The Peter Pan Syndrome: Why Mexican Firms Do Not Want to Grow Up The Economist
go to original May 17, 2014

In almost every town in Mexico, you will find at least one garish La Michoacana ice-cream parlour, or paleteria. The decor is generally pink, and the ice creams are a rainbow of colours. Flavours include rice pudding, chewing gum and avocado.

La Michoacana is a Mexican business success story, possibly as well known as Dunkin’ Donuts is in the United States. But it is not a corporation, nor a brand, nor a franchise. It is a confetti of independent, family-owned ice-cream parlours. To find its roots, you must travel to Tocumbo, a village in the south-western state of Michoacán, where, when your correspondent visited, the funeral was taking place of two youths beheaded by a drug gang the day before. Small consolation, perhaps, that the locals are so proud of their cemetery they say it is a “joy to die”.

Everything about Tocumbo, from the plush graves to the towering ice-cream monument as you enter the village, speaks to the wealth generated by La Michoacana ice creams since two villagers started peddling them in Mexico City, 500km (300 miles) away, more than 60 years ago. Over the decades, people from Tocumbo have set up ice-cream shops around Mexico (and even in America) and sent money home. Competition from global brands has increased, boosted by the proliferation of convenience stores, but La Michoacana stores mostly remain true to their past. They are the epitome of Mexican small businesses: not only independent and family-owned, but also tatty, with a few people behind the counter, working on and off the books.

They also epitomise Mexico’s stubborn attachment to smallness in business. Tocumbo’s elders have seen off all attempts to organise La Michoacana into something more structured and profitable. The OECD says Mexico has more businesses with ten workers or fewer, as a share of the total, than any other big economy in Latin America: 95.5%, compared with 80-90% in Argentina, Brazil and Chile. Manuel Molano of the Mexican Competitiveness Institute, a think-tank, calls this a “Peter Pan system” in which firms prefer to stay small than to grow, mostly because of tax and regulation. “It’s easier to fly under the radar when you are microscopic,” he says.

Read the rest at The Economist

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