The challenges for Mexico and its role in a changing world – President-elect of Mexico, Enrique Peña Nieto

 

Mexican President-elect Enrique Peña Nieto ended his European tour with a visit to OECD headquarters in Paris and delivered a speech on the challenges for Mexico and its role in a changing world.

Paris, 18th October 2012

 

Thank you very much, and a very good afternoon to each and every one of you.

 

I would like to thank OECD Secretary- General, José Ángel Gurría, for the invitation to participate in this meeting with highly distinguished personalities from the business world, the private sector, social organisations and public service — which, today, here in Paris, gives me the chance to share the country vision and main objectives of the programme of action, or work plan, I intend to promote in the government, which I shall lead and direct as from 1 December.

 

I am grateful for the presence of members of this global organisation, and the ambassadors that have kindly also agreed to accompany us.

Before embarking on what I hope will be a brief presentation of my government’s main goals, I want to publicly thank the Secretary-General and members of this organisation for the time they spent, prior to this meeting, making a presentation on important and far-reaching issues for Mexico; which, if it adopts the best practices of OCED countries, could contribute to greater social development, sustained economic growth, and greater benefits for the Mexican people.

                                                                  

 

A short while ago I was shown a diagnostic study with proposals on issues such as the economy, taxation, the education system and energy in our country. These are clearly issues of great relevance and transcendence, and they coincide with what I have been advocating for Mexico for the coming years.

These are precisely the issues I want to discuss and share with you in this talk.

I am convinced that we are part of a global world, with intensive interactions between the countries that comprise it.

And based on this greater interaction between countries, we need to find ways to obtain greater benefits for our peoples, not only in terms of trade, the presence of businesses and personnel from different countries; but also, and above all, in other types of exchange – of knowledge, experience, academic exchange, technology transfer --  which will produce greater benefits and enable the world as a whole, and  its countries, especially those that are members of this organisation, to enjoy homogeneous, harmonious and similar rates of growth.

All of this clearly pursues a higher purpose, namely to achieve greater social benefits and conditions of greater well-being for our peoples.

In this presentation, I want to mention an issue which I see as central and about which I am absolutely convinced. And particularly on this visit that I’m making today to France, like those I have made to three other European nations and to Central and South America, which was my first international working tour in this period of transition as President-elect of the United Mexican States, I am working to strengthen the bonds of friendship, with a view to bringing Mexico closer to the rest of the world and forging greater identity between the Heads of State of these countries and the person who will soon take on that responsibility in my country.

 

I also want to make sure my visit generates this intensive exchange and more fruitful, positive, and beneficial relations for our peoples.

This is aligned with something I am personally convinced of: continuing to work for Mexico’s greater openness towards the rest of world; making the most the free trade agreements that Mexico has signed with over 44 countries around the world; and ensuring that all of this produces greater benefits.

Based on this vision — of openness, participating in globalisation, maximizing the benefits of free trade, and greater interaction between countries — I propose that Mexico should focus on achieving five major goals that were identified in the diagnostic study we have made of our situation, which coincides with the diagnostic studies that the OECD in particular has made and which reveals several weaknesses and shortcomings.

The big challenge now for the government will be to put into practice and implement actions to address the main backlogs, shortcomings and needs facing Mexico today.

This provides the context for the five major objectives that my government will pursue.

 

I have already shared these objectives in different forums, which shows that my government has rigour and clarity in the objectives to be achieved.

This is not a question of tailoring the design for different forums; the aim is to reiterate again and again where my government’s focus will be placed, where our efforts will be targeted; and to make sure this helps raise development levels and welfare for all Mexicans.

Let me share these five objectives with you.

The first concerns what today is a very sensitive issue for Mexicans, and I imagine not a matter of indifference to you, despite the physical distance that separates us (although today’s communications make distances very short) — namely public security.

Unfortunately, this has been an issue which has represented or signified Mexico’s image in the world. But there are other features, other conditions that we would want to project for Mexico: its strengths, its riches, its propitious environment for productive investment, and job creation.

This is the Mexico we want to project.

 

Having said that, it is clearly of the utmost importance to tackle the problem of insecurity as effectively as possible, which has been aggravated and accentuated in specific parts of the Mexican Republic particularly.

Although the climate of insecurity is on the minds of all Mexicans, the problem is more acute and the crisis is greater in some states than in others.

My proposal for dealing with what will be a key issue for my government is to change the strategy of the Mexican Government and State, to ensure proper collaboration with all levels of government irrespective of their party political affiliation. What is important is unity of purpose, unity of declared objectives, with direction, to improve the conditions of security that Mexican people are demanding today.

Drawing on this collaboration, the strategy will be targeted on reducing level of violence which, I repeat, is our country’s unfortunate experience; significantly reducing crime rates, especially in those crimes that most aggravate and damage harmonious existence between Mexicans, such as homicide, kidnapping, and extortion.

To fight organised crime more effectively and provide better security conditions, we will need to implement a variety of actions, together with greater co-ordination of efforts among the different public entities and levels of government.

Here I should mention that we plan to create a national police force (Gendarmería Nacional), to enhance the presence and strength of the Mexican State across the country.

And bearing in mind the model developed in France, I had a meeting yesterday with the French President, who agreed that the Government of France will work with us in designing a national police force. Supported by the greater capacity and strength of the Mexican State, this new force will be deployed the length and breadth of the country, particularly in small villages and medium-sized cities, which sometimes provide a refuge for criminal gangs.

 

The second aspect of the second objective to be achieved during my government’s term of office involves significantly reducing poverty levels in our country.

We are an emerging economic power, and we currently enjoy conditions of great stability, which I will refer to in a few moments. But, unfortunately Mexico continues to suffer from poverty levels that we have been unable to reduce much in recent years.

Among other things, this is a consequence of low rates of economic growth over the last decade, and a failure to generate more opportunities for employment and development for the Mexican people; and this has reduced our capacity to reduce poverty levels.

I will implement a social policy for the Mexican State, evolving from the welfare-based assistance model of the country’s social policy today, to a more participatory social policy that aims to engage all Mexicans living in poverty in productive activity, through greater training that leads to jobs that generate higher incomes.

Poverty reduction will be one of my government’s top priorities, because I’m convinced that greater social development and higher welfare conditions will enable us to address the problems that are outstanding in our country more effectively.

 

Third objective. Education; which clearly must form the pillar of national development.

The OECD’s diagnostic study on Mexico today, which I referred to earlier, notes progress in education, which is showing positive signs; this relates not only to overcoming backlogs, but also mentions positive aspects where progress has been, particularly in the coverage of pre‑school services —  which is now nationwide — and the levels of investment made in the country’s education.

We now need to expand educational coverage at the levels currently in greatest demand, particularly upper secondary and higher education; we need to find mechanisms such as those proposed by the OECD to improve education quality; incentives for our country’s teachers to work with greater commitment to maximise the educational benefits for our country’s students.

This is a major challenge on which our efforts will need to focus.

In addition to the mechanisms announced here today by the OECD, I have also proposed several actions to raise the quality of education, by exploiting technologies – the information available today – through the Internet and greater access to the digital world for our youth.

This is how we can really achieve educational coverage and quality.

I am convinced that using these technologies will enable or help distance education to fulfil the coverage currently demanded in our country, and also enable us to have a greater influence on the quality of education.

 

The fourth objective possibly needs more thorough explanation, particularly as it is closely related to the activity of the OECD, which analyses economic conditions in each country, and highlights best practices in each case to become an engine of national development. At this meeting I would like to highlight something I have been proposing and committing my government to promote, to achieve what for us will be central in this fourth objective:

Namely to achieve rapid and sustained growth; and for this to really enable us to generate a better economic environment to promote social development and effectively tackle the issues I’ve mentioned, such as combating insecurity and raising the coverage and quality of education in our country.

For this purpose, I would like to describe the main actions I’ve been proposing, and on which my government will be working, to promote economic growth, convinced that Mexico has enormous potential to grow at faster rates.

Mexico has built a favourable environment and scenario that need to be exploited to fuel faster economic growth.

What do I mean by this? Firstly, we have favourable macroeconomic conditions, in contrast to the more developed countries, which are currently embroiled in major financial crises with large fiscal deficits — unlike Mexico today.

The last three Mexican governments have maintained disciplined and responsible management of public finances, based on central bank autonomy; and the fact that the government acts responsibly with respect to the central bank’s monetary policy decisions  provides an optimal framework for promoting faster economic growth founded on this macroeconomic stability.

I will continue to observe these two precepts: responsible management of public finances and unconditional respect for central bank decisions. In that way we will maintain macroeconomic stability and continue to provide a suitable platform for economic growth while also promoting other actions.

Secondly, Mexico must take decisive steps to promote competition in various sectors of the economy; monopoly practices harm citizens and deprive Mexicans of broader access and better choices between products, and services that can compete on the basis of price and quality.

I’m convinced that competition should be a permanent practice or a government policy, not only in terms of promoting a better legal framework to foster and help promote competition; not only by having regulators equipped with more effective legal tools to combat monopoly practices; but also by preventing legislation or legal loopholes being used as legal ways to avoid the good practices that Mexico should maintain for competition, and avoid monopoly activity.

This will be a constant aim of my government.

And, I insist, competition must be present in all sectors of the economy.

Third. I have been arguing that Mexico has major energy potential, particularly based on the capacity of what is today the national oil producer, PEMEX.

Recognising, to start with, that it will be difficult build the capacity to develop all the infrastructure needed for greater exploration, exploitation, and refining of the resource that belongs to all Mexican people, I have proposed drawing on models that are proving successful today in other countries, such as Brazil and Colombia. I believe Mexico has an opportunity to promote a new legal framework which, without privatising PEMEX, facilitates and encourages greater private sector participation to make the most of our country’s energy capacity.

Mexico can become an energy power if it succeeds in using, managing and exploiting its energy resources in the most effective way possible.

At the same time, private-sector participation also offers the chance to develop new energy sources, particularly clean energy sources – renewable energies – which is one of the proposals and recommendations made to us by the OECD.

Fourth. Action for economic growth, which is closely linked to the third objective that I have just mentioned, namely human capital formation.

Links between the labour market and academic training institutions, higher education colleges, technological institutes … we need better designs in line with labour market needs. And we must avoid the frustration of many young people who, on completion of their university or technological studies, are sometimes unable to find work opportunities.

For that reason, I also believe human capital formation is fundamental for raising productivity among the Mexican people.

And this raises an important issue, which was addressed in our previous conversation, namely greater investment in science and technology.

It is truly both encouraging and surprising to observe the achievements of other countries — for instance a case we saw a while ago, South Korea, which in just 25 or 30 years, through education and greater investment in science and technology (now over 3% of GDP), has attained this scenario of sustained economic growth and welfare, and rising per capita income. Mexico is lagging behind by comparison; we currently invest only 0.4% of GDP in science and technology.

My proposal, and I hope we are able to achieve this objective, will be to invest at least 1% of GDP in the next few years; if we achieve this investment in science and technology, which will be on the order of 150 - 180 billion pesos, it will make it possible to innovate more in our country’s productive processes.

Fifth action. Generate a regulatory framework that encourages lending in Mexico.

Unlike other countries, Mexico has robust and consolidated financial institutions; but unfortunately they have not extended credit at the levels of other more developed countries.

I therefore intend to invite and encourage the commercial banking sector to expand their lending; and I will set up a national development bank, promoted by the Mexican State, for the specific purpose of leveraging productive activity to contribute to the economic development of our country.

A sixth action for this purpose involves infrastructure investment to raise our competitiveness, and put Mexico in a better position to attract productive job-creating investments.

We therefore need to increase our infrastructure stock and also provide funds to refurbish the infrastructure that currently exists.

I believe there is an optimal legal framework for promoting public -private partnership projects in this sphere, which, with private-sector participation, will enable us to provide or generate greater infrastructure in various sectors: road and rail transport, ports; and in developing mass transit models, particular for the large cities and conurbations we have in our country, considering that that 76 - 77% of the population of our country lives in large metropolitan areas or large cities.

The seventh action is also one of the recommendations made by the OECD, namely to promote the formal economy and foster formal employment.

For this purpose I have proposed creating a universal social security system covering all Mexicans.

Social security in Mexico today only benefits 44% of the population in terms of its different benefit components, despite universal coverage in health services, which still need infrastructure to provide this service more effectively across the country.

But I believe health services should not be the only benefit; we need to expand to other social security benefits, and I have proposed making three more benefits universal: a temporary unemployment insurance, a workplace hazard insurance, and retirement benefits for the adult population of our country.

This system should encourage the creation of formal jobs in our country.

Eighth action in this vision: to promote free trade, by generating a specific framework for our country’s external trade.

I am sure that if the Mexican State, with the federal government at the helm, works in harmony with our country’s entrepreneurs and its small and medium-sized businesses, which often are not encouraged to exploit global markets, the markets that the world offers, within and by exploiting the free-trade agreements that Mexico has signed, it will be possible to increase our share in global markets.

I therefore intend to introduce a new foreign trade policy framework that encourages, supports, provides incentives for, and backs the potential presence of our country firms worldwide.

Without doubt, as a ninth action for economic growth, Mexico also needs to make the very most of its natural economic strengths.

To give just one example, tourism is an activity that comes very naturally to us. Without wishing to boast, Mexico is clearly one of the world’s great paradises —  because of its natural beauties, the warmth and hospitality of our people, the generosity of our people who always willing to receive a visitor from any part of the world.

In tourism I believe there is potential to develop greater infrastructure to enhance connectivity among our different tourist destinations.

And with the boost my government will give to this natural economic vocation, I expect tourist flows from the world to Mexico – and surely, given Mexico’s development, from our country to the rest of the world too — this activity will achieve greater development and faster growth.

Along the same lines, we need to design an industrial policy to induce innovation and generate incentives for private investment in science and technology. This means tax incentives that will encourage greater investment in this area for innovation in productive processes in Mexico.

We need greater development, and, above all, an industrial policy design that enables us to make the most of our capacity for presence in the world and to strengthen the domestic economy.

And the 10th action to achieve this goal will be to promote tax reform — a comprehensive financial reform in our country. This is a topic that has been widely addressed by the OECD which has always shared with us the best practices of the world’s most developed countries in this domain, which will also enable Mexico to strengthen its financial capacities, and thus more effectively attain the key objectives of social development with greater benefits for all Mexicans.

Accordingly, we will be promoting a financial reform that simplifies our current tax system, and revises the tax attributions and powers of the different levels of government to make them co-responsible and co-participants in the efforts made by the Mexican State to strengthen public finances.

And this should make it easier or possible to convert this financial strengthening into greater benefits for the population, produced through different public policy instruments implemented  by the Mexican government to genuinely benefit that those who have least — those living in conditions of greatest social backwardness.  The State will thus be able to play a more important role through a more effective wealth distribution policy — wealth creation and better distribution with participation by the Mexican State.

We therefore need to work on a comprehensive and far-reaching fiscal reform, which will genuinely fuel greater development in our country.

These are the 10 actions that I wanted to highlight within the topic of economic growth, which I see as central and as the engine of our country’s development.

And now the fifth action or fifth major objective, and the last of the five that I have identified — Mexico’s presence in the world.

Mexico wants to broaden and expand its bonds of cooperation, relationship and exchange, with the rest of the world.

As I mentioned my presence here today, and the encounters I will continue having during my government’s term of office, will aim precisely to build bridges of dialogue and approximation with other nations, so that, as a result of this great exchange, we can generate greater benefits for all brother peoples.

And — based on the success and achievements and progress we make home in Mexico — our experience of success will doubtless encourage us to expand the bonds of friendship with other nations.

 

This will be the fifth major objective — which I believe is especially consistent with this working tour I’m making through different regions of the world before taking office. Although the transition period in my country is certainly rather long, five months, it does allow for better preparation, and better planning of the public policies my government will be implementing to improve the welfare of the Mexican people.

Lastly, and before answering questions — the dynamic you’ve transmitted to me suggests you  may have a number of questions —  I’m convinced that Mexico has major potential, a great opportunity for faster development; that Mexico can become the centre of focus, particularly of brother countries and those with whom we have historical relations, and that we will continue opening up to other nations, to effectively increase Mexico’s presence in productive  and job-creating investment, opportunities for development that also serve and benefit those who choose to invest in our country.

This is the scenario in which Mexico wants to work, where my government’ endeavours will be focused. And all of this will enable us to improve the welfare of the Mexican people. That is my top priority; and that is what I will be working towards.

 

Thank you very much.

 

Watch Peña Nieto's speech:

 

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Mexico: President-elect Enrique Peña Nieto visit to the OECD

 

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