Paradise for Oligarchs: Poverty, Inequality Soar as Wealth Rises

Welcome to the Mexican Paradox.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Mexico is nothing if not a land of bewildering contrasts. Economically speaking, the country is a regional powerhouse. On the one hand, it boasts one of the richest “official” billionaires on the planet; on the other, some of the worst income inequality rates in the Western hemisphere. It places 20th on the list of countries with the most millionaires but it’s also home to the 15th largest population of poor people on the planet.

A new study released this week reveals that the wealthiest Mexicans, equivalent to 1% of the population, own roughly the same amount of wealth as 95% of the people further down the wealth scale.

The study, titled “The Distribution and Inequality of Financial and Non-Financial Assets in Mexico” and published by Miguel Ángel del Castillo Negrete of the Autonomous Technological Institute of Mexico, documents how after two-and-a-half decades of rampant financial and trade liberalization in Mexico, the lion’s share of the economic benefits have flowed to a tiny minority.

“Few countries have embraced economic liberalization, deregulation, and privatization as enthusiastically as Mexico,” Ricardo Fuentes-Nieva, director of Oxfam Mexico, told BBC World Service. “But some groups benefited disproportionately and they are now the richest.”

In 2014 Mexico was home to as many as 200,000 US-dollar millionaires and 804 people with personal fortunes of over $50 million. Many of these people owe their vast wealth to the rampant privatization of the country’s resources unleashed in the early 1990s by then President Carlos Salinas de Gortari, who also signed Mexico up to NAFTA in 1994.

Just as happened in Yeltsin’s Russia, the “liberalization” of Mexico’s markets gave rise to a new caste of oligarchs. Many state companies were sold off, but instead of promoting competition, the new owners, with the help of the government, applied quasi-monopolistic models.

There’s no better example of this than the country’s (and once the world’s) richest man, Carlos Slim, who essentially bought up Mexico’s entire cellphone market in the 1990s. A close associate of Salinas, Slim was able to pay for Telmex out of the company’s future profits.

It was Mexican consumers who ended up paying the real price. According to a study by the OECD, between 2005 and 2009 Mexican consumers were overcharged $6.5 billion a year for landline usage. The total loss to the Mexican economy of Slim’s dominance in telecommunications is estimated at $129 billion over a five-year period, due to excess charges and poor investment in infrastructure.

Granted, in 2014 Slim was forced by changes in Mexico’s telecommunications legislation to divest a large part of his holdings (worth some $10 billion) in América Movíl, but a fresh court ruling a few days ago watered down the telecoms overhaul. As a result, Slim’s company will once again be able to charge rivals a fee for any calls that end up in its network, prompting fears that renewed competition will suffer and consumer prices for telecom services will resurge.

Slim is not the only Mexican billionaire whose fortune was built from the ashes of once state-owned assets. More than half of the 11 Mexican tycoons featured on Forbes’ 2012 Rich List (who between them controlled a total wealth of $130 billion) are or once were owners of former state-run enterprises. They include owners or important shareholders of mines (German Larrea and Alberto Bailleres), telecoms companies (Carlos Slim, Ricardo Salinas Pliego, and Emilio Azcárraga) and banks (Roberto González Barrera, Alfredo Harp Helú, and Roberto Hernández Ramírez).

At the other end of the income scale, 55.5 million people are poor — 2.3 million more than five years ago. That’s after five years of unbroken, ableit moderate, economic growth. One out of every five Mexicans suffers from hunger — a situation that is now being exacerbated by inflation, which spiked by 6.4% in July, the fastest rate since 2008.

But it’s in the financial sector where the inequality is most pronounced. According to the new study, just 23,000 people in a country of 127 million own 80% of the shares on Mexico’s benchmark BMV index. Those shares have grown at a much faster clip than the country’s economy or workers’ wages. As a result, the wealth of the richest 1% grew at an annual rate of 7.9% between 2003 and 2014 while Mexico’s GDP grew on average each year by 2.6%. During the same 11-year period, period the median wage increased by just 4%.

The government has tried to alleviate poverty through a variety of costly public programs (financed, of course, by the tax-paying middle classes). According to the deputy secretary of Planning and Evaluation at the Department of Social Development (Sedesol), the government invests 12% of its budget on anti-poverty measures. Yet poverty continues to grow.

All the while, Mexico’s deeply corrupt government, for obvious reasons, does nothing to address the main cause of inequality — the money used by Mexico’s super wealthy and foreign corporations, such as Brazil’s Obedrecht or Spain’s OHL, to buy up politicians and senior civil servants in order to maintain their stranglehold over the direction of government policy and regulation. As Fuentes-Nieva told the BBC, “the decisions have been taken by an elite, for an elite, and supervised by an elite.” If recent scandals are any indication, it’s a model that’s unlikely to change any time soon. By Don Quijones.

After several months of predominantly positive developments, including the governing Institutional Revolutionary Party’s electoral victory in its key state, the outlook for Mexico’s economy is no longer negative; it’s stable. That’s according to rating agencies, Fitch and Standard & Poor’s. But there are some hiccups. Read…  Two of Mexico’s Biggest Bugbears Surge Again

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  49 comments for “Paradise for Oligarchs: Poverty, Inequality Soar as Wealth Rises

  1. TJ Martin says:

    Ahhh yes . The age ole paradigm of handing the reigns over to the corporations under the guise of decentralization and diminishing the role of ‘ big ‘ government in private business … only to have the corporations take over the show in ways worse than the government preceding them ever had .. proving themselves less compassionate and responsible than some of the worst governments imaginable … leaving the common man and the middle class out in the cold while the rich and mega wealthy wrap themselves in the comfort wealth stolen off the backs of those underneath them .

    Yeah … thats brilliant .. works so well … so hey .. lets do the same here .. as if financial inequality wasn’t already bad enough here in the US of .. something

    • Mugsy says:

      The irony is the public is brainwashed by the deep state controlled media into believing capitalism is to blame so that more statism and elitist government controls perpetuate the agenda of the mega wealthy….. It’s a cess pool that will self destruct eventually, but when?

      • His Wife Could Eat No Lean says:

        Capitalism leads to 1% rich and 99% poor if left unchecked. You get the same result with totalitarianism where one controls all. It is the natural course of events.

        • intosh says:

          His Wife Could Eat No Lean

          You nailed it. For some reason, many people don’t seem to get that the solution does not lie in adopting pure and uncompromised idiology but in a balanced mix.

        • Michael Fiorillo says:

          Yes, and people who’ve been conditioned by decades of “government is the problem” propaganda too often don’t realize that we’re always going to have a government; the question is whether it’s going to be a public one at least nominally/potentially accountable to the interests of the many, rather than a private government using misdirection and spectacle,usury and force to maintain the wealth and power of the few, most of whom make a religion of denying any concept of the Public Good/Interest, let alone personal responsibility for cultivating it.

          It’s gotten to the point that the system increasing rewards a smash-and-grab capitalism (isn’t that fundamentally what PE is?) with the upper quintile of the income distribution, increasingly comprised of predators and parasites. This comprises the 1%, along with the technical and professional apparat that enables it.

          The gravitational pull of unregulated capitalism is toward monopoly, and we’re seeing it worsen by the hour.

        • alex in san jose says:

          His Wife Could Eat No Lean – the best system so far seems to be capitalism but with “negative feedback loops”. To avoid the 1% rich vs. 99% poor we’re heading towards, we’ve got to have the kind of things that piss the 1% off, like social welfare programs, a social safety net, stuff like single-payer healthcare, a robust education program for all social classes, etc.

          Although the situation, and history, is complex and I myself will always be for Socialism.

        • Kathleen Smith says:

          Mexico does not have capitalism just like here in the US. Where oligarchs borrow money for free to buy state owned enterprizes sounds like socialism.. Rex Tillerson is Trump’s secretary of commerce, he is an expert in this as he was a very successful vulture capitalist from the 1990’s (he had a great time buying distressed steel company assets for a song and selling them on to India). He will privatize US infastructure as soon as the public is on the hook for paying for it’s improvements. Unless the public finally wakes up to the divide and conqueor manipulations of the elites, like we have going on now – a self created and fanned race warfare – we are doomed to end up just like Mexico.

    • intosh says:

      Instead of state-run companies, the brainwashed embraces a corporate-run state.

    • Mike says:

      I agree with you, but unfortunately, we are doing the same here. The same trends exist in the U.S., so Mexico should be a warning of the future. Republicans are in control of the Senate, House of Representatives, most governorships, and most state legislatures, reportedly.

      Given the wealth of political contributors, current Democratic politicians try to ape them and slobber adoration on the banksters to get their money: e.g., H. Clinton. It is hard for me to believe that the only independent parties can only field flakes as candidates. I would not be surprised if banksters and other billionaires were funding these flakes and dunces to discredit third parties and ensure the election of their lapdogs.

      The banksters, given the Trump mis-adminstration, just cannot agree on which slice of the pie to give to each greedy corporation: e.g., the greedy health insurers and overcharging HMOs and medical associations were fighting against other billionaires seeking to cut health care from millions so Trump could give billionaires and millionaires (like himself) a gigantic tax cut. There are no good guys left there.

      I think that reading about Mexico is reading what the U.S. will be like in ten to twenty years, or less, because all indications are that present trends will continue. Americans seemingly drugged into inaction by deceit and media distractions should be sure to at least ask for the vaseline first, as the banksters and other billionaires take “good care” of them in the years to come.

  2. Johnson says:

    Mexico is following the laws of nature. The same is true for most all societies in the world. The US is getting there. It even extends to most of the animal kingdom. Look at bees, ants, and termites, where one queen and a drone have a monopoly on reproduction and the rest are slaves and soldiers. In a chicken coop, one rooster may control the whole flock. The ratio of those who have and those who have not is probably 3% to 97%, or worse.

    • Mugsy says:

      Please tell me this is sarcasm….if not you have one of the great minds of the 12th century and should consider being
      a poltician .

      • Together They Licked The Platter Clean says:

        Thanks you for the complement. The 12th century was a great time. Except, well, that guy was born in 1167. I think his name was Genghis Khan.

  3. RangerOne says:

    Not sure if it is exactly the same case for Mexico, but at least the kind of total corruption you see in Russia came in the wake of the collapse of the soviet union creating a massive power vacuum which allowed an opportunity for power hungry people like Putin take control of all the countries major assets and government.

    The US has a far older and more stable democracy and there is an eb and flow to the corruption in our system with plenty of competing interests.

    You would need a fairly major calamity in the US to allow an opportunity to sweep away all those interests and replace it with what essentially amounts to a ruling class all moving in lock step.

    The top still fucks us in our country and makes decisions not in the interest of the common folk, but there is still plenty of power struggle at the top, with all of them also trying to fuck each other.

    • Suzie Alcatrez says:

      Russian Oligarchs owe a huge debt of gratitude to Harvard Business School as they advised Boris Yeltsin on how to turn over state owned businesses to crony’s and criminals.

      What Mexico and Russia have in common is that none of their billionaires got their wealth from starting businesses, inheritance, or working for Goldman Sachs, the three most common ways in the US.

      • wkevinw says:

        Basically correct. However, the problem is that academics in all disciplines are VERY narrow in their understanding of the world. They forgot about “regulatory capture” (the kindest term), and/or bribery. Economic freedom has a prerequisite: law and order (e.g. controlled white collar crime). The big business owners also “owned” the legal system and government officials.

        They forgot about that.

    • Bookdoc says:

      Things were just as corrupt under the old soviet system-just the commissars got rich. Different name, same deal. Only capitalism makes things improve because it benefits the one who improves as well as those he does the improvement for. I don’t care if it’s better lighting, food, vehicles, or whatever, things bet better when someone makes a buck off of doing it with their own money and time.
      I lived in Mexico City twice-as a teen with my family and then on business for a year. The country was just as corrupt both times-just one was PRI and one was PAN. All that changed were some pockets. Russia is corrupt because it is still a 3rd world top down country where you make your money by screwing someone else.

      • John says:

        Around 20 years back I spent a few weeks in Mexico. I drove across the border and just kept going. Seen a big swath of the country.
        What I remember the most was the abject poverty compared to the very few with huge wealth. I sat at tables with business owners that wore rings on every finger that were f’ing huge. Then I’d drive past women literally living in cardboard boxes, with children running amongst the traffic looking for handouts. Everytime the traffic stopped in populous areas there would be at least one child, sometimes more, at the window of the truck begging. I took to carrying fruit and passing that out freely. I was well rewarded with many super smiles.
        I remember stopping for fuel in small towns where they dispensed it by first measuring into a glass bottle then pouring through a funnel into my tank. Toget it into that bottle, the lady propieter would suck on a hose and siphon it into the jug. How many would have done that in the USA? lol none. Then I asked her where I could get dinner and she directed me across the street to a normal looking, very small home. Normal for that part of central Mexico. I knocked on the door and a lady opened and asked me to enter. I sat down to a wonderful, several course meal at a small plain table, with flowers in the center. The only table in the house. She was a fabulous cook and what amazed me most was the floor was a dirt floor, but the whole house was as spotless as any I’ve ever seen. I still have no way of comparing that sort of pride to anything I have seen up here in the US.
        I remember how the small towns would have dances on Saturday nights and it reminded me of what the 50’s were like here in the US.
        I remember also the heavy handedness of their police and army, I was stopped a few times and had my vehicle searched very quickly although courteously. Never more than about 5 minutes, and always with an apology afterwards. It didn’t bother me much, but if it was up here and the other way around it would be called profiling. Those MN plates were like a neon sign I imagine.
        All in all, they have a beautiful country there, and a very divided economy, which the US is resembling more and more every year. A few with enormous wealth and a lot with nothing.

        • alex in san jose says:

          Any 70’s kid knows how to siphon gas with a piece of garden hose, trust me.

          And I know of at least one place here in San Jose with a dirt floor, and I’m sure there are more.

        • Marty says:

          John, the woman dispensing gas that way prob got it on the black market, as Pemex employees literally siphon off the profits. Thought you’d be interested to know. Thanks for this great comment.

        • Cynic says:

          Just like Franco’s Spain in the 1950’s.

          The traditional Spanish model is one of a callous and well-connected upper class, and grab what you can for the rest.

          Brutal military and police wholly indifferent to any notion of human rights.

    • Duke De Guise says:

      “… An opportunity for power hungry people like Putin to take countrol of all the countries assets and government.”

      Uh, sorry, but the looting of public resources and assets started under Yeltsin immediately the Soviet state collapsed, ably helped along by all sorts of US financiers, academics, consultantts, and similar ilk. That led to a virtual collapse of living standards and life expectancies throughout the country, as well as the country’s defaulting in its bonds.

      It also led to things like Time Magazine’s infamous cover story in the late ’90’s bragging about our successful interference in their Russian elections, and where our man, the drunken, corrupt, Parliament-bombing Yeltsin, was re-elected.

      In many ways, Putin’s rule, whatever we might think about it, is a reaction to what preceded him. However much he and his cronies have skimmed – presumably quite a lot – it has nevertheless been in the making of a much more nationalistic development modelthe catastrophe of what came before, is not irrational.

  4. 2banana says:

    Bigger and bigger government with more and regulations and higher and higher taxes can SOLVE this.

    Every democrat and progressive tells me this.

    • Suzie Alcatrez says:

      The top tax rate in the US was 90% back in the 1950s.

      • 2banana says:

        For the 1%. With massive loopholes so no one paid anywhere close to it.

        The average middle class taxpayer today pays nearly 50% if their income in local, state and federal taxes.

        At what point between 0% and 100% taxes does one become a slave?

    • two beers says:

      2banana –

      If you hate big gummint so much, who do you suggest could possibly police the corporations?

      As it is, big gummint is now wholly owned by Big Bizness, so it’s a moot point. Ironically, the more Big Bizness screws American citizens, the more people like you and Mugsy above blame the gummint.

      The problem isn’t the size of gummint in itself. The problem is who _runs_ the gummint. We don’t live in a democracy. We live in a corporatocracy, in which gummint is run by and for Big Bizness.

      The only way out is for people to take control of their own government as the Declaration of Independence encouraged — I know, this is so very radical, it’s downright treasonous to suggest it.

      • 2banana says:

        Big business LOVES big government.

        Why? It stifles competition from smaller businesses. It allows them massive profits without fear of losing customers as they have no choice.

        Big government does NOT police big business. Big government does everything it can to protect big business.

        The problem is directly proportional to the size of government.

        Ask yourself why not one banker went to jail in the last year despite scandal after scandal in which massive fines were paid.

        Has health care gotten any better with more and more government?

        Has K-12 education gotten any better?

        Has higher education?

        Has housing?

        Name ONE thing massive government has made better.

        • Jack Spratt Could Eat No Fat says:

          The government is for sale to the highest bidder. The rich are the highest bidder. This is all you need to know.

      • marty says:

        Wow, two beers. Maybe this will help your conflicting views. In addition to what 2banana said, which is absolutely correct–please see The Triumph of Conservatism written by Gabriel Kolko, a Marxist, btw–corporations are government granted privileges. Without corp law shielding management, corporations would never grow to be so huge, forget about becoming multinational. Then throw in the US military, that serves to enforce corporations’ dictates in other countries all over the world–think Smedley Butler and United Fruit Co.–and you will start to understand that big business is impossible without big government.

    • Hiho says:

      Indeed that is the solution.

      Antitrust laws plus state owned monopolies to avoid rent extraction.

      You have not been paying attention for the last 20 years, have you?

      • Bobby Dale says:

        Pemex, PDVSA, Fannie Mae and Freddie Mac are splendid examples of how well state owned monopolies function.
        Maybe he has been paying attention.

  5. Sporkfed says:

    Corporations are just filling the power vacuum . A few well placed donations will
    ensure laws will be adjusted for their benefit. Modern serfdom .

    • Together They Licked The Platter Clean says:

      In modern serfdom you sleep in a ghetto or on a park bench. In medieval serfdom you slept on a castle stone floor padded with straw.

  6. Lee says:

    The article forgot to mention all the money certain people have made from illegal drugs – how many of those people control fortunes and vast assets?

    Mexico – stable?

    Hah, don’t worry though there are always some stupid foreigners just waiting around the corner to ‘invest’ in Mexico and then promptly lose everything.

  7. Gershon says:

    Mexico, like the US, has become an oligarchy. For now they are still more corrupt than we are, but our Wall Street-owned Republicrat duopoly is making great strides to be every bit as corrupt as Mexico’s PRI and PAN parties, while capturing our institutions of governance so they can enjoy the same impunity as the kleptocrats and grifters in Mexico. And every ‘Murican who casts a vote for the corrupt status quo is an accessory and accomplice to the loss of our late, great Republic.

    It’s a Big Club and you ain’t in it….

    • Frederick says:

      In the end it’s always Carlin Gershon Spot on he was May he Rest in peace

    • His Wife Could Eat No Lean says:

      Mexico and the US are no different than all the rest of the countries. They are oligarchies. Money talks and you know what walks.

  8. polistra says:

    Inequality isn’t a paradox if you simply use median instead of mean for all “averages”.

    When you focus on medians and quintiles and similar graph-like measurements, you visualize reality accurately.

    When you use the mean to describe “typical”, poverty is a puzzle. Everybody is wealthy! Rising tide lifts all boats! etc.

  9. Bobby Dale says:

    A truly open trade regime, not NAFTA, could help to address some of these issues, but the oligarchs on all three sides will never allow such a thing unless under duress.

  10. In the year 2100 says:

    It’s not a paradox. It’s a direct product from the policies, economic/religious/social institutions started in Conquistador days.

    Not to mention the racial component where the Mexican elites are the direct descendants of the Spanish-European ruling class, while the bottom 95% are mixed or direct descendants of the Native Americans.

    But don’t worry, America’s firmly on track to being just like Mexico with inequality, rife corruption and an insular, tone deaf elite! And Carlos Slim and the NY Times are doing their part.

    • Jack Spratt Could Eat No Fat says:

      Carlos Slim, was the richest man in the world between 2010 – 2013 when he was worth about $70 billion. Carlos Slim was born on January 28, 1940, in Mexico City, to Julián Slim Haddad (born Khalil Salim Haddad Aglamaz) and Linda Helú Atta, both Maronite Catholics from Lebanon – wiki. Carlos Slim and most of the Mexican oligarchy are descendant’s of Europe and the Middle East that includes the descendants of the Conquistadores from Spain. The descendants of the Native Americans who originally inhabited Mexico are at the bottom of the economic pyramid. This is true throughout the Western Hemisphere. What the Native Americans actually did was to preserve the Americas in a natural pure state so that the Europeans could come over and despoil and destroy the whole thing. Civilization is called progress by some but is actually the destruction of the ecology and nature that will eventually bring down the entire human race.

  11. alex in san jose says:

    Here’s an article about the real SF Bay Area. The one I live in.

  12. R Davis says:

    I can’t seem to grasp the concept …..
    It might be too early in the morning for me 10:46AM Aust.

    “the wealthiest Mexicans – equivalent to 1% of the population – own roughly the same amount of wealth as 95% of the people further down the wealth scale”

    Q: It’s talking about – exactly how many peoples of the whole population of Mexico ?
    * 2016 figures say – 46.02% of the Mexican population are poverty stricken –
    So it is not talking about them.
    * 52.98% of the population of Mexico has some wealth.
    * But it says 95% – so we deduct another 5% = 47.98%.
    * 47.98% of the population of Mexico has some wealth to speak of.
    * Today the population of mexico is 121.7 million.
    * 47% live in poverty = 57.340.000 MILLION people living in abject poverty in Mexico.
    * 1% is wealthy beyond comprehension = 1.220.000 people.
    * 53% with some wealth = 64.660.000 people.

    Now let us take into account that – as of 2004 the fertility rates of every nation on the planet fell below replacement levels – which means that the population of Mexico has steadily fallen over the last 13 years.

    * All the figures above are rubbery & cannot be trusted to reflect the reality of Mexico’s plight.

    How brainwashed are the statisticians that they cannot get it right – still.
    Or does it serve some deviant purpose to lie the truth ?

    SCIENCE 09 April 2004.
    Fertility Below Replacement Levels.
    In assessing the state of the planet, it is important to note that late 2003 – early 2004, the human population will cross the historic but, so far unnoticed threshold. Most of the worlds population already do, or soon will, live in countries or regions in which fertility is below long run replacement.

    • R Davis says:

      The vanishing Children of Planet Earth.
      We – mankind – have got – maybe 1000 – 2000 years left on planet earth.
      & we will vanish.

      • Wolf Richter says:

        That many years?

        • d says:

          If china and india continue to “develop” at the rate’s they want.

          Modern ogliarch society has less than 200 years left. barring the Influence of major wars.

          And that is optimistic.

          Realistically the planet will not make the temperature cut needed this century, to prevent rapid Antarctic and Greenland ice melt.

          So india becomes an uninhabitable desert, low-lying indo-china goes under sea, and chaos on both US coasts, for starters,= effectively modern trade society based on cheap from china and india, gone.

  13. d says:


    A catholic dominated country.

    just like all the south American and southern European catholic dominated country’s, it has the same catholic diseases. Nepotism and church approved corruption (as long as the church gets its cut first).

    Until the power of the church is broken over Politics and Society, and the catholic church, just like everybody else, pays TAX on ALL its income, nothing can, or will change. No matter whether the assets are state or privately owned.

Comments are closed.