September 12, 2003

Mexico’s Rich Don’t Like To Pay Taxes – They Think You Should

By Brenda Walker

[More by Brenda Walker]

“Poor Mexico, so far from God, so close to the United States" is an early example of the now-familiar annoying whine, first voiced by Mexican President Porfirio Diaz .

Pathetic loser, mooch, social basket case, criminal narco-state: these are Americans' mental pictures of Mexico.

But more than any other, the image is one of staggering poverty. Anyone who has been to a Mexican border town is immediately overwhelmed by the Third World - the oppressive dirt, decay, too many underfed children.

However, the truth is that Mexico is a very wealthy country. It is blessed with abundant natural resources and a fortunate location. Mexico is the richest nation in Latin America when measured by GDP, and by a wide margin: in 2001, Mexico's GDP was the highest in Latin America, a substantial 22.5 percent more than runner-up Brazil. When GDP per capita is the gauge, Mexico is second only behind Argentina.

Half of all Latin American billionaires, 11 out of 22, are Mexicans.

Mexico is the quintessential banana republic—a corrupt oligarchy of arrogant rich, a tiny middle class and millions of poor people, around half of whom live in poverty.

But Mexico is not poor overall. It has the resources to improve itself.

Economist Gary Hufbauer of the Institute for International Economics recently noted that Mexico has tax collections that amount to only 14 percent of the country's gross domestic profit, compared with the U.S. level of 25 to 28 percent.

Hubauer’s conclusion: "Basically the wealthy classes do not want to tax themselves, period."

Hufbauer further remarked:

"Basic social services and infrastructure are awfully lean for a country that wants to move ahead. While I'm not usually an advocate for larger government, Mexico is a country where public investment, done wisely, could pay huge dividends."

Arguably, with adequate taxation of its freeloader rich, Mexico could follow the example of the Asian tiger nations and invest its way into economic progress by building industrial infrastructure and educating its workforce. The recent  loss of Mexican jobs to China was partially due to the lack of capital spending on education, ports, roads and industrial parks.

But investment would cost money. And Mexico refuses to take responsibility for the social needs of its population. It's so much easier to let the Americans care for Mexico's poor.

Indeed, the Mexican propaganda war to convince Americans of the need to support poor Mexico has been largely successful.

Washington's current degree of solicitude for the well being of Mexicans is quite astonishing, particularly at a time when Americans are suffering the highest unemployment in nine years. Congress and the President are considering various welfare packages for Mexico; such as Sen. McCain's "guest worker" plan (where the "guests" never leave).

On July 10, the Senate passed a bill to provide $100 million in microloans for the poorest regions of Mexico. It's stunning that Congress would vote to provide financial aid to wealthy Mexico when 47 U.S. states have severe budget deficits and federal red ink is the highest ever.

Central to Mexican strategy is maintaining the billions of dollars in remittance money flowing south, thereby keeping a lid on social unrest among the masses. In that way, the oligarchy preserves its enormous power and riches.

The immigration scam is very successful: the rulers export their unemployment to the United States and get back billions in remittance cash annually— 2003 is on track to rack up a record $11 billion.

Talk about easy money: the worse the oligarchy run the country, the more people leave and send back money.

Furthermore, every social service for illegal aliens and legal immigrants financed by the American taxpayer—medical care, K-12 education, college tuition breaks, housing vouchers and food stamps—frees up more money for remittances.

Recent surveys show half of Latino immigrants send money home, with a monthly average amount of $250.

Mexico's propaganda effort is helped enormously by the annual carnage of unprepared walkers who die in the desert as they illegally cross into the U.S. Predictably, the May death of 19 people in an unventilated truck in Texas incited anti-borders extremists to pile blame on American immigration law.

Mexico would prefer that all its excess workers could cross an unenforced border to keep remittance dollars flowing.

Washington is currently focused on building democracy in Iraq at a cost of $4 billion per month. But should this effort really be at the top of our national priorities?

A much smaller investment could bring our southern border under control and would lower the threat of terrorists entering there. The expanding power of lawless elements in Mexican society, e.g. narco-traffickers, must be recognized as a security threat - particularly with recent reports of connections between Mexican drug cartels and terrorists, including al Qaeda. Border control is now critical to national security.

There's no reason why Mexico cannot evolve from being a parasite state into an adult nation. Washington was optimistic when opposition party candidate Vicente Fox won the presidency.

But the Fox administration has only displayed more of the same tiresome dependence.

Apparently the current system is just too easy and profitable for the insatiable ruling class.

Tough immigration enforcement from the United States is the only way to force Mexico to get its act together.

If Mr. Bush still thinks of Vicente Fox as his good friend, the President will help wean his pal from the distasteful immigration addiction that keeps Mexico mired in the Third World.

Tough love - border and interior enforcement – is the true expression of caring.

Faced with the unavoidable necessity of fixing their country, Mexicans would have to insist that the country be run for the benefit of all - not for the gluttonous few.