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Wednesday, June 28, 2006

Mexico's Woes

Robert Samuelson discusses the dilemma of Mexico: Its citizens would stay there if there were a strong local economy. Unfortunately, Mexico's 4% rate of growth is too little given its size. Samuelson explains that in 1970 South Korea has 1/2 the per capita income of Mexico. Now, at $19,000 South Korea has double Mexico's per capita income.

Why?

What else? The same issues that drag down every mediocre or failing economy: Government involvement, employment regulations, tax laws and a lack of private property rights.

One example from Samuelson:

An extreme case in point is Pemex, the state-owned monopoly oil company. Without competitors or complaining shareholders, its operations are lax. In 2004, Pemex had $69 billion in sales and 137,722 employees, according to its Web site; in the same year, Exxon Mobil had $291 billion in sales and 85,900 employees.

A profit-oriented company, Exxon earns over 4 times the income with 60% of the staff. And we can bet the salaries at Exxon are much higher than those at the Pemex.

Yes, you can legislate yourself toward permanent employment but not to prosperity.

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