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Sunday, May 21, 2006

Impoverished "Peones" Aren't All That Mexico Has Been Accused of Dumping in the U.S.

"Building a Mexican Giant"

Cemex, the world's third-largest cement maker is in Mexico, today run by Lorenzo Zambrano & family, is doing very well. The Monterrey-based cement firm, founded by Zambrano's grandfather, in 2005 spent $5.8 billion acquiring British cement firm RMC Group. Zambrano and family are worth $1.8 billion, and he also owns a good chunk of telecom company Axtel.

Cemex has operations in more than 50 countries and 50,000 employees worldwide.

Despite the fact that Friday, May 19, 2006, Cemex shares closed down 2 cents, the stock is up 6% on the year as Cemex "managed to slash costs and free up buckets of cash to start paying down the $10 billion in debt weighing on its balance sheet after the purchase. The company delivered record earnings last year, and its stock ended 2005 up 63%.

They are doing very well for a variety of reasons including low cost of labor, a smart marketing plan, a high-profit margin, and charges of "dumping in the United States."

Cemex even makes loans for home expansion.

Cemex has also found a way to peddle more cement to the nearly half of Mexican families who live in poverty by offering them something most can't get anywhere else: credit.

Shut out by banks, Mexicans have long embraced the use of lending circles, known here as tandas. Families or neighbors kick in a few pesos a week to help one another pay for weddings, appliances and other major purchases.

Cemex has updated the tradition to finance home expansions with a program called Patrimonio Hoy, or Patrimony Today. The company provides professional design services and lends small groups of borrowers 80% of the cost of building materials, secured by nothing but the peer pressure of the lending circle. When one family's project is completed and paid for, the cycle restarts with the next member of the group.

Started in 1998, the program has helped 140,000 families expand their homes, with a default rate of less than 1%, according to Hector Ureta Morales, director of social programs for Cemex. Projects that used to take years are now completed in months. Ureta said the model was such a hit in Mexico that the company recently expanded it to Colombia and Nicaragua and would soon add Venezuela and Costa Rica. He said the program was profitable and made good business sense because families were likely to call on Cemex when it came time to add another room.

"We're building brand loyalty," he said.

And they're selling the same concept in the United States:

Cemex has launched a related concept in the United States known as Construmex to channel into home construction some of the $20 billion that migrants send back to their families each year. Workers in the U.S. can walk into a Construmex office, design their home addition and get the materials delivered to relatives in Mexico. Ureta said migrants saved the hefty fees charged by money transfer companies while maintaining control of how their remittances were spent in their absence.

Such grass-roots knowledge has helped Cemex thrive in developing markets where others fear to tread.

Mexico is rich country, populated by some wealthy and intelligent people. The question is: Why haven't these people used their education, talent and wealth to improve the lives of Mexicans rather than foisting their problems onto the United States?

Read it all.


  • At Sun May 21, 03:49:00 PM PDT, Blogger Cubed © said…

    "The question is: Why haven't these people used their education, talent and wealth to improve the lives of Mexicans rather than foisting their problems onto the United States?"

    The answer is: Because we let them.


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