Jun 302012
 

Comparing the historical sizes of national economies is extremely challenging. This post relies on data from Gapminder which has attempted to do this for all the countries in the world for the period since 1800. Gapminder’s approach relies on first obtaining for each country historical population size and Gross Domestic Product per capita (GDPpc; for more details, see Standard of living in Mexico since 1800: some international comparisons) and then multiplying these to obtain the GDP. To obtain historical measures of population and GDPpc, Gapminder relies on quantitative and qualitative data from hundreds of official and unofficial documents and a number of carefully documented assumptions. In some cases they admit that some of their numbers for years before 1900 are essentially well-educated “guesstimates”. [Full details are given in the pdf file “Documentation for GDP per capita by purchasing power parities".]

Though the Gapminder data have limitations, they are about the best source for comparing the GDP growth of Mexico since 1800 with that of other large economies. The Gapminder GDPpc data are adjusted for inflation by using constant 2005 US dollars. They are also based on Purchasing Power Parity (PPP) which measures total goods and services produced by an economy independent of exchange rates.

During the 19th century Mexico’s total GDP grew at a relatively unimpressive 1.3% per year, which was only about 0.5% above population growth. In 1800, Mexico’s estimated GDP was just over $6 billion, ranking it second in the Americas. Though this was almost nine times the GDP of Canada, and 3.6 times that of Brazil, it was less than that of Nigeria and half that of the USA. China had by far the largest GDP in 1800 at about $290 billion, more than three times the GDP of second place India, over seven times that of Japan and the large European countries (France, Germany and the UK) and over 20 times that of the USA. The table below shows the estimated GDP levels from 1800 to 1900 for some of the world’s current largest economies.

Estimated total GDP of large economies, 1800 to 1900

(GDP in billions of constant 2005 US dollars based on Purchasing Power Parity)

Country1800182018701900Growth/yr, 1800-1900
Brazil1.72.47.010.31.8%
Canada0.71.19.323.13.6%
China286.9328.8279.1320.90.1%
France38.447.1113.5167.31.5%
Germany36.048.5113.2254.72.0%
India91.098.2118.8nana
Indonesia8.39.316.026.31.2%
Italy23.629.344.671.61.1%
Japan31.133.639.676.60.9%
MEXICO6.17.39.123.31.3%
Russia25.626.2nanana
UK34.945.4151.3240.12.0%
USA12.720.1261.3506.03.8%

From 1800 to 1820, just before gaining independence, the Mexican economy grew to $7.3 billion at a sluggish rate of about 0.9% per year. In contrast, Canada and the USA expanded at around 2.3% per year while Brazil’s GDP went up about 1.9% per year. Germany, France, UK and Italy grew at roughly 1.0% to 1.5% per year. The major Asian countries–China, India, Japan and Indonesia–only managed 0.4% to 0.7% per year. The Russian economy essentially stagnated during the 20 year period. China maintained the top position with over three times the GDP of India and over six times those of the large European economies.

By 1870, Mexico’s GDP had inched up over $9 billion growing rather slowly at just over 0.4% per year since 1820; this was slower than the population growth rate. While Mexico’s growth rate was better than the three biggest Asian economies, it severely lagged behind its northern neighbors which grew very rapidly based on industrialization and immigration. Canada’s economy expanded by an impressive 4.4% per year and edged past Mexico. The USA did almost as well at 4.2% per year to move into second place behind China, which declined by a surprising 0.3% per year over the fifty year period. (In China both GDPpc and population declined from 1820 to 1870.)

Brazil grew by a solid 2.1% per year and closed the gap with Mexico. The three largest European economies were also industrializing and grew by roughly 1.7% to 2.0% per year, but they were still overtaken by the USA. While Indonesia’s GDP expanded by about 1.1% per year, growth rates for Japan and India were less than 0.4% per year.

From 1870 to 1900, under the Porifiro Diaz regime, Mexico’s economy grew rapidly at about 3.2% per year up to $23.3 billion. This put Mexico just ahead of Canada which grew slightly more slowly at roughly 3.1% per year. Mexico’s estimated GDP in 1900 was just behind that of Indonesia but over twice that of Brazil which slowed to 1.3% per year. The USA sped ahead at 3.9%. In the early 1880s it became the world’s largest economy by overtaking China which grew slowly at less than 0.5% per year. In 1900 China’s estimated GDP was actually less than it had been 80 years earlier in 1820. By 1900 the USA’s estimated GDP was over $500 billion, about 22 times that of Mexico. Germany grew at an impressive 2.7% per year becoming Europe’s largest economy by moving past the UK which grew at 2.2%, about the same rate as Japan. Growth in France and Italy was significantly slower.

During the full 19th century, Mexico almost quadrupled its GDP but its overall economic performance was fair at best. Its growth rate of just over 1.3% per year was better than the Asian countries which performed poorly during the century. The USA registered a very impressive 3.8% growth per year resulting in a fortyfold GDP increase. Canada was a close second with 3.6% per year and a 34-fold increase. Germany and the UK had seven-fold increases with growth rates near 2.0%, followed by Brazil at 1.8% growth per year. France followed with growth averaging just under1.5% per year. Though these Gapminder GDP levels have some limitations, they do give a pretty good indication of relative historical economic sizes and growth rates.

Mexico’s economic performance was much better in the 20thcentury as was that of all major world countries. A future post will focus on economic growth since 1900.

 

Jun 282012
 

This account of the rope-making industry in the small village of Villa Progreso in the state of Querétaro, is based on information collected during numerous student interviews conducted in the village in the 1980s.

Villa Progreso in the 1980s

Preparing to start. Rope-maker starts to twist the strands.

Preparing to start. Rope-maker starts to twist the strands.

Villa Progreso is nestled in the hills at the end of a road, east of the town of Ezequiel Montes. The rocky soil is not very fertile, and water is in short supply, so agricultural production is limited, though maguey plants grow well here, even when neglected. The local maguey plants used to supply the raw material for rope-making, the main “secondary” occupation in the village.

However, as the village’s population increased, and as more and more families became dependent on rope-making, another maguey product, ixtle de henequen (henequen fibers), had to be trucked in as the raw material from other states, in particular from Yucatán and Tamaulipas.

The trucks are either rented by the villagers or supplied by the village “distributors” (who eventually buy the finished ropes from the village). About 40 metric tons of henequen are needed each week to keep the rope-makers supplied.

In the 1980s (all monetary figures are from that time), raw henequen was bought by the distributors for about 50 pesos a kilo, and then resold to the villagers at about 95 pesos a kilo. The distributors are “middle men” who, in the words of one student, “make a lot of money doing nothing” and “live in the largest, most expensive homes in the village.”

Once the villagers have purchased a supply of henequen, they perform the various tasks to turn it into ropes. The first step is to “comb” it to make fine fibers and to clean the henequen.

The fibers are then shaken in the wind to further separate them before being stored in a large sack. The ends of the top fibers are then tied onto three wires (see first photo). These wires are made to spin by a wheel.

This is often an old bicycle wheel. Some villagers turn the wheel themselves as they walk backwards feeding fibers onto the wires, via a rope that is wound over the wheel; others rely on children or family members to turn the wheel.

The rope gets longer... and thicker...

The rope gets longer… and thicker…

As the person carrying the sack walks backwards, they continue to feed the three strands of fiber, gradually creating three fine strands of rope. The spinning process is repeated, using the fine strands as the basis, and the rope can be made as thick as you like by successive spins.

The entire family helps

The entire family helps (note cloth tied as sunshade)

The main output from this system is strands of rope of various thicknesses, used for things such as clothes lines. Short strands of henequen are not wasted, but formed into natural cleaning pads.

The work is done by the entire family. One worker pointed out that “it is better to have a large family as like this all can work for each other”. Any workers who have no family have to hire extra workers and are unlikely to make any profit.

On a good day, one family can produce about 72 ropes, each about 5 meters long, which can be sold for around 1800 pesos. However, it takes about 1 kilo of henequen to make 7 or 8 ropes, so the family only makes about 800 pesos [about 5 dollars at the then exchange rate] a day after they have paid for the “raw” henequen. The average family size, including children, in the village was between 5 and 6 individuals. 800 pesos a day is not much income to support the entire family!

The finished ropes are bought by the distributors, who in turn sell it on to other distributors in other places, and so on. The main markets are Mexico City, where about 90% of these ropes are eventually sold.

The workers in the rope-making industry in Villa Progreso have tried to organize themselves, but with only limited success. For example, three years before the interviews, they had formed a cooperative, but decided to quit the group when they realized that the managers of the cooperative also wanted part of the profits. So, at the time of the interviews, they had returned to working independently without any outside help.

Sales of rope fluctuate with the economy, and also seasonally, with the highest demand during the rainy season, partly because these natural fiber ropes tend to disintegrate more quickly during damp conditions.

The final stage, with finished ropes

The final stage, with finished ropes

As one student concluded, “It is very visible here how the middle men (distributors) take advantage of the cheap labor available and make a large profit by only buying and selling raw materials and by buying and selling finished products. thus, the distributors are getting richer by exploiting the workers and the workers are remaining as poor or getting poorer than before. The workers have been pulled into a situation that they can not easily escape from.”

How have things changed since the 1980s?

Sadly, I haven’t had the chance to return to Villa Progreso since then, but things appear to have changed considerably. Newspaper accounts such as “Artesanos dan nuevo aire al ixtle” (“Artisans give new life to Ixtle”), which appeared in the national daily El Universal in 2008, suggest that the residents of Villa Progreso are now emerging from some very hard times.

The price of natural fiber ropes could not compete with cheaper plastic alternatives and the rope-making industry went into near-terminal decline. Many of the able-bodied young men left to look for work north of the border. A small number (mainly the older inhabitants) remained home and continued to make ropes by hand for the limited market that remained for their products.

Now, though, a new industry has arisen based on the henequen fibers (usually known simply as ixtle). Enterprising villagers have turned their hands to fashioning nativity scenes and decorative items out of ixtle. Isaías Mendoza Guzmán is described in the article as making pieces that are more than two meters tall and take three months to complete, clearly indicating a high level of sophistication in the final product.

Villa Progreso now holds an Ixtle and Nopal Fair (Feria del Ixtle y el Nopal) towards the end of April each year in the La Canoa “ecotourism park”.

Villa Progreso is by no means the only place in Mexico where rope-making is an important activity. Similar rope-making methods are used elsewhere in Mexico. For example, John Pint describes in “Mexican artisans of Lake Cajititlán” how rodeo-quality lariats are made in the village of San Miguel Cuyutlán, near Guadalajara. Demand for these high-end products apparently remains strong.

Photo credit:

All photos in this post are by Tony Burton; all rights reserved.

How to get there:

Villa Progreso is about 10 km east of the town of Ezequiel Montes in Querétaro. From Mexico City, take the Querétaro highway (Hwy 57D) north-west to San Juan del Río. Then take Highway 120 past Tequisquiapan to Ezequiel Montes. Once in the town, turn right for the road to Villa Progreso. Allow 2.0 to 2.5 hours for the drive.

Related posts about the same general area:

 

Jun 232012
 

Comparing historical standards of living for different countries over long periods of time is extremely challenging. This post relies on data from Gapminder which has attempted to do this for all countries in the world since 1800. Their approach relies on quantitative and qualitative data from hundreds of references and a number of carefully documented assumptions. They obtained input from a very wide range of official and unofficial documents and combined these to come up with their best estimates. In some cases they admit that some of their numbers for years before 1950 are essentially well-educated “guesstimates”. [For more details, see “Documentation for GDP per capita by purchasing power parities" (pdf file).]

Though the Gapminder data have some limitations, they are about the best source for comparing standards of living in Mexico since 1800 with a number of other middle income countries. The measure of standard of living used in this post is the Gapminder indicator of Gross Domestic Product per capita (GDPpc) at constant 2005 US dollars based on Purchasing Power Parity (PPP) which measures total goods and services produced by an economy independent of exchange rates.

The data indicate that Mexico’s GDPpc has grown over eleven-fold since 1800 from over $1,000 to almost $12,000. This increase sounds very impressive but actually represents an average annual increase of under 1.2% per year. The eleven-fold increase demonstrates the power of compounding. The growth has not been constant. During the 19thcentury Mexico’s GDPpc actually decreased slightly up until 1870, but then expanded relatively rapidly under the Porfirio Diaz regime, almost doubling between 1870 and 1900. For the century as a whole it increased an average of about 0.5% per year. The rate of increase more than doubled during the first half of the 20th century to 1.2%. It doubled again to 2.5% during the second half of the 20th century, which included the so-called “Mexican Miracle”, which started in the 1940s. After 2000, as a result of the very severe recession in the USA, Mexico’s growth slowed to 0.6% per year for the period 2000-2011. Growth is expected to increase significantly during the present decade.

Income growth in Mexico since 1800 (Gapminder data) 

(Incomes values are at constant 2005 US dollars based on Purchasing Power Parity)

Country18001900195020002011Growth/yr, 1800-2011
Argentina8724,0116,32310,77114,5951.3%
Brazil5095981,9047,81910,1921.4%
Chile7022,3063,61210,10613,6111.4%
China9868024272,7847,9311.0%
Cuba1,124na4,9585,8249,4691.0%
India5635855881,6072,9720.8%
Indonesia5146046662,6273,9991.0%
Iran7501,3472,8168,26011,6661.3%
South Korea59667070815,69225,2561.8%
MEXICO1,0541,7223,07410,35911,7541.2%
Peru6979963,2895,7058,4201.2%
Russia824nana7,79214,3181.4%
South Africa759na4,7667,3349,2841.2%

The table compares the 1800 to 2011 GDPpc of Mexico with 12 other middle and low income countries. In 1800, Mexico was ahead of all other countries in the table except Cuba. By 1900, Argentina had moved past and its GDPpc was more than double that of Mexico. Argentina’s GDPpc growth rate for the 19thcentury was over three times that of Mexico. Chile also moved ahead of Mexico. On the other hand, Brazil grew very slowly at only about 0.2% per year during the century; it actually declined between 1870 and 2000. By 1900, its GDPpc was about equal to that of India and a third that of Mexico.

In 1800, China’s GDPpc trailed Mexico by only about 6.5%; but declined by about 0.2% per year during the 19thcentury when China’s economy seriously stagnated as a result of opium wars and numerous internal rebellions which took from 20 to 40 million lives. By 1900, China’s GDPpc was less than half that of Mexico. India, South Korea and Indonesia also grew very slowly during the century. Their GDPpcs went from about half that of Mexico to about a third. There was no Asian economic miracle during the 19th century.

By 1950, Mexico trailed Argentina, Chile, Peru, Cuba and South Africa. From 1900 to 1950, the GDPpc of Mexico grew by a respectable 1.2% per year; however Peru and Brazil grew twice as fast. At the other end, the Asian countries did rather poorly. For example, China’s GDPpc declined by an amazing 1.2% per year from 1900 to 1950, when the country suffered from competing warlords, a protracted civil war, and Japanese invasion. By 1950, China’s GDPpc was less than half of what it had been in 1800 and also was behind India and less than a seventh that of Mexico. From 1900 to 1950, India’s GDPpc grew by only 0.01% per year while Indonesia and South Korea did only marginally better. The mid 20thcentury wars were very damaging to the Asian economies.

By 2000, Mexico had almost caught up with Argentina and had surpassed Chile, Peru, Cuba and South Africa. While Mexico’s growth from 1950 to 2000 of about 2.5% per year was very impressive, Brazil grew even faster at 2.9% per year. South Korea’s GDPpc surged ahead by an amazing 6.4% per year during the second half of the 20th century; it increased over twenty-fold from about $700 to over $15,000. China also grew at a very impressive 3.8% per year posting over a six fold increase. These two countries recovered briskly after their numerous wars and kept moving ahead at a rapid clip.

During the years between 2000 and 2011, Mexico had the worst performance of the countries in the table, growing at only 1.6% per year. China grew over eight times faster than Mexico; India and Russia grew almost five times faster. The growth rates of the other Latin American countries in the table – Argentina, Brazil, Chile, Cuba and Peru – were over twice that of Mexico. However, the Mexican economy is closely tied to the USA where GDPpc grew less than half as fast as Mexico. As mentioned previously, Mexico is expected to grow briskly during the rest of this decade.

It is interesting to look over the full 211 year period from 1800 to 2011. Interestingly throughout the whole period the GDPpc of Iran slightly trailed that of Mexico. The gap between these two countries closed a bit during the 211 year period. As a result of its rapid surge in recent decades, South Korea grew the fastest at 1.8% per year; it moved from one of the poorest in 1800 to the richest in the table. Other solid growth rates were posted by Argentina, Brazil, Chile, Iran and Russia. The slowest growth occurred in India, at only 0.8% per year, followed by Indonesia and China at slightly less than 1.0% per year. However, these Asian countries are now growing considerably faster than the other countries in the table. Looking at income growth over the last two hundred years puts the current situation in perspective. It is interesting to speculate on what the next two hundred years will bring, something we will return to in future posts.

Related posts:

Jun 092012
 

The annual total of remittances sent back to families in Mexico by migrant workers in the USA increased year-on-year to 22.731 billion dollars in 2011, and looks set to rise again this year.

Mexico’s central bank (the Bank of Mexico) recently released figures showing that remittances to Mexico increased in April 2012 by more than 8% compared to the same month a year earlier, bringing the cumulative total for the first four months of this year to 7.4 billion dollars, 6% higher than in the same period in 2011.

These increases in remittance flows come despite increasing evidence that the net flow of migrants leaving Mexico to work in the USA has come to a standstill:  Net migration flow from Mexico to the USA falls close to zero or has possibly reversed.

For more detail about remittances in Mexico, see:

 

Jun 042012
 

A previous post—How “complex” is the Mexican economy?—discussed The Atlas of Economic Complexity and noted that Mexico’s Economic Complexity Index (ECI) of 1.145 ranked it 20th among 128 countries. ECI indicates a wide range of complex knowledge capabilities related to productive enterprises. Mexico has a very high ECI given its income level; all other countries in the top 20 have significantly higher incomes than Mexico.

According to the Atlas, during the rest of the decade Mexico’s GDP should grow relatively rapidly to catch up with its ECI. Analyses in the Atlas indicate that during the last few decades countries with higher than expected ECIs compared to their income levels experience more rapid economic growth. While this relationship is empirically true, it should be noted that it does not explicitly include other factors thought to be important to economic growth (see Section 4 of the Atlas). Some of these other factors are governance and institutional quality, corruption, political stability, measures of human capital and competitiveness indicators. The Atlas implies that these other factors contribute to and thus are indirectly part of the Economic Complexity Index.

The analysis in the Atlas predicts that Mexico’s annual growth in real per capita GDP will be 3.5% from 2009 to 2020, ranking it 10th in the world in growth rate (see table). (The growth rates for some other countries are given in footnote 1 below.)  Mexico’s annual growth in real per capita GDP is impressive given that its growth was only 0.8% per year for 1999 to 2009, the same as that for the USA. Growth in these two countries was slowed significantly during this period as a result of the very severe recession, the worst since the great depression. This rather slow growth is surprising given that Mexico’s ECI increased from 1998 to 2008 was ranked 30th worldwide. Though the Mexican economy suffered significantly during this period, it continued to develop new productive capabilities and become more complex. This added complexity is expected to generate accelerated economic growth in the current decade.

RankCountry% growth in GDP/person, 1999-2009Expected % growth in GDP/person, 2009-2020, Income/person, 2009Expected income/person, 2020
1China9.64.33,7445,962
2India5.64.31,1921,886
3Thailand3.14.03,8936,023
4Belarus7.94.05,0757,806
5Moldova4.84.01,5162,321
6Zimbabwe449.03.8 - 6.2676?
7Ukraine5.23.72,4683,694
8Bosnia-Herzegovina4.13.64,5256,669
9Panama3.93.67,15510,529
10MEXICO0.83.58,14311,894

The low growth rate of 0.8% per year for 1999 to 2009 represents “real” per capita growth corrected for inflation and population growth. In nominal terms, Mexico’s total GDP growth from 1998 to 2008 was 1.8% per year. It is expected to grow 4.8% per year for 2009 to 2020, which ranks its 22nd in the world, behind numerous poor African countries with rapidly growing populations. Of large or populous world countries, the only ones ranked ahead of Mexico are India (ranked 8th), the Philippines (12th), Egypt (14th), Pakistan (18th) and China (20th).

In summary, the Atlas of Economic Complexity predicts that the Mexican economy will grow very rapidly during the rest of this decade and beyond. Let’s hope that this prediction becomes a reality.

Footnote 1:

For comparison: Indonesia ranked 21st at 3.3%, Pakistan 27th at 3.1%, Guatemala 35th at 3.0%, South Africa 41st at 2.9%, Turkey 43rd at 2.8%, Brazil 48th at 2.7%, Argentina 54th at 2.6%, Russia 59th at 2.6%, USA 91st at 2.0%, Canada 104th at 1.7% and Nigeria 118th at 1.1%.

Source:

Ricardo Hausmann, Cesar Hidalgo, et. al. The Atlas of Economic Complexity, The Observatory of Economic Complexity (Harvard HKS/CDI – MIT Media Lab). Retrieved 19 May 2012.

May 122012
 

Recent allegations of bribery related to Wal-Mart de México beg two questions:

  • How serious is corruption in Mexico?
  • How does corruption in Mexico compare to that of other countries?

Fortunately for us, these questions have been comprehensively investigated by Transparency International (TI), a global civil society organization dedicated to reducing corruption. TI defines corruption as “abuse of entrusted power for private gain”.

Its recent study, “Corruption Perceptions Index 2011” focuses on “perceptions” because corruption is a hidden activity that is difficult to measure. The Corruption Perceptions Index (CPI) draws on a wide array of surveys and polls of international experts, business opinion surveys and country residents. It is based on 17 data sources from 13 different institutions. The focus is on bribery, kickbacks and embezzlement involving politicians, public officials and civil servants. Anti-corruption efforts are also considered.

Given the difficulties associated with measuring and interpreting corruption, the CPI has received considerable criticism. (For example, see this Wikipedia entry on  Corruption Perceptions Index). Despite this criticism, the CPI provides a viable approach to comparing corruption in various countries.

According to this index, perceived corruption in Mexico has become considerably worse in the past few years. In terms of freedom from corruption, Mexico’s 2011 score of 3.0 ranks it below the middle, in rank #100 out of 182 countries, tied with 11 other countries including Argentina and Indonesia. It is interesting to note that some individual Asian, African, European and Latin American countries are considerably ahead of Mexico (see table), but others are considerably behind.

CountryRankCountryRankCountryRank
New Zealand1South Africa64Argentina100=
Canada10Italy69=Indonesia100=
UK16Ghana69=Egypt112
Chile22Brazil73Guatemala120
USA24China75Nigeria143=
South Korea43Colombia80Russia143=
Saudi Arabia57India95Venezuela172
Turkey61MEXICO100=Somalia182

Within Latin America, Mexico is far better than Venezuela, Haiti and Paraguay. However, it is way behind Chile, Uruguay, Costa Rica and Brazil. As a regional leader, Mexico should do much better in terms of corruption.

Back in 2008, Mexico’s score of 3.6 placed it significantly above the middle. It was then ahead of Brazil, India, China, Saudi Arabia and Turkey; now it trails these five countries. Why Mexico’s score has dropped significantly since 2008 is not exactly clear, but is probably related to the escalation of the drug wars.

Mexico has signed several multilateral anti-corruption agreements, and recently passed a stiff anti-corruption law. However, legal instruments alone will not reduce corruption in Mexico, according to Emilio Godoy in his article Tangled Web of Corruption Debilitates Mexico (IPS, 10 May 2012). What is needed is aggressive government action as well as dramatic cultural changes among public and private sector officials. This will not be easy, given the existing long-established systems based on patronage, nepotism, cronyism and organized crime.

If Mexico is going to continue attracting foreign investment and experience economic and social growth in the years ahead, it will have to do much better with respect to its level of corruption.

May 052012
 

Much recent attention in the USA and Mexico has focused on the allegations of bribery related to Wal-Mart de México.  Interestingly, the company has a rather long history in Mexico. It started in 1958 when Jerónimo Arango and his brothers Placido and Manual started a company called Cifra and opened a deep discount store in Mexico City named Aurrera Bolivar. It was inspired by the E.J. Korvette discount store in New York City. The store was an immediate success, helped by sponsorship of the popular TV show, La Pregunta de los $64,000 pesos (“The $64,000 Pesos Question”).

Wal-Mart's expansion across Mexico, 1993-2007

Wal-Mart's expansion across Mexico, 1993-2007. Click map to enlarge

By 1965 Cifra had eight Aurrera stores in the Mexico City area as well as a Superama grocery store and VIPS restaurant. Cifra and Jewel-Osco of Chicago formed a joint venture and by 1970 they opened the first Bodega Aurrera discount warehouse stores and Suburbia department stores. Their first hypermarket, Gran Bazar, followed in 1976. Shares in the company were sold to the public in 1977.   By serving low-income customers, the company managed to survive the financial crisis of 1982.  In fact during the 1980s it increased sales by an average 20% per year reaching US$550 million by 1989.

Rapid growth continued in the 1990s. By 1992 there were 38 Almacenes Aurrera supermarkets, 29 Bodega Aurreras, 34 Superamas, 29 Suburbias (department stores), 59 VIPS, as well as 15 El Portón restaurants. Almost all of these were located in the densely populated Mexico City and surrounding State of Mexico. Phenomenal growth continued in 1992 with 23 new units added. Cifra B shares increased forty-fold in just five years from the start of 1988 through the end of 1992. At that time, Cifra had a sophisticated, state-of-the-art data system for inventory control and monitoring customer preferences.

In 1991 Cifra formed a joint venture with the US firm Wal-Mart (founded in 1962, four years after Cifra). Unlike Cifra, whose early growth was based on an enormous urban area, Wal-Mart USA’s incredible early growth concentrated on rural areas. Initially the joint venture focused on trade and the members’ only Club Aurrera, which was soon renamed Sam’s Club. The first map shows the distribution of Wal-Mart stores in 1993. Expansion of new outlets throughout Mexico was only slightly slowed by the 1994 financial crisis.

By 1995, there were 22 Sam’s Clubs, and 11 Wal-Marts, 35 Almacenes Aurrera, 58 Bodegas Aurrera, 36 Superamas, 33 Suburbias, as well as 114 VIPS restaurants. One of the new Wal-Mart Supercenters was the largest in the world. The signing of NAFTA in 1994 strengthened the joint venture. In 1997 Wal-Mart USA acquired majority interest in Cifra creating Wal-Mart de Mexico or Walmex. The company, which previously had been heavily concentrated in Metro Mexico City, was soon aggressively opening new units in cities throughout the country (see maps).

Recent news reports allege that this aggressive growth may have been facilitated by payments of bribes to expedite construction permits. As of March 2012, Walmex was operating no fewer than 2,106 retail units throughout Mexico. They include 127 Sam’s Clubs, 213 Walmart Supercenters, 94 Suburbias, 385 Bodega Aurreras, 88 Superamas, 358 VIPS and El Portón restaurants, and over 840 Bodega Aurrera Expresses and other small outlets.

Wal-Mart de México is the country’s largest retailer, with sales of over US$24 billion, and largest private-sector employer, with 209,000 employees. These figures make Walmex the dominant player in its sector, well ahead of its Mexican supermarket rivals: Soriana ($8 billion); Comercial Mexicana (Mega, $4.5 billion) and Chedraui ($4.4 billion).

The 2007 map shows how Wal-Mart has now expanded into some areas where the population density is relatively low. The early expansion of Wal-Mart was into areas with high population density, where a single, well-placed store could easily be accessed by a lot of people, and therefore have the potential to be highly profitable. Even with the 2007 distribution, however, there is still a marked north-south divide in access to Wal-Mart, which reflects income disparities in Mexico.

In 2009/10 Walmex acquired Walmart Centroamérica and is now named Wal-Mart de México y Centroamérica, adding 622 retail outlets in Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica, to bring the total number of units it operates (including Mexico) to 2, 728 retail outlets (with sales of about $29 billion) compared to Wal-Mart USA’s 4,468 outlets (with 2011 sales of $447 billion).

Source for maps:  

The maps have been redrawn, based on maps in “Supplier Responses to Wal-Mart’s Invasion of Mexico”  by Leonardo Iacovone, Beata Smarzynska Javorcik, Wolfgang Keller, James R. Tybout. Working Paper 17204  of the National Bureau of Economic Research, Cambridge, MA, USA.

Related posts

 

Apr 212012
 

Despite this being an obvious question, there is no simple or generally accepted answer! However, a document published last month by Centro de Estudios Sociales y de Opinión Pública de la Cámara de Diputados (CESOP), entitled Lavado de dinero: indicadores y acciones de gobierno binacionales (“Money Laundering: bi-national indicators and government actions”) does offer some clues and estimates.

For example, according to Mexico’s tax authorities (SHCP), the nation’s financial system “gained” at least 10 billion dollars last year from unrecorded, presumably illicit, activities such as drug trafficking. North of the border, the US State Department believes that money laundering in Mexico accounts for between 8 billion and 25 billion dollars a year, while figures as high as 29 billion dollars have been offered in the US Congress.

Financial models developed by Global Financial Integrity and Columbia University in the City of New York suggest that the total “gains” from all forms of illegal activities in the USA are about 196 billion dollars (1.36% of US GDP), and that about 90% of this amount is laundered each year. The same models, applied to Mexico, suggest total crime-related profits of 38 billion dollars (3.6% of Mexico’s GDP), only 10-14 billion dollars of which is laundered into the formal economy.

If the models are to be believed, in the USA, 46% of the total amount laundered derives from drug trafficking, 32% from people trafficking, 15% from pirated goods and 7% from fraud. In Mexico, 41% of laundered money originates from drugs, 33% from people trafficking, 20% from pirated goods and 6% from fraud.

Despite the considerable variation in numbers, most of the figures and calculations fall within, or close to, the range of values (between 2 and 5% of global GDP) that is estimated by the International Monetary Fund to be laundered each year around the world.

Nov 102011
 

A recent publication from the public opinion research consultancy Mitofsky offers some insights into the distribution of different socio-economic groups within Mexico.

The Mitofsky study relies on the AMAI 10×6 system to tabulate the percentage of households in each state that fall into six distinct categories: A/B, C+, C, D+, D and E.

Across Mexico as a whole, 4.4% of households are categorized as A/B (the highest category, see map below), 12.3% as C+, 17.9% as C, 39.1% as D+, 21.6% as D and 4.7% as E (the lowest category).

The data show that, between them, four states–the Federal District (23.4% of all A/B households in Mexico), Jalisco (14.4%), State of México (9.3%) and Nuevo León (5.9%)– account for more than half of all the homes in this category in Mexico

The map shows how the incidence of A/B households (the highest socio-economic category) vary, state by state, across the country.

Distribution of highest socio-economic status households in Mexico.
Households in the highest socio-economic group in Mexico. (Geo-Mexico/Tony Burton; all rights reserved)

Do you live in an A/B household?

1. Housing characteristics:
- average of 6-8 rooms (often 3 bedrooms, 3 bathrooms) built of brick and/or concrete
- floors tiled, hardwood or stone; more likely to have carpets or rugs than lower categories
- most are owner-occupied, not rented

2. Sanitary Infrastructure
- connected to municipal potable water and sewer systems
- all have tub, shower, and water heater (usually using gas)
- two-thirds of these homes have water cisterns and pump to supply water tanks.
- some have air conditioning and/or central heating

3. Practical Infrastructure
- average 2 vehicles
- all have stoves, refrigerators and washing machines
- almost all have microwave ovens, blenders, toasters, coffee-makers and juice extractors

4. Communications and Entertainment Infrastructure
- almost all have fixed line telephones and cell phones
- most have 3 or 4 TVs and  satellite or cable TV
- all have DVDs and stereos/CD players; half have video game consoles
- average more than 1 computers per household; 75% connected to Internet
- many have memberships of private sports clubs and own a second home or time-share.
- more than 50% have traveled by air at least once in last 6 months, and most travel overseas at least once a year

5. Educational and Occupational Profile of Head of Family
- usually has a bachelor’s degree or higher
- work in medium or large companies, as directors, CEOs or other high-ranking professionals

6. Expenditures
- these households save more, but also spend more on education, entertainment, communication and vehicles
- food purchases account for only 7% of total expenditures, well below the average for the total population
- of these food purchases, the proportion spent on dairy products, fruit, and drinks is greater than lower categories

Questions worth thinking about:

  • How does this map compare to other maps on Geo-Mexico of inequalities across the country? (Use the site search feature or tags from the tag cloud on the left hand side of each page to find other inequality maps)
  • To what extent does this map confirm that north-south divide described in several previous posts?

Source:

Niveles socioeconómicos por entidad federativa 2009 – 2010 by Roy Campos and Ana María Hernández; CONSULTA MITOFSKY, December 2010.

Related Posts:

Oct 042011
 

Santa Rosalía in Baja California Sur is one of my favorite places on the Baja California Peninsula. Geography and economics have conspired to change its fortunes more than most towns in the course of history. Originally founded in 1705, the town failed to prosper as its populace faced repeated epidemics, and its farmland was subject to a disastrous flood. The town was largely abandoned by 1828.

A chance find of copper-bearing ore in the middle of the century reversed Santa Rosalía’s fate, and in 1885, a new lease of life was provided when the El Boleo mining company, backed by French capital, was granted a 99-year concession by President Díaz to begin mining for copper in exchange for building all the necessary infrastructure: port, town, mines, railway and foundry. It was judicious timing given that the world market for copper was taking off at precisely that time due to the rising demand for the metal from the fledgling electric companies in Europe and the USA.

Boleo Mine, Santa Rosalía
El Boleo Mine, Santa Rosalía

Within a decade, the mining company had become responsible for more than 80% of Mexico’s exports of copper ingots. The local ore was rich, with up to 25% copper in some samples. Workers flocked in from far afield, including three thousand from China. Working conditions were atrocious, little better than slavery. The health conditions for the miners and foundry workers were appalling;.for example, 1400 deaths were recorded between 1901 and 1903. The company decided on an unusual solution. Rather than move the workers’ homes, it decided to move the smelter chimney. The new chimney was built a kilometer out of town, connected to the smelter by a large, ground-hugging flue. The flue can still be seen today, climbing the hillside immediately behind the Hotel Francés.

By 1900, Santa Rosalía had become a major world copper producer. The smelter relied on supplies of coking coal from Europe, principally from South Wales and Germany. The ships took from 120 to 200 days to reach Santa Rosalía from their home ports. Square-rigged vessels, flying the British or German flag, were constantly arriving in the harbor. When the First World War broke out, several German ships were unable to return to Europe and spent the next few years anchored offshore. The sailors were shocked when they heard that Germany had lost the war; their vessels were eventually distributed among the victors.

The copper deposits were eventually exhausted. The El Boleo mining company closed in 1954, but the state-run Compañía Minera Santa Rosalía continued to mine until 1985, when the smelter was finally shut down, on the eve of the town’s 100th anniversary.

The collapse of the copper mining industry may have caused Santa Rosalía to slip back temporarily into a somnolent slump, but it is now recovering. The mining boom of a hundred and twenty years ago has been replaced by a boom in nature and adventure tourism, which take advantage of the town’s proximity to Conception Bay and the islands in the Sea of Cortés. As we shall see in a future post, because Santa Rosalía has preserved much of its past, it has a massive advantage over its competitors in the region, in that its initial revival fueled by ecotourism can be amplified by cultural or heritage tourism. This beautiful old town and its inhabitants have plenty of reasons to be optimistic as they face up to the challenges of the twenty-first century.

Paddling to an ecotourist future... Photo: Tony Burton
Paddling to an ecotourist future…

And now, the town has another reason for optimism. The massive El Boleo copper cobalt zinc-manganese deposit, which fueled the town’s first boom period, is now being re-developed with new technology. Baja Mining, based in Canada, owns 70% of El Boleo; a consortium of Korean companies owns the remaining 30%. The 1.2-billion-dollar, open-cast mine will add 3,800 jobs to the local economy. During its anticipated 23-year life span, El Boleo is expected to yield more than 2,000 metric tons of cobalt, 25,000 tons of zinc sulfate and 50,000 tons of copper annually.

Sources:

de Novelo, María Eugenia B. A History of Santa Rosalía in Baja California. The Journal of San Diego History: Winter 1989, vol 35 #1. Includes a link to some wonderful old photos.

Niemann, Greg. Baja Legends : The Historic Characters, Events, and Locations That Put Baja California on the Map. Sunbelt Cultural Heritage Books.

North of Loreto: Mulege and Santa Rosalía, sun, beaches, hotels and history (Original article on MexConnect).