At Any Price: The Walmartization of Mexico

Walmex, Mexico’s largest private employer and the biggest retailer in the country, recently reported earnings of 351 million dollars for the April to June period of 2010.  Walmex is owned by the American retail giant Walmart and a number of its different subsidiaries, and while the official percentage of ownership is 31%, I would be willing to bet a federal bailout that the unofficial percentage (that which is hidden behind coordinated holdings and “unaffiliated” subsidiaries) is actually much, much higher.

Walmex has recently started opening up retail banking locations inside of their retail locations.  In the past several years they have opened up almost 250 branches.  According to Antonio Ocaranza, a spokesman for Walmex, ” seven out of ten Mexicans do not have a banking account.”  Banco de Wal-Mart, as the bank calls itself, unabashedly courts this 70% of the Mexican population, ostensibly to “help them build credit”, which in the eyes of the bank means that they will now be able to spend above their means and by even more cheap crap that they don’t need at slightly lower prices than they can find at Walmex’s competition.

So the poorest Mexicans are able to save a few pesos on the tv/dvd player combo that they absolutely do not need and that will break within a short period of time.  What is the greater cost of this purchase for this subset of the Mexican population?  Let’s take a closer look.

Banco de Wal-Mart offers credit in the form of high interest credit cards for their customers who have no credit.  In the United States, when we think of high interest, we think 20%, maybe even 30% percent.  Well Banco de Wal-Mart has other ideas.  They offer their customers the low, low interest rate of 60%.  This is criminal by any standard, but it is especially aggregious when you consider the poverty level below which the majority of Mexicans live.

The question that naturally follows then is how does Banco de Wal-Mart collect payments on overdue payments of such a ridiculously high interest rate.  Many people might reasonably assume that impoverished consumers who default on absurdly high credit card payments would simply refuse to pay, since there is very little that the bank could do to punish them.

The answer then, is that it is reasonable to assume that as the largest single private employer in Mexico, many of Walmex’s employees live below the poverty line and have few other employment options.  Many of these workers are also part of the same 70% of the population who lack bank accounts, and who Banco de Wal-Mart is desperately trying to attract.  When these consumers default on their credit card payments, Walmex simply takes the payments that are due out of their wages, forcing the consumer/employee to work longer for less money, while the money that they do spend is funneled back into Walmex’s coffers in the form of continued consumption.  And because the prices at Walmex are slightly lower than their competition, the indebted employee/consumer has little choice but to continue the cycle.

The resulting dynamic is akin to the relationship of the employee with the company store that existed during the great depression.   The employee would be forced to work such ridiculously long hours for such absurdly low wages that the only remaining earnings were spent just to eke out a survival on the bare minimum.  Consequentially, a slave like relationship came into existence.

It is obvious to all but the most callous observer that this “laissez faire free market” relationship is criminal and unjust, and yet it continues unabated because the Mexican government, in all their incorruptible glory, has decided that Walmex and Banco de Wal-Mart are both “too big to fail.” As the largest single private employer in the country, Wal-Mart has the Mexican government bent over, grabbing their ankles, and crying “Tio!” They effectively control the government, and prevent the implementation of any rules or regulations that would put a cap on interest rates or any other kind of price control or employee manipulation.  The entire relationship is strangely reminiscent of the one that exists between Washington and Wall Street, except that it is perhaps even more distasteful to anyone with even a modicum of respect or interest in basic worker’s rights.

The larger implications of this relationship for Mexico are terrifying, and are less obvious to the casual observer.  Tune in next time for that.

To be continued…

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~ by iamtomjoad on August 14, 2010.

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