Hubbub

Seneca, the Roman philosopher, had long since anticipated it: “If one does not know to which port one is sailing, no wind is favorable”. Tariff disputes, free trade agreements, and the future of the economy evidence the flagrant confusion that characterizes us. The positions of the government as well as those of the private sector are so absolute and enraged that it would seem that the entire world is at stake.
The conflict is out in the open: the specific theme is what is least important; what’s relevant is the confrontation. On the one hand, the government insists on the need to reduce tariffs, deregulate and create a more competitive environment for economic activity. On the other hand, the private sector jumps at the first opportunity, but with a sole monosyllable: NO. Truth to tell, both are right: because since no one, including the rest of the Mexicans, has any idea of where we are going, any road will take us there. Consequently, it is better to stage an uproar than to attempt to find a space of understanding.
In the meleé, perspective has been lost: the function of the government; the rationale of the business community; and the direction of economic development. For starters, the government’s obligation and responsibility is to create conditions under which the economy can develop. Among these is found the shaping of a competitive climate that allows a rise in the productivity of the economy as a whole, obliging entrepreneurs to be more efficient, and to foster the formation of new companies. In an ideal world, the rules of the game must facilitate the genesis of businesses when an entrepreneur generates an idea that is liable to gain ground in the market, and one that concurrently permits the transformation or death of those incapable of satisfying consumer demand.
This is the quid of the matter. The fundamental lack of definition lies at the heart of the contention between the government and the business chambers: who should be the beneficiary of the development, the entrepreneur or producer or the citizen and consumer. In the 1980s, the country appeared to have taken this basic step when imports were first liberalized, subsidies to industrial activity were reduced, and, apparently, privileging the consumer as the raison d’être of economic activity. The objective was not to do away with the productive plant, as business chambers and critics clamored, but rather to afford long-term viability to the nation’s economy by increasing production scale and creating a more specialized economy, one that would be more capable of satisfying consumer demand. That is, the spin attempted was that of obligating the productive plant to serve the consumer instead of the opposite: the consumer depending on the producer’s good will.
Behind the governmental logic of the time was found the old discussion regarding the function of the market in economic development. The objective of free trade is that all economies become specialized, i.e., instead of manufacturing all of the goods that the society demands in a country, each nation specializes in what is better. When a country has lived under the yoke of protected producers, it is natural that an opening to imports causes diverse disruptions; however, the objective of the opening is not to cause dislocation, but to provoke transformation of the sector so that the more efficient businesses could become consolidated; generate better, well-paid jobs; and, on the whole, a win-win situation.
Unfortunately, the opening of the Mexican economy was very unequal. Importation was liberalized of the majority of industrial products, but trade in services was not freed up, while diverse protection mechanisms were maintained –by means of tariffs, subsidies, exceptions, and tortuous regulations- that have had the effect of making competition much more difficult. The result has been that some industrial sectors confront merciless competition, while others dwell in Ali Baba’s treasure trove. The most recent episode of liberalization was suggestive of what we really are up against: some goods were liberalized but the game reserves of some items were preserved, such as electrical cables, on the pretext that Mexican norms are distinct, despite the fact that we export these and that they are identical to those produced in those countries. That is, they are boorish protection mechanisms for well-heeled companies that monopolize their market.
The indecision regarding the nation’s course and the criteria that should prevail in driving economic policy has caused an extraordinary delay in growth, but not only that: the costs are tangible. Paradoxically, the sectors with the least or null protection are precisely those that are the most competitive and those that pay the best salaries. The reason is simple: competition raises productivity, and the latter exacts better workers and generates resources for remunerating them better. It is not by chance that the true arrearage that Mexico is experiencing is found exactly in sectors and regions that “enjoy” the doubtful privilege of protection.
The nation’s real theme is that it has no sense of direction: the 1994 crisis annihilated the liberalizing project and, from then on, no government has had a clear idea of what course it wants to pursue or, to an even lesser degree, of knowing how to convince the population of the advantages or costs of this or other options.
Faced by governmental (and social) confusion, the private sector does what it knows how to do best: complain and protest. The reality is that the business chambers have a good argument, but have not known how to articulate it: the general conditions of the economy do not allow businesses to compete; thus, it is indispensable to liberalize and deregulate the protected sectors, beginning with the services sector, but including all of the industrial activities that continue to luxuriate in protections and subsidies. The prototypal entrepreneur pays highly for credit and transport; is the servant, rather than a consumer, of PEMEX, the oil company and of CFE, the utility entity; and, as if these encumbrances were but minutiae, suffers from a pathetic infrastructure and must defray costs for security. Their competitor in Korea, Taiwan, or China has access to highly trained personnel, unsurpassed infrastructure, and a government devoted to improving the conditions of competition every day. The problem of the Mexican entrepreneurs is not that they complain, but that they do not complain about what is relevant. Instead of demanding improved conditions of competition, they would rather play politics, propitiate constitutional controversies, and request subsidies. The country will never progress like this.
The difference with Brazil is not that its industries are protected, but that Brazil knows where it’s going. The difference is not minor.