Tuesday, July 28

Poverty in Mexico deepening

Thanks for letting us know, Bloomberg!  It's a very helpful report, too.  Mexico is one of America's two neighbors, but U.S. reporting on Mexico is generally such that the country might as well be located in the South Pacific.  As a matter of fact the only reason poverty in Mexico is getting attention from Bloomberg is because of Wal-Mart's poor sales in the country.

As to U.S. reporting on America's other neighbor -- the country might as well be situated on Mars. I take that back; actually there's been more reporting about Mars during the past couple years than on Canada during the past 20 not counting wildfires this year but that's only because smoke from the fires was giving people in Iowa respiratory problems.  Just ask an American to name Canada's national leader. Go ahead; see the blank look you get in reply.  All right, Pundita, that's enough.  

by Nacha Cattan
July 27 10:05 PM EDT updated July 28 4:22 PM EDT
Bloomberg Business

Just as Mexico’s consumer sector begins to emerge from the doldrums of the 2009 recession, a new government report suggests the recovery’s foundation is on shaky ground.
An additional 2 million Mexicans have become poor since 2012, pushing one poverty gauge to a 14-year high, Mexico’s social policy evaluation council said. The data show the challenges faced by President Enrique Pena Nieto to meet campaign promises to lift millions out of poverty and expand the middle class.
The report is also spurring questions about whether first-half consumer spending gains had more to do with government outlays for mid-term elections and a favorable comparison to 2014, when new sales taxes hit shoppers, and less to do with a sustainable recovery. Rallies at companies like Wal-Mart de Mexico SAB and Kimberly Clark de Mexico SAB may not have much fuel left in them.
Rising poverty “poses a risk for all retailers,” said Giselle Mojica, an analyst at Monex Casa de Bolsa. “There could be an impact on formats that target low-income shoppers. With people’s purchasing power falling, they wouldn’t be able to shop there and they’d focus more on informal and roving markets. It’s cheaper there and they can bargain.”
Wal-Mex’s shares plunged the most since August 2012 on July 22 after second-quarter earnings missed analysts’ estimates. JPMorgan Chase & Co. said profit margins will probably narrow as the company lowered prices to reignite store traffic. Wal-Mex rose 1.1 percent to 38.76 pesos at the close in Mexico City Tuesday.
Coneval, the social policy evaluation council, conducts the poverty study every two years. Based on income alone, poverty climbed to 53 percent from 43 percent in 2006, the highest since 2000.

Wrong Direction

On a broader metric, taking into account access to basic services such as education, the numbers were lower but still pointing in the wrong direction. In 2014, 46.2 percent of Mexicans, or 55.3 million people, fell below that version of the poverty line, up 44.3 percent from 2008.
Average household income in Mexico dropped 3.5 percent in real terms in 2014 from 2012, according to Coneval. That’s just one sign of stagnant salaries in Mexico, pressuring policy makers in September to announce a committee to study the minimum wage. The group has yet to decide on raising it from 70.10 pesos per day in Mexico City. The rate has plunged 70 percent in the past four decades in inflation-adjusted terms, according to Bank of America.
“My salary is frozen, but prices keep rising,” said Andrea Martinez, who cleans houses for 4,000 pesos ($246) a month and switched last year from shopping at Wal-Mex discount stores to street markets. “It’s more affordable.”

Crowded Market

Negative net migration to the U.S. from Mexico is “crowding” the labor market and slow economic growth is hurting chances of accommodating those workers to help curb poverty, said Pia Orrenius, an economist at the Federal Reserve Bank of Dallas.
The number of undocumented Mexicans in the U.S. fell to 5.9 million in 2012 from 6.9 million in 2007, according to the Pew Research Center. That also means fewer workers in the U.S. sending money home to their relatives in Mexico, Orrenius said.
She said growth in anti-poverty efforts are likely to slow by limited government spending because of falling prices for oil, which accounts for about a third of the federal budget.

Campaign Spending

Consumers’ early gains this year may not be sustainable, said Francisco Guzman, an analyst at Interacciones Casa de Bolsa SA. The increases may have been overstated by political-campaign spending and easy comparisons with 2014, when new taxes took effect, he said.
Mexico defines as poor families whose monthly income is below 2,595 pesos per mouth to feed in cities and 1,659 pesos in villages, and that lack a basic need like education, health or living space.

No Fruit

Alicia Garcia Gonzalez falls in that category. Her husband earns about 2,000 pesos a month working corn fields in a village 138 kilometers (88 miles) northwest of Mexico City for her and her four children, she says. They share one room in her mother-in-law’s adobe home, a space considered insufficient by government standards.
“I no longer buy fruit,” said the 40-year-old Garcia, who wore a rhinestone-studded belt and scarf to swaddle her 2-year-old daughter as she shopped at Mexico City’s Lagunilla market. “We eat meat once a month.”
There are several positive signs for Mexico’s consumer industry, according to Grupo Financiero Santander Mexico SAB, thanks to slowing inflation, lower unemployment and a shrinking informal economy.
Retail sales were growing more than 4 percent each month on an annual basis through May, a sign that the industry is improving this year, according to Orrenius of the Dallas Fed. A depreciating peso will also help poor families that receive remittances in dollars, said Interacciones’ Guzman.
That may not be enough to persuade Andrea Martinez to return to the aisles of Wal-Mex’s Bodega Aurrera discount chain near her house. On Saturday, she purchased 200-peso knockoff Adidas high tops for her grandson at a Mexico City street market.
“Ten years ago 200 pesos a day was a real salary,” said Andrea, who also supports her husband. “Not anymore.”


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