Mexico's (and the U.S.'s) Real Problem (Watery Chicken Potpie Edition)


Why, asks Steve Forbes in his "Fact and Comment" col in the most recent ish of the mag that bears his father's (and grandfather's, and his) name, does Diner 24 insist on serving up "tepid 'disco' fries, third-rate meatloaf and watery chicken potpie?"

More importantly, he asks "Why isn't Mexico--which has virtually free access to the U.S., the world's largest and most productive market--growing faster?" One major culprit, sez Forbes, is the relative cost of starting a business:

In Mexico…it takes at least 58 days to start a business, compared with 5 in the U.S., 3 in Canada and 27 in Chile. Mind you, this is only the process of getting all the legal permissions needed to launch a business. The cost of starting a business as a percent of per capita income is even more startling--16.7% in Mexico versus 11.7% in Brazil, 10% in Chile and 0.6% in the U.S.

Forbes' data comes from a World Bank study released last year. That study created "Rigidity of Employment Index," which measures such things as the ease of hiring and firing workers, mandated benefits, and the like, on a scale of zero to 100 (the higher the number, the more rigid the laws).

Mexico's score is a business-killing 72 versus Argentina's 51, Chile's 19 and the U.S.' 3. The cost of letting a worker go in Mexico is equivalent to 83 weeks of the worker's wages; this covers severance pay, fines or penalties to the government and the costs involved in meeting advance-notice requirements. In Chile the comparable number is 51 weeks; Canada, 28; the U.S., 8. (In New Zealand, by the way, it's 0!) Mexico also severely lags other countries in the time it takes to register property and in the cost of doing so.

Whole thing, including restaurant reviews--there's nothing that takes the taste of Mexican economic misery out of your mouth like the "obscenely good french fries" at Cafe du Soleil--here.

By talking about the time and difficulties it takes to register businesses, Forbes--and the World Bank--are channeling Peruvian social critic Hernando De Soto (read his Reason interview here).