Apr 192013
 

The Boston Consulting Group (BCG) periodically identifies 100 companies from rapidly developing economies as “global challengers.” (Bcgperspectives, “Introducing the 2013 BCG Global Challengers“).

BCG has identified 100 companies for this list in 2006, 2008, 2009, 2011 and 2013. They focus on companies in developing Asia (excluding Japan, South Korea, Taiwan, Hong Kong and Singapore), Eastern Europe, the Commonwealth of Independent States, the Middle East, Latin America, and Africa. Companies considered for the list must have annual revenues of at least $1 billion, overseas revenues at least 10% of total revenues or $500 million, and be focused on building a truly global footprint.

The biggest emerging economies have dominated. In 2006 the list included 44 Chinese companies, 21 Indian companies and 12 from Brazil. Russia was next with seven followed by Mexico with six. The dominance of the big three declined from 77 in 2006 to 63 in 2013. One reason for this is that some of the countries on the list “graduated” from the challengers list to become full global competitors.

In 2013, China led with 30 companies, followed by India with 20 and Brazil with 13. Mexico was 4th with seven companies, followed by Russia with six, South Africa with five, Thailand with four and Turkey with three. Countries with two companies on the list are Chile, Malaysia, and Saudi Arabia. Those with one company on the list are Argentina, Colombia, Egypt, Qatar and United Arab Emirates.

The seven Mexican companies in the group are Alfa, American Movil, FEMSA, Gruma, Grupo Bimbo, Mabe, and Mexichem. One Mexican company, Cemex, has “graduated” from the “challengers” list. It is the world’s largest building materials supplier and 3rd largest cement maker. Cemex now operates in 50 countries on six continents and is the leading cement seller in the USA. Revenues in 2012 were $15 billion.

ALFA is the world’s leading manufacturer of high-tech aluminum engine heads and blocks through its subsidiary Nemak. Its other major subsidiaries are Alpek (petrochemicals), Sigma Alimntos (foods) and Alestra (electronics and telecommunications). Revenues in 2012 were $15 billion.

América Móvil. operates Telmex and Telcel, the world’s fourth largest cell phone operator with 160,000 employees and over 250 million subscribers mostly in Latin America and the USA. Its revenues in 2012 were $59 billion. It is a candidate to graduate from this “challengers” group in the near future.

Gruma is the world’s largest producer of corn flour and tortillas. It has subsidiaries in the USA, China, UK, and Latin America. Revenues in 2012 were $5 billion.

FEMSA, based in Monterrey, is the world’s largest bottler of Coca-Cola. FEMSA also operates OXXO, the largest convenience store chain in Latin America. Revenues in 2012 were $18 billion.

Grupo Bimbo is the world’s largest bread maker and the biggest bread seller in the USA. Among its 100 brands are Arnold’s, Entenmann’s, Thomas’s English Muffins, and Sara Lee fresh baked products. Bimbo is the world’s 4th largest food company behind only Nestle, Kraft, and Unilever. Revenues in 2012 were $13 billion.

Mabe. is a leader in the production of large household appliances such as stoves, refrigerators, washers, dryers, etc. These are sold in 70 countries under the General Electric and Mabe brand names. It controls 70% of the market in Latin America. Revenues in 2012 were $4 billion.

Mexichem is a chemical company that operates throughout the Americas as well as in Europe and Asia. It exports to more than 50 countries, has over 10,000 employees, and earns over $4 billion annually.

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Apr 162013
 

Cynthia Roderick is an award-winning photographer whose work has been widely published in major newspapers, magazines and TV news programs. However, I had not realized until recently that Roderick has a strong affection for Oaxaca. Several portfolios of work related to Oaxaca can be accessed via her website:

  • San Mateo Rio Hondo (40 images) San Mateo Río Hondo, a town and municipality in Oaxaca, is situated in the Miahuatlán District in the south of the Sierra Sur.
Credit: Copyright held by Cynthia Roderick

Credit: Copyright held by Cynthia Roderick

Festival Our Lady of Guadalupe – Image by Cynthia Roderick

Her informal images capture the personalities and sights of these events, warts and all. Roderick has a keen eye for subject matter, color and detail. Her fine photographs bring these events and the magic of Oaxaca to life for her viewers.

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Apr 132013
 

In an earlier post, we described President Enrique Peña Nieto’s very ambitious “Pact for Mexico”. Very briefly, the Pact addresses 95 important issues in five broad categories: reducing violence, combating poverty, boosting economic growth, reforming education, and fostering social responsibility.

Achieving these reforms will require passage of new legislation by a majority in both houses and signed into law by the President. Many of the reforms will require passage of Constitutional amendments which require two-thirds majority in each house as well as approval by at least half of the states.

Passing the reforms will be a real challenge because the President’s party, PRI (Partido Revolucionario Institucional, Institutional Revolutionary Party), holds only 41.4% of the seats in the Chamber of Deputies (207 of 500) and 40.6% of the seats in the Senate (52 of 128). If they join forces with their natural ally PVEM (Partido Verde Ecologísta de México, Green Party), they still fall short of a majority: 48.2% in the Chamber and 47.7% in the Senate. While some important leaders of PAN (Partido Acción Nacional, National Action Party) and PRD (Partido de la Revolución Democrática, Party of the Democratic Revolution), Mexico’s two other major parties, have “signed” on to the Pact and are serving on the Pact Implementation Committee, many PAN and PRD members have not formally supported it.

If PRI gets complete support from the PRD and the other two leftist parties PT (Partido del Trabajo, Labor Party) and MC (Movimiento Ciudadano (Citizens’ Movement, formerly known as Convergencia or Convergence) they can pass reform legislation. But they still would be unable to pass Constitutional amendments because while they would have a two-thirds majority (68.4%) in the Chamber they would not in the Senate (62.5%). Furthermore, to get all legislators from these leftist parties to agree, they might have to make the reforms so radical that they might lose some support from some PRI and PVEM legislators.

If all PRI and PAN legislators agreed, they would have a 70.3% majority in the Senate, but would still have only 64.2% in the Chamber, less than the two-thirds majority needed to pass Constitutional amendments.

In conclusion, the only way the major “Pact for Mexico” reforms which require Constitutional amendments can be implemented is through serious bargaining and coalitions. One possible successful coalition would be PRI, PAN and PVEM; it would have 71.0% in the Chamber and 77.3% in the Senate. Such a group would probably have to opt for a more neo-liberal approach to gain PAN votes. Another, more radical coalition would be PRI, PRD, PT, CV and PVEM, which would have 75.2% in the Chamber and 69.5% in the Senate. In any case, to get reforms passed, the legislation might have to be so watered down that it would not significantly change the status quo. On the other hand, there appears to be such a groundswell of support for the “Pact for Mexico” that the existing parties may feel great pressure to move forward with meaningful reforms. Only time will tell.

 Posted by at 8:40 am  Tagged with:
Apr 112013
 

El Sótano de las Golondrinas, in the municipality of Aquismón in the state of San Luis Potosí, is a massive limestone sinkhole (pit cave), one of the largest known in the world. In terms of depth, it is thought to be the second deepest sinkhole in Mexico and is probably in the world’s top 20.

The depth of sinkholes can be difficult to determine. For example, in the case of El Sótano de las Golondrinas, its surface opening is about 50 meters by 60 meters (160 by 200 ft) in size, but is on a slope. The depth on the high side is about 376 meters (1220 ft); the depth on the low side is about 330 meters (1090 ft).

sotano-de-las-golon

Below the surface (see profile) the sinkhole is roughly bottle-shaped. The floor of the sinkhole is about 300 x 135 meters (990 by 440 ft) in area. However, the sinkhole is believed to have formed from the collapse of the roof of an underground cave. As a result, the floor of the sinkhole is not solid rock but rubble that presumably came from the walls and former roof. A shaft on one side extends down at least another 100 m, suggesting that the true floor of the original cave lies at least that far beneath the current rubble-strewn floor.

US photographer Amy Hinkle shot some spectacular images earlier this year in this cave.  The accompanying article highlights the “secret garden” that “nestles 300 meters beneath the surface of the earth”.

The cave’s name (literally “basement of the swallows”) derives from the thousands of white-collared swifts that inhabit the overhanging walls of its interior. They spiral out of the cave every morning over a period of 25-30 minutes and return to their cave homes close to sunset. Large numbers of green parakeets also live in the cave.

The floor of the sinkhole is home to a rich plant life, as well as a diverse selection of  fungi, millipedes, insects, snakes, and scorpions.

The original cave is thought to have been formed by a lengthy period of water erosion along a major fault line in the lower Cretaceous limestone in the Sierra Huasteca (part of Mexico’s Eastern Sierra Madre). Over time, the cave became larger as a consequence of both the water erosion and due to mass movements (landslides, rockfalls) on its walls. Eventually, the size of the cave was so large that its walls could no longer support its roof which then collapsed into the cave, leaving the open air sinkhole seen today. Following heavy rain, short-lived waterfalls cascade down the sides of the sinkhole.

The first documented exploration of El Sótano de las Golondrinas was apparently in 1966. Since that time, the cave has become a popular destination for various adventure sports including rappelling, abseiling and base jumping (no longer allowed).

There are several other very deep sinkholes in the same general area, including Hoya de las Guasguas (with a 202 m deep entrance shaft) and Sótano del Barro (402 m in depth).

Some ornithological studies have found that the bird population of El Sótano de las Golondrinas is decreasing, perhaps due to the disturbance caused by the increasing number of human visitors. To limit disturbance, access and activities are more tightly controlled. For instance, descents into the cave are now strictly limited to daylight hours when the birds are absent, and a no-fly zone has been established around the cave, primarily to avoid helicopter disturbance.

El Sótano de las Golondrinas is yet another outstanding example of a geomorphosite in Mexico. Mexico has literally thousands of geomorphosites. Among those described in previous Geo-Mexico posts are:

References:

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Apr 082013
 

On-going rural-urban migration has led to a proliferation of metropolitan areas and the construction of millions of new homes across Mexico. Thirty years ago, there were only 15 recognized metropolitan areas in Mexico, today there are 59.

In recent decades, there has been insufficient coordination between the various government departments responsible for housing, services and land development, such that some settlements were authorized even though they lacked or had inadequate access to highways or basic services. In many instances, settlements were given the green light even though the ownership of the land was still in dispute.

A recent Mexico City news report entitled Desorden urbano dejó en el país millones de viviendas fantasmas claims that this poor planning in Mexico has resulted in as many as 4 million houses, many of them newly built, standing empty.

Among the settlements with a large number of uninhabited new homes is Santiago el Pinar in the heart of the southern state of Chiapas, home of the indigenous coffee–growing Tzotzil Indians who have traditionally lived in dispersed rural communities where access to central services is difficult. The previous federal administration built hundreds of homes here in its effort to “develop” the area into a “sustainable rural city” (whatever that means!). It was hoped that modern homes, located near services such a small, new hospital, would help give the Tzotzil a chance to escape poverty, though it did involve some relocation.

Santago el Pinar. Credit: glasgowchiapassolidaritygroup.wordpress.com

Santago el Pinar. Credit: glasgowchiapassolidaritygroup.wordpress.com

This BBC clip – Santiago el Pinar: One Square Mile of Mexico – describes the plan and some of the obstacles it has encountered.

The people’s traditional dwellings have dirt floors where food can be cooked over small fires. The new homes, designed by Marco Antonio Constantino, are mounted on stilts and have wooden floors, where traditional forms of indoor cooking would be hazardous. There were also some serious issues of construction quality, as well as a significant delay in supplying water to the new homes. All these factors combined have meant that almost all of the new homes have quickly been abandoned.

The lack of provision of basic services (water, electricity, drainage) is also cited as a factor why many new homes elsewhere in Mexico remain unoccupied.

In the past 20-30 years, Mexico’s largest homebuilders (companies such as Urbi, Geo and Homex) have done very well financially. They are now having to adjust to tougher times. Part of their problem, according to the Mexican financial press, is that government policy has shifted away from the construction of single-family units (such as those in Santiago de Pinar), which these big companies thrived on, towards building multi-family vertical units. The advantages of the latter are they reduce overall energy usage and the total cost associated with supplying other essential services.

This brief look at the issue of empty houses in Mexico suggests that while Mexico is certainly changing, and often for the better, change (as evidenced by Santiago de Pinar) is not necessarily synonymous with progress.

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Apr 062013
 

In a presentation entitled “Mexico’s Outlook” in Ajijic, Jalisco, Mexico, on 20 March 2013, noted Mexican political economist Leo Zuckermann explained how many economists see Mexico as the “flavor of the month” among Latin American economies.  Brazil previously was the star of Latin America as evidenced by the 14-20 November 2009 cover of  The Economist. However, Brazil’s performance slowed considerably in 2012; its GDP grew by only 1.0% and the dollar value of its stock market actually declined by 0.5% in 2012. (The Economist, 19 January 2013, p 93)

Economist covers

Mexico is the new star according to The Economist 14-page Special Report on Mexico in its 24-30 November 2012 edition. Mexico’s GDP grew by 4.0% in 2012, faster than the US, Canada and all European economies, though it did trail China (7.7%), India (5.4%), Indonesia (6.3%) and Thailand (5.8%). In dollar terms its stock market shot up an impressive 33.6% in 2012, tied with Germany and faster than all other sizable countries, except Turkey (75.8%), Thailand (45.9%) and Egypt (43.9%). (The Economist, 19 January 2013, pp 92, 93).

Mexico is expected to grow by 3.5% in 2013. However, it should be noted that after appearing on The Economist cover in November 2009, Brazil’s GDP declined steadily from over 8% to only 1%. We hope that Mexico can avoid this Economist cover jinx.

Mexico’s recent growth and positive outlook is largely dependent on continued expansion of exports, particularly the sale of automobiles and electronics to the USA. In 2013, Mexico is expected to surpass Japan as the leading exporter of light vehicles into the USA.

Though Mexican industrial export numbers are impressive, many of the components of these exports are initially imported. For example, the foreign content of Mexico’s electronic exports is 61%, compared to about 40% for China, 45% for Korea and only 11% for the USA.

Much of Mexico’s export capacity results from foreign direct investment in Mexico. However, such investment declined from nearly $30 billion a year in 2007 and 2008 to only $12.7 billion in 2012 (The Economist, 19 January 2013, pp 92, 93). This could limit export growth in future years. Furthermore Mexican direct investment abroad in 2012 was $25.5 billion almost twice the amount foreigners invested in Mexico. Prior to 2012 foreigners invested far more in Mexico than vice versa. This trend suggests that many Mexican investors see better opportunities abroad than in Mexico. Such investments are one reason for the rapid foreign expansion of some major Mexican multinational corporations such as Cemex, América Móvil, FEMSA and Bimbo. Another factor suggested by these numbers is that both foreign and Mexican investors do not see many attractive opportunities for domestic industries selling to the Mexican market. If Mexico is indeed now the “flavor of the month,” it remains to be seen if Mexico can retain its current popularity.

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 Posted by at 8:23 am  Tagged with:
Apr 042013
 

According to a recently published U.S. Chamber of Commerce study of the largest energy-consuming nations, Mexico is the most energy secure country of the 25 countries in the large energy user group with a score 14% below the OECD average (see graph).

energy security graph (US Congress)

The study compiled an “International Index of Energy Security Risk”, taking into account 28 metrics including fossil-fuel imports, power generation and carbon-dioxide emissions, using data from sources such as the U.S. Energy Information Administration and the Paris-based International Energy Administration.

Other countries with high levels of energy security included the U.K., Norway, New Zealand, Denmark, Australia and the U.S. (Which tanked 7th overall. Energy security was lowest in the Ukraine, followed by Thailand, South Korea, the Netherlands, Brazil, Italy, Turkey and Japan.

Mexico’s energy security has ranked as first or second among the large energy user group of countries every year since 1980. The metrics where Mexico has a significant comparative advantage over other OECD members include:

  • low amount it spends on fuel imports per dollar of GDP generated
  • low energy expenditures per dollar of GDP and per capita are also lower
  • low costs to produce electricity.
  • low amount of energy each person uses, both overall and in the transport sector
  • low amount of carbon dioxide each person emits

As the graph shows, however, Mexico’s energy security is edging closer to that of OECD countries, meaning that Mexico’s comparative advantage in energy security is slowly shrinking.

Mexico is the world’s seventh largest oil producer, and also a major oil exporter. While production levels had been declining, they have begun to rise again in recent months. Mexico also has large reserves of natural gas, but these have not been developed quickly enough to prevent imports of natural gas from rising sharply in recent years as demand for natural gas outstrips domestic supply.

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Apr 022013
 

This post describes several newsworthy developments relating to Mexico’s natural environment.

Financing to fight deforestation

The Inter-American Development Bank is giving Mexico $15 million in financial and technical assistance to support climate change mitigation efforts. The program will help communities and ejidos finance low carbon projects in forest landscapes in five states, all of which have high levels of net forest loss: Oaxaca, Yucatán, Quintana Roo, Jalisco and Campeche.

The program includes a $10 million loan for financing projects that must reconcile economic profit for the communities and generate environmental benefits through reducing the pressure on forests and promoting enhancement of carbon stocks. In addition, a $5 million grant will provide financial and technical assistance to support the viability of individual projects, by strengthening technical, financial and management skills.

The IDB says that the program is a pilot project that will allow lessons to be learned for its replication in other key geographic areas in Mexico. It should demonstrate a viable business model that promotes the reduction of deforestation and degradation while increasing economic returns. [based on an IDB press release]

Mexican company converts avocado seeds into biodegradable plastic

A Mexican company called Biofase has developed a way to turn avocado pits into 100% biodegradable plastic resins. Avocado pits are normally discarded as waste. Biofase will collect some of the estimated 30,000 metric tons of avocado pits discarded each month for processing. The company has patented the technology and is looking for additional raw material containing some of the same chemicals as avocados.

Huichol Indians oppose peyote conservation measure

A presidential decree signed last November prohibits the harvesting of the hallucinogenic peyote cactus from two protected areas in the state of San Luis Potosí. The decree has met fierce opposition from the indigenous Huichol (Wixarika) people, for whom the peyote is a sacred plant. The Huichol undertake a lengthy pilgrimage each year to gather peyote for subsequent use in their ceremonies.

The restriction on peyote harvesting is the latest in a long line of problems faced by the Huichol including the incursion by a large number of mining companies onto traditional territory. The Regional Council for the Defense of Wirikuta has demanded that the government guarantee the Huichol’s right to pick peyote, and called for the cancellation of 79 mining concessions (most of them to Canadian companies) that impinge on their sacred land. Critics claim that mining is having a devastating impact on the local environment, especially because the companies involved are using large quantities of highly toxic cyanide.

Expand the port or protect the coral reef?

In Avalan destruir arrecifes para ampliar puerto de Veracruz published in Mexico City daily La Jornada, Luz María Rivera describes how one of the final acts of the previous administration was to redraw the boundaries of the protected area of coral reef off the coast of Veracruz state. The new boundaries have reduced the protected offshore area near the cities of Veracruz, Boca del Río and Alvarado by about 1200 hectares (3000 acres). The redrawing of the protected area is to enable the expansion of the port of Veracruz, one of the country’s largest, and almost double its capacity. Government officials claimed that the area affected was already “damaged” and that the reef system was 98% or 99% “dead”.

Government-NGO accord to protect Mexican whale sanctuary

The Mexican government has signed an accord with the NGO Pronatura Noroeste to improve the protection of Laguna San Ignacio, the Pacific coastal lagoon which is a major breeding ground for gray whales. The lagoon has 400 kilometers (250 miles) of coastline, bounded by wetlands and mangroves, and is part of the El Vizcaino Biosphere Reserve in the northern part of the state of Baja California Sur. The accord calls for joint development of plans for protection, monitoring and tracking the whales and other species that inhabit the lagoon, as well as  establishing protocols for resolving any eventual environmental contingencies.

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Mar 302013
 

In our series of brief updates on topics featured in previous Geo-Mexico posts, we look this week at the continuing eruption of two major volcanoes: Popocatapetl Volcano (between Mexico City and Puebla) and Colima Volcano (on the Jalisco-Colima state border in western Mexico).

Popocatepetl, 30 July 2012

Popocatepetl, 30 July 2012

Since our previous post, about a year ago, entitled Alert level rises as Popocatepetl volcano starts to erupt, Popocatapetl Volcano (photo) has continued to be active, with up to 250 activity events a day. The alert level has been reduced slightly to Yellow Phase 2, the fourth highest level. This level indicates intermediate scale explosive activity and possible expulsion of lava, explosions of increasing intensity and wind-blown ash falling on nearby villages. The volcano is monitored daily, and updates from CENAPRED  (in Spanish and English) are issued every 24 hours.

The report issued on 27 March is typical of recent months. In the previous 24 hours, there were 83 low intensity events with emissions of gas, water vapor and ash. The two largest events sent material rising 1000 meters and 600 meters into the atmosphere respectively, before the wind blew the material north eastwards (away from Mexico City).

Colima Volcano

In January 2013, we reported how Colima Volcano erupts, destroying lava dome first created in 2007. The volcano has continued to erupt in the ten weeks since then. The experts monitoring the volcano have reported up to 200 eruptive events a day, with numerous minor emissions of lava. Local villagers have been asked to remain on alert, though the experts are not yet calling for any villages to be evacuated.

The image below (source: Nasa Earth Observatory) shows Colima Volcano in 2010, part way into its current eruptive phase which is expected to last several years. The image shows the evidence at that time of four different types of volcanic activity:

  • lava dome growth
  • explosive eruptions
  • flank collapse
  • lava flows.

(Note that the 2013 eruptions have significantly altered the top of the volcano since this image was taken).

Nasa Earth Observatory)

Colima Volcano in 2010 (Nasa Earth Observatory)

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Mar 282013
 

Corruption is a serious concern in Mexico and these other four major emerging economies. Corruption is rather subjective and not an easy concept to measure. This post looks into corruption in Mexico, Brazil, China, India and Russia, as reported by Transparency International (TI) in its Perceived Corruption Index 2012 and the World Justice Project (WJP) Rule of Law Report for 2012-2013.

Transparency International’s “Index of Perceived Corruption” is based on a wide array of surveys, polls of international experts and interviews with knowledgeable residents. In TI’s analysis of 2007 results, Mexico, Brazil, China and India were all tied at 72nd out of 179 countries. Russia was far behind at 143rd However, by 2012, Mexico had slipped to 105th; India had dropped to 94th, China to 80th, while Brazil improved a bit to 69th. (See also Tim Padgett’s “Tale of Two Corruptos: Brazil and Mexico on Different Transparency Paths”.) Russia moved up a bit, but still was 133rd. Mexico’s fall in the rankings might have been associated with the explosion of drug cartel violence between 2007 and 2012.

The World Justice Project (WJP)’s 2012-2013 Report “Absence of Corruption” ranked Brazil and China at 38th of 97 countries; Russia was ranked 70th, Mexico 74th and India 81st. These WJP rankings do not correlate very well with those of Transparency International (IT). For example, Russia appears far more corrupt in the TI rankings, while India looks more corrupt on the WJP rankings.

The WJP looks into four separate corruption sub-factors. These are listed below with the ranks of the five countries:

1. Government officials in the executive branch do not use public office for private gain.

  • Brazil (40th of 97), Mexico (49th), China (49th), Russia (56th) India (89th)

2. Government officials in the judicial branch do not use public office for private gain.

  • Brazil (33rd), India (52nd), Russia (67th), China (70th), Mexico (84th)

3. Government officials in the police and the military do not use public office for private gain.

  • China (36th), Brazil (37th), Russia (67th), Mexico (84th), India (86th)

4. Government officials in the legislative branch do not use public office for private gain.

  • China (30th), Mexico (51th), Brazil (75th), Russia (77th), India (81st)

The results suggest that Mexico’s main corruption problems are not with the executive and legislative branches, perhaps because the Mexican constitution limits elected officials to only one term. The main problems are with the judicial and police/military branches. Mexico’s judicial reform program which is currently being implemented, should reduce judicial and police corruption. Also police and penal code reforms advocated by President Peña Nieto’s “Pact for Mexico” should help. Mexico’s future corruption ranks according to both TI and WJP could be a bit better because the “Pact for Mexico” identifies corruption as a priority. Only time will tell.