Moving south into
We must buy
Before we go further, I should mention that the inspiration for this series posts (beyond the idiotic demonstrations of the preceding week), is an article by Mr. Walter Mead that appeared in Esquire Magazine somewhere in the early ‘90’s titled, “Let’s Buy Siberia!” I’ve Googled high and low for a copy and have been unable to find it, but I do believe that the model described by Mr. Mead serves as a decent proxy for what I am talking about here. If you can locate it, it’s a worthy read and I sure would appreciate a copy.
As I said in yesterday’s preview to today’s post, buying
The numbers, of course are daunting.
Our investment horizon is 20 years (value after that is the result of new owners’ efforts)
Mexico GNP remains flat at $700B during this period
Discount Rate: 6%; admittedly high, but this is buy no means a risk free deal
Popping these numbers into my handy Excel spreadsheet I’m coming up with a value for
Of course, I have not factored in any negotiation on this deal and I’d recommend that we low ball these guys because my guess is that
In other words, it’s good to be the deep pockets guy when you’re on offense and the happy result is that I think we can negotiate this baby down to $5trillion, which still represents a fine deal for the sellers since the benefits for
We would pay off all of the country’s externally held debt of $174B
A majority of the remaining purchase price would be used to upgrade public infrastructure
A cash rebate would be paid to
The legal system would be brought up to par with
The government would be reformed into a two party system with American style checks and balances
The U.S. greenback would provide a stable currency, controlled by the Fed
This is just the beginning; the economic benefits that would accrue to ordinary Mexicans would change life as they know it today. To estimate the impact we only have to look at NAFTA’s impact to see what complete removal of the border might accomplish from an economic point of view.
Since NAFTA passed over 10 years ago the economic landscape of
Still, more can be done, and by purchasing
The question is how much opportunity can we create and how do we measure the impact this change would have on
There can be no question that Canadians have done marvelous job of taking advantage of their co-location with the
And the results would be astounding. Were Mexico to simply move into line on a per capita basis with Canada – ignoring “normal” growth and population expansion, Mexico’s GDP would increase to $2.3T annually making it by today’s numbers the fifth largest economy in the world ahead of countries such as the U.K., France, Italy, and yes, Canada itself. Remember though, that we would be making
Now I’m on to you folks, because I know what you’re thinking: “Well yah, but that growth would just come out of
Growth is growth baby, and what we would be accomplishing with our Mexican buyout would be providing the Mexican people with an opportunity to realize their full potential. We would be investing capital, making the allocation of that capital more efficient, with the resulting benefit being that Mexican growth would come from their adding increased value to the global economy! The idea that they somehow would be stealing this growth from the
The beauty part is summed up in two words people: Value Creation. Gosh, I’m almost weepy just thinking about it. Say it with me: Value Creation. Why is that so beautiful? Well yes we would be making the lives of each and every Mexican better but as wonderful as that is that isn’t really it. No, the beauty part is that
In other words, we didn’t just buy
And it just gets better. Anybody want to guess the demographics of the Mexican population? That’s right, they’re skewed towards youth. 30% of the population is under 14 and a full 94% are under 65. This matters because we need young workers with long lives ahead of them to help support our baby boom generation in retirement.
There was a time in
Tomorrow: Yes, but what about all of those voters?