Mexico Has a New President. So What?

 

The Land of the NFL and Starbucks (Not Just Drug Wars)

There is no easy way to get from Boston to Mexico City. It’s easier to fly to London. A lot easier. My trip took me by way of Atlanta and a significant layover. Scrambled travel plans left my 6’3” frame in a middle seat for the day long journey. But when I landed a driver was waiting for me. There had been some conversations at home about safety and I had made assurances that I would be well supervised at all points. Julio had a nice sign but quickly informed me that it might take 90 minutes to get to my hotel since it was pay day and that meant traffic would be particularly bad. I had noticed out the plane window on approach the endless stream of red taillights stretching to the horizon.

Once I got in the car I really didn’t want to talk. I was exhausted. But sleeping was not an option. My phone was dead so calling my wife was out of the question. And Julio seemed to think he needed to entertain me as part of his job.

“Where are you from?” he started.

“Boston,” I said trying not to sound as tired as I felt.

“Ah, you must be a Patriots fan!” Julio said brightly.

The fact that a random driver in Mexico City knew the NFL teams cold shocked me. I had assumed the game was soccer and maybe a little baseball.

“I’m a Redskins fan,” Julio continued. “I really think RG3 is going to take them to the Super Bowl,” he confided.

And so my education on what Mexico is really like had begun.

 ♦◊♦

By the time I arrived at the ultra modern Westin Hotel Santa Fe, I had learned a lot more than the central importance of Thursday night football for the average Mexican male. Yes, ESPN Deportes had long ago made the Green Bay Packers a favorite south of the border, even though most of the fans who watched them each week had very little idea where Wisconsin even is. But I had come to Mexico City to see for myself whether the country was over-run with the drug war so often written about in the United States.

Julio explained that the recent election of Enrique Peña Nieto was in part because his PRI party, who ruled for 70 years prior to the change in power in 2000, was viewed as being willing to work to reduce drug violence after President Calderon, Mexico’s current president, made combating cartels a top priority when he took office in December 2006. Since then, more than 47,500 people have died in drug-related violence nationwide.

Julio also explained the fragmentation of the two main cartels, the creation of a paramilitary power that took American hostages and committed the most brutal acts of violence, and the Calderon crack down which ultimately led to the government killing of Heriberto Lazcano, the founder and the principal leader of the Zetas, one of the most violent criminal gangs to terrorize Mexico.

From my cab ride, it sounded like the drug war was indeed a lot more localized than most Americans would imagine. But it was still very much on the mind of most Mexicans, despite their interest in the NFL and a growing and vibrant economy.

  ♦◊♦

After a good night’s sleep I went upstairs to find some coffee. The view out over the city was stunning. I’m not sure if the sun is out every day or I just got lucky.

Soon I was downstairs and walking with the CEO of our company across the street and by a BMW dealership that he assured me sold more cars than any in Mexico. We entered a brand new office complex of massive scale. Augusto told me it was the biggest of its kind in Latin America and was, as of yet, only half occupied so he had gotten an attractive rate that he had to pay in dollars. “All real estate transactions are done in American dollars,” he told me. “Despite the strength of the peso every family still talks about the exchange rate over dinner every night because so many lost everything in the last devaluation.”

I didn’t give a shit what currency Augusto was paying. I stared down as we walked along the massive concourse and almost lost my breakfast. The floor was glass, or some very transparent kind of plastic, revealing an Olympic swimming pool a hundred feet below. For someone who doesn’t like heights it was a very cool touch, verging on nauseating.

  ♦◊♦

My interest in Mexico was completely accidental. I met two young Harvard educated entrepreneurs, Augusto and Jose, who planned to go back to Mexico City and start a specialty finance company. Over a period of weeks and months, they explained to me how misinformed most Americans are about the Mexican economy. All they see is the drug war. What they miss is an economy growing steadily and a currency that is run by an independent central bank. The national debt is tiny as percentage of GDP, compared to European countries and the United States.

And unlike the United States, were wealth continues to squeeze out the middle class in Mexico there is significant upward class mobility and a growing middle class. Granted, Mexico starts with vast disparities in wealth. But therein lies the opportunity. The whole economy, particularly the financial services industry, is geared exclusively to the mega rich. No one is paying any attention to the growing number of citizens with means but who will never be millionaires.

In his office, Augusto explained to me that the Mexican population of 110 million people is broken into five classes of wealth A to E, with A being the most affluent and E being those living below the poverty line. 20 million of Mexico’s people live in the metro Mexico City area with 10 million in the downtown sprawl. The official figures for those in poverty are in the 10 to 15 million range but Augusto reported that international reports indicate that number is more like 25 million. Those people are starving, so need a lot more than financial products.

But between a half million and a million people are moving up the economic scale every year.

Augusto took me out on the deck just outside the office. He pointed to a row of big houses just across the main road. “Each of those is a million dollars,” he said. “Those are the As.”

“See that vast expanse of houses just beyond that row of houses?” I nodded. “Those are all twenty thousand dollar homes. Those are the Cs and Ds. Those people deserve to have someone paying attention to them. But no one is. There are forty million of them in this country.”

It’s not like there aren’t massively rich neighborhoods next to quite poor ones in Boston (try walking from the nicest section of Milton over to Mattapan Square) but I’d never seen such disparity of wealth on such scale right before my very eyes. And yet I was there because that gulf was actually changing.

 

  ♦◊♦

On the way to lunch I noticed not just one but two different Starbucks. They were jammed with people. As a coffee snob myself, I complained to Augusto about the burnt ground and the crappy food. He readily agreed but pointed out it had very little to do with the coffee itself and everything to do with what the brand stands for.

“There are 700 Starbucks in Mexico now,” he told me. “Compared to the minimum wage here the prices are way more expensive than in the United States. But they are growing faster here than anywhere else in the world because people view them as aspirational. If you can afford Starbucks, you have arrived.”

Again, I understood the point but it kinda made me throw up in my mouth. I can deal with a country obsessed with pro football even though there is not one Mexican playing in the NFL (they claim Mark Sanchez as their own but in reality he is about five generations removed from any Mexican ancestry). But the idea of Mexican laborers killing themselves to afford a bad cup of coffee and a stale muffin just seemed more than a little perverse to me, like they were inheriting Rod Stewart and they could have had the Rolling Stones. I guess when they get sick of Starbucks, Peet’s Coffee will eventually make its way here, I thought to myself.

Jose and Augusto explained to me that lunch is still a 2 to 3 hour affair in Mexico, and business is a very personal matter. You need to know who you are dealing with, sit with them and socialize, before anything can get done. They told the story of buying their top salesmen a $500 plane ticket that allowed him to fly anywhere in the country for one month. And he got every bit of value out of it flying sometimes twice a day to the most distant potential customers to break bread and get to know them.

Augusto explained that Mexico is slowing moving from a purely cash economy to one that embraces modern banking and finance. But that change is still slow in coming, in part because of the influence of black market drug money but also just a history of depending on cash to avoid federal income tax for average citizens. The government has instituted a tax of 3% on any cash deposit above a minimum threshold of $25,000 in one month. That tax raised billions showing just how much cash is still the driving force behind the economy.

On the way back to the office after consuming some delicious steaks, I heard about how Mexican storeowners are trying to adopt the black Friday bonanza we have in the States. “We don’t celebrate Thanksgiving,” Augusto said. “We have a version of Halloween a few days after yours. From that day on it’s all about Christmas around here. So last year the stores all created a black weekend rather than a Friday. It was a huge success.”

  ♦◊♦

Back at the office we reviewed our companies complex procedures for loaning money to federal government employees and women’s microfinance collectives. Augusto retrieved a thick binder of loan documents for just one of the collectives. These are short-term loans, generally three months, to women who need working capital to expand their cottage businesses like making shoes.

Augusto walked through all the many forms that the women had to fill out. Each had a map where their collective met each week and the rules of that collective noting that any member who is late for a meeting would be charged ten pesos and anyone who misses a meeting is charged fifty pesos (roughly 13 pesos per U.S. dollar).

Jose made clear that loan officers actually visit the meetings and then check up on each individual business. Each woman has to fill out a mini profit and loss statement. So the officer would physically inspect the inventory of shoes, for instance, to see if they are collecting dust to indicate they are not selling as fast as the woman looking for a loan had said. The officer would also just spend the day observing the foot traffic and pace of sales.

When Augusto flipped to the final page of the document where each woman had to sign their name to get the loan, I noticed numerous thumbprints. “A lot of these women don’t know how to read or write,” he said.

The most amazing part came at the very end. I knew it already but it still astounded me. We loan these women the equivalent of a few hundred dollars to start. Each time they pay us back we loan them a little more. Some are now on their 9th and 10th cycles and are now borrowing thousands of dollars.

The default rate on these loans to these women in the “D” credit classification, meaning barely above the poverty line, is zero. They always pay us back. We’ve been doing this for almost three years now and the pattern has become clear.

  ♦◊♦

One of the last things I remember Jose telling me was the power of football in Mexico. As if to reinforce the point that Julio had made on the way in, he said that if you really wanted to impress your clients in Mexico you’d hire a plane and take them all to the billion-dollar shrine to professional football in Arlington Texas to watch a Cowboys game.

The perverse thought crossed my mind, what if you got a women’s collective and put them on a private plane and took them to a Broadway showWouldn’t that make a lot more sense?

 Photos by author with the exception of woman and steelers fans by AP

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About Tom Matlack

Tom Matlack is the co-founder of The Good Men Project. He has a 18-year-old daughter and 16- and 7-year-old sons. His wife, Elena, is the love of his life. Follow him on Twitter @TMatlack.

Comments

  1. Richard Aubrey says:

    We have a family friend who worked for Fox when Fox was governor of Guanajuato State. He and his friends are pretty plugged in.
    It’s not just him who’s made the point that PRI–the current winner–is the most corrupt, dirtiest, crookedest party in this hemispere. As Stalin said, it’s not who votes that counts, it’s who counts the votes.

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