The Power and the Money

Sotomayor, soccer, and all that

  I’m all for ethnic solidarity and all that, but Senator Jeff Sessions is taking it to a whole ‘nother level at the Sotomayor hearings.

Anyway, interesting as the linked story is, I just wanted to post a picture of me in this shirt, which I wore to the World Baseball Classic games in Mexico City.  (The picture above is at my favorite bistro in the D.F.)  I will not be wearing it to the U.S.-Mexico World Cup qualifier in Azteca Stadium on August 12th.  In fact, while I will be rooting for the U.S. team, I also want to live, and so will dress in green and red. 

Patrick, Mike, Carlos, what think you?  Am I wimping out?

Are there lessons in what didn’t happen in Mexico?

 From the outside, the Mexican federal government, and several local administrations, seem to have handled the flu outbreak fairly well.  Not perfectly:  there is some evidence that the country’s inefficient health system may have contributed to the outbreak in the first place, or at least the relatively high initial death toll.  But fairly well. 

The necessary condition for a solid Mexican response, of course, is that Mexico is not a failed state.  It’s not even a failing state.

My question:  do failed states pose a epidemiological threat?  On the one hand, there won’t be any authority to coordinate a response to an outbreak.  On the other, contacts between failed states and the rest of the world are almost inescapably limited, presumably making any outbreaks less likely to spread.  And if they are an epidemiological threat (a big if) what (if anything, because not all threats are worth countering) should be the international response? 

Unbecoming Canadian sensitivity

  I am an unabashed Canadaphile.  The Canadian constitution is rather better designed than the American one, other than not having a popularly-elected governor-general.  The health care system is not the one I’d design from scratch, but it has ours beat cold.  The federal system makes more sense.  They don’t fetishize local government.  Plus, they play good baseball and make good hip-hop.  And I have in-laws in the Mounties.  How Canadian is that, eh?

 

With that in mind, Canadian defensiveness towards the U.S. perplexes me, and it pops up in the most unexpected places.  Frex, as I didn’t know until I read Randy’s blog, it seems that Janet Napolitano may have accidently confused the Millennium Plot with 9-11 during a press conference.  OK, that’s a little embarrassing.  I’ve been there myself.  But enough to produce this reaction?  Or this one? 

The Globe and Mail column is particularly confusing.  After all, the sensible ripost to any mention of the Millennium Plot is to say, as the column did, that the U.S. blocked the terrorists at the border and the system worked.  Instead it brings up security theater that has nada to do with Canada (shoes in airports) and stuff that’s really aimed at keeping track of Americans, like requiring passports.  And that after a claim that Janet Napolitano is just like Dick Cheney.  Erm?  From whence this excitement?

Now, there are countries where people are understandably worried about perceived slights from the United States.  Like Mexico, where there are umpty-scrump reasons for people to be defensive with respect to their 800-pound neighbor.  Among other things, Mexico lost its war with the United States.  That sensitivity is why the U.S. needs to apply the same border controls to the northern and southern frontier, or at least be publicly seen to be doing that; otherwise key segments of Mexican public opinion would be enflamed, making cooperation unnecessarily harder. 

But similar Canadian sensitivity I don’t get.

Newsflash: Mexico flu

  I'm in Los Angeles, eating breakfast.  As in, that's what I'm doing right now.  And all the people at the table next to me are saying, in Spanish, that the Mexican government just shut down the school systems in the D.F. and Mexico State after 16 people died.  Apparently two people in the their 20s passed away, leading the government to decide that the outbreak was serious enough to close the schools and organize mass vaccinations.  People are urged to go to a hospital immediately if they detect symptoms.

I would like to take the opportunity to repeat that failing states do not react to flu epidemics in this manner. 

¡Viva ... uh ... Texaco?

  A while ago, insecure Americans got themselves all worked into a stupid dither about a Mexican vodka ad.  Now, in a sign of great maturity, Mexicans are refusing to get worked up about a European hamburger ad for something called the “Texican” that Burger King has run in the United Kingdom and the madre patria. 

Burger King is going to pull the ad anyway, just like Absolut pulled its.  You be the judge.

Hat tip:  Ganchoblog.

Keep on trucking

  A while ago, I wrote that I was fairly sanguine about the Buy-USA provisions in the stimulus bill.  I prognosticated that they would probably not be applied to our NAFTA partners, and even if they were, the NAFTA dispute-resolution mechanism would limit the damage.  Now along comes another dispute, this time over trucking, that poses a greater threat to trade ... although I am still confident that it will end well.

What's the story?  In 1994, NAFTA passed the U.S. Congress.  It mandated that all three countries open up their long-distance trucking markets to the others.  The U.S., however, punted when it came to Mexico, claiming that Mexican trucks weren't safe.  In 1998, Mexico took the U.S. to NAFTA arbitration.  On February 6, 2001, the U.S. lost ... partially.  The panel ruled that the U.S. couldn't issue a blanket ban on Mexican trucks, but that it could assess their safety on a case-by-case basis.  The Bush administration pushed Congress to issue enabling legislation that would bring the U.S. into compliance with the ruling, and with the political capital gained from 9-11, finally succeeded in November 2001.  (Not everything the Bush Administration did was wrong, although much was botched ... keep reading.)    Congress authorized the FMCSA to inspect Mexican trucks, and the Bush administration issued the required regulations to implement the law. 

Problem solved!  Not quite.  The Bush regulations had some, well, holes big enough to drive a truck through.  More below the fold.

El Clásico del Beis

  I'm in Mexico, for work, but one of the nice things about my line of business is that I have some flexibility to choose when I travel.  So I chose this trip to coincide with the first round of the World Baseball Classic, being held at the Foro Sol in Mexico City.  You can kind of see the Foro off to the left of the spiky dome thing in the picture below. 

The spiky dome is the Palacio de los Deportes.  In a sign of the amazing rapidity of Mexico's cultural revolution, it just finished hosting the Expo Sexo 2009, which is exactly what you think it is. 

Anyway, we were in the area for el beis.  For the Cuba-Mexico final game, I was with three fellow fans:  an American, a Venezuelan, and a Canadian.  We took Line 9 of the metro, which was much more crowded than I remember it being.  On the way, we met an older fellow in a baseball jacket.  He was a very talkative guy, who knew a lot about the game.  He also happened to be the most foul-mouthed man I've met in a long time, and that's saying a lot.  Every other word was a curse.  I wish I'd had a tape-recorder; the man was artistic in his use of profanity.

So were the fans.  They shouted pretty foul things at the Cuban team.  Nothing that you wouldn't hear among the Bleacher Creatures of the Bronx, of course, but good to hear.  My favorite was “culero” chanted at anyone who seemed to be, well, a culero.  It was raining — hard — and only the hard core were left by the sixth inning.  (It wasn't, I have to say, a very good game, as a game, and neither was the previous day's match against Australia.)

At one point a dude dressed as a stuffed Barney came out and started a dance with some other stuffed animal, to loud boos.  Until Barney ripped off his head to reveal a wrestling mask, and started tossing the other animal around the sidelines.  That was fun. 

The Cuban fans were also a lot of fun.  They sat in their own blue-white-and-red draped sections, with giant flags and ridiculous wigs, and played music.  We didn't a get a chance to talk to any of them, but I have a strong suspiscion that they're mostly Cuban expats, and not people whom the government flew out for the games.  They didn't seem organized enough.

Anyway, despite getting soaked to the bone, and having beer poured on me, and having people confuse my Puerto Rico flag shirt with a Cuban banner, it was a great night.  ¡Viva el beis!

Getting serious about the cartel wars

  Much of Mexico's organized crime problem derives from the United States.  First, obviously but intractably, the U.S. provides most of the demand for illegal narcotics.  Second, and more tractably, the U.S. provides most of the weapons.  This is not to deny that the weakness of Mexican law enforcement and local government is a necessary condition for the current violence.

There are several ways around the problems of Mexican law enforcement.  The simplest one is to use foreign agents.  In fact, that's happened.  In Operación Limpieza, the Mexican government recently busted open a corruption ring inside SIEDO, the agency charged with fighting organized crime.  Except ... the info originally came from an FBI agent operating in Mexico.  (Hat tip:  Patrick Corcoran.)  This will be a diplomatic problem, especially considering how long it took the Americans to pass the information along.

Except it shouldn't be a problem.  In fact, embedding Americans inside the chain-of-command of Mexican law enforcement might be one of the most effective ways of improving its efficacy.  So would spending much more U.S. money on training, or subsidizing Mexican salaries.  This is not to say that Americans are uncorruptible; it is to say that it's much harder to suborn an American agent without discovery.  The incentives are just too different.  The same applies (albeit to a lesser extent) to a better-paid Mexican agent.

A serious American reaction would involve reinstating the assault rifle ban and giving Mexico much more money.  A serious Mexican reaction would involve allowing Americans to bring their investigatory knowledge to Mexico, and use Americans to police Mexican law enforcement. 

Which isn't to say that organized crime is intractable without American help.  It isn't.  It's merely to say that entirely-understandable nationalism on both sides of the border ― “Why should we spend money to help Mexico do things it should be able to do for itself?”  “Why should we allow gringos hipócritas malintencionados to give orders to our own people on our own soil?” ― keeps some of the best tools out of the kit.  And that seems like a shame. 

Pobre México gordo

  An unwanted sign of North American convergence has been the convergence of the Mexican waistline with the American one. 

Today's Financial Times ran a story about obesity in Mexico.  The figures are sobering, and obvious to anyone who rides a pesero in Mexico City, although you could miss it in Polanco or Condesa.  4.1 million 5-to-11 year olds — 26% of the total — are overweight or obese.  Two-thirds of male adults are overweight, as are 71.9% of females. 

We wrote a bit about this in Mexico since 1980, especially in chapter 6.  Diabetes was the number-one killer when we wrote.  What we didn't know was that treating diabetes consumes one-third of the health budget, according to the FT.  Now, I still don't know that we know that, and I don't trust the FT's numbers.  But I believe the trend.

The future in most countries, I think, is going to be Big Government.  Soon what you eat and how you eat it will be taxed and regulated.  I don't particularly like the idea.  I used to be a heavy drinker, by American standards if not by European or Mexican ones, and the only reason I don't smoke a cigar or two every day is that my wife won't let me.  (That's also why I'm no longer a heavy drinker, in fact.)  But the fact is that nobody pays for their own health treatment in later life:  either an insurance company does, or, if you're under insured, the United States will pick up the tab.  So unless some sort of miracle Singularity-related program activity comes along to either make us all capable of pigging out and staying thin, or making it healthy to carry about lots of excess adipose tissue, Big Government is going to get what you eat. 

Or so I think at this particular moment.  As those of you who've known me know, I change my mind a lot.  It may be the only way in which I resemble Andrew Sullivan.  So, in that vein, counterarguments?

Yet another modest proposal, in which I outrage my friends by advocating protectionism but please Canadians and Mexicans by saying it shouldn't be aimed at them

  The new stimulus bill requires that all steel be purchased domestically.  Brad Delong is unhappy:

“If there's little excess capacity in the U.S. steel industry — so that the price of steel is high enough to induce people to look outside for suppliers — then a stimulus won't be much needed. If there's a lot of excess capacity so that a stimulus is needed, then steel customers should be able to bargain prices down to marginal cost — in which case foreign producers will have an extremely difficult time competing on price given that steel is heavy and distances are great.”

Well, maybe.  Marginal cost can vary a lot, and there are two steel-producing nations whose companies enjoy almost as good access to American markets as their American competitors:  Canada and Mexico.  The price of the same product imported from the two countries varies between 14% and 65%.  (December price data below the fold.)  Meanwhile, China has achieved significant import penetration, despite prices which exceed Canadian ones by 40% on average, and by 11% in the chief product category China exports to the United States.  The implication is that American firms are high cost.

Normally, the fact that U.S. firms are high-cost wouldn't change anything.  It would make sense to buy the cheapest steel from wherever.  American consumers would save by going to the lowest cost producer, and Americans as a whole would be better off, even if American steel producers would suffer. 

Under depression conditions, however, I'm not sure the above logic still holds.  Under depression conditions, using public money to buy from domestic high-cost producers has three advantages that don't mean anything in normal times.  First, domestic high-cost producers will spend more of their revenues, not park them as saved profits ... after all, they have high costs!  Second, the workers and suppliers of American steel companies (who make up the chief costs of the domestic producers) are far more likely to spend their wages and earnings on American goods and services than their foreign counterparts, keeping the multiplier higher than it would be otherwise.   Finally, having steel mills shut down in American towns and American workers thrown out of work will have psychological costs for American consumers and businesses.  They could worsen the downturn.  Such costs will be much less if the workers being tossed on the dole are in Ontario or Hebei.   In short, when American resources are unemployed and their unemployment looks set to last, buy-USA provisions can make the country better off as a whole.   

More below the fold.

Department of WTF

  This is bizarre.  And this is really bizarre.  Can anyone explain to me why people would write such nonsense?  Please?  I really want to understand.

Brooklyn is not expanding, and the Mexican state is not failing

  “He’s been depressed.  All of sudden he can’t do anything.”

“Why are you depressed, Albanito?”

“Tell Dr. Parpadeo!  It’s something he read.”

“Something you read, huh?”

“The Mexican state is failing.”

“The Mexican state is failing?”

“Well, the state orders everything, and if the state is failing, then one day it will break apart, and that will be the end of everything.”

“What is that your business!  He stopped doing his homework!”

“What’s the point?”

“What has the state got to do with it!  You’re here in Iztapalapa!  Iztapalapa is not failing!” 

Seriously, people, the Mexican state is not failing.  The Mexican state is weak compared to the United States or Canada.  But it is incredibly strong compared to the places in Africa or Central Asia that are generally called failing states.  Garbage is picked up.  (In more places than Afghanistan, anyway.)  Uniformed children go to school.    Middle-class families take weekend getaways, and do so on motorways better than the ones north of the Río Bravo, with no fear of IED attacks. 

Let's put some numbers on this.  In 1997, the Mexican federation had a murder rate that made it, in per capita terms, about as dangerous as Puerto Rico is today.  Over time, that fell, so that by last year Mexico's homicide rate had fallen within striking distance (or statistical error) of Maryland's.  In 2008, murders appear to have spiked by at least a quarter ... making the country almost-but-not-quite as bad for your health as ... Louisiana.

Crime is the major problem in Mexico; its government's failure to control it is a blight, and Mexican voters should judge their leaders accordingly.  Kidnappings, express or otherwise, should not regularly occur in a country with a halfway professional investigatory service.  In the seven ... practically speaking, eight ... years that I lived in Mexico City both my downstairs neighbor and my best friend suffered carjackings, I lost the entire front end of my 1990 Mercury Cougar when I left it unattended for 15 minutes on a highway access road, and I myself got mugged by cops in Tlalpan. 

That's a lot of crime.  In comparative terms, I managed to traipse around East Harlem, Prospect Heights, Washington Heights, Manhattan Valley, the Lower East Side, and the South Bronx during the 1980s with less experience of mayhem.  (Although I never actually saw any dead bodies in Mexico City, as opposed to three during my youth in Brooklyn and Manhattan.  And no one ever attacked me with a knife on a metro train in el D.F. for no apparent reason.  Nor was my house ever broken into and ransacked.  But the point holds.  Crime is worse in Mexico City than NYC in the bad old days.  I think.)  

In other words, crime is the major problem in Mexico.  And it doesn't help that the cartels have made steps in turning themselves into a Mexican version of the Camorra in states like Sinaloa, or that displaced cartel hitmen have started opportunistically engaging in small-town crime. 

But the Mexican state is not failing.  Mexico is not failing.  Iztapalapa is not failing.  Iztapalapa (and Mexico) has problems, but it is not failing, and little Albano better do his homework.

Senates

  There is a debate going on downblog over the United States Senate. 

Let's take a brief tour of Senates around the hemisphere.  (To which we'll include the Philippines, due to its political history.)  The American example set in 1787 proved very influential, particularly for the larger nations of América.  Did their adoption of an upper house with equal representation for federal subunits make sense?  Did they keep it? 

Argentina:  The Argentine senate gives each province three senators.  That's obviously undemocratic.  Argentina, however, has a historical justification for the practice.  Like the United States, the Argentine Republic began as a federation of independent states.  Unlike the United States, the states that formed the Argentine Republic had very little autonomous political history; most had been created from city councils that simply declared independence in the wake of the political chaos that enveloped South America after 1808.  After a great deal of civil war, including the loss of Bolivia, Paraguay, and Uruguay, provincial forces decisively defeated Buenos Aires in 1852.  A convention that excluded representatives of Buenos Aires hammered out a constitution the next year.  That same constitution has remained in effect since then, at least juridically. 

The convention accepted equal provincial representation in the Senate in order to limit Buenos Aires's dominance.  It also had senators elected for nine-year terms by state legislatures and required them to be able to show a minimum annual income of 2,000 pesos.  (That's approximately US$67,000 today in terms of purchasing power.)  Thankfully, later amendments got rid of those latter features, but equal representation remains.  In short, while there isn't really any good reason to keep the apportionment of the Argentine senate, the institution has deep roots in Argentine political history.  The resemblance to the U.S. case is quite strong.

Brazil:  The senate of the Federal Republic of Brazil gives three senators to each state.  The historical roots of this institution, however, are rather shallower than in Argentina or the United States.  The 19th-century Imperial senate did not provide equal representation for the provinces.  When the empire fell to a military coup in 1889, the new leaders had to find ways to convince provincial elites to support the new government.  One of the ways that they did so was to provide the provincial governments with equal representation in the upper house, in open imitation of the American example.  (In fact, the constitution of 1891 named the country the United States of Brazil.)  Brazil has gone through multiple constitutions since then, but the institution of the Senate has remained.  Unfortunately. 

Mexico:  The constitutions of 1824, 1857, and 1917 all granted equal senate representation to each state.  There was never much historical justification for doing so, other than imitation of the United States.  (Mexican states gained much autonomy during the 19th century, and several declared independence, but that came about after the end of Spanish rule.)  Since the country's governments rarely ruled by the constitution, however, legal stipulations didn't matter.  Under Porfirio Díaz, for example, all legislative votes were unanimous after 1893.  Nor did senators necessarily come from their putative state.  Under those circumstances, the number of senators per state didn't make a difference.  The Revolution didn't change that.  Under President Álvaro Obregón, for example, recalcitrant legislators were often shot.  Then came the creation of the PRI, with its iron-lock over politics, and ‘nuff said.  Constitutional stipulations didn't become more important than party rules until the 1997 midterm election. 

Mexico, however, is now ruled by a democratic government, and the constitutional rules matter a lot.  As part of the transition to democracy, Mexican politicians amended the constitution in 1993 and 1996.  In theory, the reforms granted each state four senators, up from two.  In practice, the reforms created an upper house selected by a weak form of proportional representation.  The winning party in each state receives two seats.  The runner-up receives one.  The remaining 25% of senate seats are then allocated to each party in proportion to their popular vote share.  In effect, the Mexico's current senate keeps the form of equal representation for each state while abandoning much (but not quite all) of the substance. 

The Philippines:  The Philippine Autonomy Act of 1916 created a 24-person senate.  The act grouped the country's 50 provinces into 12 districts, each of which received two senators.  The 1935 constitution of the Philippine Commonwealth dumped that crazy system, but selected something even crazier in its place:   at-large Senate elections.  That is, every voter writes in 12 names.  The top 12 vote-getters then become senators for six years.  The exercise is repeated every three years, making for a total of 24 senators.  The 1987 constitution of the Philippine Republic retains the feature.

The only polity that I can imagine justifiably imitating the United States, Argentine Republic, and Federal Republic of Brazil in the 21st century is the European Union.  Then again, I may suffer from a lack of imagination.

The sad state of the Mexican service sector

  One of the more striking figures that we uncovered while researching Mexico since 1980 can be encapsulated in this graph:

       

It surprised me.  Surely the entry of foreign banks and foreign retailers must have done more to improve service productivity?  All those Wal-Marts!  That new Banamex logo!  Nada?  De veras?? 

Yes, de veras.  And here is some more sad evidence:  despite a 30% fall in the value of the peso and flat economic growth, middle-class Mexican shoppers continue to flock across the border in search of bargains.  It probably isn't just measurement error. 

Why is service (particularly retail) productivity so flat in Mexico?

Sealing the alliance

 Argentine-Mexican relations were rocky under former presidents Néstor Kirchner and Vicente Fox.  I was in Argentina during one of their more famous spats, and it was very amusing to watch.

All that is over now.  President Calderón met with President Fernández in Buenos Aires to cement a series of pacts between the two countries.  The pacts covered everything from nuclear technology (Mexico to Argentina), agricultural techniques (Argentina to Mexico), information-sharing (particularly in regards to crime), and mutual recognition of advanced degrees and an extradition treaty.  The two presidents also created what they called a “Strategic Association Council,” which would serve to insure both a permanent high-level diplomatic link between the two governments and make it easier for lower-level functionaries outside the foreign ministry to communicate with their equivalents in the other government.

And then they sealed it with a ... uh ...

Reposted from a parallel universe

  A casino, a liquor store, a Bureau of Indian Affairs office, a corrupt judge, a BATF operation gone way wrong, and a bewildered FBI investigator trying to understand how the high price of Coca-Cola fits into the other strange goings-on in San Cristobal County ...

“In syncretistic religions, Scully, the attributes of one religious figure,” Mulder taps a case containing a weeping St. Catherine, “are given to another. In this case, John the Baptist’s connections with water: rivers, dunking ...”

“Baptism?”

“... made him the prime candidate to represent Chac, the Mayan water god.”

“I see. Like a mid-season replacement.”

Mulder glowers. “Now, traditionally, fermented corn mash was used as the sacrament in Mayan ritual, mixed with some magic herbs. A little binge, a little purge, and soon you're seeing visions.”

Scully looks around at the vaguely Catholic ornamentation encrusting the church. “I can’t imagine why.”

“The Spanish must have stopped the magic mushroom part of the ceremony, but you still had the folk belief that to receive the numinous, you had to expel the profane. Hence the burping contest we saw at Mass.”

“And that’s where the Coca-Cola comes in.”

“Yeah. What a racket. No wonder El Jefe owns the bottling plant.”  Mulder looks up at a garish mural, Salome being presented with the martyred St. John’s head. Not too many redheads in Spanish colonial religious art.

Doug in Burundi, part 8

Here Doug discusses what cheap labor really means on the ground.  And he means cheap labor.  According to the U.S. State Department, workers in Burundi received on average 1,500 francs per day, or $1.40.  Since a 12-hour day wouldn't surprise me, Doug's estimate of 20 cents per hour might even be high.

You don't need to go to Western Europe to see just how poor that is.  To give an example with which Americans are familiar, production workers in Mexican maquiladoras cost US$2.64 per hour in 2006.  Production workers in all Mexican manufacturing cost US$2.75.  Total hourly direct pay for all employees (including benefits but not taxes and other social charges) averaged US$3.32 per hour.  (That'd be 5,752 pesos per month.)  Even farmworkers in the country's northern states make about US$1.50 an hour.  In short, Burundi is impoverished compared to Mexico.

Anyone who spends time in Latin America can see some of the effects of cheap labor, but nothing on the scale of what Doug describes.

This is just wrong

Carlos will remember my tales of the disturbing town of San Juan Chamula, Chiapas.  The misshapen crosses, the angry children, the dirty market, the uprooted tree, the church in the plaza, the candles, and the offerings of the holy Coca-Cola to the water god.

You do not want to go there.  Go infiltrate the FARC instead. 

Mérida, Yucatán, is several hundred miles away, and a very pleasant town.  Or so I thought when I last visited the place, which must of been 2000 or thereabouts.  I mean, ritual decapitations by death-worshipping criminal gangs?   

Maybe I should have watched the X-Files more closely.

Doug in Burundi, part 7, time for some coffee

Doug discusses the Burundian coffee economy here. 

A decade ago (or thereabouts) I got involved with an NGO that advised Chiapan villagers in the area off Mexico-199 between Paleque and Ocosingo. To get there, you had to leave the paved road, travelling along dirt paths maintained (and unofficially tolled) by the locals.  The agricultural areas were served by little "towns" barely worthy of the name, usually consisting of a church (often Protestant — there had been a great deal of religious fighting in the area, and towns tended to be segregated) and a general store.  Electricity was scarce, although cellphones worked fine in some surprising places — the Mexican army made sure of that.

The chief cash crops were cacao and coffee.  More below the fold.

Vaqueros contra llaneros

Longtime readers of TPTM (all three of you) will note that Cemex has attracted some small controversy in these great United States as well as Venezuela.  But since Puerto Rico seems to have reconciled itself to vasty plumes of tire smoke floating across its southern shore, Venezuela is where the Cemex action is at these days.

So, how much are Cemex's assets in Venezuela worth?  Priceless, if this publicity still from El Economista is to be believed:

More seriously, according to today's El Economista, Venezuelan operations generated about 4% of Cemex's earnings before interest, taxes, depreciation and amortization.  In 2007, Cemex earned US$ 4.6 billion before interest, taxes, depreciation and amortization.    Four percent of that number is US$ 183 million. 

Cemex as a whole earned US$ 3.22 per ADR.  It's price/earnings ratio varied between 8 and 13 over the course of 2007; it's 12-month P/E is currently down to 6.2.

In other words, a simply back-of-the-envelope calculation puts the value of Cemex's operations in Venezuela between 183m × 6.2 = US$ 1.14 billion, and 183m × 13 = US$ 2.38 billion.

Since that 6.2 measure already embodies market belief in rising political risk and the recent run-up in input costs, I'd have to say that the US$ 1.3 billion value claimed by Cemex sounds pretty conservative.

Caracas probably shouldn't have taken on Monterrey so cavalierly.  Nobody should take on Monterrey so cavalierly.  Monterrey is a tough town, and businesses from Monterrey are tough businesses.  They've seen this sort of thing before, and they've come out ahead.

In this particular fight between the cowboys of the northern deserts and the cowboys of the southern plains, my money is on the regiomontanos of the northern desert. 

ICSID v Chávez

So, President Chávez nationalized the cement industry the other day.  Venezuela agreed to buy 89 per cent of Lafarge for $267m and 85 per cent of Holcim for $552m, but Cemex requested $1,300m.  Venezuela sent in troops to take over Cemex's installation, and then offered $650m.  Chávez called the Mexicans “disrespectful.”  After accusing Cemex of tax evasion and excessive pollution, he went on say, “They're as Latin as we are, but they feel closer to el Norte.”  President Calderón of Mexico was not happy, but there was not a lot that Mexico could do about it. 

But there is someone who can ... ICSID.  I've mentioned it before.  ICSID is powerful.  When lefties blather on about "empire" or whatever, things like ICSID are what they mean, even if they don't know it.  ICSID can cause pain.  In fact, Venezuela's nationalizations have consistently (so far Exxon and Conoco are the only exceptions) given the nationalized companies everything that they want. 

Of course, it costs a lot to go to ICSID, and it costs even more to get national courts to actually order attachments after a ruling, so companies usually don't start an arbitration unless they think that they can win.

Cemex appears to think it can win.

And it seems that the Venezuelan government agrees with Cemex.  Right after Cemex announced that it was going to take the Bolivarian Republic to ICSID, Venezuelan officials announced that hey, yo, don't get all upset about the troops thing, let's talk.  Sixty more days, okay?  At which point President Chávez told the world that he has a secret letter from President Calderón that will help resolve everything.  “We asked the Mexican government to give us one more chance with Cemex's executives to see if we can come to a mutual understanding,” he said. 

My money is on Cemex getting something close to the $1.3 billion that it wants.  But it will be interesting to watch.  Even if you're a Cemex shareholder.

    

Buy our book!

Go buy our book!  It is the best book.  Ever.  About anything.

 

Or not.  But is a very good book about Mexico since 1980.  Here are the chapters:

1. The second Mexican revolution: economic, political, and social change since 1980;
2. Mexico before 1982: the political economy of authoritarian rule;
3. The causes and consequences of free trade;
4. The Mexican banking system: the politics and economics of financial underdevelopment;
5. The transformation of Mexican politics;
6. Health, education, and welfare in Mexico since 1980;
7. Democracy and development in Mexico: future challenges and the legacy of authoritarian rule.

The book is a stand-alone, but it's really the second one in a planned trilogy.  You can buy the first part here.  Anyway, if you're interested in Mexico, economic development, or the importance of democracy, I'd recommend that you pick up a copy of Mexico Since 1980. 

Acribillado en mi colonia

"Acribillado" is a good word.  It carries the connotation of the English "ventilated," or "plugged," only it's not a colloquial term in Spanish.  The formal way to translate it would be "riddled with bullets." 

An unidentified gunman fired six bullets from a 9m m handgun into a prominent Mexican defense attorney, Marcos Castillejos, when he was sitting in his car on the corner of Montes de Oca and Mazatlán in the Condesa neighborhood this morning.  It's the most recent of several assassinations in Mexico City.  Most of the recent killings, like the head of Federal Investigation Agency, Igor Labastida, have been linked to the federal government's recent assault on the northern drug cartels. 

This killing might also be linked to the cartel war somehow:  Luis Cárdenas Palomino, the head of the federal Department of Public Security, is Castillejos's son-in-law.  Then again, it might not be.  Sadly, contract killings haven't been that rare in Mexico for a long time, and there are plenty of other possible motives.  Castillejo defended the accused in the murder of a comedian, Paco Stanley, a few years ago. (Stanley was killed in a taco joint off the Periférico freeway that I used to haunt).  The Stanley killing is shrouded in mystery (he was politically connected) and God only knows what could be crawling out from under that rock. Castillejos was also hired by the head of the association of street peddlers, Alejandra Barrios.  She was charged with murdering the husband of one of her competitors. In addition, the street peddlers are currently in the middle of an epic battle with the city government, which has been successfully squeezing them out of the historic old city.  If I were an investigator in this murder, that's where I'd start.

In other words, I wouldn't make too much of this recent killing, although I suspect that John Robb might anyway.  It's sad, but it doesn't represent a worsening.  Just more of the same. 

I recommend Ganchoblog for more. 

The Earth Award goes to ... AMLO!

Pemex, Mexico's national oil company, is in trouble. Production is declining.  More than three-quarters of all petroleum comes from fields on their last legs.  Cantarell, the largest, is almost tapped out.  On current projections, the country will become a net oil importer by 2016.  (Joining Indonesia, whose government just recognized reality and quit OPEC.) 

President Calderón has proposed a sensible (if insufficient) reform that would alter Pemex's relation with the government from that of a state agency to that of a state-owned company, with the ability to control its own investment budget and hire foreign companies to provide exploration and production-related services.  It's sensible, small-c conservative, preserves national control of the oil, and rather badly needed if Mexico is to remain an oil exporter.

So, of course, the center-left PRD, under the influence of your hero and mine, Andrés Manuel López Obrador (AMLO), is fighting it tooth and nail.  They forced the PAN to agree to 71 days of Congressional debate on the bill ... which will then almost certainly face a Supreme Court challenge. 

And I say ... good for AMLO!  Falling Mexican production means higher oil prices, and higher oil prices mean more conservation.  It's better for the environment, it's better for alternative energy companies, it's better for small cars, it's better for America.  Heck, it's probably even better for Mexico --- the place has done a great job of avoiding the Dutch Disease, but the federal government is gonna hafta wean itself from oil revenues someday, so why not today?

Go mismanagement of state-owned oil companies!  Up with nationalization!  Viva MEND!  At some point those big Brazilian fields will come on line, and Iraq will get its oil act together, and who knows how much oil is in the rest of West Africa?  So if you believe that $200 a barrel oil is a good thing for the world, then let's cheer on Hugo and AMLO and all the rest! 

It's a dirty job, saving the Earth, but somebody has to do it.

Russia:Finland::Mexico:United States?

A while ago, Doug Muir argued that air travel belonged in the category of "things least likely to change in the next quarter-century."  I'd like to propose the experience of crossing the U.S.-Mexico border to that list.  (Legally or illegally.)

There are serious proposals to erase, or at least massively alter, that border.  Most recently, Douglas Massey proposed that the U.S. follow the E.U. model in dealing with Mexican immigration:  massive aid, open borders, and common institutions.

It will never happen.  The barriers aren't just on the U.S. side -- Mexicans don't have a whole lot of desire to subordinate their national sovereignty in what will inevitably be American-run common institutions. 

The other way to go is to try to replicate this version of the Finno-Russian border.  That's also impossible, of course.  Millions of Americans of Mexican-descent live on the U.S. side of the border, and somewhere between 300,000 and a million Americans of non-Mexican descent live on the Mexican side.  In California, around 35,000 people commute every day from Tijuana to their jobs in San Diego.  (That was 2.7% of all workers in metro San Diego in 1998.)  Another 10,000 drive south from their U.S. homes to their Mexican jobs.  The same pattern occurs in Arizona and Texas. 

Hard to see how you can get the support for Finno-Russian style quasi-militarization under those circumstances.  Plus, our border has much better weather than their border. 

My prediction?  The U.S.-Mexico border won't look much different in 10 years.  In 20, there will be less illegal immigration, as migration from Mexico slows as Mexico grows.  But the experience of muddling across at Laredo or Nogales won't look or feel much different, except maybe in the cool electronic passports we'll all use ... although Charlie Stross mentions reasons why that might not happen either. 

Hat tip:  Matt Yglesias.

Mas sabiduría del occidente para los griegos

This is not a joke.  But it is nonetheless very very funny.

I love it!  Now, again, please get over the whole name thing.  Please.

Hat tip:  Ross Douthat.  Commentary worth clicking the link.  And me say that I myself want to see a map where Canada includes all the West Indies, call it Absolut Caribe.  Anyone have their own irredentisms (or reverse irredentisms) that they'd like to see on a bus stop billboard for an alcoholic drink?  Suggestions in comments, please.

Interlude: Rhon, Hank, Rhon!

I once lived in a Manhattan neighborhood that was upon-a-time a Mafia stomping ground.  It wasn't the happiest period in my life, so I don't think about it that much.  It does seem to have affected me, however.  When I went back to visit it with Amma, for the first time in many years, we visited the below-pictured pizza place, within which we had an experience with the fellow patrons that caused her to exclaim, "Now I understand!  You really are Italian." 

Among other things, the experience appears to have given me a bit of unwarranted sympathy for colorful members of organized crime syndicates. 

Fortunately, living in Mexico also appears to have permanently eroded that sympathy, which is why I take a great deal of pleasure in Jorge Hank Rhon's failure to win the Baja California gubernatorial race.  Hank is certainly colorful --- he likes to drink tequila mixed with tiger penises, and once said, "Women are my favorite animal."  He's also astoundingly corrupt.