Economic surveys and country surveillance

Economic survey of Mexico 2007: Executive summary

 

Contents | How to obtain this publication | Additional info

The following is the Executive summary of the OECD assessment and recommendations, taken from the Economic survey of Mexico, published on 4 October 2007.

 

Click here to read the addendum to the Economic Survey of Mexico 2007.

 

Contents                                                                                                                                          

Over the past decade, Mexico has made significant progress towards macroeconomic stability and has launched important structural reforms to further open the economy to trade and investment and improve the functioning of markets for goods and services as well as to develop the financial sector. These efforts have yielded relatively good performance. After a strong 2006, output growth is expected to be close to potential, between 3½ and 4% over the next two years. Potential GDP growth, however, is much too low to bridge the wide gap in living standards with wealthier OECD countries and tackle the still widespread poverty. To move the economy onto a higher and sustainable growth path, a renewed effort at reform on a broad front is required.

Strengthening public finances remains a priority

The fiscal position is good, and the 2006 Budget and Fiscal Responsibility Law has contributed to further strengthening the fiscal framework. However, the underlying situation of public finances is not yet comfortable given the heavy reliance of the budget on uncertain oil revenue. Measures aimed at increasing public spending efficiency are necessary. But a far reaching tax reform also remains a priority to increase resources for supporting essential spending needs. Moreover, fiscal relations across levels of government should be reviewed to strengthen sub national governments’ accountability. The Mexican Government recently submitted to Congress a comprehensive public finance reform which would imply significant progress if approved.

Further international trade and investment liberalisation together with regulatory reforms are required

Mexico has undertaken substantial trade reforms, including regional trade agreements with many countries, and tariffs vis-à-vis other countries have been reduced although they remain above levels prevailing in the OECD. Further tariff reduction would likely bring substantial gains since it would create new opportunities for firms to access competitive inputs and much needed technologies. It is also important to reduce non tariff barriers, including inefficient customs procedures and irksome technical requirements, which hamper trade flows. Likewise, there is scope to ease restrictions on foreign direct investment, in particular in telecommunications, domestic land transport, coastal shipping and airports.

Mexico also needs stronger competition and better regulation to boost productivity and growth

Significant progress has already been made, but there is scope to improve regulations and the enforcement of competition policy. Competition in postal services, natural gas and electricity is still hampered by unduly restrictive regulations. In airports, railways and telecommunications, adequate regulations for access pricing to key facilities are required to encourage the entry of new participants and enhance their ability to compete. The sector regulators do not always have sufficient authority to be effective. Finally, the enforcement of competition policy and sector regulations is often hindered by time consuming litigation.

Labour market and social policies have an important role to play

Open unemployment is low, but many workers are engaged in low-productivity and unrewarding jobs. A review of the tax benefit package is required, in particular to improve the efficiency and reliability of social security services. This would contribute to strengthening incentives to work in the formal economy, especially for low-paid workers. A better balance should also be found between labour market flexibility and worker protection in case of job loss. Moreover, stronger coordination between labour and social policies, as well as greater efforts to enhance human capital, are needed to effectively assist the most vulnerable individuals and pull people out of the poverty trap.

 

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.

Una versión para imprimir de la síntesis en Español, en formato pdf, también puede ser descargada. Esta incluye la “Evaluación y recomendaciones” de la OCDE, pero no incluye todas las figuras que aparecen en las paginas anteriores.

The complete edition of the Economic survey of Mexico 2007 is available from:

Additional information                                                                                                  

 

For further information please contact the Mexico Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Bénédicte Larre, David Haugh and Bruno Rocha under the supervision of Stefano Scarpetta. Research assistance was provided by Roselyne Jamin.

 

 

 

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