The presidential election in Mexico garners more interest in Texas than many places because of the increasing problems that the state faces in regard to the influx of immigrants and violence on the border. Calderon’s apparent victory is almost certainly better economically for Mexico, and Opinion Journal’s Mary Anastasia O’Grady observes that the handling of the election is a hopeful sign for Mexico’s emerging multi-party political system. However, the Washington Post’s Robert Samuelson identifies in this column the problem that continues to vex Mexico’s economic development — inefficient big businesses that are protected by the government and vibrant small businesses that are threatened by it:

[Mexico’s] economy consists of two vast sectors, each slow to adopt better technology and business practices.
One sector involves large, modern firms in semi-protected markets that limit the pressure to improve efficiency or lower prices. “Mexico’s business sector is risk-averse. It’s never had to operate in a true competitive environment,” says Pamela Starr, an analyst for the Eurasia Group, a consulting firm. “It’s operated with monopolies and oligopolies encouraged by the government.”…
The other part of the economy is usually called the “informal sector.” It consists of thousands of small firms — street vendors, stores, repair shops, tiny manufacturers — that theoretically aren’t legal, because they haven’t registered with the government and often don’t pay taxes or comply with regulations on wages and hiring and firing. Almost two-thirds of Mexico’s workers may be employed in the informal sector, according to one rough estimate by the International Monetary Fund.
The sector’s size might suggest great entrepreneurial vitality. The trouble is that these firms are virtually compelled to remain small and inefficient. Because they’re technically illegal, they can’t easily get bank loans and can’t grow too large without being forced to pay taxes or comply with government regulations.

Read the entire column.