrador’s priority should be the education system throughout the nation’s 31 states. It is in dire need of reform. So it is important for Mexicans at this moment to harness the energy of their activist population, a majority of which are youth, and encourage educational change and facilitation to ready a new generation for the jobs of the 21st century.

Further, Norte Americanos should not be part of the problem here. For instance, driving around without proper car registration or skipping certain taxes or benefits for services often play into gringo temptations. Mostly, because we’re not aware of the rules or the non-rules, and we’re often impressed by those under-the-table schemes involving unenforced laws.  Financial responsibilities here for foreign nationals can be complicated and misunderstood. Tax issues, for example. We may owe taxes on interest paid by a bank or investment account held in Mexico, we may have income from part-time renting of a vacation home or an investment property, we may owe taxes if we sell a home or property or we may even own a business here where tax complications occur and we remain blissfully ignorant.

Too many things in Mexico are done under the table. Top of the table is for dining only. That is especially true for gringos and Mexicans. Some gringos roll with the “when in Rome” mentality and working class Mexicans are forced to it to feed their families. Under the table means it’s just too small a deal for law enforcement or revenue agencies to detect, and it thrives because arrangements are still on a cash basis. For example, handshake deals where employees working for foreign national companies aren’t receiving the health care or pension benefits they deserve. They accept the work, because it’s badly needed and they are reluctant to demand their benefits. This author has had occasion (and refused) to pay off traffic officers for infractions, but I have concluded that maybe bribing is so widespread because the police are woefully underpaid. Of course, that feeds further into the corruption here. The officer probably needs it. The system doesn’t.

Wage disparity is one of the key reasons for many of Mexico’s social problems and its struggling and erratic economy.  For many, there are few places to turn for assistance.

(Part II coming next week.)