Real life in beautiful and ugly Guadalajara.
categories: political philosophy, rants, society

Anyone who reads newspapers here or follows political trends likely knows of Sergio Sarmiento.  Sarmiento is a nationally syndicated columnist, economist, and has quite a long history in journalism.  He’s a politically philosophical writing machine, consistently putting out at least five new columns every week.   Some would consider him to be more to the right, others more to the left.. to some it’s not clear.. it all depends on which columns you’ve read… but it really doesn’t matter..  the point is that he’s an individual I’d love to sit down and have a few beers with and duke out some issues.  There are moments I’d like to give the guy a high five and a hug, and others I’d prefer to wring his neck until his face turned a gruesome shade of purple.

Of course I’m going to showcase a sample here of the latter, as will also be the case with the next post, ripping apart his views on the “tenencia”.   Why go cherry picking fights like this?  Because it’s more fun.   Would you really be interested in reading any of this if you thought I was just going to pat him on the back for the following string of paragraphs?  Now, it may turn out here that I’ve got it all wrong.   There’s always far more happening on the political playing field than meets the eye.. especially the eye of an amateur like myself…  But I honestly wouldn’t bother if I didn’t believe I had the upper hand.  Below are a few excerpts from Sergio Sarmiento, expressing his views concerning what he calls ‘the artificially low gas price’ here in Mexico (which isn’t really that low, in fact)..

“We’re spending away the last of the money from the oil bonanza.  But on what? might ask.  On education?  On productive investments?  On infrastructure?  On fighting crime?  On fighting poverty?  No, not on anything that could make any sense in the long run.  We’re using the money we generate from a nonrenewable natural resource to subsidize a growing consumption of gasoline.”  (5-21-2008)

“If a country could really achieve prosperity on subsidies, Mexico would be one of the wealthiest countries in the world.  The reality, however, is exactly the opposite.  While other countries have come from behind to build more prosperous economies, we’ve perpetuated our poverty by giving out subsidies in astronomical quantities.

“We’ve never seen, however, a subsidy so burdensome and harmful as what today is being applied to fuel and energy.  Felipe Calderon himself has calculated that in 2008 alone the government will spend 200 billion pesos – almost 20 billion dollars – on this program.  According to him, the purpose is to combat inflation.  In the end all it will do is stall it a bit.

“This huge portion could be better invested in the construction of the two oil refineries the country so desperately needs, and for many other productive investments that would make us more prosperous and competitive.  But instead, the gasoline subsidy promotes the use of a contaminating fuel, and benefits mostly the least needy.”          (6-4-2008)

“The money that we’re losing, and that we can’t invest in social and economically rentable projects, we’re using to subsidize the consumption of gasoline by the wealthiest 5 percent of the population, the ones who have private vehicles.  Yes, it’s true that public and heavy transport also use fuel.  But the majority of the subsidy is being given to motorists.  Like all populist governments, Felipe Calderon’s is ransacking a company belonging to all Mexicans, including the poor, in order to give money to the wealthiest.”  (4-29-2008)

“Mexico has 138 automobiles for every 1,000 citizens (, which are possessed by the richest 10 – 12 percent of the population.”   (6-28-2010)

Hohhhhleeee crapoly, Batman.. where to start???

He does infer one very good point somewhere up there – that subsidizing poverty and failure will only generate more poverty and failure.  It’s one of the most basic characteristics of human nature.  One doesn’t need to be an economist to understand that you should never trust a mediocre worker who says the more money you pay him, the harder he’ll work.  The question here is, who’s paying who?  Who’s subsidizing who?

 “PEMEX is 100% Mexican, belongs to all Mexicans and is for the benefit of all Mexicans”

Since 1938, when the petroleum industry in Mexico was expropriated and nationalized, it’s not certain whether the above expression has ever truly been clarified for people in terms of what it really means.  I sure as hell couldn’t tell you.  One malcontent school of thought sees it in terms of “if it’s ours, why must we pay so bloody much for gasoline?”  Another point of view is “with the money PEMEX brings to the government (partially from exports, and partially through the sale of gasoline throughout Mexico), it can invest in projects that increase the prosperity of all Mexicans”  Sarmiento clearly concurs with the latter:

“What difference does it make – many people ask me – if PEMEX and the government lose money via gasoline sales?  Those who ask such questions demonstrate an absolute lack of awareness of the fact that we Mexicans are the owners of PEMEX and that the federal government is nothing other than an organization established by us in order to administer the resources that we collectively possess.  It’s as if we thought it makes no sense to demand that the administration of the condominium we live in keep it well maintained because we suppose that the administration is the only one that loses out and not us.”  (4-29-2008)

Yeah well, the problem Sergio is that the administration historically has taken our rent money to build and maintain its own condos, while investing no more than minimally necessary for ours not to completely dilapidate and collapse.  When they come around raising the rent, we have to wonder how many of us fools are going to just sit on our hands and take it.

In fact, neither of the two views above is valid, nor will they ever be at any point in the near future.  Mexico, even if the government wished to, cannot provide super cheap gasoline.  It hasn’t enough refineries to keep up with demand.  And regardless of the efficiency of those it does have, nearly half of all gasoline sold in Mexico is imported from the outside.  Sergio’s point of view holds just as little water, because as administration after administration has shown, apart from the crippling corruption within PEMEX, there’s no interest nor therefore any real initiative in the proper investment of PEMEX funds to work for the prosperity of Mexico. If there were, there would already exist a sufficient number of efficient refineries, not to mention a far greater acceleration of prosperity.

When he talks about PEMEX losing billions of pesos, he’s referring to the gas price.  For the last two or three years, starting way back when oil passed $100 and was nearing $150 per barrel, one of his biggest complaints against the Calderon administration has been its decision to maintain gas prices artificially low, supposedly to keep down inflation.. In fact, back in April of 2008, while in the U.S. the average national price was anywhere between $4 – $5 per gallon, here in Mexico we were paying about 7.15 pesos per liter.  At the time we were right at 11 pesos to the dollar, which came out to equal $2.45 (U.S.) per gallon. He predicted that if and when the barrel price should fall, which it most certainly did, there were going to be some nasty chickens coming home to roost, and that government would hardly have any money for anything.  Hence, the panic that the Calderon administration was recklessly favoring the less needy.  Of course, that’s going by a certain man’s definition of the term “less needy”.

The idea that only the wealthiest 10 – 12 percent of Mexicans possess automobiles is hopelessly absurd, and far beneath the intelligence of a man as much in the know as Sergio Sarmiento.  But evidently, that’s what he believes.  Only rich people have cars.  If it were anything close to true, he might be a bit closer to hitting the mark, but not much.  I can agree with him that the rich don’t lack cars.  But to suggest that 85 – 90% of the Mexican population doesn’t possess, much less benefit from the use of cars, comes dangerously close to pure academic ineptitude.  To go on to suggest that therefore we less fortunate would be economically in the clear from any hike in gas prices, and only enjoy the benefits of higher waves of wealth distribution, is nothing less than a cry for help  to have some common sense mercilessly beaten into you.

Nonetheless, Sergio’s and other coinciding arguments eventually won the day, sort of.  After a government price freeze that lasted nearly a year, gasoline finally took on a continually gradual increase.  The current price as of this week in July of 2010 is 8.36 pesos per liter (not bad, actually, considering that Sergio believes it should have been 14.00 from two years back).  At the current rate of roughly 13 pesos to the dollar, it’s equal to the same as two years ago – $2.45 (U.S.) per gallon, which actually is pretty close to the U.S. national average at the moment.  This however, is mere coincidence.  Gasoline in Mexico is not a market commodity.  The market does not determine the gas price here.  The government does.  And should government defend its decision to raise prices in order to keep up with the world market, what should we expect if again the barrel price suddenly drops, leading to lower gasoline prices throughout the market?  Bueno, call me cynical, but I think it would be foolish to expect Mexico to follow suit.

Add to that the fact that $2.45 is but 5% of the American minimum wage daily income.  The 32 pesos it takes to buy the same gallon of gas is over 60% of the Mexican minimum wage daily income.  Sarmiento may be sadly mistaken about only rich people having cars, but if the price here in Mexico continues to rise, his ridiculous assessment will become more and more accurate.  And this would be good for the poor?  This would be good for the economy?

Are we to understand then that this idea that “PEMEX belongs to all Mexicans for the benefit of all Mexicans” means essentially that it’s a government tool for the redistribution of Mexican wealth (formula = rich people guzzle gas, the proceeds which then are redistributed to bloated government salaries)?  If so, the gas price is nothing more than pure tax (that the government has not to lift even a finger to collect).  What Sergio calls a $20 billion subsidy, I would better see as a tax cut for any Mexican that benefits from gas consuming transportation… which is far, far more than the 10 – 12 percent that he believes doesn’t deserve it.  Sergio refers to it as a ransacking of a government enterprise established as a source for Mexican prosperity.  I say it allows the private sector to advance uninhibited by extremely high gas prices, therefore employing more people and thus increasing their purchase power, also less inhibited by skyrocketing gasoline prices, allowing us to see how this intent at prosperity compares to whatever triumph the government can claim.

Is it not the case that government failure has for far too long been subsidized by the contributions of the Mexican people?

Economies grow because some people sense what others want and need, and move to meet that demand.   Demand increases and is more successfully met when the ability for people to obtain what they need and want increases.  That ability to obtain increases whenever it becomes more feasible for any person to get from any point A to any point B.  To be sure, a dependable and efficient public transportation system can help.  But does Sarmiento really assume that 85 – 90% of Mexicans simply don’t need to go anywhere beyond the reach of public transportation or would never have any wish to move themselves about on their own terms?  If so, he’s truly not living in the same Mexico as I.

More, below here, of Mexico’s “cream of the crop”, according to Sergio Sarmiento…

Got it?

1 comment

Jonathan Danby

July 23rd, 2010

Nice one chap. Nevermind the bus fare – “the poor man’s mode of transport” – prices escalating out of control if the gov wasn’t subsidising the price of gas. Me gusto mucho guey

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