Crunching Numbers on Mexico's Distribution of Wealth

Mexico, a country rich in both physical and financial assets, stands as a beacon of potential in the Latin American landscape. However, behind the glittering façade of its vast resources lies a troubling reality: wealth in Mexico is unevenly distributed. In fact, it's more lopsided than a badly stacked pile of sombreros.

Miguel del Castillo Negrete Rovira, the head of the Social Development Unit of the Economic Commission for Latin America and the Caribbean (ECLAC), Subregional Headquarters in Mexico, recently presented a report titled “The distribution of income and wealth in Mexico and selected countries.” The findings were as striking as a mariachi band at a silent auction.

To put things into perspective, Mexico's total wealth represents a substantial 18.3 percent of the net wealth of the United States, and it even outshines Canada by a staggering 40 percent. Yet, paradoxically, 36.6 percent of Mexico's population lives impoverished. It's like having a vibrant piñata, but only a select few get to enjoy its colorful treasures.

Del Castillo Negrete Rovira dropped the bombshell that only one percent of Mexico's population holds the keys to 41.2 percent of the nation's wealth. That's like throwing a fiesta and inviting everyone but handing the piñata stick to just one person!

But wait, it gets even more unequal when we talk about financial assets. A mere one percent of the population has a stranglehold on a mind-boggling 87.9 percent of financial opulence. Meanwhile, 64.2 percent of households are left with crumbs—less than 50 percent of the average net wealth. It's like trying to split a taco with a squirrel; the wealth just doesn't spread far.

And if you thought things couldn't get more unequal, think again. Just 0.1 percent of families are basking in 22.3 percent of net wealth, which includes physical assets, financial assets, and minus financial liabilities. It's as if the wealth gap were a sombrero, and they're all fighting to wear it.

But here's where it gets fascinating. Del Castillo Negrete Rovira points out that the root cause of this inequality is the skewed distribution of value generated by companies. In Mexico, a staggering 19.7 million people are earning just three trillion pesos from private companies, averaging a meager 12.9 thousand pesos per month. Meanwhile, a lucky 1.1 million families are raking in 3.7 billion pesos in dividends, which translates to a hefty 280,000 pesos per month on average. It's like giving a piñata filled with gold coins to a few and expecting the rest to celebrate with candy.

Now, let's talk about taxes. In Mexico, households contribute a whopping 72.9 percent of tax collection, when it should be corporations carrying more of the burden. In 2021, the government pocketed 1.1 billion pesos from Value Added Tax, while only 1.9 million pesos were paid in Income Tax. It's time for companies to step up and contribute their fair share to bridge this wealth gap.

But amidst the gloom of inequality, there are rays of hope. From 2018 to 2024, the minimum wage in Mexico has surged by 88.6 percent, outpacing inflation and nearing the value it had in 1985. The IMSS contribution base wage for 21.9 million formal workers has also grown by 20.8 percent in real terms. These changes show that Mexico is gradually moving in the right direction.

In 2021, Mexico ranked fifteenth in GDP size and tenth in population worldwide. The country boasted a net wealth for each person of 78.6 thousand dollars, which was 90 percent of the United Kingdom, 49 percent of the United States, and 46 percent of Italy. Mexico's potential is undeniable.

Despite setbacks, household wealth in Mexico has been on the rise. It grew 5.9 percent in 2009 during the global financial crisis and increased 5.1 percent during the COVID-19 pandemic, while income dropped 6.8 percent. In 2021, the national perception of household wealth saw a real increase of 6.6 percent.

Additionally, ECLAC data reveals that almost two-thirds of the poorest households received government transfers, offering a glimmer of hope for the most vulnerable.

In conclusion, Mexico holds immense potential, both in its abundant resources and its resilience in the face of economic challenges. However, addressing the wealth gap and ensuring a fair distribution of wealth must be a top priority. It's time to turn this sombrero of inequality into a crown of shared prosperity.