Informal Jobs Grow | El Economista

Informal Jobs Grow | El Economista

Contradicting government claims that Mexico’s so-called recovery is on track, the jobless rate in the second quarter edged up to 5.3% from 5.2% in the same quarter last year, when the recession was in full bloom. At the same time, employment in the informal sector, which pays no taxes, reached an all-time high of 12.8 million persons, up 660,000 from last year’s second quarter, equivalent to 28.8% of the labor force, reported over the weekend the National Statistics Institute (INEGI).

The official unemployment rate, which to many analysts is actually much closer to 20%, is deceptively low because INEGI applies advanced- nation methodologies in a country where there is no unemployment insurance. In practical terms, that means that the unemployed are those who didn’t even work two hours a week cleaning windshields or selling gum, and didn’t even look for a job.

The INEGI figures for the informal sector are also severely questioned. If the so-called sub-occupied sector were added, since no taxes are paid there either, most analysts agree that Mexico’s informal economy is closer to 50% of the labor force, which now stands at 47.1 million people, and accounts for almost half of GDP.

Mexicana Quits Flying

The besieged airline Mexicana notified its pilots, flight attendants and ground personnel unions that beginning Monday, it will cease most flights because it is no longer financially capable of maintaining operations, and that includes the mainline carrier and its two low-cost subsidiaries, Click and Link.

All through the weekend, in a last-ditch effort to salvage Mexicana, which is in receivership, the carrier’s unions and authorities and legislators held emergency meetings while most domestic flights were kept on schedule since there were an estimated 90,000 tickets outstanding remaining to be honored. Efforts to have stockholders pump fresh capital into the “fictional bankruptcy”, or else bring in new investors, have faded.

But despite a flurry of statements and accusations against the management team and the shareholders, and their efforts to have the federal government step in and rescue the airline, the fact remains that Mexicana’s fate rests in the hands of bankruptcy court.

Slowdown Seen Likely

The very probable slowdown in the global economy in the next several months, particularly in the United States, is likely to have some impact on the Mexican economy which is already showing a declining trend, said over the weekend the deputy governor of the central bank, Manuel Sánchez-González.

The official said the best recipe to face another global recession is for a country like Mexico to have sound macroeconomic fundamentals and to give an added impetus to in-depth structural reforms.

“We must give an added push to price stability and solid public finances, in order to create a stronger macroeconomic framework”, he said. Sánchez touched briefly on the delicate subject of the inflation rate, which is currently above 5%, considerably above the central bank estimate of 3%.

Sales Grow in July

Retail sales in comparable stores, that is, those open at least for a year, rose in July at an annual rate of 4.8%, thanks in large measure to a favorable calendar that brought one additional Saturday from last year, the National Association of Self-Service and Department Stores (ANTAD).

The increase, achieved against the slump period of the summer of 2009, came against the backdrop of a setback in consumer confidence indicators for July. The government claimed that the confidence decrease was unexpected, but in reality various private sector organizations had been anticipating the drop in view of growing unemployment, the prevailing violence and severe floods in the country’s northeast states.

Including all stores, even those that have opened for business more recently than a year, total retail sales in July advanced a combined 10.6%, according to ANTAD figures, which do not include sales in tens of thousands of smaller retail establishments.

HSBC Loses Lawsuit

HSBC Mexico will be required to pay 275.2 million pesos (about US$22 million) to the government’s power monopoly Federal Electricity Commission (CFE), in the wake of a circuit court ruling that found the bank liable for fraud through its corporate accounts system.

The lawsuit was brought against the bank in 2007, when the CFE detected a number of illegal transfers from its corporate accounts that were disguised as payroll payments. The ruling determines that HSBC will have to reimburse the principal plus interest at an annual rate of 6%.

The bank claims the CFE did not effectively prove that the electronic transfers lacked the two authorized signatures of CFE officials. The case had been appealed previously by both sides, and now HSBC says it will further appeal the district court ruling.

Laundering Reform Looms

In view of the “difficulty” in detecting organized crime money, President Felipe Calderón last week revealed he has instructed Finance Secretary Ernesto Cordero to work on the design of a brand new scheme to combat money laundering. No mention was made of a bigger budget.

The president said he has formally asked the central bank governor, Agustín Carstens, to assist in developing the new government policy, even though the federal government recognizes Banco de México’s independence.

Following his custom of praising those who fail to do their job, Calderón said that while the Finance Secretariat’s Money Laundering Unit has worked more than at any other time, “it’s also true that the challenges we face today are greater than ever”. Estimates are that money laundering from drug traffic tops US$25 billion each year and growing.

Also, check out the following opinion columns:

“The Great Depression”, by Enrique Campos

President Obama’s worst nightmare has nothing to do with environmental or racial issues. It is the absence of dollars in the pockets of Americans. Why is it a better option for Barack Obama at this point to have his daughters wade in the Gulf of Mexico’s polluted waters than to make the local issue of a Ground Zero mosque a national affair? Because any religious, racial or ecological issue will pale in the midterm elections against the economic quagmire.

“Strongbox”, by Luis Miguel González

In the U.S., philanthropy brings social prestige. The very rich struggle to be recognized as true patrons. But in Mexico, for a variety of reasons, philanthropy simply does not fly. It’s a mystery that we would do well to resolve, beyond the fact that it only accounts for 0.12% of GDP, according to a Johns Hopkins University study. That’s 24 times lower than in the U.S.

rmena@eleconomista.com.mx