Human Capital Matters

As anyone with studies in Economics know, there are 3 factors of
production: Capital, Land and Labour, in more recent versions of such concepts
the word “human capital” is included considering an upgrading labour skill able
to produce a much higher productivity, in short is a way to resume any
productive enterprise.

The concepts above returned to my mind as i talked about business with a
fashion designer, while complaining the lack of help/subsidies by the
government and how poor is the quality of the local fabrics as more designers
were betting about how advances in technology allowed creating “smart
collections”.

The flow of the conversation made me think how really is needed for any
kind of entrepreneurial project a manager or a corporate economist, as i found
lack of substance about his complains, I spent the next hour crafting several
possibilities from prices ranges for raw materials to Points Of Sales (POS).

Several successful companies appeared in the traditional clothing
sector, incredibly Inditex is one of them a company born in a country with
stiff labour laws, hungry for imports and high wages, the same could be said
about H&M or Uniqlo which boast more or less the same business model, but
also more local firms could be set as an standard.

Monster and NaCo turned in to household names when their products became
ubiquitous amongst lower and middle class in Mexico, using plain cheap bulk low
grade shirts to print original messages/graphics, this allowed the companies to
develop product rather fast with prices so low that even teens could afford a
new shirt every week, eventually this firms were able to reinvest their profits
in to building a bigger range of products.

Ironically these efforts were led by graphic designers using bulk plain
shirts as templates, as I told to my friend, unfortunately fashion designers
dream in art, a wearable art with fat price sticks, not in to developing volume
street wear with innovative twists, with a moderate prices that could be able
to sustain volumes large enough to build a profitable brand.

On that tone, Asos a British online retailer and listed on the FTSE-100
hides a very interesting business model, I could say it’s a bit like a fashion
supermarket, offers lot of well known brands both local and European such as
the Danish firm Humor, but also part of their offering comes from their own
brand delivering a good balance in quality, style and price, sometimes notably
inspired on garments several times the price, or on the styling from British
stars, Asos build a very successful business along this lines, while their own
brand supports sales volume and web traffic at the same time, distributing
brands such Alexander McQueen, Ben Sherman and Humor allows the company to
boost profitability and keep cachet.

At the end of the conversation my friend turned more upbeat about the
possibilities laying around and how is needed to balance a lot of factors
before build a clothing brand, understanding after all that not everything can
be high end and command high prices, if fashion is to be change, is the street
wear the place were more chances do exist to build a profitable business.

At the end again all comes how you mix the production factors and which
human capital mix is better to craft a viable business, in this case fashion
designing meeting financial and corporate know-how.

The Corporate Rider and Beyond

Between the Great Depression and the late 1950´s the stock market became a bit of a “no go zone” deemed to insecure and volatile, yet after the post-war bonanza and much prosperity investors began to seek higher returns in the stock market.

This is the setting of “The Mayfair Set” a British documentary in 4 parts covering from the rise of the first corporate riders in Britain back in the 1960’s, until de 80’s wall street junk bond market and 90’s British shifting politics, this series may seem to show how this events seem to be linked, but there is also a bigger
picture.

The documentary help me to expand my view over the 80’s boom, by  linking seemingly unrelated events, for example the drop on risk aversion to investment at the stock market, and how this was used to restructure full industries, as we know specialization was unheard among companies in the post war period (like
Japanese companies this days) as most of the large companies were vast industrial empires spread along several numerous industries employing large number of people mainly in manufacturing, this holdings were controlled by powerful people who allowed to direct the economy along cozy links with the government, this allowed to follow national development plans with the private sector this was true in a number of developed countries and several developing ones as the concentration of industries were much higher.

These industrial behemoths were able to reap a large amount of incomes right from the multiple products they offered and their distribution channels but were poorly managed and not quite efficient, by the late 70’s after the oil embargo this figures in the economic model began to suffer a lot this lack of efficiency
despite counting with a very successful business, the lagging ones became a drag to the financial results and restraining quality improvements, in the western world the rise of the Japanese companies didn´t helped too.

The paper of the corporate riders at their time was to inject new strength in to the industries by disposing the unprofitable areas of the companies; this allowed me to understand the real reasons of something I learned at my school classes when the companies became focused in few products or services, in this sense
the corporate rider allowed the companies to become more focused on a narrower set of good where their results and profits were better.

In the bigger picture these leaner, meaner companies boosted results, profits thus lifting price shares making attractive to invest on shares, deregulation played it´s part to make more attractive the selloff of  unprofitable assets further acquired from other firms seeking value from distressed assets, this kind of
transactions changed the industrial landscape, but also explain why the tight knit  stock ownership between companies actually protecting the firms from takeovers, this business model is more or less the rule across Asia, this kind of structure have been more suited to the economic “dirigisme” followed in Asia and being kept to sustain a domestic led industrialization.

At the end this documentary allowed me to link the dots and understand more broadly from the industrial-financial sense, and how the actual globalization phenomenon began to develop, also draws clearer path of where it´s going.

Neza: la representación suburbana de un problema nacional.

Nezahualcóyotl es uno de esos municipios suburbanos que ya cuentan con cierto peso en la memoria de los habitantes de la ciudad, desde el ser uno de los más poblados, hasta el ser escaparate de recientes proyectos de inversión de Carlos Slim (Plaza Jardín), igualmente representa el desarrollo de la ciudad y buena parte del país al haber pasado de ser un municipio de alto índice de marginación en los años 60’s, a volverse un suburbio con una gruesa clase media-baja con emergente polo de consumo dentro del área metropolitana, inclusive este municipio ha sido razón de artículos en medios tales como el Economist.

Nezahualcoyolt no cuenta con un perfil económico preestablecido como fue el caso de Tultitlan o Cuautitlan Izcalli donde grandes capitales invirtieron ampliando el sector productivo mientras que el municipio invirtió en vivienda e infraestructura para los habitantes y trabajadores, curiosamente una de las señales más notables de Nezahualcoyolt es el hecho de ser un municipio donde pequeños capitales generaron una clase media solida vía pequeños negocios, esto ha permitido que este municipio presente uno de los niveles de renta de espacio comercial más caros de los suburbios inmediatos del D.F y sostiene niveles de vida e ingreso y precio del suelo inclusive más elevados que delegaciones como Iztapalapa o Iztacalco.

El censo económico más reciente sitúa a Nezahualcoyotl como uno de los 5 con mayor densidad de negocios cercano al municipio de Monterrey, sin embargo también destaca la dependencia en negocios pequeños y de baja productividad, la nueva generación de estos dueños de negocios tienen pocos incentivos para estudiar carreras profesionales, aquellos que lo logran se mudan al D.F o otras partes del país donde les es más fácil conseguir empleos que demandan sus calificaciones y los problemas de movilidad urbana generan que pierda atractivo conseguir un empleo fuera del municipio.

Otro problema radica en que la planta productiva es pequeña en cuanto generación de empleo y salarios que ofrece, la atracción de grandes capitales es sumamente baja fuera del sector comercio debido al alto transito, alto costo del suelo y limitado transporte público.

Nezahualcoyotl se enfrenta al igual que el resto del país a buscar soluciones para ampliar la productividad e innovación en su planta productiva, una necesidad a ampliar las actividades económicas que se generan en el área, ampliar la red de transporte.

Desde mi perspectiva el municipio y la región alrededor tienen oportunidades en áreas como infraestructura de transporte, comercial (ambas debido a la cercanía con el aeropuerto), con mejoras en seguridad e imagen urbana existe la oportunidad de aprovechar el viejo tiradero en un área de oficinas de bajo costo, incubadoras de empresas o parques industriales que podrían utilizar el nuevo espacio utilizado, con altas inversiones en saneamiento de aguas e imagen urbana se podría aprovechar la región del lago de Texcoco con uso de las aguas con fines de ocio y recreativos fomentando el turismo en el municipio y haciéndolo más atractivo para vivir.

Otro aspecto menos conocido es la oferta de entretenimiento en el municipio el cual representa otra oportunidad de generar un sector exitoso generador de empleo y oportunidades, sin embargo al igual que en gran parte del país donde gente industriosa se encuentra con problemas de regulación o falta de inversión y políticas públicas para el aumento de la productividad local, liberar nuevos mercados o sectores productivos.

Not Quite There: The Unlikely Case of a Depresion 2.0

On my daily basis news update from time to time, I find myself reading about a line of economist very worry about a relapse of the recession, a double dip or a very “gloomish” view of the future, while my feet is firmly set on the ground i need to point several critical differences between 1937 and 2010, while a do agree in the common view, that like during the depression, a large banking crisis derailed the financial system, household struggling with a mixture of large unemployment and a languishing recovery, but this line of economist are relying much more in the history book rather than reviewing the current global situation, my duty is to dispel few myths and unfounded fears arising from the media from time to time.


- It’s a depression like feeling: Yes the recession was awful and the effects may linger around the economic climate for several years, the economy has been expanding at feeble pace for over a year, people returned to spend albeit at more picky ways, and industrial production have been consistently picking up so far the recovery pace proves to be between the average recovery of a financial crisis and the historical average recovery from the typical recession.

- This recovery is very fragile: Well that depends vastly of where your head is looking, during the Great Depression, policy mistakes piled up one against another all around the world, by then only U.S and Europe had enough economic clout and weight to matter, the developing nations were agrarian and commodity exporters, with a large peasant population and thinly populated cities.

Now emerging nations proves to have a large urban population, growing services sectors and deepening domestic markets, booming China now is 2nd largest economy in the world and emerging countries middle class it’s already consuming from domestic and foreign companies, this broad set of countries with healthy financial systems and growing GDP and demand are a floating saviour that during the 30’s was inexistent

- This is a gloomy world and set to be sluggish for years: Yes and no, while most of the western world keep licking the wounds generated by excesses and poor management, most of the emerging world have already been growing as fast as ever, with low debt and healthy macro economy, this is more the picture of a 2 speed economy, thus duality is nearly everywhere, in U.S the lees indebted counties are already lifting their spending rapidly.

- Europe will disappoint: Everyone seems to say this except only by a smallish group of Euro fans, but reviewing raw data people tend to forget that Europe population it’s stagnant vs the 1% growth of U.S, in other terms, when it comes to GDP per capita, EU have been on par or outpacing U.S most of the decade, also EU have a more trade dependent industry network, a German industrial hinterland (with pan-european suppliers) and very good diplomatic-business relations abroad, helping the EU to tap growth with emerging nations, this proves a big leverage to keep boosting growth and confidence to the region, also the EU is very sensitive to devaluations, any big drop end up boosting growth like in the late 90’s.

- New protectionism will hinder trade growth: If during the worse part of the recession, little barriers were erected, it’s not likely that in the near futures will, as trade improved the variety of products and lowered prices across the world, protectionism may fail to take root in the current world.

- Fiscal hawks will push the economy to a double dip: Years from the behavioural economics helped to understand the decision making process of the companies, when it comes to taxes and interest rates the more certain about the future, the better, U.S business community lacks from this, even for economist the scenario it´s like trying to see thru thick fog, Europe instead took a giant step by setting a credible plan to cut deficit this is in fact helping the business to forecast, plan and using this blueprint for the future, the key in here is, clear out the expectations of the market, no matter if the deficit will persist or not, but the importance is to have a blueprint towards a sustained path, showing if taxes will be higher or not, large decisions depend on this government blueprints.

This is not a depression indeed and the elements of it are missing, every recession and depression have it´s similarities and differences, how to analyze and planning for a recovery must come from a deeper review of such diagnosis, so far i see we are not quite there in the same depression like scenario, now the trade is deeper, there are much more goods and manufacturing is more evenly spread across the world, services weigh in the GDP surpass more than 50% in the OCDE countries, and knowledge economy, and tertiary education is rising, this new setting could hold the key to a more sustainable recovery.

A Roadmap to Stop Bleeding and Start Healing (Part 2)

In my previous post i talked a bit of the current situation in America, and the difference it makes for the economic agents to boost demand and in fact sustain the recovery.


Now as America faced large deficits twin deficits (trade and fiscal) thru the 2000’s, is time to redefine the policies to change such disbalances.

On the fiscal side U.S need urgently a consumption side taxes (VAT), this may not like the overall population but may help to restrain conspicuous consumption, and contain the trade deficit from the demand side.

On the supply side the corporate rate at nearly 40% remains terribly high, (and the OECD second highest), this at the time where revenues fail to hit 2% of the GDP in good times, but nations with lower nominal rates, also fetch more income from their corporations while the higher nominal tax, the less receipts (companies cut their tax bill thru several loopholes, high taxes are an incentive to such distortion) as the graphs show below

Also the countries with higher corporate taxes are more likely to show lower output growth, so higher output gain, less companies cutting artificially their tax bill added to the fiscal incentive to hire and build in America, are strong reasons to slash those rates and bring them in par with the EU at least.

Fiscal simplification could do a lot too, as easier tax fillings could fill the coffers with fresh resources.

All this new money raised from a lighter, simpler tax structure could be used to plug the deficit, improve infrastructure and finally boosting the goods producing industries, a bit like cutting trade deficit cutting demand, and increasing supply by turning more attractive America as a production site, and helping the companies to keep prices of their wares by paying less taxes thus able to absorb partially or totally the VAT, an act that importers wouldn’t be so eager to do.

¿Isn´t this look like a coherent way to raise tax revenue while stimulating production?

http://money.usnews.com/money/blogs/capital-commerce/2008/8/15/us-corporate-taxes-still-second-highest-on-planet-earth.html

A Roadmap to Stop Bleeding and Start Healing (Part 1)

Right now the American economy is sputtering, losing momentum just in the most needed time, with exports failing to propel the way the did early in the year, and jobs hard to come by, pretty much this is how a recovery works.




Either way consumer led or export led kicks (both a source of demand), the spare capacity begin to shrink (from factories to offices and retail), but not until business think they need to, so a sustained rhythm seems necessary, in factories this is pending orders or unfilled orders, and in retail means dropping inventories + more and constantly increasing traffic in store turning in to sales, after the current number of employees begin to seem unable to fulfill upcoming demand, is when the magic happens and hiring unwind, unfolding a virtuous cycle when increasing hiring, led to increasing demand, to increasing investment to expand capacity and so demand keep rising, etc.



In the current recession, few have been able to consolidate a robust demand from exports or consumers, Asia thru a mix of both, as governments help to reassure confidence and opening the grid of credit.

Europe seems to be quickening before and during the debt crisis, and such event sparked a temporary stimulus by making the euro cheaper, the European GDP data proved that PIIGS remain weak, but a lot stronger than consensus, and improving German fortunes may actually send demand shockwaves across the mainland, while at the same time government have been sending confidence to the economic agents thru tightening fiscal policy with still loose monetary one, as well a big 1 trillion dollar support to states in need have quite shored up confidence along the way, even in the current state Europeans are likely to begin to spend a bit more, companies keep tapping Asian demand and even after the budget cuts, mostly because they are not so harsh in most of the nations and spread out across a span of several years.



Meanwhile U.S economic policy remains quite dovish about how to mend the country, the real worry (the same from companies and consumers) is about the sustainability of the country current economic structure, lack of reforms, overspending, and not foreseeable credible plan to return to a more normal path, the current lack of confidence, is denting the ability of the economic agents to take decisions to invest, spend and thus they rather save (¿have everyone seen how much cash is kept by companies and how consumers are saving?) , U.S need reform to strengthen real income grow, a credible plan to restore confidence in the public finances and a way to pave a true recovery road, while at the same time cutting trade deficit and raising competitivity

Why is the keyword “confidence” in this comment? because economic agents will hold their decisions until the future seems more clear, this is keeping most of Americans guessing “what’s next for us” and “in this current environment im unable to spend”

La Nueva Brecha Digital

Hoy en día me alegra ver a gente tan animosa, trabajando arduamente a lo largo y ancho de diversas redes sociales, sugiriendo como explotarla como una fuente de recursos empresariales, humanos y administrativos que permitan a las pequeñas y medianas empresas progresar, desde consejos sencillos, hasta oportunidades de lanzar campañas publicitarias de alto impacto y de gran cobertura, ligado a servicios como los del gigante Google, cuyo servicio sencillo y practico, permite que las empresas de cualquier tamaño tengan un pedacito de Internet a su disposición.




Es cierto que estos recursos han sido de enorme utilidad, en especial utilizados por personas hábiles y preactivas en el mundo desarrollado, donde los niveles de penetración de Internet móvil, banda ancha en los hogares sumado a una creciente participación por parte de las empresas.



Estas tendencias están igualmente moviendo a América Latina, desde una base mas pequeña y concentrado en cierta “elite” la cual tiene acceso a los medios para adquirir los equipos, redes y generalmente se le puede ver como un publico mas solvente que el grueso de la población, mejor informada y que demandan mas calidad, lo cual se esta volviendo un mantra para las empresas que están saltando al vagón de Internet, en nacimiento de empresas que facilitan pagos (paypal, moneybrookers, etc) por Internet sumados a empresas de paquetería y envió nacionales o locales que permiten entregas rápidas dentro de lapsos de tiempos pequeños, desde esta óptica es obvio por que la emoción del uso de Internet en los negocios, así como la mejora en los servicios y atención al cliente, ¿pero por que esta tendencia se esta ignorando tanto en México?



“¿Eso como para que?”



Hoy por hoy la brecha digital entre países desarrollados y no desarrollados se ha estrechado, al existir mayor disponibilidad de las herramientas (equipos de cómputo, celulares, etc), así como de los servicios (Sistemas de banda ancha, Internet móvil confiable, etc), de lo que hoy en día si se puede hablar es en gran medida de una brecha digital interna, donde los estados con índices de penetración casi a nivel de país desarrollado vs niveles de países en desarrollo en otros estados, por poner un ejemplo en el Distrito Federal se cuenta casi con mas de 2 líneas de telefonía celular registradas, cuando en estados del sur no se llega a 1 por cada 2 habitantes.

Otro dato destacable es que pese a contar con una elevada población, México en si no cuenta con un sistema de búsqueda nacional, pese a la presencia de Google en todo el mundo, Rusia y Republica Checa cuentan con sus propios buscadores de Internet nacionales y altamente especializados, lo que los diferencia del mercado, Brasil incluso cuenta con su red social nacional (eso si, Google Brasil es la dueña), la cual es altamente popular y el grueso de sus usuarios son de Brasil y Paraguay, esto nos hace sugerir, si existe tanto talento, nichos y oportunidades en otros mercados emergentes, ¿por que no sucede lo mismo en el país?

Según un artículo reciente la respuesta es tan simple como “desinterés”, lo preocupante de esto es que pese a contar con niveles educativos similares a países en la región, que cuentan con mayor penetración de Internet y mayor participación de empresas en redes sociales y apoyándose de Internet para sus departamentos y operaciones diarias.



Lo que se podría hacer para revertir estas tendencias, serian el abaratamiento de los servicios, quizás campañas de educación tanto para usuarios como para empresas, personalmente he visto mucha actividad por el lado de apoyo a pymes vía twitter, sin embargo es mucho “hype” para una audiencia aun tan pequeña, considero que deberíamos empezar por educar vía offline, a las empresas y usuarios antes de dar tanto impulso a herramientas claramente subutilizadas, el uso de Internet por individuos y empresas solo podrá alcanzarse cuando se pueda educar de los alcances, información, mercado potencial y crecimiento del mismo, a los grupos interesados, o bien, esperar 10 años a que el grueso de los usuarios (12 a 18 años), crezca hasta volverse consumidores y empredendedores con amplio uso y experiencia de Internet.







http://eleconomista.com.mx/industrias/2010/08/09/perdimos-liderazgo-entre-brics-apenas-cinco-anos

http://eleconomista.com.mx/industrias/2010/07/28/desinteres-motivo-no-usar-internet-mexico