By Judith Ugwumadu | 9 January 2015
Recently approved reforms in Mexico could dramatically boost growth rates and drive down poverty, but only if public administration is improved and widespread corruption reduced.
According to the Organisation for Economic Co-operation and Development (OECD), crucial reforms that have now been legislated for – including policies for improved tax, infrastructure, labour and education systems – could have a significant economic impact.
Mexico’s ‘bold’ package of structural reform could help the country break free from three decades of slow growth, low productivity, high inequality in the labour market and income inequality, the OECD stated today.
It added that, if fully implemented, these reforms could boost productivity and investment, increasing annual gross domestic product growth by as much as one percentage point over the next ten years.
OECD Secretary-General Angel Gurría said that Mexico’s ambitious agenda made it an example to be followed by other countries in need of reform.
‘But full implementation is crucial, and concerted efforts are needed at all levels of government,’ Gurría reiterated as he presented the report alongside Mexico’s Finance Minister Luis Videgaray in Mexico City.
‘The fundamental remaining challenge is to ensure that the institutions are robust enough to enforce laws and regulations effectively, uphold the rule of law, reduce corruption and offer sufficient public security to all citizens.’
Videgaray also said that moving forward with implementation of the recently approved reforms would require ‘ambitious initiatives’ to improve public administration, the justice system and security.
The OEDC report also stated that the reforms, along with the global recovery, could generate annual growth of up to 4% in the years ahead. The reform package is being rolled out at a time when Mexico faces external headwinds, notably declining oil prices and the tightening of US monetary policy.
Therefore, full implementation of the reforms in the near term would be crucial ‘to reap the benefits’ of a strong and sustainable recovery, the OECD report suggested.
This would require maintaining a strong political commitment and further strengthening of administrative capacity, it said.
Going forward, further reforms in education, promotion of access to quality healthcare and childcare, new systems of unemployment insurance and universal pensions and the full roll-out of the Prospera cash transfer programme are still needed.
Echoing the World Bank yesterday – which produced a separate report – the OECD stated that low oil prices should be a catalyst to reduce, once and for all, the Mexican economy's reliance on this primary resource.
