`Economic Miracle' Has Yet to Reach Mexico's Poorest

Despite country's robust economic growth, gap between haves and have-nots widens

MEXICAN President Carlos Salinas de Gortari has just returned from a trip to Europe, where he was lavished with kudos as the architect of Mexico's "economic miracle."

Four consecutive years of healthy economic growth, all-but-tamed inflation, a free-trade pact on the horizon, and a boom in the stock market no doubt have contributed to Mexico's tally of seven billionaires - the most in Latin America and more than Saudi Arabia or Britain, according to a recent Forbes magazine survey.

But at the street level - where the sidewalks are jammed with vendors and barefoot children wander between cars hawking gum - the Mexican "miracle" has yet to arrive.

"I don't believe the economy's any better. My sales are less than they were five years ago and it's getting worse," says Vincent Lopez Garcia, who sells watch straps and tiny batteries from an illegal stand set up on Avenida 16 de Septiembre in downtown Mexico City.

Mr. Lopez feeds a wife and five small children on his average daily take of 20,000 pesos (about $6.50). "Sometimes it's not enough," he says matter of factly. The problem, he says, is competition. "Five years ago, there were just three of us selling these things. Now, there are at least 10 like me on this block."

Indeed, Lopez is no minority in Mexican society. Just over 50 percent of Mexico's 82 million people earn what he does - or less. Only 7.6 percent of the population makes $5,700 or more, according to the 1990 census.

During the debt-induced crisis of the 1980s, many Mexicans found that survival meant becoming a sidewalk entrepreneur. Economists conservatively estimate that 25 percent of Mexico's GNP is generated by the "informal" sector - not just street peddlers, but mechanics, plumbers, and similar small merchants who avoid paying sales, customs, and income taxes (not to mention rent or insurance or social security) by not registering with government agencies.

And the "underground" economy keeps growing. The National Chamber of Commerce of Mexico City calculates the number of new street sellers will jump by 7 percent this year (to 137,000), more than twice the growth rate of legitimate businesses.

"We used to carry watch straps. But we can't compete with them," says Ramon Portilla Moreno, owner of a leather goods store on Avenida 16 de Septiembre. "They don't have to pay for electricity, employees, insurance, rent," he complains. "They can sell for half the price I can."

The government sporadically comes to grips with the issue, usually announcing plans for a new market for street vendors. Last month, established store owners closed their shops on Tacuba Street to protest the government's failure to relocate the vendors. The shop owners' leader was pummeled with tomatoes by street peddlers. City hall responded by sending in riot police to clear the street. To prevent the vendors from returning, every block on Tacuba street now hosts a helmeted, nightstick-wielding cop. S cores of displaced vendors have simply shoe-horned their way into spots on neighboring avenues.

Many Mexicans have been driven to the streets (both as sellers and buyers) by high inflation. The buying power of minimum wage earners fell by 60 percent in the last decade. Inflation, as measured by the consumer price index, peaked at 159 percent in 1987 and has been reduced to about 12 percent this year.

Only recently have wage hikes in some sectors begun to keep pace with inflation. In the manufacturing sector (employing about 10 percent of the labor force), productivity is up and annual wage increases have been 4 percent to 10 percent in real terms since 1990, notes Guillermo Castillo, a labor economist with Groupo de Economistas y Asociados, a consulting firm. But most workers are getting raises in line with the official inflation rate.

Arturo Lomeli, director of the Mexican Association of Studies for the Defense of the Consumer, warns that "looking at the price increases in the government's basic basket of consumer goods doesn't reflect what is happening in the economy."

For example, electricity prices have gone up 218 percent in three years, according to a study by the Center of Economic Studies of the Private Sector, a private consultant group. Services such as medical care, private schooling, and auto repairs are up 308 percent over the same period. Lomeli cites telephone rates rising 110 percent since last November. And rents have shot up from 30 to 300 percent nationwide, he says. Most of these costs are not in the consumer price index, since items such as phones an d autos are not staples for most Mexicans.

Inflation is still climbing in some sectors, says economist Rogelio Ramirez de la O, because President Salinas's privatization program has left some industries as private monopolies or near monopolies without foreign competition. Competition from imports has helped bring inflation down on some goods. But the telecommunications, energy, broadcasting, and banking industries remain in the hands of a few. "Consumers are paying for the slow restructuring and inefficencies in these industries. It's evident the se sectors have had an excessively free hand and that's a dangerous economic situation," says Mr. Ramirez.

Christopher Whalen, editor of Washington-based Mexico Report, states bluntly: "There's been no real dispersion or decrease in the concentration of wealth under Salinas. The money and power remain with family and friends."

So far, the ruling party doesn't seem to have suffered much from the widening gap between haves and have-nots. While keeping a tight reign on wage hikes, Salinas has pumped more money into education and public works projects. In particular, the $3 billion 1992 budget (funded by selling off government enterprises) of the Solidarity anti-poverty public works program has been a political boon.

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