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Lloyd Mexico Economic Report October 2003

Table of Contents

STATE OF THE NATION REPORT
POLITICAL ADVANCES
RESIZING THE GOVERNMENT
E-MEXICO
FOREIGN AFFAIRS
IMPORTANCE OF REMITTANCES
FIGHT AGAINST POVERTY
HEALTH AND SOCIAL SECURITY
EDUCATION, SCIENCE AND TECHNOLOGY
INDIGENOUS RIGHTS
ENVIRONMENTAL AFFAIRS
MACROECONOMICS
INFRASTRUCTURE
TOURISM
SMALL AND MEDIUM-SIZED BUSINESSES
RURAL FINANCING
THE WAY FORWARD
ENERGY POLICY
CONCLUSION

STATE OF THE NATION REPORT

On September 1, President Vicente Fox Quesada delivered his third State of the Nation address since taking office. His address highlighted the progress Mexico has made, as well as the challenges that lie ahead. Here, in the form of quotes, with emphasis on economic matters, is a summary of what he said:


POLITICAL ADVANCES

"In the recent elections citizens voted for a pluralistic Chamber of Deputies, not giving any of the political forces represented here a majority. Everyone must now put that political diversity to work through agreements."

"The federal pact has been strengthened. Total estimated allocations to the states and municipalities for this year will grow by 28.5% in real terms compared to what they received in 2000."


RESIZING THE GOVERNMENT

"Federal government is being resized. By the end of this year we will have accumulated savings of approximately 27 billion pesos to invest more in education, health, and security. We have brought a social approach to spending on the federal payroll."

"Today we have more nurses, teachers, doctors, and police officers. Spending on this has increased by 16% compared to 2000, whereas spending on salaries for administrative personnel has fallen. Today it is only 29%, compared with 45% in 2000."


E-MEXICO

"Today citizens and enterprises may electronically access information related to all federal procedures and services from anywhere. Today, approximately 500 procedures can be carried out and services obtained quickly and securely over the Internet."

"By way of E-Mexico we have linked all the country's municipalities and the Federal District, giving remote communities access to many government services via the Internet. 3,200 community digital centers have made this possible. We have increased to 679 the number of federal government work centers with the ISO9000 certificate of international quality, and, at the end of 2003, there will be 850."


FOREIGN AFFAIRS

"Mexico historically has actively supported peace... We do not strive only for peace but also for the right to development and cooperation among nations. Last September we participated at the Johannesburg Summit on Sustainable Development. Following Mexico's proposal, the group of Like-minded Megadiverse Countries was created."

"We have strengthened our strategic association with the U.S., a country with which we share such challenges as migration, human rights, security, and the fight against terrorism. We seek to reduce the imbalances in our economic relationship; we seek a better integrated, healthy, and constantly growing market; we seek a free flow of goods, investments, and services accompanied by the ordered transit of people."


IMPORTANCE OF REMITTANCES

"We know how important the funds migrant workers send home are to their families in Mexico. In 2002 alone remittances totaled 9.814 billion dollars, 26% more than in the previous year. We have worked to ensure these funds can reach their destinations as cheaply and as securely as possible, with a 58% cut in the cost of transmission. We will continue to promote further reductions in these charges."


FIGHT AGAINST POVERTY

"For the first time a government is undertaking to measure poverty with an objective and verifiable method. Assessments by the National Statistics Institute (INEGI), the United Nations Development Programme, and the Economic Commission for Latin America and the Caribbean all indicate that in Mexico we have made progress in cutting poverty and improving income distribution. However, we acknowledge that the lags and challenges we face remain huge. We are not closing our eyes to this fact."

"We have broadened the coverage of social programs and multiplied their supports... Today more than 21 million Mexicans in conditions of poverty are receiving supports in cash and in kind for education, health, and nutrition."


HEALTH AND SOCIAL SECURITY

"As part of a broad investment plan agreed with state governments, to date we have put into operation 685 health centers, 60 hospitals, and 11 public health units."

"The recent reform of the General Health Act created the Social Protection in Health System. Through the Popular Insurance scheme, protection will be gradually provided for 45 million people who until now did not have formal social security."


EDUCATION, SCIENCE AND TECHNOLOGY

"National spending on education for this year, including investments by local authorities and the private sector, now accounts for 6.8% of GDP, meaning we are approaching the 8% recommended by international organizations."

"Despite a shortage of resources, between 2001 and 2002 we provided public universities with more than 5.93 billion pesos in additional funding to increase the quality of their educational projects and to extend and improve their facilities... So far during my administration enrollment at the higher education level has grown by more than 12% and 57 higher education centers have been created."

"Science and technology provide progress and competitiveness with a solid foundation. In 2003 federal spending on this item amounted to 27.426 billion pesos, a real-terms increase of 6.7% compared to the previous year."


INDIGENOUS RIGHTS

"We maintain a relationship of respect, dignity, and justice with the country's indigenous peoples. This year, with the support of Congress, we took a crucial step with the creation of the National Commission for the Development of Indigenous Peoples, which strengthens our ability to respond to and meet their demands and overcome cases of backwardness. In the last two years, the federal budget for indigenous communities has grown by 55%. Today it stands at more than 17.4 billion pesos."


ENVIRONMENTAL AFFAIRS

"Mexico suffers severe environmental degradation. We are working to reverse this fact. Water and the forests are matters of national security. This year, the federal budget for drinking water and sanitation in urban areas is more than 3.4 billion pesos, 350% more than last year. Together with local governments and producers we have spent more than 3.1 billion pesos on rescuing forests and jungles, ten times more than in 2000."

"The coming into force of the Sustainable Forestry Development Act offers a new forestry model that will help us to curb illegal cutting and preserve and strengthen our ecosystems."

"We are making solid progress toward our 2006 target of Natural Protected Areas accounting for 10% of Mexico's territory. So far, we have reached 9% with the inclusion this year of seven new areas. Planting is outpacing deforestation. Over the last three years we have regenerated 550,000 hectares (1.36 million acres)."


MACROECONOMICS

"My government's strategy has been to dynamize the internal market and strengthen competitiveness. Thanks to responsible economic management, inflation has been controlled and the purchasing power of families has been protected. With strict fiscal discipline and a cautious monetary policy we have managed to traverse an adverse economic international environment in an orderly fashion."

"Inflation is at its lowest in the last 34 years. Interest rates are at their lowest for decades. We have the highest international reserves in history. Country risk is highly favorable and the principal rating agencies give us an investment grade."

"Despite their limitation, wages in the formal sector of the economy have risen by 10.5% in real terms under this administration. In the last two years, the cost of servicing the foreign debt has fallen by more than 46 billion pesos."

"Tax receipts by the end of this year will have increased by 1.4 percentage points of GDP. This level is by far the highest seen since 1980."


INFRASTRUCTURE

"Despite the shortage of resources, there have also been major investments in infrastructure and energy. Over these three years they will total more than 680 billion pesos, the greatest amount generated by the public sector in a similar period. In the same period we have increased power generation capacity by 20%, one and a half times the growth over the entire previous six-year administration. PEMEX (Petróleos Mexicanos) this year achieved a historic crude oil output of more than 3,550,000 barrels a day, 17% more than in 2000."

"To boost competitiveness we are applying a strategy of deregulation and simplification which includes the System for the Expedited Opening of Enterprises and the publication of the National Proceedings and Services Register."


TOURISM

"In tourism, in 2002 Mexico enjoyed record foreign currency revenues from visitors to our country, of 8.858 billion dollars. Revenues in the first half of 2003 were even higher, up 6.9% on the same period in the previous year."


SMALL AND MEDIUM-SIZED BUSINESSES

"This year Nacional Financiera is helping more than 350,000 small and medium-sized enterprises to consolidate and grow... The social banks, including the National Savings and Financial Service Bank and the other savings banks, have increased coverage for low- and middle-income entrepreneurs with a network of 753 points throughout the country."

"Microfinancers are another pillar in the democratization of access to financing. During my government, 724 million pesos have been channeled, allowing them to grant 692,169 micro-loans. In addition to this financing, there are federal government supports for 58,347 productive projects, worth 3.262 billion pesos, that benefit more than 1.6 million people."


RURAL FINANCING

"As part of our commitment to the small and medium-sized producers in the countryside we are carrying out a wide-ranging restructuring of the rural financial system and setting up a new instrument that allows the operation of credit to be placed in the hands of the producers themselves... This year we are channeling the greatest budget in history to the countryside, 117 billion pesos, 21% more in real terms than in 2000."


THE WAY FORWARD

"The great task remaining is achieving sustained and dynamic economic growth that will enable the creation of the jobs the country demands. This is the only way to advance more quickly in the recovery of the standard of living of Mexican families."

"The problem of unemployment is the big challenge... We are the ninth largest economy in the world and, paradoxically, we have a marked social deficit."

"If we want to bring our infrastructure up to the level required by economic growth and social demands we must invest in drinking water and sanitation networks; in electricity for the most isolated communities; in schools and hospitals; in highways and bridges, and in new oil and natural gas fields. For all of this more resources are needed."

"In this context strategic reforms are essential, capable of releasing the nation's huge potential, strengthening the State, and generating conditions to stimulate economic growth and turn uncertainty into trust in the country's future."

"We cannot pin our development solely on the dynamic of the external market. We must find independent sources of growth, we must strengthen the internal market and increase our competitiveness."


ENERGY POLICY

"My government will not privatize the Federal Electricity Commission or PEMEX. However, we cannot hide the fact that both corporations' economic viability is seriously compromised... We cannot delay the decision on how to strengthen them, capitalize them, modernize them, and extend their sphere of action. We must find ways to allow the energy sector to be the mainstay of the country's economic development."

"We must put together the value chain of the national energy industry. Mexico must not continue to import resources it has available, nor refined products in which it has a competitive advantage. Nor can we fail to invest in exploration to turn around falling trends in reserves. Over the next 10 years approximately 500 billion pesos must be channeled into the electricity sector."


CONCLUSION

"This report has looked back at achievements, but also acknowledged an unfinished transition. We must recognize that tasks remain pending... Together we can do more than we imagine. Together we can achieve much of what today seems impossible. This is a task for all of us. The time has come for unity around higher ideals and hopes; unity around the defense of new values and institutions that will allow us to achieve our desires for justice, democracy and social well-being."




The text of this report was not submitted to any Federal Mexican Authorities or approved by them prior to publication. In preparing it, we have done our own research, using sources we believe to be reliable. However, we do not guarantee its accuracy. Neither the information contained herein nor the opinions expressed, constitute a solicitation by us of the purchase of any security.

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

2003 Operadora de Fondos Lloyd, S.A.
© 2003 Allen W. Lloyd, S.A. de C.V.

Published or Updated on: July 20, 2006
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