NPR is running a story today on the informal sector in Mexico. There are some interesting insights into the daily life of street vendors. Consider, for example, Porfirio Salinas, who modified his bicycle so that he is able to provide city residents a knife-sharpening service. He tells about some difficulties of being informal:
“If I want to get a loan from a bank, I can’t because I don’t have the right documents,” he says. “People who have businesses and own homes they have access to the bank’s money but us street people… I have nothing of value.”
Not a big deal, some may say, if a street vendor can’t get a bank loan to expand his business. For one street vendor, it may be so, but consider the magnitude of the problem [emphasis mine]:
An estimated half of all jobs in Mexico City come from the informal economy.
Half of the employers or the employed, depending on how you look at these entrepreneurs, not having access to the finances and being forced to resort to informal sector borrowing through friends, family, neighbors, and street loan networks?! I can’t even begin to think of the potential impact of reaching out to these street vendors and setting up a formal financial network. Maybe some initiatives are underway in Mexico to do just that.
Of course, extending loans to street vendors is only part of the solution. There is another side, abundant with questions such as – why so many street vendors do not have the proper papers; why do they operate in the informal economy in the first place; and how can the informal sector be formalized? Answering questions such as these can provide some insights into developing programs to complement loan initiatives; with the ultimate goal of supporting the private sector, securing economic freedoms of individual citizens, and finding a path to sustainable economic growth.
Consider also Jose Luis Hernandez, a junk trader, who, essentially, provides some recycling services for the city by running his own street operation.
“I take paper, plastic, glass, and metal,” he says. “It’s all recycled. Nothing is wasted, everything is reused.”
I wonder, how many are there like him and what kind of an impact they have in providing what can be called a public service. We’ve all heard about private solutions to public problems in the context of private sector performing services more efficiently than governments. Jose Luis Hernandez gives a whole new meaning to this notion, by adding street vendors, not just firms in their traditional sense, into the mix. Now, if only these vendors would have greater opportunities to grow and expand their business operations…
Published Date: June 13, 2006