Economic Survey of Mexico 2013

 

The next Economic Survey of Mexico will be launched 8 January 2015

Overview of the Economic Survey of Mexico

OECD Economic Surveys: Mexico 2013 | OECD Free preview | Powered by Keepeek Digital Asset Management

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The new government has set an ambitious course of economic and social reforms (a key element of which is its recent Pacto por México), for which it has obtained broad political support. The policies of the past several years have positioned the country well in terms of macroeconomic and financial performance, but economic growth remains insufficient and more needs to be done to improve well-being. This Economic Survey puts forward reforms aimed to achieve higher income levels and better social conditions in Mexico.

"This is an exciting time to discuss Mexico’s reforms. Reforms are happening nearly every week – the pace of reform is breathtaking, more-so than in any other OECD country. And these reforms are not just incremental reforms: even “painful” and substantial constitutional reforms are being passed, such as the telecommunications reform that was just approved by state legislatures yesterday." see full text of Speech by Deputy Secretary-General and Chief Economist, Pier Carlo Padoan.

Survey page in Spanish: Estudio Económico de México 2013

In order to raise long-term economic growth by accelerating productivity and factor accumulation, structural reforms will be required across multiple institutional domains, as many of the problems are interlinked. This should include a follow-through of already-legislated reforms which need to be implemented – notably in the key areas of labour markets, competition and education. These reforms, however, are heavily attenuated by widespread informal employment and weak legal institutions that diminish the effectiveness of policies and hold back gains in productivity. New legislation and regulatory reform are needed to remove barriers to market entry, reduce corruption and make the civil justice system more effective.

 Mexico Survey 2013 graph English

Download underlying data in Excel

Pressures on natural resources and environmental outcomes need to be taken into account as Mexico seeks to boost economic growth. Costs of environmental degradation represented 5% of GDP in 2011 and the country has made less progress than other OECD countries in decoupling CO2 emissions from economic growth. The government has set ambitious emission reduction targets that will require new policy tools to be achieved. Removing fossil-fuel subsidies and introducing carbon pricing would be the most cost-efficient ways to accomplish these goals, and stricter emission standards also have a role to play to lower emissions in the transportation sector.

While fiscal policy continues to be prudent, public debt has increased during the recession, as in other countries, and the government budget is overly dependent on oil. The risk of decline in oil output, in the absence of energy reform, is a threat to fiscal stability. Fiscal buffers should be rebuilt over time to protect the economy against possible contingencies. Transitioning towards a new fiscal rule is also desirable to reduce the partial pro-cyclicality of the current framework. Moreover, the tax system could be made more efficient, by broadening the tax base, and it does not raise sufficient revenues to fight poverty, develop human capital and build infrastructure. Evaluating and removing tax expenditures and special tax regimes is necessary, especially those that erode the corporate income tax base, such as for the maquiladoras. Additionally, the system of fiscal federalism as it currently functions in Mexico has important shortcomings, with states and municipalities overly dependent on federal transfers to finance expenditure. The federal government should harden the budget constraints on sub-national governments by limiting further increases in transfers and avoiding extraordinary transfers. At the same time, debt ceilings and restrictions on deficits should be established to prevent unsustainable borrowing by local governments.

 Remarkable progress has been made in reducing poverty and inequality over the past fifteen years. Still, social indicators remain unfavourable by international comparison, and poverty has increased once again during the recession. Mexico needs to strengthen its social policies to achieve a less unequal income distribution. Building on existing programmes will be important, as Oportunidades, Seguro Popular and 70 y más have generally been successful, and should be expanded. However, strengthening the social safety net significantly will be costly, so improving the efficiency of the current system by reducing duplication among the numerous programmes and evaluating their effectiveness will be important. Building an unemployment insurance scheme would also be useful.


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 Sean Dougherty and Aida Caldera-Sanchez and Carla Valdivia under the supervision of Patrick Lenain. Research assistance was provided by Roselyne Jamin.

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