185. Should the U.S. Merge With Mexico?

[0] If you've been paying even a little bit of attention in the news lately, you will have noticed a worldwide trend.

[1] You might call it independence fever.

[2] The polls have closed in Scotland, and the vote over independence went down to the wire closer than a lot of people imagined.

[3] And a plan to split California in six different states is one step closer to a vote this morning.

[4] Hundreds of thousands of people gathered in Barcelona to demand the right to vote on independence from Spain.

[5] Now, Catalonia is not alone in the United States.

[6] battlefield for sovereignty.

[7] Another Spanish region, the Basque country, is also seeking a referendum on independence.

[8] In Iraq, the president of the country's autonomous Kurdish North has asked the regional parliament to prepare for a referendum on independence.

[9] But, while countries are threatening to break apart, companies are moving in the opposite direction.

[10] US fast food giant Burger King is in merger talks with Canadian coffee and donut chain, Tim Hortens.

[11] If the deal goes through, It will create the world's third largest fast food chain.

[12] Dollar General has gone hostile and it's been to buy rival family dollar.

[13] America's two biggest cable companies announced a $45 billion merger.

[14] Three of the four largest German deals ever have happened in 2014.

[15] And we've seen $61 billion worth of German companies buying U .S. companies this year.

[16] But here we are again.

[17] And it's just another example of an M &A frenzy.

[18] Is it really a frenzy?

[19] We've had three multi -billion -dollar deals just in the last week.

[20] I see a lot of cross -border deals.

[21] Yeah, it's a frenzy.

[22] You know that voice, don't you?

[23] Yep, I'm Jim Kramer, and I'm the host of Mad Money with Jim Kramer, the co -host of Squawk on the Street, and I'm also the markets commentator for the street .com.

[24] We had Kramer on the line because we had a question.

[25] If all this consolidation is good enough for companies, why not for countries?

[26] That is, rather than independence fee, Why not merger fever?

[27] This came from a listener named Dan Warner recently sent us an email.

[28] He wrote, I was lying awake last night thinking about what might happen if the U .S. somehow incorporated Mexico.

[29] I'm not talking about waging war and taking over, but rather a mutually beneficial merger.

[30] Now, last year, Jim, you said, quote, I think Mexico is a great buy.

[31] I believe you're talking about a Mexican index fund, maybe some individual stocks, but I wonder, Jim, if that goes, for Mexican stocks, do you think it might go for Mexico as a whole?

[32] Do you think maybe we Americans should think about acquiring Mexico?

[33] Well, I think that we're, if currency matters, yes, we ought to.

[34] The dollar's way too strong at 13 pesos.

[35] Do we make that acquisition?

[36] Then I think our gross domestic product goes up.

[37] Our workforce will be, I'd say, energized, and there's a country with tremendous natural resources that we've been able to exploit, I sure wish we'd do it.

[38] And what if there were a stock offering for this merger, for this new conglomerate called a Mexico or maybe Mexamerica?

[39] Look, that IPO I want everyone in, and I'm willing to pay 20 % above the price talk because I think people are short -selling Mexico because they think it is just a place where you just have lawlessness.

[40] They've not been to Mexico.

[41] They don't realize the immediate premium this deal is going to go to.

[42] I want in that deal.

[43] And I'm also going to buy in the aftermarket after it comes public.

[44] From WNYC, this is Freakonomics Radio, the podcast that explores the hidden side of everything.

[45] Here's your host, Stephen Dubner.

[46] So not that this will happen, but what if the U .S. and Mexico were to merge?

[47] There is, of course, some relevant history to examine.

[48] You may recall the Mexican -American War in the 1840s, the U .S. won, and under the U .S. won, and under the terms of the Treaty of Guadalupe Idalgo, Mexico turned over more than half its territory.

[49] This includes what is now California, Nevada, and Utah, as well as parts of New Mexico, Wyoming, Arizona, Colorado, and Texas, which itself had earlier seceded from Mexico, but parts of Texas were still disputed at the time of the war.

[50] The treaty called for the U .S. to compensate Mexico $15 million for all this property.

[51] Adjusted for inflation, that's roughly $400 million current dollars, which means the U .S. got all that land for less money than it cost to make the movie Avatar.

[52] Now, granted, Mexico didn't have much bargaining power.

[53] It had just lost a war.

[54] So this wasn't so much a merger as a hostile takeover.

[55] But what about this idea of a more modern, more win -win merger between the U .S. and Mexico?

[56] Jim Kramer already owned some property there.

[57] If someone said to you, viewer, hey, I'm going to go buy houses in Mexico, you might think that you were a little crazy.

[58] Totally insane.

[59] Okay.

[60] Well, I did a real estate deal, yes.

[61] I have some property in Mexico.

[62] It's San Miguel Danday.

[63] And San Miguel's got to be one of the nicest places I've ever been in.

[64] Kramer loves San Miguel so much that when he opened a Mexican restaurant in Brooklyn, guess what he named it?

[65] We're here at Bar, San Miguel, the latest Mexican restaurant to hit Carol Gardens, Brooklyn, also known as the latest investment by Jim Kramer.

[66] Jim, thanks so much for having us here.

[67] Brittany, I'm glad you're here.

[68] I'm glad you're.

[69] Well, cheers.

[70] So Jim Kramer is pretty much a Mexico fanboy, which you'd already know if you watch them on CNBC.

[71] When you take a global view, all right, things stagnant.

[72] But there are still some bright spots out there.

[73] And believe it or not, one of the brightest is Mexico.

[74] That's right.

[75] Mexico has been getting its act together.

[76] Tonight we're moving on to another country that's kicking butt in the World Cup, the great, land of Mexico.

[77] And the Mexican auto business, wow, it is on fire.

[78] Think Corona, Medello, Pacifico, which is, by the way, my favorite.

[79] Holy cow, me and guacamole.

[80] Oh, geez, you know, I can't suspend guacamole.

[81] Can't you?

[82] Exactly.

[83] Here's the bottom line.

[84] There are still countries that are in great shape.

[85] And Mexico, despite all that publicity about the gangs and the terror, I got to tell you some.

[86] Mexico's in the better shape than almost every country on earth.

[87] Okay, you get the picture?

[88] That's why we went to Kramer with our proposal.

[89] Let's pretend for a minute that you, Jim Kramer, are representing the U .S. in this takeover, merger, effort, whatever you want to call it, and that you're sitting down, talk to Mexican President Nieto and maybe the Mexican Congress.

[90] Let's hear your pitch on why this could be a good idea.

[91] I mean, the basic rule of economic transactions are transactions happen when they're good for all parts.

[92] parties involved.

[93] So let's hear you describe why this merger could really lift all boats, Mexican and American.

[94] Well, first I'd start out with some bona fides.

[95] I own a lot of land in San Miguel Diende, which is in the center of the country, yeah, Guano Alto State.

[96] I also own a Mexican restaurant where I'm trying to make a deal right now to import mescal and tequila.

[97] So I regard myself as a friend of Mexico, not as an imperialist that wants very much to take the country over.

[98] My experience is Mexico twofold.

[99] One, it's got the best health care system I've come across because it's not tied into worker employment.

[100] So that would be something that we could import.

[101] Second, the workforce is remarkable.

[102] And since many of our cars and the Toyota and the BMW are being made there, I'd like to bring that manufacturing back to the United States.

[103] The way you would do that is to incorporate with Mexico.

[104] In the interim, Mexico's phenomenal, phenomenal resources have not been able to be exploited because the government has been dealing with entrenched interests.

[105] We can come in and change that dramatically because suddenly Exxon's a Mexican company.

[106] Natural resources, by the way, have always been linked with great powers.

[107] Our natural resources would be so bountiful if Mexico and United States were joined that I think you'd recognize that we are once again going to be a continental powerhouse.

[108] We could learn a lot from Mexico.

[109] Geez, I think it's a great country.

[110] Talk for a minute about what a merger would do for the American immigration issue and how much of that issue is really Mexico.

[111] Well, I think actually the Mexican immigration has died down.

[112] I think there are a lot of other countries in Latin America that have used Mexico as a bit of a cut through.

[113] But I just think, I don't know, maybe because I'm partial because I go to Mexico so many times during the year, I think that what would happen is that we would have an influx of workers who work so hard that it would actually drive down.

[114] U .S. wages.

[115] So I think that what people would be afraid of in our country is the importing of the deflation of the labor force.

[116] But at the same time, of course, I believe the labor force in Mexico, they'd be paid more given the fact that there is a minimum wage that is certainly in our country double what I see many Mexicans make.

[117] That would be a boon for Mexico.

[118] So Jim Kramer likes the idea of some kind of Mexico -U

[119].S.

[120] merger,

[121] which