Monday, March 10, 2014

Mexico Pemex/CitiBank/Oceanografia Scandal...

I have been living in Mexico during the long cold Canadian winter months for three years now, and I know many very successful businessmen here.  This current scandal is, in my opinion, indicative of things to come in Mexico's future.  Many of Mexico's large multi-million dollar businesses have been built by hard working business people - from the ground up.  Sure some of them didn't grow their empires just by hard work, but by establishing important contacts in Government, and they have basically followed Mexican laws such as they are.

Unfortunately many of these business owners also adhere to the traditional cultural and family values, which means they provide everything from the basic necessities of life to higher education for their families.  Many of their children, who are laughingly referred to as 'Juniors', are basically spoiled children that have never had to work a day in their lives, and spend most of their time driving around in expensive cars their fathers have bought for them, and partying their lives away.

Then comes the day that the father decides to retire, and he turns over the management of his multi-million dollar business to his child(ren), who have little or no business training at all.  Of course this transition usually requires the child(ren) to provide a pension for their parents throughout their retirement and old age.  So after the parent has provided absolutely no training, or very little, the child(ren) are basically thrown to the business world wolves.

It doesn't take long before they are taken advantage by corrupt politicians or fellow businessmen, and the once successful business is ruined financially. And that is exactly what I understand happened to Oceanografia.  It is difficult to imagine a business that was probably worth billions being turned over to one of these untrained children and expected to survive, let alone grow.  It is even more difficult to imagine that an intelligent father, who created a mammoth business such as this, would turn it over completely to an untrained son.  Especially since his families future income depends on how well the child performs.

But really, I guess this system in Mexico isn't too different from our democratic process in North America.  We have an election and elect a bunch of politicians, many of them 'Juniors', to run our state/province/country.  Then the head of Government appoints a few of them to important posts.  Let's say for example, John from Little Pebble, Arkansas is appointed Minister of Finance.  We know he is qualified because his father owned a pig farm, and he helped pay the bills.  Or Rita from Red Duck Alberta is appointed Minister of Highways. What's wrong with that, she can drive?  I'm amazed more Governments haven't had these same financial woes - oh, they have haven't they.

I also found it very amazing that large banks throughout the world would make these huge loans to a Mexican company that was well known for it's disreputable business dealings.  Whether they had a big Government contract or not, I would think collateral for a loan in the millions should be required.  Also, I would think Citibank must have known from it's subsidiary Banamex just how business works down here.  Maybe they are run by 'Juniors' too.

Now that the Mexican Government (that's another story) and the news is involved, it will be interesting to see how this drama plays out.