Mexico’s rich getting richer, study finds

Times Staff Writer

Mexico’s rich and powerful got even more rich and powerful during the six-year term of outgoing President Vicente Fox.

That’s the conclusion of a World Bank study released this week that said Mexico’s business elite and powerful public-sector unions were a major drag on the nation’s economy.

The net worth of Mexico’s billionaires soared, from just over 4% of gross domestic product in 2000 to about 6% in 2006, according to the study. Strong earnings at big corporations have driven the stock market to repeated highs.


But those benefits haven’t been widely shared. The concentration of economic power in few hands has saddled Mexican consumers with high prices, exacerbated income inequality and retarded economic growth.

Over the last six years, Mexico’s gross domestic product has expanded only about 2.3% a year on average. The nation has created less than a quarter of the 1 million net new jobs it needs annually just to keep up with growth in the working population.

Attacking the nation’s monopolies and bringing real competition to important sectors of Mexico’s economy are crucial for the nation to raise living standards, generate employment and compete in a global economy, said economist Luis Felipe Lopez-Calva, one of the study’s authors.

“It is fundamental ... if Mexico hopes to grow faster,” said Lopez-Calva, a researcher with the United Nations Development Program in Mexico. He co-authored the report with economists Isabel Guerrero of the World Bank and Michael Walton of Harvard University’s John F. Kennedy School of Government. The report was released at a World Bank conference this week.

Nearly half of Mexico’s 106 million people live in poverty. Yet it has more billionaires than Switzerland -- 10 last year -- according to Forbes magazine’s list of the world’s richest people. Many of them inherited their wealth or built their fortunes in Mexican industries that have little or no competition and aren’t likely to anytime soon.

Carlos Slim, the world’s third- richest man with a net worth estimated at $30 billion, owns telecom companies that control 94% of Mexico’s land lines and 80% of its cellular service.


Broadcasters Televisa and TV Azteca own 94% of Mexico’s television stations. Two brewers, Grupo Modelo and Cerveceria Cuauhtemoc Moctezuma, have a combined market share topping 99%.

Their sway over Mexico’s economic and political life is eroding faith in Mexico’s institutions, which many here believe are set up to protect the interests of Mexico’s rich and powerful.

Companies controlled by Mexican billionaires are more likely to be engaged in monopolistic practices than other firms, and they are much more likely to win judicial stays known as amparos allowing them effectively to ignore regulators’ rulings against them for years while the cases are appealed.

That was the conclusion of the study’s authors, who examined the outcome of 612 anti-competition cases brought before Mexico’s Federal Competition Commission from 1998 to 2006.

“These firms that are owned by very powerful people ... always find judicial means to gain protection,” Lopez-Calva said.

He said Mexico’s oligopolies were also using their clout to exploit weaknesses in the political system. Mexico’s president is limited to a single term, and federal legislators can’t run for consecutive terms, which critics say makes them more beholden to well-heeled business interests and powerful unions than to the voters who put them in office.


Lopez-Calva said an example of that came this year when Mexico’s Congress approved a controversial overhaul of the nation’s broadcasting laws that opponents said amounted to a giveaway of broadcasting spectrum to Televisa and TV Azteca.

The law provoked outrage from a broad coalition of citizen groups, which accused lawmakers of caving in to pressure from the media giants in a presidential year for fear that their candidates would be snubbed by the TV cameras.

The report also cited powerful public-sector unions as a drag on Mexico’s economy. The government petroleum monopoly Pemex is one of the least-efficient oil companies on the planet and is known as a hotbed of corruption.

The state-controlled electricity monopoly charges some of the highest rates in Latin America. The federal Social Security system, the nation’s largest public healthcare provider, will soon spend more on retirees’ pensions than it does providing medical care to Mexican workers.

Times staff writer Cecilia Sanchez contributed to this report.



Living large

Privileged government-sector union workers and the wealthy fared much better than typical wage earners during the administration of President Vicente Fox.


Percentage increase in incomes, 2000-2004

Top 0.01% of earners: 211.5%

Top 0.1% of earners: 66.5

Telecom workers: 49.7

Petroleum workers: 28.4

All workers: 4.1


Source: World Bank