Category Archives: News brief

LESSONS FROM MEXICAN ECONOMIC REFORMS.

John Kehoe, from the Australian Financial Review, published today an op-ed on the economic reforms undertaken by Mexican President Peña Nieto.  Kehoe highlights the political agreement reached among the three major parties (PRI, PAN, PRD) that have enable the current administration to pass the much needed reforms (previous post). Despite outstanding challenges to overcome, such as violence and corruption, Mexico earned ‘A’ grade sovereign rate from Moody’s credit rating agency as a result of such reforms.

 

Kehoe further notes Australian Treasurer Joe Hockey comments, on Mexico’s efforts to undertake domestic reforms to cope with global volatility. Last weekend in Sydney, G20 Finance Ministers and Central Bank Governors committed to promote a resilient financial system and to foster a conducive investment environment. The author concludes that Mexico, along with other developing countries, is in a much better position to fulfill the G20 commitments.

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Filed under Foreign investment, Global Governance, Macroeconomics, Mexico, News brief, Uncategorized

Peña Nieto on the front cover of TIME magazine

TIME EPN

Last 16 February, Mexican President Enrique Peña Nieto made the front cover of TIME magazine. This issue spark off a heated debated in social media in Mexico, criticising Michael Crowley, the author, and TIME for allegedly “selling out” themselves to the Peña Nieto government.

As Crowley rightly points out, Peña Nieto only won the presidential election with 38% of the votes and therefore it is evident that his detractors react this way. I agree that perhaps the title of the story would have been better with an interrogation mark at the end: “SAVING MEXICO?”, but I must concede that the author presents both sides of the same coin. He highlights achievements and strengths of the country, but also points out the numerous challenges that the current government still has to overcome.

At the same time, I must recognise the sharp Mexican humor to transform the cover into this one.

In any case, I strongly invite you to read the article (or Spanish version) and make your own judgement.

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Filed under Corruption, Democracy, Development, Foreign investment, Macroeconomics, Mexico, News brief, Security, Uncategorized

AFTER THE FIRST YEAR….

ImageMexico’s President Enrique Peña Nieto (EPN) used his first state-of-the-nation address to present the achievements of the government during the first few months of his mandate. He praised the members of parliament for their support and diligent approval of the reforms that his administration launched. He emphasised the importance of setting the basis to end the inertia and transform Mexico in the great nation that it is. Peña Nieto and his supporters believe that Mexico has the potential to improve in few years the quality of life of all Mexicans.

The Mexican President enounced the outcomes and progress in each of the five axes of the National Plan for Development 2013-2018 (launched at the beginning of his term in office): 1) Mexico in peace; 2) social inclusion; 3) education with quality; 4) economic prosperity; and 5) Mexico as a responsible global actor.  Firstly, he highlighted the decrease on the number of murders, the improved coordination between the law enforcement agencies and the reform of the judicial system. Then, Peña Nieto described the results of social programs, especially the National Crusade against Hunger, the expansion of Oportunidades and the addition of scholarships in the program and the inclusion of gender perspective in all government programs. In terms of education, the Mexican President affirmed that the education reform will produce better facilities, better teachers, better access to computers, internet and teaching technologies and improved facilities for students.

Moreover, he pointed out that the constitutional reforms proposed by his government aim to improve productivity, promote economic growth and create jobs. The current administration considers that it is necessary to lay the legal and institutional foundations that will support the country’s sustainable growth in following decades. In this regard, the private sector commended the government’s actions and noted that benefits from macroeconomic stability are already showing; for instance, Mexico climbed to the 7th position as recipient of foreign direct investment (FDI), only in the first semester of 2013 Mexico received USD$24 million on FDI. The chair of COPARMEX (Mexican Patron’s Confederation) indicated that even when the government has promoted larger efforts against organised crime, it is still necessary to offer more certainty to investors.

Great speculation emerged after the announcement of the energy reform. PEMEX (Petróleos Mexicanos, state-owned oil company) is a symbol of pride and any discussion around it touches the deepest fibres of Mexican nationalism, but the company has become so obsolete and inefficient that its production is constantly decreasing. Without private investment PEMEX is incapable to exploit the rich oil and gas reserves that the country owns. Foreign companies warmly welcomed the reform, since it represents great investment opportunities; for the US, especially, could mean less dependency on OPEC countries supply and therefore less leverage for the cartel. But in the domestic realm, private foreign investment has brought a big debate; detractors believe that it will put the nation’s wealth in the hands of imperialists interests and only very few will see the benefits. Cuauhtémoc Cárdenas (leader of leftist party PRD) and Andrés Manuel López Obrador (AMLO, leader of leftist movement MORENA) have separately called for massive public protests against the reform.

Additionally to the energy sector, Mexico needs to reform the tax system. This will not only decrease the burden on PEMEX, but also will bring sounder fiscal policies, transparency and greater competitiveness to private companies. Among OECD members, Mexico is the country with the smallest proportion of tax collection (it is equivalent to only 10% of GDP, while the average is 25%). Additionally, Peña Nieto announced that in brief his government will submit to Congress a proposal to reform the financial system, which will intend to make funding cheaper and more accessible for micro, small and medium enterprises. This set of structural reforms is designed to create the conditions for a more competitive, productive and dynamic economic environment that attracts larger sums of foreign investment and encourages the creation of more jobs.

Finally, EPN mentioned that Mexico has promoted closer and deeper bonds with its neighbours. With the US, the Mexican government established an integral agenda with the aim to create the most productive region of the world. In the southern border, Mexico finalised a free trade agreement (TLC Unico) with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua and it is negotiating another one with Panama.  Although, Peña Nieto’s administration is promoting more exchanges with Asia-Pacifico and his government wants to encourage larger integration of the Pacific Alliance (Chile, Colombia, Mexico and Peru) and the TPP to take advantage of synergies across the Pacific, its closer neighbours are the main focus of its foreign policy.

Denise Dresser and Lorenzo Meyer, political analysts, commented that Peña Nieto had opened too many fronts with the series of constitutional reforms promoted in Congress. The analysts gave particular attention to the impact of the energy sector reform on PEMEX and CFE (state-owned enterprises for oil and electricity production and distribution), as well as, on the state revenue. It is still necessary to pass complementary bills and then to implement them all, which in reality will take quite a few years to produce results and to spill the benefits down to the masses. To sum up, Peña Nieto presented a large number of actions initiated by his government, but the results are still to be produced…. Will Peña Nieto’s have sufficient political leverage to achieve these objectives? Will the Pacto por Mexico coalition hold together for the next five years?  It seems that the honeymoon is over.

If you wish to consult the full state-of-the -nation document, please click here.

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by | September 4, 2013 · 10:47 am

Aztec tiger begins to sharpen its claws

The Financial Times published an interesting article on Mexico’s economic environment. It highlights the prudent fiscal and monetary policies that the country has implemented recently, creating a sound macroeconomic environment.

Furthermore, the journalist underlines the structural reforms that President Peña Nieto was able to promote, as a result of the pact established with the main political forces of the country. Mexico is in the track of industrialisation, but still has a long way to go. Peña Nieto’s government needs to capitalize the momentum and continue further with other important reforms, such as the energy sector and tax schemes.

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Filed under Foreign investment, Macroeconomics, Mexico, News brief, Trade, Uncategorized

‘RELAUNCHING’ CHINA-MEXICO RELATIONS: President Xi Jinping visit to Mexico

china-mexico-notimex

Last week, Chinese President Xi Jinping visited Mexico, as part of his first trip to the Americas. Earlier this year, during a trip to China to participate in the Boao Forum for Asia, President Peña Nieto extended an invitation to the Chinese President to visit Mexico. China and Mexico established diplomatic relations in 1972, but bilateral contacts are much older than that. In the XVIth Century, during the Spanish colony ships sailed the Pacific loaded with precious metals, cacao grains, avocados, tomatoes and other articles from the Americas that were exchanged for Asian spices, Chinese tea, porcelain and fabrics, especially silk.

For most of the last 40 years, the relations between the countries were quite cordial, during the last ten years. However, diplomatic mishaps and a policy that sought to bring Mexico closer to the US, during the Fox and Calderon administrations, provoked the Mexican neglect of strategic partners in other parts of the world, and in particular in Asia. Despite regular high-level encounters in international fora, such as APEC or G20, and the signing of cooperation agreements in numerous sectors, trade rivalry overshadowed  Sino-Mexican bilateral relations.

Unlike the rest of Latin-America, the economic relationship with Mexico has not been based on Chinese investment to ensure the flow of raw materials to fuel China’s industry. In fact, cheap Chinese labour made Mexico and China direct competitors in the US market;  in some cases, Chinese manufactures displaced national production in the Mexican domestic market. Furthermore, the bilateral trade deficit is heavily favorable to China; in 2012 Chinese exports to Mexico accounted for USD$57 billion, while Mexican exports to China were USD$5.7  billion (according to the Mexican Ministry of Trade, www.economia.gob.mx).

The occasion to relaunch the bilateral relationship could not be better. Each President has recently taken office and both countries seek to reaffirm their positions as global actors. On the domestic side, President Peña Nieto’s administration started a series of structural reforms to increase economic productivity, while China seeks to maintain its economic momentum. The increase of Chinese wages and international oil prices has narrowed down the productivity gap between Chinese and Mexican products. China’s products are not as cheap as they used to, in some cases, it is cheaper and certainly quicker to import from Mexico than from China for US companies. These elements helped Mexico to leave aside fears and realise the economic potential of complementing, rather than competing with, Chinese partners.

With the aims to enhance mutual trust, expand cooperation and deepen friendship, Peña Nieto and Xi Jinping announced the Comprehensive Strategic Partnership. This agreement aims to push for comprehensive, in-depth and mutual cooperation between the two countries and to make positive contributions to world peace, stability and prosperity. A permanent bilateral commission and working groups will follow the commitments established in the Partnership by the leaders.

Likewise, the two Presidents agreed to move forward, solving the long standing conflicts on pork, tequila and textiles trade. They committed to increase trade and investment and established a high-level business forum. Mexico and China also signed memoranda of understanding to improve cooperation in energy, biotechnology, mining, financial services and sport.

Additionally, President Peña Nieto and President Xi Jinping will encourage deeper people-to-people links. To start, the Chinese government will increase the number of scholarships offered to Mexican students from 40 to 300 per year. To increase cultural and academic exchanges, a Mexican cultural centre in Beijing and a centre specialising on Chinese studies in the National Autonomous University of Mexico (UNAM) will be opened. Finally, as symbol of the two countries’ endeavours to boost tourism flows, during the last day of the visit, President Xi Jinping and his wife visited the archaeological site of Chichen-Itza.

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Some specialists point out that the Chinese visit to Latin America is a sign to the US. China is pointing out that it has interests in other parts of the world, and is not afraid to contest US hegemony, even in the its back yard. Similarly, the US could interpret the visit as a payback for the recent increase in US engagement in Asia, China’s back yard. In any case, this is a perfect environment for Mexico’s diversification, since it could help to break the Mexican trade dependency on the US and to reaffirm itself as a key global player.

As said by President Xi Jiping in his address to the Mexican Senate*, China has a population of 1,300 million, is the second largest importer, expects to invest overseas more than USD$500, and more than 400 million of Chinese tourists will travel around the world in the next few years. This is an incredible opportunity for countries in Latin America, and of course for Mexico. The Comprehensive Strategic Partnership has opened the path for a promising future for Sino-Mexican relations.

 Mexico cannot waste this opportunity…


* I do encourage you to read President Xi Jinping’s speech to the Mexican Senate.

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Filed under BRICS, Development, Foreign investment, Mexico, News brief, Trade, Uncategorized

WEF Latin America 2013

WEF

Since yesterday, more than 400 personalities, including heads of states and representatives from the private sector, academia and civil society, are gathered in the Peruvian capital, Lima, to participate in the 2013 World Economic Forum (WEF) Latin America. They will  discuss about challenges and  opportunities around the topic of “delivering growth and strengthening societies”.  Latin America has registered constant rates of economic growth in recent years.  However, there are big challenges ahead in terms of inequality and exclusion, and especially insecurity.

The program of the  event is organised around the following three pillars:

1) Modernizing economies for growth.

2) Strengthening society through innovation.

3) Building resilience for sustainable development.

Follow live panel discussions on: http://www.wto.org/english/thewto_e/dg_e/dg_selection_process_e.htm

Program:  http://www.weforum.org/events/world-economic-forum-latin-america-2013/programme

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Filed under Development, News brief, Security

Washington’s view of Brazil’s rise

One of Brazil’s most prescient foreign policy observers and analysts — Professor Matias Spektor from the Fundação Getulio Vargas university in Rio de Janeiro — has spent the last few weeks talking to policy-makers in Washington about Brazil’s rise. As Spektor explains in his latest column for the newspaper Folha de São Paulo, there is generally a favourable attitude in Washington to Brazil’s international rise, but tempered with four main concerns:

  1. While Brazil’s activism has put it on the international map, there are worries that this has come at the cost of questionable or even negative impacts on Brazil’s core issues — Mercosul, Unasul, G20, the WTO and the UN Security Council;
  2. Concrete investment in foreign policy resources is not keeping up with official ambitions. Observers in Washington do not understand why Brazil keeps opening embassies in Africa and the Caribbean when it lacks the personnel to staff them;
  3. Brazil is running into major resistance in its own neighbourhood and diplomatic investments in South America are not helping with Brazil’s wider ambitions;
  4. Brazil is actively advocating a world less controlled by the North Atlantic with a greater role for emerging countries, but it is not offering a practical vision for how this would work.

Spektor’s comments fit neatly into the debate currently going on under the surface in Brasília. Diplomats at Itamaraty continue to ring-fence foreign policy as a private preserve for their department. Political guidance remains weak with officials very reluctant to press president Dilma Rousseff for additional resources unless their project involves China or the BRICs. Moreover, traditional attitudes of ‘not wanting to impose’, which translates in practical terms into not wanting to absorb the costs of leading predominate. The bottom line appears to be that Brazil has arrived at the main decision tables of global governance, but having achieved its seat now needs to sort out what it wants to do. As Spektor notes, for Washington Brazil’s rise is welcome. It is just that there is uncertainty in what it will mean and if it will last without a clear vision in Brasília and concrete resources to back ambitions.

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Filed under Brazil, Foreign Policy / Diplomacy, News brief