In the early aughts, inspired by populists in Texas and the U.S. Southwest, Mexican officials joined with Wall Street execs to launch a high-flying and ambitious project aimed at providing low-cost residential housing for millions of lower-income Mexicans.
The goal was to lift hardworking yet struggling people out of sub-par structures, fulfilling the nation’s constitutional guarantee of “a dignified and decent” home for all. In support, the World Bank and Inter-American Development Bank agreed to pitch in over $2.8 billion dollars.
Things go sideways
According to a recent L.A. Times report, the project started to careen off the rails right after the balloons burst and the photo ops ended.
The Times team traveled to 50 affordable-housing sites all over Mexico, revealing a mind-boggling glimpse into the struggles of millions who invested their life savings in a project doomed to fail even before it began.
The Times reviewed thousands of pages of government and industry documents, and interviewed hundreds of homeowners, municipal leaders, housing experts, civil engineers, construction workers and government officials. Among other details, they discovered that most projects were built on marginal land — wetlands, riverbanks and unstable hillsides — often with scarce access to water and usually far from job markets. Zoning laws, they found, were terribly written, and approved with little or no review.
The dream, the nightmare
Several months after the grand opening and lofty promises about “housing for all”, private contractors started abandoning projects en mass. An exodus took place in every state, many leaving without finishing the plumbing or wiring. It seemed all pre-planned, just waiting to happen. Between 2005 and 2012, for example, contractors in the State of Mexico completed only 36 of 235 developments, leaving 200,000 to 500,000 people without lights, drainage or usable roads.
Where projects had been started, living conditions quickly eroded. “Rapid decay is evident at developments in or near every major city: Failed water systems. Unfinished electrical grids, wastewater systems and other infrastructure. Parks and schools that were promised but never materialized.”
In tract after tract, people started carrying flashlights to navigate pitch-black streets; burning garbage in vacant lots to fend off rats. The residents of one development, tucked in the barren foothills in Huehuetoca about 40 miles north of Mexico City, changed its name from “Santa Teresa” to “Santa Pobreza” (which means poverty).
“Elderly women stoop for water at curbside spigots. Children chase balls into the rubble of collapsed sidewalks. Raw sewage bubbles up from manholes.” “It’s like a war zone here,” said Jose Merin, Huehuetoca’s water system coordinator.
It started when the government, for lack of funds, failed to hire inspectors. From that point on, contractors skimped on asphalt – resulting in roads that were often pulverized by construction trucks. Faulty designs were hastily approved for storm drains by so-called engineers, resulting in curbs and sidewalks that washed away in heavy rain, turning streets into rivers.
Marco Lopez Silva, a civil engineer who researched the Mexican housing industry for the Inter-American Development Bank, claims that this systematic failure was repeated in projects all across the country.
In Tlajomulco, a suburb of Guadalajara, the current mayor claims that his predecessor had approved permits for blatantly inadequate well water infrastructure that currently affects over 300,000 people – and walked away with millions in siphoned funds. He’s currently on the lamb, living comfortably in Panama or Miami. In the meantime, tens of thousands of families now receive water just once every two days.
“It was a world of corruption,” said the mayor, who was swept in by voters sick of the same old sickening combination of graft and incompetence. Huge sums vanished, projects were abandoned, shell companies went belly up, materials disappeared – or were replaced by shoddy substitutes. Funds were siphoned. To date, hundreds of millions in construction bonds issued for repairs and infrastructure remain unaccounted for.
In March, the U.S. SEC accused Homex, once Mexico’s biggest developer, of reporting “fake” sales of 100,000 homes, inflating revenues by $3.3 billion. It is believed to be the largest fraud in Mexican history.
But it wasn’t just Homex; it was everyone.
Freebies for the well-connected
How can fraud of such magnitude go on for so long? And why is it being ignored by Mexican politicians and media? The answer is a’blowing in the halls of Congress, the Tribunals and Commissions that “regulate” Mexican affairs.
To date, not a single hearing or fact-finding commission has been summoned. Pablo Rodriguez Mendez, a city official, likens the housing crisis to a natural disaster. “We have emergency plans for hurricanes, but we have nothing to deal with massive housing failure,” he said.
The only ones to raise a voice, the homeowner associations, have been met with violence and repression. Some have even been bought off. “Residents of blighted developments have marched on city halls, blocked highways, pelted sales offices with rocks, held sales agents hostage, even set fire to model homes”. The government and constructors have yet to respond.
Mexico’s leading homeowner leader was imprisoned for 2 years without trial on trumped-up armed robbery charges – even though the charges were thrown out by several judges.
A Reckoning? Don’t bet the farm.
Thanks to the LA Times, this crisis has come to light. But what will happen to those implicated? Because on the face of it, everybody colluded: the contractors, the landowners, agency heads, inspectors, engineers, attorneys, real estate brokers. All a scam. Corrupt politicians stepping onto podium after podium, preaching the gospel of universal housing. What will happen to these people? What will happen to the system that produced these people?
Mexican officials may skirt unflattering media attention for a few days but that’s a small price to pay. For the millions now saddled with mortgages, things look very different.
Despite the joint government-and-contractor failure to pull off their end, home buyers still get 25% of a typical worker’s salary deducted from their paychecks. The only way many can escape debt is to quit their jobs and work in the underground economy.
“The federal government assumed officials would do their job at the municipal level. That they would have attorneys to review the construction bonds,” said one government official. “They assumed people would make good decisions. All of that failed.’