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Lloyd Mexico Economic Report October 2002

Table of Contents

STATE OF THE NATION REPORT
GOOD GROWTH PROSPECTS
HIGHLIGHTS OF RECENT PROGRESS
REGIONAL DEVELOPMENT
MORE EFFICIENT ADMINISTRATION
FOREIGN POLICY
SOCIAL POLICY
EDUCATION AND HEALTH
INDIGENOUS AFFAIRS
ECONOMIC OVERVIEW
INVESTOR CONFIDENCE
BUSINESS SUPPORT
INVESTMENT IN TOURISM
SPENDING ON WATER
RAISING RURAL INCOMES
FUTURE POLICY
THE CHALLENGE AHEAD

STATE OF THE NATION REPORT

On September 1, President Vicente Fox Quesada delivered his second State of the Nation address since taking office. His address publicly acknowledged the contributions made by Congress and the Judiciary over the past year and 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:


GOOD GROWTH PROSPECTS

"My government's fundamental mission is based upon a socially responsible humanism, upheld by a recognition of the capacity, dignity, and diversity of men and women. This principle sustains and shapes our government project and is the compass that guides us... Despite the economic and political turbulence that threatens many of the world's countries, Mexico has succeeded in moving ahead and protecting her achievements. We emphasized the strengthening of the internal market. We recorded the lowest inflation and country risk in Mexico's modern history. Despite the problems of the world economy, our currency has remained stable and wages have begun to recover. We face good growth prospects."


HIGHLIGHTS OF RECENT PROGRESS

"Together we are building the Mexico of the 21st century. We can see it the length and breadth of the country. We can see it in the 435 billion pesos invested in infrastructure and energy in the two years of my administration; in the approximately 85 billion pesos distributed in the first half of the year through the financial system of promotion; in the more than 5 million scholarships; in the increase of around 650,000 students compared to the previous school year, and in the 12,500 teachers recently hired."

"We can see it in the more than 300,000 housing supports processed so far this year; in the construction and opening of more than 650 health centers, clinics, and hospitals; and in the construction or upgrading of 160% more highway kilometers than in 2001, with a budget increase of only 29%... We can see it in the increase in per-capita income, which in these almost two years rose more than 12 %, from 5,700 to 6,400 dollars; in the size of our economy, which climbed from 10th to 9th place in the world; and in the scale of our trade balance, which is now the 7th largest in the world."


REGIONAL DEVELOPMENT

"We have strengthened the states and municipalities. At the end of 2001, funds channeled to the states reached an historic maximum of 63%. Today, despite the fall in tax revenue and the resulting budgetary cuts, this amount stands at 67%. In other words, of each peso disbursed by the federal government, 67 cents are directly managed, spent, and invested by state and municipal governments. Thanks to this and the commitment of all local governments, since December 2000 more than 700,000 works have been carried out in the country. For example, more than 40,000 in Chiapas, more than 29,000 in Guanajuato, 50,000 in Oaxaca and around 12,000 in Michoacán in this government's brief time in office."


MORE EFFICIENT ADMINISTRATION

"Public administration has left behind secretiveness for transparency. Since the beginning of my mandate, I committed myself to ensuring public administration be conducted along the lines of honesty, transparency, and rationality. Therefore, the Executive I lead promoted the Federal Transparency and Access to Public Government Information Act. This act is unprecedented in Mexico's history. It is one of the broadest extensions of citizens' rights in the last quarter of a century."

"To fight corruption and make government work transparent we have taken significant steps in the use of new technologies. Today, 2,023 procedures can be carried out over the Internet. Government is being made more efficient and its costs are being cut. So far in my administration, we have saved 18.5 billion pesos, channeled to deal with the priorities of education and health."


FOREIGN POLICY

"We have a foreign policy in line with the times. Activism is one of its essential premises. Therefore, Mexico has an ever more effective, acknowledged, and respected presence in the world. Mexico's new activism was proven at the Conference on Financing for Development, held recently in Monterrey... My government has made a priority of work to establish a comprehensive agreement with the United States of America granting our migrants a legal status and security."


SOCIAL POLICY

"In social policy, the strategy is Contigo (With You). This is our response to be able to face the profound lags and inequalities afflicting the nation. It is the change from handouts to a social policy of inclusion and equity... Contigo means leaving behind centralized decisions and adopting innovative forms of cooperation between the three tiers of government and with civil society... Contigo is not limited to dealing with the consequences of poverty but, above all, its causes."


EDUCATION AND HEALTH

"During this year, we built approximately 4,000 new educational spaces. In 2002, 17% of those enrolled in schools now have the support of a scholarship. This coverage is 20% greater than last year's. Raising the quality of education is another imperative. A first step is the development of a new management model: Quality Schools. This year, 10,000 schools are receiving these forms of support and are part of this process of improvement".

"Mexico provides the most complete inoculation program in Latin America, thanks to which we have the lowest rates of cholera, malaria, and tetanus and this is the first year when not a single case of measles has been recorded. Malnutrition is the most painful face of poverty and still afflicts one in every five boys and girls. To deal with this problem, we have launched and provided almost 5 million children with a milk fortified with nutritional supplements."

"The Opportunities Program reached the goal we set ourselves early, and we are supporting 1,600,000 families more than in the year 2000. For the first time, this program deals with urban centers, where poverty is increasingly concentrated... To generate income opportunities, we are providing more than a million productive supports and loans to low-income entrepreneurial families and social enterprises."


INDIGENOUS AFFAIRS

"This year, the government's overall budget for indigenous communities and peoples grew by 27% in real terms from 11 billion to more than 15 billion pesos... A year ago, we implemented the Health and Nutrition for Indigenous Peoples Program, which today cares for 324,000 women and children in 361 municipalities in thirteen states."


ECONOMIC OVERVIEW

"The country is advancing and advancing well. We have promoted the move from extreme liberalism to new economic humanism, reconciling the role of the market with responsible State intervention and promotion. We have gone from six-yearly crises to change with stability. Despite global uncertainty the soundness of our economy was proven. In today's world, very few economies can say the same. While the international climate was deteriorating, in Mexico inflation has been cut in half and interest rates fell to a third of what they were at the beginning of my six-year term. Our current account deficit is moderate."

"Responsible economic management has brought the nation concrete benefits. Thanks to the stability and confidence our economic policy has awakened, spending on servicing the debt has been cut by more than 35 billion pesos, an amount approximately equal to the budget of 12 federal agencies."


INVESTOR CONFIDENCE

"The greater strength of our economy can be seen in investor confidence. The main international agencies give us an investment grade. Never before has the country's risk been so low and international reserves so high. Foreign direct investment flows, totaling more than 30 billion dollars from January 2001 to June 2002, were higher than for any similar period in Mexico's history. This means confidence in Mexico, greater investment, and more jobs."


BUSINESS SUPPORT

"Under the heading of support for micro, small, and medium- sized enterprises, the budget earmarked for different entrepreneurial promotion and development programs has grown by 750% compared to 2000, and the participation of small and medium-sized businesses in public administration purchases has been encouraged... Real wages in the manufacturing sector saw an increase in their purchasing power of 6.3% in 2001, and 2.9% in the first half of 2002."

"Supports granted in the first half of this year by the Nacional Financiera development bank and the National Foreign Trade Bank amounted to 53.6 billion pesos, 71% higher than the figure recorded in the same period of 2001. Nacional Financiera alone went from attending to approximately 15,000 micro, small, and medium-sized enterprises in 2000, to 90,500 the following year, with a target of 216,000 for 2002."


INVESTMENT IN TOURISM

"In tourism, more than 15 years since the creation of the last integrally planned center, we are today promoting five mega-projects, and private investment is being intensely promoted. To July of this year, it already stood at 1.436 billion dollars."


SPENDING ON WATER

"In 2002 we brought about a true transformation. By totally reintegrating the payments made by municipalities for water consumption, around 2 billion pesos will be invested in the construction of infrastructure for drinking water, water treatment, and the reuse of waste water."


RAISING RURAL INCOMES

"We are making progress toward ordering agricultural markets. We have made a radical change in the policy of supports for crop sales, with the direct delivery, without intermediaries, of supports to farmers. This has meant they receive greater income. Today, our farmers keep 30 cents of every peso paid by consumers for agricultural products, instead of the 20 cents they received before this administration."

"We are also procuring the competitiveness of the agricultural sector by guaranteeing world prices for the main inputs of agricultural production. We will not abandon our farmers and we will not allow unfair trade practices. The men in the fields can compete if the rules are fair; however, competition in agriculture is profoundly uneven among NAFTA's partners. We are using all the protection mechanisms established in international and Mexican law to properly guarantee their rights."


FUTURE POLICY

"Almost two years have passed since we began the process of change. The set of achievements and challenges I have reported today is a sign that we have made progress and have direction... In line with the path we established in the National Development Plan, in this second third of the government's term we will promote the structural reforms still lacking and that form a major part of our domestic agenda. We will maintain the soundness of the economy, the basis for growth and social well-being. We will continue to strengthen the financial system, to ensure it fulfills its role as the promoter of development."

"We will boost a solid public treasury, that will allow us the healthy financing of social spending and investment. We will promote a state-of-the-art telecommunications sector and a sovereign, efficient, and sufficient energy sector; as well as the deployment of a labor culture of cooperation, and the design of fundamental solutions to guarantee a financially healthy public social security system. The goal of all these actions is to strengthen the internal market, generate employment, support those with small businesses and agricultural producers, protect the environment, and boost the competitiveness of the economy."


THE CHALLENGE AHEAD

"Pending structural reforms must be boosted to make national institutions fully democratic; to make economic development more efficient, to properly face our serious social inequalities, and improve the place we currently occupy in the world economy... We share a past that brings us together and unites us as a nation and a future that we must build together. Change calls upon all of us. We all have a historic responsibility. I am sure we will face up to it."




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.

2002 Operadora de Fondos Lloyd, S.A.
© 2002 Allen W. Lloyd, S.A. de C.V.

Published or Updated on: July 20, 2002
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