Mexico: Cartels and Trash move Pesos through a ‘Trickle-Down’ Economy

Yaqui for Borderland Beat 

In 2020, these bills with jailed drug lord Joaquín "El Chapo" Guzmán Loera’s initials appeared in Culiacán, evidence of the cartel's influence on Mexico’s economy.

In Mexico, cartels and trash move pesos through a ‘trickle-down’ economy; If the drug trade were to evaporate today, the economy would crash tomorrow.

The term “trickle-down economics” was coined by Will Rodgers in the early 1930s. His exact quote was as follows:

“The money was all appropriated for the top in hopes it would trickle down to the needy. Mr. Hoover didn’t know that the money trickled up. Give it to the people at the bottom, and the people at the top will have it before night anyhow. But it will have passed through the poor fellow’s hand.”

He was a humorist making a joke. Yes, a joke.

The pseudo-economic philosophy behind this joke refers to the proposition that taxes on businesses and the wealthy should be reduced as a means to stimulate investment in the short term and benefit society at large in the long term. The theory that businesses will use their tax savings to reinvest in such a way that the average person benefits economically is pure political bunkum. Publicly traded companies will use their tax savings to buy back shares of their own stock, and the wealthy will simply hoard it.

When wealthy people receive a tax break, they rarely spend it in such a way to benefit society in general; they invest it to increase their personal wealth. This amassing of money at the top of the economic food chain will generate no significant benefit to the average citizen.

However, when the average person receives a windfall, they spend it: they pay bills, buy food, pay for home maintenance or auto repairs or any of the myriad ways money trickles through our fingers on a daily basis. Savings maybe, but not so much. As individuals, our spending habits drive the economic engine which powers a modern economy.

                                  Narco "Juniors" Cannot Resist a Flashy Lifestyle

Here in the land of tacos and tequila, trickle-down economics is not only alive and well, it actually works. There are many forms whereby pesos percolate through this deeply stratified society from the very top and eventually down to the impoverished folks who glean a living at the local landfill.

First, let’s take look at the largest fountain of trickle-down funds that suffuses all regions of México: the drug trade.

We are all aware that the various drug cartels in Mexico generate huge amounts of cash. The estimated monetary flow from this illicit enterprise ranges between US $30 billion and $60 billion per year, depending on the information source, and remittances (money sent to Mexico from abroad) are around $30 billion annually. In light of these figures, if the clandestine cash of the drug trade were to evaporate today, the Mexican economy would crash tomorrow.

The average drug lord does not buy stocks or bonds or options or warrants or any type of paper equities. He buys boats, cars, jewelry, houses, airplanes, restaurants and hotels as well as politicians, judges, various policemen and members of the military — along with numerous “street” people.

Charles Bowden:

In Charles Bowden’s book Down by The River, he writes that according to his research, the Juárez Cartel spent about $40 million every month in the late ’90s for bribes, wages and protection (as well as a significant amount of ammunition). That monthly payroll was spread between 10,000 and 12,000 people and made the cartel the largest employer in that quadrant of Mexico. With at least five active cartels operating around Mexico, all spending money in a similar fashion, a significant benefit is trickled down to the average person. I have spent time in villages in the mountains of Sinaloa, and the prosperity is obvious.

Trickle-down economics at the landfill:

Most of the people in this illicit business come from impoverished backgrounds, where spending exuberantly and excessively is the ultimate expression of their success. Therefore, most narco cash is spent in such a way that the pesos are circulated throughout the Mexican economy.

In Culiacán, the Sinaloa Cartel’s cultural center, the narco trickle-down is openly expressed with marked currency. Several months ago, 200-peso notes with the stamped message “De su amigo JGL” started to show up throughout the city. It basically says, “From your friend Joaquín Guzmán Loera,” i.e. the infamous drug lord known as “El Chapo,” who even from a prison in the United States trickles down pesos to the people of Sinaloa.

However, average Mexicans also have many ways to contribute to the trickle-down effect as well. A major one is via trash.

If you have spent time in Mexico, I am sure you have seen beer cans flying out the windows of a vehicle. Most of the gringos who witness this act of giving are appalled by what they think is a wanton disregard for our environment and not a trickle-down. However, at 18 pesos per kilo, those aluminum cans will be gathered by someone who is grateful for each and every one. 

(Helpful gringo info: it is best to separate aluminum from your household basura; this allows the scroungers to easily access what they are seeking without digging through the trash barrel and scattering its contents onto the street.)

When the trash is picked up, even the Basureros , ie Garbagemen have personal bags with them to collect anything of value. By the time the trash truck empties its load at the landfill, even though very few things of any value are left, there are desperately poor people who eviscerate the bags and pick through the contents.

The process of recycling — another form of trickle-down — has been finely tuned throughout Mexico for many generations. North of the border, recycled items are handled by recycling companies, not by impoverished individuals who live a hand-to-mouth existence.

The typical small tire repair shops in Mexico are a prime example of the Mexican ingenuity employed in recycling. These shops will recondition and reuse tires that would warrant jail time in the U.S. or Canada. In a country where a single new tire can cost 2,000 pesos and 30% of the working population makes less than 2,000 pesos per month, any tire which can hold air has an immediate value.

Mexico is a country where many benefit from the kindness of others, and the less fortunate position themselves to maximize that benefit. In the cities, every busy intersection has its share of people looking for a handout. Some will perform, some display a sign with a brief outline of a personal horror story and the severely handicapped just hold out a hand.

In rural areas, vendors will set up at the topes (speed bumps), where motorists are forced to slow to a crawl. In these situations, it is the people without automobiles soliciting a pittance from the people wealthy enough to own an automobile. Even when a person withdraws pesos from an ATM, the machine will ask if you wish to donate to a children’s fund.

Now, if the government would just put a value on anything plastic — bags, cups, packaging, etc. — the landscape would be trash-free, and the impoverished would benefit.

The writer describes himself as a very middle-aged man who lives full-time in Mazatlán with a captured tourist woman and the ghost of a half-wild dog. He can be reached at buscardero@yahoo.com.

Mexicans defy pandemic blues with record remittance surge, $40 Billion US Dollars:

Jantetelco, Morelos :

Alberto Burgos is one of thousands of Mexican migrants living in the United States who dug deep and sent extra money to family back home last year to alleviate the devastating impact of the coronavirus pandemic.

                            

Elsa Maria Gonzales, whose husband Alberto Burgos works in the U.S. to send money for their family, walks near the Western Union in Jantetelco, state of Morelos, Mexico November 12, 2020.  

Growing plants and helping to handle their sale at a huge nursery in Alabama, the 35-year-old dipped into savings to transfer about a third more to his home town in central Mexico than he did in 2019, he said in an interview.

Burgos is one of a growing number of Mexicans with U.S. work permits or access to benefits who helped to fuel a more than 10% jump in remittances to Mexico last year to more than $40 billion, even as money transfers to other countries tumbled.

The record remittances have made Burgos’ home town of Jantetelco - which has sent many economic migrants to work in U.S. nurseries and elsewhere - an oasis of relative prosperity despite the worst recession to batter Mexico since the 1930s.

“Returning to Mexico made me very sad this time: it’s hard to see people with nothing,” Burgos said. “Thank God I was able to support them because I didn’t lose my job.”

Because of a surge in demand for flowers from Americans trying to brighten up their homes and enjoy gardening during lockdown, Burgos had about nine months of work in the United States last year, three months more than usual, he said.

The pandemic shaved 8.5% off Mexican gross domestic product (GDP) in 2020, but remittances softened the blow, helping Jantetelco residents to repair their homes and even cover private medical bills sparked by the strain on public hospitals.

Last year, total remittances to Mexico were equivalent to about 3.8% of GDP, according to calculations by economists including Jonathan Heath, a board member of Mexico’s central bank. Over 95% come from the United States, official data show.

The volume underlines Mexico’s reliance on the United States even as former President Donald Trump attempted to shut down migration with a border wall and threats of trade sanctions.

President Andres Manuel Lopez Obrador has hailed the migrants as “heroes” but Mexico’s dependence on their money shows the difficulty he has had in delivering on his pledge to create economic conditions that render migration unnecessary.

          Traditional Sight in one town square in Jantetelco, Morelos

Helping to fuel remittances is greater access to social security among Mexicans in the United States, 60% of whom have lived there for at least 20 years, according to data from Washington-based think tank the Migration Policy Institute.

Since the financial crisis of 2008-2009, the percentage of Mexican migrants with U.S. citizenship has risen significantly, said Jesus Cervantes, a remittance expert at the Centro de Estudios Monetarios Latinoamericanos (CEMLA) research institute.

Over the past decade, the number of Mexican-born people registered in the United States has declined slightly. But the proportion of those holding U.S. citizenship rose by nearly a third to 37% of the total, according to the IPUMS USA database, based on an annual U.S. survey.

That, Cervantes said, made remittances to Mexico “more resilient” than they have been to other countries.

Global transfers to Latin America as a whole likely fell by around 20%, and declined by 13-22% to countries across Asia, according to an annual report by bank BBVA.

Much of the money captured in Mexico last year went into healthcare and housing, experts say.

In Jantetelco, some two hours’ drive southeast of Mexico City, 78-year-old Maria Elena Sandoval said she saved her foot from thrombosis thanks to private surgery paid for by money from a son living in the United States.

Burgos asked Reuters not to reveal how much money he was sending back via Western Union lest it encourage criminals to target his family, a risk in Mexico.

A municipality of about 18,000 inhabitants, Jantetelco took in about 25% more in remittances between January and September than in the same period in 2019, according to central bank data.

In the third quarter, that equated to about $425 per person - or to almost two months’ worth of Mexico’s daily minimum wage. “Thank God and thank my son they didn’t cut off my foot,” said Sandoval, a grandmother who said she spent the equivalent of $600 on medical treatment to save her limb.

Other Jantetelco residents said they have used remittances to pay for everything from construction and renovation of homes damaged by a 2017 earthquake, new cars, appliances and crop seeds, to coming-of-age parties.

Mexico’s leaders have traditionally tended not to draw attention to the money, given the often murky U.S. migration status of many people supporting families in Mexico.

But Lopez Obrador has repeatedly celebrated their contributions, and welcomed U.S. President Joe Biden’s bid to implement a reform that would settle the migration status of many Mexicans living in the United States.

“You’re vulnerable on remittances,” said Bank of America economist Carlos Capistran, “because it’s income the country doesn’t control.”

Reporting by: Lizbeth Diaz and Abraham Gonzalez; Editing by Dave Graham and Rosalba O’Brien for Reuters.

The writer Bodie Kellogg describes himself as a very middle-aged man who lives full-time in Mazatlán with a captured tourist woman and the ghost of a half-wild dog. He can be reached at buscardero@yahoo.com.

Sources: MND / Reuters