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Re: Good business vs. good investment
On Thu, 18 May 95 16:27:10 EDT Jorge Raygoza wrote:
> Sergio:
>
> I agrre on mot of what you said. But let me give you some examples that you
> might have forgot (unintentionally of course!). MASECA was not allawed to buy
> MICONSA. But, what does the maseca's owner want MICONSA for when he is
> already receiving a lot of subsidies? That is, Maseca has been able to get
> lots of profits thanks to "unfair competence" based on lots of subsidies
> which have sent lots of "molineros" to bankrupcy. References? Just go to see
> the details about this industry: Canacintra (Perspectiva de la industria
> molinera, 1993); Secofi (la industria alimentaria en Mexico, 1991, which
> reports that in the lat 4 years around 1000 "molinos" have closed because of
> the subsidies to Maseca)...
You are absolutely correct: MASECA received subsidies, but because the
"molineros" received them also. That is, maize was subsidised for all producers of
tortillas; there was no unfair distribution of subsidies. MASECA had a huge share of
the market, and now that MICONSA is private it is being reduced.
We agree completely in the special situation of MASECA; nobody would deny the
advantages it had, with the close relation of its owners to the Minister of
Agriculture, but the posting was about privatization. Just to enjoy a real monopoly,
MASECA would have gladly bought MICONSA.
> The case of Televisa? Do
> you think they really wanted Imevision when they can place on the air as many
> chanels as they want? I don't think Televisa needed it nor they wanted it.
I really think that, if Televisa had the chance, it would buy Television Azteca, as in
the mid-1970s Telesistema Mexicano bought Television Independiente de Mexico
(TIM, channel 8), owned by the Grupo Monterrey. The chance to have a monopoly is
a golden opportunity for any businessman, that is why any government should be
in the middle: to stop them, and promote competition.
> Now, with respect to the cases you are saying about "privitizated
> enterprises" which are now in bankrupcy or close to it. That is precisely one
> of my points: they were thinking on making money in an speculative way not on
> making the enterprise efficient. Otherwise, they wouldn't have reached
> bankrupcy, would they? I realize however that this could be due to the
> posibility that they didn't now what they were buying, but I don't think so!
You point out a possibility, but in the concrete example I mentioned, the economy
was always open to steel imports, so the ones that bought Sidena knew they
wouldn't have a monopoly. Another example: when Bombardier (from Canada)
bought Concarril, it expected a lot of contracts from the "Metro", and therefore
pushed its prices very high; the government bought the cars from another
company (BTW, that enraged Bombardier).
We agree, one option is that they didn't know what they were buying; another is
that they were not good administrators, and went bankrupt.
> The cases of mexicana and Aeromexico are even worse. Just check the airfare
> they charge per mile (or km) and compare them to those of other countries.
> For example, is cheaper to flight from Dallas to Acapulco than from Mexico
> city to Cancun.
Precisely, that is why TAESA and other regional airlines are such a success. Again,
the buyers of Aeromexico and Mexicana didn't expect a monopoly.
> That's the ame case with car rental companies: one day of
> rent (compact car) in Mexico city: close to 70 dollars, and they charge you
> seven days in one week, meanwhile in New York is close to 50 dollars and you
> just pay 5 days for a week. Is this just a tax difference? No, it is not. Is
> there competence in Mexico's car rental market? Yes, there is! Explanations?
I must confess my complete ignorance of the car rental market in Mexico City, but
of course there are many (theoretical) explanations: no real competition (that is,
collusion between the car rental companies), greater costs because of economies
of scale and, well, there may be a tax difference: cars are much cheaper in the U.S.
because taxes are lower.
> o, I still think that entrepenuers in Mexico put their feet on the earth and
> begin to do "good investments" and not only "short run good bussiness". By
> the way, doe somebody think that thi might change if the group in power were
> not "neoliberal and/or priista"? Because this think must change, but as
> usual, the question is HOW to do it!
Again we agree. Businessmen, like any other rational human, wants to maximize
utility (profits). If they can get subsidies, monopoly power, etc. great for them. The
private sector is always for competition, until it affects them personally. Business
groups will always complain - with Echeverria (certainly no neoliberal) or Zedillo,
because to complain is many times profitable.
> Regards!
> Jorge Raygoza
>
>
Also Regards,
Sergio.