Wednesday, June 17, 2009

Home economics

Like an ominous fog rolling in, economic hard times have settled over San Miguel during the past six months.

The weather continues sunny and perfect. And the town's small contingent of mounted policemen, decked out in their theatrical uniforms, still take their posts around the central square and wait for tourists to take their picture and pat the horses.

Except that the steady stream of foreign tourists and of retirees migrating from the U.S. and Canada--the life force the local economy--has almost dried up. Potential tourists are said to be afraid of the swine flu and the narco-violence. And American and Canadian retirees who had been fantasizing about realizing fabulous profits in the sale of their homes, and investing the money here, are suddenly too broke or spooked to do any such thing.

The economic debacle here is really a tragic trifecta. The faltering of the U.S. and global economies has clobbered Mexico despite early predictions the country might survive relatively unscathed. The booming San Miguel real estate market, which fed off the easy mortgages and ever-rising housing values in the U.S., has very nearly flat-lined.

Then came the escalation, or at least the escalation of coverage by the U.S. media, of the wars among competing drug cartels and the Mexican army. The killings mostly take place along the U.S. border, approximately a 10-hour drive from San Miguel, a pissant town of no interest to the drug lords, at least not yet. But TV viewers and vacation planners in the U.S. can be forgiven for not being able to parse such fine distinctions and therefore taking a pass on Mexico.

Orlando looks good, doesn't it honey?

Finally, the swine flu hysteria hit. As far as I know, no one died of the disease in San Miguel, but no matter. The natives took to wearing blue or green surgical masks, which made the place look a bit a like a leper colony. Tourists cancelled. Some hotel owners hope the yearly wave of Texans fleeing the heat back home might mark the beginning of a recovery for the tourist industry.

Home construction in San Miguel has practically ceased, except for a few huge subdivisions. But even those seem to be progressing in slow motion. Stew and I ran into an architect friend at a local grocery store and she admitted her business had cratered--as in zero projects right now. During an unguarded moment yesterday, our own architect confided that unless some new work comes in by July our house will be the only job on his schedule.

We appreciate and enjoy the gushing attention we suddenly get from him and all the suppliers. Everyone returns phone calls promptly. And no need to worry about our modest adobe home getting bumped off the monitor by someone else's million-dollar palazzo. We are the only thing on the monitor.

Also--and at the risk of sounding like a totally insensitive vulture--the economic crisis in Mexico likely will end up saving us considerable amounts of money, particularly in labor and some other construction costs.

Consider that since late last year the value of the Mexican peso has declined by about 35 percent against the U.S. dollar, going from $10.00 pesos to $13.50 pesos to a dollar. Some economists say the peso may drop to 20 to a dollar by the end of the year.

The shrinking peso has particularly depressed the already low real wages of Mexican workers. It may shock some to hear that laborers working at our house get paid approximately $1000 pesos a week, which at the current exchange of rate of about $13.50 pesos to $1 dollar, amounts to about $75 dollars a week. That's for 45 hours of work, or about US$1.70 an hour.

Worried and vaguely guilty that we might be unintentionally running some sort of Mexican gulag, I have on a number of occasions checked and asked around about wages and salaries in other jobs. Ours compared favorably, even for jobs requiring greater skills or education.

Over the phone, a friend from Chicago figuratively held my hand and helped me assuage my guilt. What you pay is the commonly accepted local wage, she said, and if you weren't building your house--even at those comparatively low wage rates--there would only be that many more people unemployed in San Miguel.

Yet some acquaintances in San Miguel--apparently more socially minded than Stew and me--say they pay their gardener a "living wage," or what they have decided he should earn in order to achieve a "decent living standard" for himself his family. According to these friends, the "living wage" in San Miguel now stands at a little over $5 an hour, or triple what my architect is paying the construction crews.

Stew and I never got clear definitions of such emotive terms as "living" or "decent." But if the projected labor costs for building our house had been three times higher there's a real possibility we wouldn't be building anything.

In that case our home construction formula would have been something like this:

"Living Wage"--> Triple Costs--> No House--> No Jobs --> Nobody Happy

There are some mitigating factors to the low wages here too. Prices of most domestic goods--basic food items like tortillas--have remained stable. The government also stifles price increases in some basic items like gasoline (all production is owned and controlled by the government) and subsidizes other key items. Still, many items at grocery stores are imported and now exhorbitantly expensive to lower middle-class and low-income Mexicans.

At our new house, not everything has dropped in price either, even with the more favorable exchange rate. Cement and rebar--those two essential ingredients of Mexican building--have increased considerably. When it comes to buying kitchen appliances and bathroom fixtures, we'll be paying full U.S. prices too.

So don't go figuring that the cost of building our house has dropped by 35 or 40 percent on account of the flagging peso. Or try to guilt-trip us over what we might actually save.

OK?

Or am I sounding a little guilty already?

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