March 14, 2010
Mario Sanchez
http://www.engitek.com/
http://www.industriaytecnologia.com
I have been following the recent crisis in the United States and I have come to these conclusions.
1) The crisis was incubated on ongoing bases since 20 years ago with the sharp increase in the US factories relocation to other parts of the world, specially China and other countries in that region.
Although jobs have been exported to Mexico, the effect here is much lower due to the tight economics and labor relationship and because the fact that about 80% of the maquilas are located within 50 miles from the USA border with Mexico sharing in some measure the jobs between them.
Most of the USA maquila plants in Mexico work under the concept of twin plants, meaning that they do share operations, under this concept most of the manufacturing operations are performed south of the border but an important part is done in the USA, in the form of warehousing and distribution of finished goods, engineering, validation and sourcing of USA made materials. In general the USA hired employees working in Mexico live in USA border towns helping the local housing industry and consuming in their area shops. Additionally a big proportion if not all of the maquila employees spent part of their salary back in the USA side or "otro lado".
Several American goods find a market in Mexico crated by these jobs. This export market help to fuel more employment north of the border. Moving US manufacturing plants to Asia or other faraway locations negate all these adventages to both countries or at best reduces it drastically.
2) The housing industry is mentioned as the main cause of this crisis, however this crisis has two main variants:
a) The lost of jobs as mentioned before, as result of dismantling of the USA manufacturing base.
How the people will pay their mortgages and products to help the economy, if the jobs are being exported? Companies are shooting themselves by exporting jobs, they are reducing they own consuming base for their own products, people no longer can afford to buy their products because they don't have a job, or the available jobs are mostly at the minimum wage level or close to it, the good well paid manufacturing jobs are becoming a specie in extinction.
b) The other side of the crisis is the one most known, the housing crisis in the sub prime market.
This crisis has his root in the shared responsibility of banker as institutions, lending officers, and borrowers as well.
It was notorious and a spreadout practice that in sake of getting a commissions, bonuses, promotions etc, lending officers were altering the threshold of the income qualification for the borrowers, this with their borrowers complacence making this an unethical application of the win win concept.
In other words borrowers income statement were in many cases altered to help qualify their lend prospects. Unfortunately it was like both partners sheeting on each other, and both pretending not to know but convenient.
It's assumed that critical payments information was ignored or not explained, for example the adjustable credits in which the initial mortgages monthly payments for the first three or five years were half or less after these period, or the other one in which only interest payment are made during the first years, what people never tough is that while their payments double or triple during this period the salaries would remain almost fix or employment would be lost.
Comments are welcome.
www.engitek.com
www.industriaytecnologia.com
Mario Sanchez
http://www.engitek.com/
http://www.industriaytecnologia.com
I have been following the recent crisis in the United States and I have come to these conclusions.
1) The crisis was incubated on ongoing bases since 20 years ago with the sharp increase in the US factories relocation to other parts of the world, specially China and other countries in that region.
Although jobs have been exported to Mexico, the effect here is much lower due to the tight economics and labor relationship and because the fact that about 80% of the maquilas are located within 50 miles from the USA border with Mexico sharing in some measure the jobs between them.
Most of the USA maquila plants in Mexico work under the concept of twin plants, meaning that they do share operations, under this concept most of the manufacturing operations are performed south of the border but an important part is done in the USA, in the form of warehousing and distribution of finished goods, engineering, validation and sourcing of USA made materials. In general the USA hired employees working in Mexico live in USA border towns helping the local housing industry and consuming in their area shops. Additionally a big proportion if not all of the maquila employees spent part of their salary back in the USA side or "otro lado".
Several American goods find a market in Mexico crated by these jobs. This export market help to fuel more employment north of the border. Moving US manufacturing plants to Asia or other faraway locations negate all these adventages to both countries or at best reduces it drastically.
2) The housing industry is mentioned as the main cause of this crisis, however this crisis has two main variants:
a) The lost of jobs as mentioned before, as result of dismantling of the USA manufacturing base.
How the people will pay their mortgages and products to help the economy, if the jobs are being exported? Companies are shooting themselves by exporting jobs, they are reducing they own consuming base for their own products, people no longer can afford to buy their products because they don't have a job, or the available jobs are mostly at the minimum wage level or close to it, the good well paid manufacturing jobs are becoming a specie in extinction.
b) The other side of the crisis is the one most known, the housing crisis in the sub prime market.
This crisis has his root in the shared responsibility of banker as institutions, lending officers, and borrowers as well.
It was notorious and a spreadout practice that in sake of getting a commissions, bonuses, promotions etc, lending officers were altering the threshold of the income qualification for the borrowers, this with their borrowers complacence making this an unethical application of the win win concept.
In other words borrowers income statement were in many cases altered to help qualify their lend prospects. Unfortunately it was like both partners sheeting on each other, and both pretending not to know but convenient.
It's assumed that critical payments information was ignored or not explained, for example the adjustable credits in which the initial mortgages monthly payments for the first three or five years were half or less after these period, or the other one in which only interest payment are made during the first years, what people never tough is that while their payments double or triple during this period the salaries would remain almost fix or employment would be lost.
Comments are welcome.
www.engitek.com
www.industriaytecnologia.com
