Heads Rolling - Mexico May Finally Be Ready To Face The Plague Of Corruption

Once Mexico's most powerful woman
Once Mexico's most powerful woman


MEXICO CITY - There are many possible interpretations of the sudden and public imprisonment of the extravagant Elba Esther Gordillo, who until a couple of days ago was the president of the Mexican teachers’ union, and who is accused of having embezzled $160 million from the union.

Gordillo is known throughout Mexico as “The Teacher,” and she didn’t hide her luxurious lifestyle, so it was well known that she was living from more than just her union salary. She is addicted to plastic surgery and travels incessantly.

She was arrested while disembarking from a private plane on the way home from one of her properties in La Jolla, an expensive neighborhood of San Diego, California. The following day, more details of her extravagant life came to light, such as a $2 million account with high-end U.S. retailer Nieman Marcus. Gordillo also paid a Nigerian psychic to tell her future –a service that cost $45,000.

It’s doubtful the Nigerian psychic predicted Gordillo would be arrested by the PRI (Institutional Revolutionary Party) government that came to power in the beginning of 2013. It is equally unlikely that the psychic told her that her detention would coincide with an educational reform that, among other things, takes power away from the union she led.

The various conspiracy theories swirling in Mexican politics are accusing new President Enrique Peña Nieto of making a number of spectacular changes without really making any true reforms. But the government’s decision to decapitate the teachers’ union and imprison its corrupt president is a sign that Peña Nieto is on the right track.

People who follow Mexican politics and unions advise caution. History is filled with stories that repeat themselves, where heroes become traitors and traitors become heroes. You don’t have look hard to find other, similar, union decapitations. In 1989, the powerful leader of the workers union of state-owned oil company Pemex, Joaquin Hernandez, was accused of illegally possessing firearms and jailed by Carlos Salinas de Gortari’s government. The government used Hernandez’s imprisonment to legitimize and launch reforms aimed at privatizing Pemex.

Hernandez was replaced as union leader by Carlos Romero Deschamps, who was recently in the news after it was revealed that he had given his son a limited edition Ferrari worth $2 million. One corrupt union leader was imprisoned to give legitimacy to a new government, but he was replaced by another corrupt union leader. The union never lost any power nor was the company privatized.

On the brink, in the good sense

So it is easy to be cynical about The Teacher’s imprisonment. But it is better do give Peña Nieto the benefit of the doubt and believe that he really does want to improve the quality of education in Mexico

The truth is, it really needs to improve. That much is clear from the latest results of the Program for International Student Assessment tests. In that test, 52% of South Korean students had scores that were satisfactory or better, while only 7.6% of Mexican students had satisfactory or better results. Mexico spends 20.6% of its public budget on education, while South Korea spends only 15.8%.

It’s possible that Peña Nieto just wanted to legitimize his government by arresting Gordillo. But it is also possible – a necessary for educational reform – that he wants to make profound changes in the system and reduce the teacher union’s power. Peña Nieto’s educational reform does in fact take contracts and teachers’ competency exams away from the union, and establishes a system of promotions based on merit.

Today, it is relatively common for teachers to stop teaching and take on union jobs, pulling both salaries and having high school juniors and seniors teach for them. There are also teachers who hand down their positions to their children and positions that go to the highest bidder. In Mexico, 20% of teachers got their job through the teachers’ union, 5% inherited the position and only 16% went through any kind of public application process.

Mexico is in a privileged position, on the brink of becoming a developed country. It has already become a powerful manufacturer, thanks to its proximity to the United States and the North American Free Trade Act (NAFTA). Mexico has more free trade agreements – 44 – than any other country in the world.

One of the country’s most important tasks is to develop its human capital so that it can start to climb the ladder in innovation, management, science and technology. That task will be impossible without a real educational reform that put a premium on excellence and results.

So it’s better to think that Peña Nieto is taking all this talk about making things better seriously. One of the recommendations that América Economía made when he was elected president was that he take power away from the very people who helped him get elected. At least in this case, he seems to be taking our advice. Time will tell if it is for real.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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