Mexico’s poverty conundrum

Viene-vienes at work

By Ron Buchanan and Pan Kwan Yuk

They call them the “viene-vienes”. In cities throughout Mexico, red rags in their hands, they wave down motorists into available parking spaces and receive modest tips for their trouble in “looking after the cars”.

Their name comes from their shouts of invitation to their clients: “Viene! Viene!” – “Come on! Come on!”.

The “viene-viene” men occupy one segment of Mexico’s vast informal economy. And their ubiquity is a glaring reminder that – for all the praises that are being lavished on the country’s economic resurgence – poverty remains an obstacle to Mexico’s ability to unlock its full economic potential.

In Brazil, a commodity-fuelled boom helped lift some 30-40m people out of poverty over the past decade. This remarkable reduction has in turn helped create booming markets for consumer goods and drawn in global investors.

But in Mexico, wage stagnation, under-employment and inflation have eroded the income level of some 31m Mexicans, according to Jose Luis de la Cruz, director of the Center for Research on the Economy and Business at the Mexico state campus of Monterrey Tech.

The most recent data from National Council on Evaluation of Social Development Policy (Coneval) put the number of Mexicans living in poverty in 2010 at 52m, or 46.2 per cent of the population.

And while Mexico’s gini coefficient, a measure of income inequality, might have fallen between 2000 and 2010, the gap between rich and poor persists, with 10 per cent of the population holding nearly 40 per cent of the country’s wealth in 2010, according to the Economic Commission for Latin America.

The box-office success of “Nosotros los Nobles” (We are the Nobles), a Mexican film that pokes fun at the country’s elites, appears to attest to this lingering sense of rich-poor divide.

According to Inegi, the national statistics institute, some 57 per cent of Mexico’s economically active population work in the informal sector – which stretches from the viene-vienes men, shoeshine boys and street taco sellers to those who run Mexico’s huge counterfeit and stolen goods markets.

This is a population that is not captured by the country’s statistics on incomes and salaries. While the minimum wage in Mexico is about $6 a day and 50 per cent higher for such skilled workers as carpenters, those in the informal sector often do not draw a salary. They include many petrol pump attendants or waitresses in bargain-priced restaurants, whose only income comes from tips.

The struggle faced by Mexico’s underclasses can be seen in areas such as the Iztapalapa borough of the capital, almost never frequented by the professional classes but with a population of the UK’s Birmingham and Manchester combined.

About half a million of the 1.8m population of Iztapalapa lack potable water in their homes. Violent crime and small-time drug retail are prevalent.

Inegi’s figures for 2012 show that 12.8 per cent of the economically active population either have no work or work without a wage. The next band on the wage scale earns up to twice the minimum wage, or $12 a day, and comprises 44.7 per cent of the economically active population. Meanwhile, wages in manufacturing – held by those jokingly referred to as the aristocrats of Mexican labour – are just $4.80 an hour, according to Inegi.

Lifting the country’s 21m extreme poor out of poverty could boost GDP by as much as 9 per cent, said Raúl Feliz, an economist at Mexico’s CIDE think tank.

Getting more people into the formal economy would be a start. If that happens, the viene-vienes could be driving their own cars.

Related reading:
Mexican labour: cheaper than China, beyondbrics
Mexico: China’s unlikely challenger, FT
As Mexico claws toward prosperity, some in middle class slide back, Washington Post