Vicente Fox is no longer president of Mexico, but he continues to speak his mind. During a recent speech at Wharton, he praised Mexican immigrants in the United States and criticized U.S. efforts to build a wall between itself and its southern neighbor. He lamented Mexico’s dependence on oil and called for renewed efforts to eradicate poverty. And he wondered whether legalizing drugs could be one solution to eliminating the violence ripping through Mexico today.
“I would like to send a message from my heart to all those Mexicans here in the United States — maybe 22 million Mexicans, who have been here for over five generations,” Fox said. “They are productive, beautiful people, always dedicated to hard [work]…. I want to give them some recognition and all my respect, because they make a huge contribution to the U.S. economy and this nation, which has welcomed them.”
Fox himself came from a migrant family, he told the audience. His grandfather was born in Cincinnati, Ohio, and migrated to Mexico when he was about 30 years old. “He took a horse in 1895 and he rode down south, and he finally settled in the state of Guanajuato,” Fox said. “We don’t know why he decided to settle there. Maybe a couple of dark eyes, a beautiful Mexican lady attracted him. And that’s where we’ve lived for five generations. So migration is a two-way street. Americans also migrate.”
Mexico’s former president, who was in office from 2000 to 2006, now spends much of his time in Guanajuato constructing the country’s first presidential library — the Vicente Fox Center of Studies, Library and Museum. Before his political career, Fox spent 15 years at Coca-Cola, working his way up from salesman to president of the soft-drink company’s Mexico operations.
Migration is a great asset to all nations, Fox said. “That’s why I don’t understand why this nation — so vigorous, so big, so powerful — is building walls. You and I know that walls don’t work. The Berlin Wall didn’t work. The Chinese wall didn’t work. This wall [between the United States and Mexico] won’t work either, because it divides neighbors and friends. Instead of walls, we should be building bridges … bridges of understanding between our two nations, bridges of knowledge and exchange … so that we progress together toward prosperity. There is no single nation that can be successful on its own. We all depend on somebody else.”
Mexico imported more than $250 billion of goods and services from the U.S. last year, Fox noted. “Mexico accounts for hundreds of thousands, literally millions of jobs [for] U.S. citizens by importing from the United States,” Fox stressed. “We’re building a future. Unfortunately, [the North American Free Trade Agreement] is dormant right now. President Obama doesn’t seem to believe in trade and an open market. He doesn’t believe in outsourcing.”
Instead of building walls, the U.S. should strengthen its partnership with Canada and Mexico to compete with rising trade blocs in the rest of the world, particularly in Asia, Fox said. “What is better for this nation than having a successful Mexico?” Fox asked. “No doubt, there is a power shift moving very fast and dynamically from west to east.… We need to partner to make sure we face these challenges of the future.”
The Keys to Prosperity
Fox said he reduced poverty in Mexico during his six years in office, primarily by maintaining steady economic growth and keeping inflation in check. “To defeat poverty, you have to grow the size of your economy, per capita income and distribution of income…. During my administration, we grew an average 2.5% a year, which is not much compared to the double-digit growth of China or the 8% or 9% of India or other nations that go way above 5%…. But even having grown 2.5%, we were able to reduce poverty by 35%. Thirty-five percent of Mexican families during those six years had the opportunity to overcome, by their own efforts, their condition of poverty.”
This effect can be replicated in Mexico and elsewhere by making sure that gains are not eroded by inflation, something Fox learned from his finance minister. Although Latin America grew steadily during the 20th century, poverty increased because inflation was out of control, Fox noted. “Every year, we’d have these mammoth devaluations, these mammoth economic crises, that would take you backwards…. Your currency kept losing value … so there was no way for the poor to come along; there was no way for business and investment to have sustainable growth…. Controlling inflation as part of that stability is the key.”
Promoting lifestyle improvements is also important for reducing poverty, Fox stated. “Even if the economy isn’t growing at a fast rate, if you bring in powerful social policies and you associate them with the economy, you get a much better output. I’m speaking about education, human capital building, health, housing and direct combat of poverty,” he noted. Devoting a sizable portion of the budget to such areas magnifies benefits for a high number of people “even though the size of the pie might not be growing at the rate you would expect.”
Fox does not equate social programs with a paternalistic government, which he sees as a danger to Latin America’s progress. “We need the power and strength of entrepreneurship and individual actions to come along.” He deplored the rise of “non-democratic leaders like Hugo Chávez,” the president of Venezuela, calling their rise to power a “backward trend…. We had democratized all of our nations [at] the end of the last century. [Before that] we had those dictators and those powerful governments, and we did not have democracy or freedom, and maybe that’s a good reason we [had] paternalistic societies.
“People just didn’t grow…. It’s very unfortunate that some countries now are going backwards again,” Fox added. “We have to not only worry about that, but also be very active in promoting different ideas to make sure that Latin America is successful.”
Latin America needs to work quickly to eradicate poverty, build human capital and “expand the promise of democracy and freedom,” Fox said. “Forty-five percent of the total population of Latin America is poor. That’s not sustainable. We have to move and move fast.”
An abundance of oil and a lack of education exacerbate the problem, according to Fox. In his view, Chávez uses oil revenues to stay in power in Venezuela, but he does not invest in the country’s infrastructure or long-term economic growth. “Oil has made Hugo Chávez powerful,” Fox said. “As long he’s got that income, and as long as people are ignorant or [badly] educated and poor, democracies are difficult to sustain. And that’s our problem in Latin America. There’s so much poverty that everybody comes in with a torta or a taco and gets a vote for [his] party.”
Mexico’s economy, too, has suffered in recent years because of the global recession, the drop in oil prices and the war against drugs. “Mexico’s economy fell by 7% last year, the worst performance in all of Latin America,” Fox said.
Oil is one of the biggest challenges for Mexico, Fox added. With its monopoly on the country’s energy sources, the government has become dependent on oil revenues that are quickly drying up. “We are only nine years away -– an oil-rich nation — of not having one more barrel of oil to [sell abroad] when the export of oil has been nourishing the budget,” Fox said. “Sometimes, I think that resource was not given to Mexico by God but by the devil, because it represents over 40% of the total budget of the nation.” Oil revenue “has made us lazy in Mexico.” Tax revenue is 11% of GDP, which is low compared with other countries. For example, he said, the U.S. derives 32% of its GDP from taxes, and Brazil and China 30%. Mexicans, he said, “have used oil to compensate for the taxes we are not collecting.”
Fox also doesn’t approve of how Mexico is spending its oil revenue. Rather than investing in human capital, the revenue is going toward developing oil fields, exploration and refineries. “I’m sorry, but that’s stupid,” he said. “I would gladly exchange each barrel of oil that we have [to put] one kid in university. It would be absolutely better.
“Problem number two with oil is the monopoly,” Fox continued. He recalled how his administration was the first to try to change the state’s monopoly on oil. The current president, Felipe Calderón, also tried, but neither was successful. “If you’re looking for a job, go to government. See if you can change it, please. I couldn’t,” he quipped. “Unfortunately, this paradigm comes from the 1930s when oil was nationalized.”
‘It’s Not Our Fault’
Crime and violence from Mexico’s drug war are also putting considerable pressure on the economy, Fox said. “Crime, drugs, violence: It’s incredible what is going on in Mexico today. We’re now averaging 40 people dying in Mexico every day. Over 500 policemen have been killed in the last few years. Over 100 people in the army have been killed in the last three years. There seems to be an endless war. A decision was [made] at the beginning of the administration of President Calderón to bring in the army and all the power of the state to try to reduce crime. But maybe we are learning that violence doesn’t defeat violence.”
Most of the violence in Mexico comes from turf battles between gangs that traffic drugs from countries in Central and South America through Mexico to the U.S. “Mexico happens to be in between this market and the producing nations of the south — Columbia, Venezuela, Ecuador,” Fox said. “It’s not our fault. We are not a drug-consuming market. In Mexico, 0.4% of citizens are addicts. In the United States, 3.5% are addicts … and about 40% of this nation has [at some point] taken drugs … like President Clinton did, like President Obama did…. It makes [the U.S.] the largest drug-consuming nation in the world.”
Fox raised his concern that Mexico’s current policy to enlist the army to combat traffickers could be making matters worse. Calderón, who took power in December 2006, vowed to squash the drug cartels and deployed 45,000 army troops to Mexico’s most drug-prone areas. Violence has since skyrocketed, accounting for more than 18,000 drug-related murders across Mexico. Calderón’s strategy of choosing the army over local police has come under fire, most recently in March, when a U.S. consulate worker and her husband were gunned down in broad daylight in Cuidad Juárez. “I’ve said I’m not in agreement with the army being on the streets, because they’re doing the [job] of the police. You are beginning to see violations of human rights,” Fox said. “We’re paying with blood and death to try to cut the supply of drugs.”
Calderón’s hard-line stance against drugs may be part of the problem, Fox suggested. “Do you know of any other leader in the world who has decided to totally cut the supply of drugs to users?” he asked. “There’s no other. Here [in the U.S.], nobody has said, ‘No matter what, there will be no more drugs circulating in this nation.’ That’s a decision Calderón took.” Fox stopped short of declaring Calderón’s decision right or wrong, but pointed out that sex, drugs and alcohol have always been difficult for governments to control completely.
Legalizing drugs might be a solution to the violence, Fox said. In European countries where some drugs have been legalized, consumption has stabilized but violence has dropped, Fox pointed out. During the Prohibition Era of the 1920s and 1930s in the U.S., Chicago and other cities were overwhelmed by mafia violence, which all but disappeared when alcohol was made legal. “I’m glad California is considering legalizing drugs. That could be one answer…. Imagine a world where you will go here in Philadelphia and you have 10 stores where you can go and buy drugs. You’re going to pay high prices, because there’s going to be a 100% taxation on it. That revenue could be used by the government to educate [and] enhance programs in schools…. That would be a good answer to this problem, but it is a debate that has to be carried out in both nations. We cannot do it in Mexico without the United States.”