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Lloyd Mexico Economic Report - January 2001

Table of Contents THE SHAPE OF 2001
PRESIDENT FOX'S INAUGURAL ADDRESS
A NEW APPROACH
SEVEN KEY AREAS OF REFORM
ECONOMIC AND SOCIAL GOALS
INDIGENOUS RELATIONS
MACROECONOMICS
BUSINESS DEVELOPMENT
LABOR RELATIONS
FISCAL REFORM
ENERGY POLICY
THE ROLE OF PEMEX
HEALTH CARE CHOICE
ENVIRONMENTAL POLICY
PLURALISM
FINANCE SECRETARY
ECONOMY SECRETARY
OTHER CABINET MEMBERS
MEXICAN MIGRANTS

THE SHAPE OF 2001

This will be one of the most interesting years in modern Mexican history. The momentous political changes of the year 2000 have propelled the nation forwards into the new millennium with a renewed vigor and sense of purpose. The eyes of the world are on the new President, Vicente Fox, as he begins his six-year term of office. Though many members of his Cabinet have only limited political experience, they are well qualified academically and many have had successful careers in business. Fox did not appoint as many women to key posts as was anticipated, but his team does include several members of the PRI, the former ruling party.

Fox's campaign speeches and election success have raised the hopes of millions of Mexicans. Now, the big question is, can he and his team deliver? They face numerous challenges.

First, Fox's own party, the PAN, does not enjoy a majority in either house, so Fox will have to depend on consensus politics in order to get key reforms passed by Congress.

Secondly, the U.S. economy appears to be weakening. A slow-down in the economy of Mexico's main trading partner could cause some hiccups along the way if, as expected, Mexico's economy continues its rapid rate of growth.

Thirdly, Fox's success last year has engendered a new sense of political freedom throughout Mexico which opposition parties may use to their advantage if the new administration fails to live up to people's expectations.

In addition, there is considerable uncertainty over oil prices. The 2001 budget is being calculated with the price of oil set at 18 dollars a barrel, well below current levels, but if the price drops below this, then the budget wou ld be severely compromised since oil revenues account for about one-third of all government income.


PRESIDENT FOX'S INAUGURAL ADDRESS

President Fox made his inaugural address before Congress on December 1. In an upbeat speech, Fox outlined his vision for Mexico's future. Here, in the form of brief extracts from his address, is a summary of what he said, with particular emphasis on economic matters:


A NEW APPROACH

"In this new era of democratic practice, the President proposes and the Congress disposes. That is the new reality for the Executive Branch in Mexico. For many years our traditional "presidentialism" imposed its monologue. Today, more than ever before, governing means dialogue; the nation's strength can no longer come from a single point of view, a single party or a single philosophy. Today, more than ever before, understanding, agreement and convergence among the various political, economic and social participants, among the various legitimate interests and diverse ideological visions, are necessary... The cause of many of our problems lies in the excessive concentration of power".


SEVEN KEY AREAS OF REFORM

"In order to guarantee both an effective democracy and democratic effectiveness, I am making the commitment to promote seven key reforms... that represent the Mexican people's mandate for change". The seven reforms described by the President will aim to consolidate democratic progress; fight poverty and promote social equality; improve education; guarantee economic growth and reduce emigration; decentralize Federal powers and resources, giving the states, municipalities and communities greater autonomy; assure transparency and accountability in government; improve public security.


ECONOMIC AND SOCIAL GOALS

"I am taking office as the economy is operating well, but with a budget that has little room to maneuver to respond to our enormous social deficiencies. Throughout my election campaign, I saw great human and natural potential going to waste throughout the country: children without schools, young people without a future or prospects for advancement; family disintegration, marginalization and discrimination; highly trained professionals and technicians with no alternative to unemployment or underemployment... The government's accumulated responsibility is enormous in social matters. The least bit of common sense tells us how false the thesis is that claims we must curb people's living standards for the sake of the economy's health".

"I am convinced that the economy must recover its moral and humanistic dimensions, which give it meaning and direction. I am also convinced that a society's quality of life is measured not only by its ability to generate wealth, but above all by its equity in the distribution of wealth... Quality education, employment and regional development are the levers to remove, once and for all, the signs of poverty which are inequity, injustice, discrimination and exclusion".


INDIGENOUS RELATIONS

"I am committed to new relations between the indigenous peoples and the Mexican State. I shall work tirelessly until this is achieved..." The President has already ordered the Army to pull- back in Chiapas and has sent a bill to Congress implementing the "San Andr és Accords" which resulted from negotiations between the previous administration and the Zapatista Indians. There are about 10 million indigenous people in Mexico, 10% of the total population.


MACROECONOMICS

"My administration's Economic Program calls for a genuine commitment to stability and growth. We are not going to play with macroeconomic variables. We are going to act with complete discipline... We will maintain macroeconomic stability, because it represents the order without which what has been earned is lost. But we will work to turn it into tangible and specific benefits in the pockets of every Mexican man and woman". The 2001 macro-economic goals include that of restricting the budget deficit to 0.5% of GDP and anticipates a 4.5% growth rate in GDP this year.


BUSINESS DEVELOPMENT

"The Economic Program... includes a business development policy for small, very small and medium-scale companies and an economic policy with a social rationale for very small companies and for the self-employed. We are going to emancipate Mexican men and women with lower incomes from a legal and institutional credit system that discriminates against them".

LABOR RELATIONS

"There are many goals we must meet, beginning with a gradual but sustained increase in workers' living standards. But there are no magic solutions. We need to raise productivity, create wealth and distribute it at the same time. My administration wants to support this effort by updating labor legislation to consolidate rights, promote employment, foster training, productivity and competitiveness, and thus provide new channels for union life".


FISCAL REFORM

"Fiscal Reform is not the easy way out for solving the government's revenue problems. It is the correct way. The Mexico we want to build will have the Comprehensive Fiscal Reform as a cornerstone for stimulating savings and investment and for transforming tax collection into an engine of development. It will be guided by criteria of equitable sharing of the burden, simplification of payment and effectiveness in administration. Its objective will be to make more resources available to benefit the poorest among us, to include those who have been excluded. But above all, the nation's fiscal resources will be invested in health care, security and education for the coming generation".


ENERGY POLICY

"As regards energy resources, we will be faithful to our history and we will take strategic forecasts of the future into account. In this process the Federal Electricity Commission will not, I repeat, will not be privatized, nor will any of its assets be sold".


THE ROLE OF PEMEX

"Within the current constitutional framework, PEMEX will continue as the exclusive property of the nation... It should nevertheless be recognized that PEMEX has strong administrative, budgetary and regulatory rigidity that prevents it from developing into an efficient and competitive company... PEMEX will be transformed into a company managed with criteria of efficiency in line with the best in the world; PEMEX will be managed honestly. It will also be a company with sensitivity for the regions, states and municipalities in which it operates". PEMEX (Petroleos Mexicanos) is now headed by Raul Muñoz Leos, formerly CEO of DuPont Mexico. Muñoz is expected to change Pemex's tax and operational structures and is likely to seek much greater private-sector involvement in the oil industry. Pemex is the fourth-largest oil-producing company in the world and will generate close to 14 billion dollars in oil export income this year.


HEALTH CARE CHOICE

"Today I propose to democratize access to public health services, to have a system in which the beneficiaries have a voice in the decisions that affect them, and greater freedom in choosing the service provider, until we reach the point where every family can choose its own doctor... The change involves providing financial protection in the area of health care for the entire population, so that at the end of this six-year term all Mexican families have basic health insurance".


ENVIRONMENTAL POLICY

"The models of growth experienced in the past few decades have followed a strategy of grow today and clean up later. Protecting Mexicans' natural heritage is an essential part of my government program. We will promote a productive and competitive economy in harmony with the environment. It is only under a scheme of sustainable development that we will open doors for productive investment and economic growth".


PLURALISM

"We are beginning our term of office with a government team whose watchword is pluralism. It is a team of officials with democratic convictions and new ideas, who bring together a suitable amalgam of intelligence, loyalty and expertise, capable, honest and with a sense of State... Building the Mexico of the future is not the task of one person. We need the work and commitment of all men and women, each at his or her own battlefront, but working always with passion and love for our homeland".


FINANCE SECRETARY

Among the key Cabinet appointments is that of Francisco Gil Díaz, a member of the Institutional Revolutionary Party (PRI), as Finance Secretary. Gil is widely considered a hard-liner as regards tax collection. Important changes to the country's tax code are expected this April in order to raise tax revenues by making it easier for taxpayers to meet their obligations. A one- time amnesty will give taxpayers the opportunity to put their finances in order by paying this year's taxes in full. If they do so, their books for the past five years will be exempt from future review. The measure will not apply to financial institutions or holding companies. A second change will remove the current requirement that companies present paper invoices for transactions conducted electronically.


ECONOMY SECRETARY

Luis Ernesto Derbez heads the Economy Secretariat, formerly known as the Commerce and Industrial Promotion Secretariat. Derbez will be anxious to create more opportunities for small- and medium-sized companies. For example, the large "in-trust" export-manufacturing factories (maquiladoras) account for nearly half of the nation's exports and employ more than a million workers, but only about 3% of the components they use come from domestic suppliers. Through government incentives and low-cost loans, Derbez hopes to raise this figure to 20%.


OTHER CABINET MEMBERS

Other significant Cabinet appointments include Pedro Cerisola y Weber as Communications and Transportation Secretary, Ernesto Martens Rebolledo as Energy Secretary and Javier Usabiaga as Secretary of Agriculture. The Comptroller General is Francisco Barrio Terraza, a former governor of Chihuahua, while Jorge Castañeda is Secretary of Foreign Relations and Rafael Macedo de la Concha is the new Attorney General.


MEXICAN MIGRANTS

President Fox has repeatedly stressed the importance of strengthening ties with the large community of Mexican migrants resident in the U.S. They send between 6 and 8 billion dollars back to Mexico each year in "remittances"; this is similar to the amount of revenue generated by tourism. Fox has said he plans to expand the programs that already exist in some Mexican states whereby funds sent home by migrants for community development projects can lead to the project receiving matching funds from the government.

Mirrored with permission from Lloyd S.A. de C.V.
See their Page on Mexico Connect.

2001 Operadora de Fondos Lloyd, S.A.
© 2001 Allen W. Lloyd, S.A. de C.V.

Published or Updated on: July 20, 2006
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