Remarks by Angel Gurría
8 January 2018, Mexico City, Mexico
(As prepared for delivery)
Minister, Ambassadors and Consuls, Members of the Foreign Service, Governors, Legislators, Ladies and Gentlemen:
It is a great pleasure to be back here at the Meeting of Ambassadors and Consuls of the Ministry of Foreign Relations, especially at this defining time for Mexico. A time when our country is undergoing profound change: change in the geopolitical and geo-economic parameters of North and Latin America; changes in the national political fabric following one of the broadest, most plural electoral processes in our history; changes that are being wrought at an ever more rapid pace in the increasingly digital and interactive community that is Mexican society.
What view do those of us on the outside have of Mexico? Allow me to share how things look from the OECD’s vantage point. I shall describe my view of Mexico in terms of six focal points that I regard as crucial to our country’s development.
Let’s start with the good news. The Mexican economy is continuing to grow. Economic activity grew by 2.4% in 2017 (above the OECD figure of 1.8%) and will continue growing by more than 2% in 2018. And on into 2019 too. Nevertheless, that growth rate is not enough to reduce poverty and generate the jobs that our young people need. We must do better. Properly implemented, structural reform could add another percentage point to the rate. Monetary policy is sound, and Mexico’s fiscal performance is improving. The 2014 fiscal reforms have increased non-petroleum revenue and bettered the redistributive capacity of the fiscal system. However, we must further reduce our dependence on oil and increase our tax collection, which is among the lowest in the world as a proportion of GDP; we must further bolster the redistributive capacity of the fiscal system, and we must improve skills in budget planning and expenditure at state and municipal level.
Progress is also being made in terms of microeconomics. SMEs are at the heart of Mexico’s Productivity Democratization Programme. The National Institute of the Entrepreneur (INADEM) is improving the coherence and effectiveness of policies for SMEs. Red tape has been cut significantly (by up to 36%), and legislative changes have been encouraged that will make it easier and cheaper to close businesses down. However, much remains to be done to improve the funding of SMEs, their internationalization and their integration into global value chains. Mexico has a major opportunity to encourage this agenda at the next OECD SME Ministerial Conference to be held here in the Federal District on 22 and 23 February, and I call on you to help us promote it. This is essential because Mexico’s productivity continues to be low – in fact, our country has the lowest levels of labour productivity within SMEs in the OECD. Indeed, labour productivity in Mexico compared to that of the US fell from 40% in 1991 to 29% in 2016.
Mexico has cut extreme poverty by beefing up its social programmes, yet levels of poverty remain high – close to 44% of the population is affected (more than 53 million people). And some aspects of deprivation and vulnerabilities affect an even larger number. According to the OECD report “Latin American Economic Outlook 2018”, seven out of ten Mexicans are poor or vulnerable. Mexico is also the OECD country with the greatest inequalities: the average income of the richest 10% is 20 times higher than that of the poorest 10% (more than double the OECD average).
As noted in the OECD Review of Mexico’s Poverty Reduction Strategy (to be published shortly), it is therefore essential to conduct an in-depth review of the effectiveness of poverty reduction and social programmes (at federal, state and municipal levels), which number more than 5 000 in all. It is also important to increase social spending – the figure for Mexico is among the lowest in the OECD as a percentage of GDP, and the lowest of all countries for labour activation programmes. At the same time, it is vital to press forward with the implementation of the Education Reforms, the Skills Strategy, and measures to achieve greater inclusion and gender equality. Moreover, the review urges us, as a matter of utmost priority, to adopt a national strategy to reduce informality.
Mexico is one of the largest and most open economies in the world. Exports of Mexican manufactures are growing at close to 9%, while inflows of foreign direct investment to the country in the first half of 2017 also rose by close to 9% compared to the same period in the previous year, despite the ECLAC forecast of a 5% drop in FDI flows to Latin America. As well as in the thick of the NAFTA renegotiations.
Mexico has built one of the world’s largest networks of FTAs, has significantly cut its barriers to trade and investment, and improved its business climate. However, we must step up the pace in order to increase our levels of productivity; open up other sectors such as air and land transport; improve the national infrastructure and logistics; encourage the integration of SMEs into global value chains; and diversify, diversify, diversify.
The Government of Mexico has impressed the world with the launch of a reform package without precedent in the OECD; it has made significant progress on regulatory improvement and tops the OECD’s list of most improved countries; it has developed high standards in Open Government Data. It has also significantly enhanced public procurement processes and taken important measures to improve work to combat corruption by making the National Anti-Corruption System (SNA) operational and publishing the General Law on Administrative Liabilities. It has also increased women’s participation in the Congress, and indeed holds the top ranking in the OECD on that point.
Despite this, Mexico is the OECD country where satisfaction with Government is the lowest. Only 28% of the public trust the Government (42% in the OECD), while 70% of the population thinks that corruption within it continues to be common practice. Much remains to be done in this field. It is a matter of urgency to implement the pending nominations to key positions in the SNA, especially the Anticorruption Prosecutor; to continue to promote profound reform in the rule of law and the judicial system; and to work ever more with state and municipal governments to help them with their reforms and build their capacities. The OECD is providing assistance in the form of Integrity Studies examining the Federal Government and state governments including those of the Federal District, Coahuila and Nuevo León. We are also working with the Secretary of the Civil Service on an Action Plan to implement the recommendations of the OECD Integrity Survey in Mexico. But we must step up the pace.
One key aspect in Mexico’s economic development is its connection to the digital world. It is key to competitiveness, productivity, innovation, entrepreneurship and inclusion. As a result of the Telecommunications Reform, prices for broadband mobile services have fallen by up to 75%, and the number of subscribers has risen by 50 million. Today, close to 100 000 public spaces, schools and hospitals have free Internet access. But much remains to be done. Most Mexican homes still do not have an Internet connection (only 47%, compared to the OECD average of 83%), and there are still stark differences between the various regions in the quality and accessibility of Internet services.
In order to fully enter the digital era, Mexico must continue to strengthen the institutional structure that has emerged as a result of the reform, especially the autonomy of the Federal Telecommunications Institute (IFT); it must more clearly define the powers of the Federal Commission on Economic Competition, the Office of the Federal Prosecutor for the Consumer (PROFECO) and the IFT; it must strengthen and update the National Digital Strategy by putting indicators and clear timelines in place for the various programmes within the Strategy; and, above all, it must not backtrack on the changes introduced under the reform.
Finally, the environmental aspect. Mexico has made very significant progress in combating climate change. It was the first emerging country to decide on its contribution and did so even before COP21; it confirmed its clean energy objective in the Energy Transition Law in 2015; it ratified the Paris Agreement in September 2016, and took on a challenging programme to reduce emissions by 2030. The country has also taken important measures to protect its mega-biodiversity with 182 National Protected Areas (ANPs). The recently created Revillagigedo Archipelago National Park, North America’s largest marine reserve, sets an example to the world.
But here, too, much remains to be done. Emissions in the energy and transport sectors continue to grow rapidly. Mexico must increase the rates of the new carbon tax and make sure that they reflect the carbon content of fuels. On biodiversity, it is important to strengthen the institutional framework for multisectoral management of the biodiversity protection programmes by putting a cross-ministerial coordination mechanism in place. It is also vital to reform government aids that are harmful to the environment in sectors such as agriculture and fisheries. The OECD stands ready to support these efforts.
This is how we in the OECD view Mexico. We see a vibrant country in the midst of transition, a transformation that is complicated by the difficulties experienced in casting the old ways aside. We see an open country that is integrated into the international economy, but also profoundly unequal, with extensive sectors alienated from the modern world. A country with a hard-working, optimistic population who are full of hope and have important values, but also a country with very low wages, huge inequalities and high levels of informality, poor skills and low productivity. A country of huge riches and huge deprivation; a country of talent and inventiveness, but one that still has major education gaps.
These contradictions describe us and constrain us, they hold us back and push us into action. The work must go on. Efforts must be redoubled. We must continue to tell the world about our complex nature abounding in opportunity. We must continue to ensure that Mexico draws on best international practice and, in turn, contributes its own best practice to the world. What better team to achieve this could there be but you, our Foreign Service, which I am proud to have led, and to which I largely owe my election as OECD Secretary-General.
Let us continue to work together for a stronger, more inclusive and more sustainable Mexico. You can count on the OECD! Thank you very much.