Forbes to Fox: Mend economy

Steve Forbes has some blunt advice for Mexican President Vicente Fox: Fix your economy.

Forbes, president and chief executive of Forbes Inc. and a two-time former candidate for the Republican nomination for the presidency, is not one to dance around the controversial issue of illegal immigration. If Mexico's economy was booming, he said, there would be a lot less inclination for people to cross the border into the United States.

And Forbes may have the opportunity to deliver that message himself. Forbes is scheduled to speak on global economic issues at Zions Bank's International Trade and Business Conference Wednesday in downtown Salt Lake City, the same day Fox will be in town.

"I think Fox is going to have to do a lot more to reform Mexico's own economy," Forbes said in a phone interview Thursday with the Deseret Morning News. "Mexico's economy should be growing in real terms of 8 to 10 percent a year. It should be similar to the kind of sizzling growth we've seen in India, China and some other parts of the world."

Instead, Forbes said, Mexico continues to foster monopolies that put high-cost pressures on entrepreneurs.

"Mexico's taxes are not low enough," said Forbes, who supports a guest worker program. "They should adopt the tax code of Hong Kong or Ireland. They should remove the barriers to setting up legal businesses."

According to the World Bank, Mexico ranks poorly when it comes to starting a business, obtaining credit, protecting investors, enforcing contracts and the tax burden it places on businesses.

In 2005, the tax that a medium-size company in Mexico paid or withheld was 31.3 percent of gross profit, giving Mexico a No. 95 ranking among 155 countries. In contrast, the United States ranked No. 30 at 21.5 percent of gross profit.

Overall, Mexico ranked No. 73 in "ease of doing business" of 155 countries, according to the World Bank. New Zealand was No. 1, with the United States at No. 3.

In the future, Forbes said, inflation poses the most serious threat to the U.S. economy. This week the U.S. Labor Department reported that the cost of living jumped nearly 1 percent in April. But high oil prices, Forbes said, are a symptom of excess money creation by the Federal Reserve, not the cause of inflation.

"It's the reason why interest rates are up," Forbes said. "It's the chief reason why gasoline prices are as high as they are today and copper prices. In inflation we create too much money. Commodities feel it first, and then it courses its way through the rest of the economy."