Tuesday, 25 January 2011

Exchange Rates, Business, and the Quinta

     Due to the American proclivity to think that the central government can and should control the general economy and the economy of each man, our currency has weakened considerably.   This is especially true when compared to the currencies of nations that have begun to practice a bit of budget restraint and realistic financial management.
      Mexico....its President, and incredibly, its Congress,  has been stumbling, dragging, edging, and crawling more and more to a less socialist economic model.   Although there are many, many vestiges of the ancient, Jurrasic Epoch socialist infrastructure (PEMEX, Comision Federal de Electricidad, Instituto Mexicano de Seguro Social, Confederacion de Trabajadores Mexicanos, etc.) much of the country is moving to greater private economic position.    It has long been said that Mexico is a land of small business....and this is clearly evident when one sees the taco stands, shoe shine men, push carts, tiny stores, repair shops, tire repair stands, and the like. 

      Sometimes it is assumed by the foreign visitor that these tiny operations are deigned by abject necessity.   Perhaps in some...even many.....cases this is true.    But the total truth is some how best expressed in a classic Vicente Fernandez song of the Charro/Mariachi genre...

"Con dinero y sin dinero,
Yo hago siempre lo que quiero.
Y mi palabra es la ley.
No tengo trono ni reina.
Ni nadie que me comprenda.
Pero sigo siendo el rey."

     This says, "With money and without money....I do always that which I want....And my word is the law.    I have no throne nor a queen....and nobody that can understand me.....But I continue being the King."

      This song is an anthem of the  conservative, lower-middle class, blue collar type.   Such a person is usually a male...full of the classic machismo etc.....but it can and frequently is a self-employed female.   They grumble about taxes, crummy government services, corruption, and they pretty much take care of themselves.  They also foul up the polls and the centrist and leftist political parties, because, although far from rich or well-to-do,  they tend to vote Partido de Accion Nacional (PAN) which in Gringo means an amalgam of Republican moderates, right-wing crazy Republicans, Tea Party Whackoes, and Ron / Rand Paul Libertarian types.   As you might imagine, I identify with this particular Mexican demographic fairly closely.
       Their eclecticism is best described by the little place where I had a tire repaired not long ago.   A wall of the three sided structure had pictures of things of interest to men and human beings as well.   President Calderon had his image there, along with John Kennedy, Fernando Valenzuela, some girls who forgot to get dressed before their photo-shoot, Veronica Castro (almost obligatory), Pedro Infante, Sarah Palin (with clothes on), Emiliano Zapata w/ Pancho Villa (also with their clothes on) at their meeting in Chapultepec Castle in Mexico City in 1915, and other such things.   

       So, the Mexican Government and financial gurus have...since about 1994 stayed on a steady course of running budgets that run very close to balanced, with small variations into the red and into the black.    The above described Mexicans grumble about reductions in outlays...price increases at times for things like gasoline and electricity... but, there is a haunting ghost that they still remember.     They remember the 50,000 peso note....which could buy a couple of hamburgers....drinks are extra.   They have told their children about the 50,000 peso note....and the older Mexicans have told their children about the 1 peso silver coin  (and the one peso silver certificate, paper currency)  that would buy a good hamburger, a cup of coffee, and leave a large, solid copper 20 centavo coin as a gratuity.   I did this 1 peso trick many times as a pre-delinquent and as a teen during my adventurous times in Mexico.   I did not know then that it was such a hard trick to duplicate....but apparently it was....because all the Bernackes, Greenspans, Volkers, and Geitners in the world have not been able to duplicate that trick again.

      Now, however, with revaluations, devaluations, adjustments, re-positioning and whatever else the gnomes of the Banco de Mexico and the Tesoria de la Republica spin out of the "D.F."...a person can buy a couple of decent meals at the Pollo Loco or KFC, with soda pops, and have a little change left over from a 100 peso note.
      My problem is that during the last year, the peso has gained from about 13.30 to a dollar to now around 12.15 to a dollar.  That means the Obamadollar has lost about 9 per cent against the peso....almost totally due to the loss of faith in the exchange markets in the dollar's ability to withstand the borrowing required by $2,000,000,000,000 annual budget deficits.
      This has put a bit of a crimp in our batting stance at the Quinta...but we, as small operators will figure a way out of the labyrinth better than any dumbo who can be Secretary of the Treasury but who also supposedly cannot figure out how to do his tax return.
Thanks, once again for your attention and investment of time!!!
El Gringo Viejo