The U.S. is three times larger in population than Mexico. Its territory is almost five times bigger and its economy is almost 17 times greater (GDP at market prices). But the difference between U.S. and Mexican private firms is even more striking. The combined value of the six largest companies listed on the Mexican Stock Exchange (BMV, by its acronym in Spanish) is US $206 billion. The six largest U.S. listed firms are worth 47 times more: US $9.7 trillion. What is most surprising is their average age: the top six Mexican companies are 91 years-old on average, while American ones are just 29. The Mexican firms are based in traditional economic sectors while the US companies are all part of the so-called “new economy”.
The gulf between industrialized and developing countries is increasingly explained by who participates in the most disruptive sectors of the new economy, and by the level of support that each country gives to entrepreneurs. In Mexico, we have been brainwashed into thinking that a businessman is an abusive and exploitative foreman of sorts who, as such, deserves to be extorted by tax authorities, shaken down by organized crime, blackmailed by labor unions, and even ripped off by his employees.
In developed countries, successful entrepreneurs are supported, admired, and emulated. It is well understood that the future of a country hinges on its ability to innovate, that its prosperity will depend on creating wealth, and that the latter is generated by private businesses, not by the state. In those countries, the state is responsible for setting the table, providing modern infrastructure, a safe environment, fostering competition, rule of law, and endowing its citizens with the skills that enable them to successfully enter the job market.
Even internally, our regional differences have to do with business development. In January of 2018, 57.5 percent of formal jobs in Mexico were created in the northern states, and only 2.1 percent of the jobs were created in southern states.
Developed countries, and the U.S. in particular, have developed an ecosystem where lack of capital is the furthest obstacle to an idea becoming a business. There is a virtuous cycle where venture capital funds provide seed capital. If the company manages to take off, private equity funds step in. When the company matures, it goes public, returning liquidity to initial investors, so that they have new seeds to sow. Many companies will not survive the journey, but others will yield tons of profits for those who took that risk. Far from being “speculators”, participants in the process include pension funds, universities investing their endowments, and eventually the public. The process allows many to share in the prosperity forged by entrepreneurs. A dollar invested in 1970 in the U.S. Stock Market was worth US $182 in 2020, and 55 percent of Americans invest in it.
We know that entrepreneurship comes naturally to us when we see our fellow Mexicans’ success when they cross the border. According to the New American Economy Research Fund, there were 1.4 million Hispanic business owners in the US (mostly Mexican) in 2017. In 2020, the fifth largest IPO on the New York Stock Exchange (NYSE) was of a company valued at US $32 billion and founded by a businessman born in Mexico. Another one recently sold a portion of the company he founded in 2004, valued at nearly US $3 billion. It seems that in the right environment, Mexican entrepreneurship ranks with the best.
We have allowed a narrative of envy and resentment to emanate from mediocre Mexican political leaders who want us to get used to finding excuses and pointing fingers, to voice our resentment with anger.
Aristotle said that the problem is not to aim too high and miss, but to aim too low and hit. President Andrés Manuel López Obrador so-called “Fourth Transformation” movement has done just that. In his view, we must settle for surviving through horse-powered sugar cane mills, agriculture for self-consumption, and money handouts to young Mexicans who don’t work or study (an existing government program was designed to “reward” them).
Mexico’s future depends on knowing that we are capable of creating value, of being entrepreneurs, of competing with others. Let’s start worrying more about creating wealth than about distributing poverty. Let’s stop listening to those who want us complaisant and addicted to the handouts of an increasingly impoverished government.
* Jorge Suárez-Vélez is an economic and political analyst He is the author of The Coming Downturn of the World Economy (Random House 2011). A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. Twitter: @jorgesuarezv