13 gas stations on 21 km stretch of road or "State Capitalism" does not work

A 21km stretch of road in Mexico between Punta Mita and Puerto Vallarta airport has a total of 13 very nice, big Pemex gas stations. What is noticeable is not only their sheer number but that they are all Pemex.

The state of Mexico is via Pemex managing its unemployment rate and providing employment for a lot of folks who spend most of the day doing nothing at all because none of these stations are very busy.

No matter how non-sensical this is, I will bet any amount of money that there is some PowerPoint slide somewhere in Mexico that shows a graph of how with more gas stations you will sell more gasoline.

This is a perfect example of why "state capitalism" does not work on that most fundamental of levels - return on capital.

The country's collective savings are being spent to build infrastructure that is not needed and therefore produces very low return on investment because motivations of the owner - the State - are quite a bit more complex than the motivations of a private shareholder would be.

Let me state my point more bluntly - at least half of those petrol stations could be medical clinics with much bigger net human benefit to all of Mexico's citizens. They could also employ the same number of people or more. However, the health system does not have the capital to invest and the state oil company does and therefore gas stations and not clinics or schools are built.

Perverse underlying structure leads to suboptimal use of resources and the result is less progress and well being for citizens. Russia and China should take a look.

Comments

Miljenko said…
And I finally found data to support the notion that very low rates of unemployment in Mexico are indeed a result of the hiring practices of Pemex and maybe other state controlled firms there.

September 27, 2018 6:24 PM
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