Analysis Agenda – April 15th, 2013

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The first year of the 62nd Legislature is less than 15 days from ending. This Congress has had the distinctive feature, unlike other assemblies focused on the Presidential transition period, of dealing with two Presidents, one outgoing and other incoming, both very active with their respective initiatives. Felipe Calderón tried to make the most out of an enterprise that, for the moment, had its debut and farewell on the last months of his government: the preferential initiative. Enrique Peña, based primarily on the framework of the Pact for Mexico, has tried to build an “effective negotiator” reputation and has been able to legally ensure – though its full application remains to be seen – a complex educational reform. A second major test comes with the telecommunications reform. Now, the federal government will do everything in its power to achieve it, whether or not it may happen under the Pact.

1- “Partners” of the National Crusade against Hunger. The program that is set to become the symbol of Peña´s government has been criticised almost since its official announcement. Initially, the criteria used to established which of the 400 municipalities would be helped first was questioned. Now, following its official implementation on April 2, the Crusade faces a new entanglement. It has been announced that “socially responsible companies” (as Secretary of Social Development, Rosario Robles, refers them) such as Pepsico, Nestlé, Bimbo, Cargill and Monsanto would participate in the initiative. Critics of these companies have accused them of encouraging consumption of junk products, impoverishment of Mexican countryside and even obtaining unfair fiscal benefits. However, is the participation of these companies in government’s initiatives really harmful? What are the myths and reality behind it all?

2- Telecommunications reform (finally) under debate. Constitutional amendments on telecommunications, approved by the Chamber of Deputies in the early hours of March 22 are theoretically undergoing a process of further filtering on its way to the Senate. For instance, the relevant draft was only discussed in Congress by the Committee on Constitutional Matters before it reached the House; it is being deliberated by four commissions in the Senate, two of them specialized on that particular matter (Communications and Transports, Radio and Television). Additionally, on the second week of April hearings and forums with experts were held with the purpose of improving the reform, which apparently is on its way back to the Chamber of Deputies. What are the fine points that Senators intend to sharpen? Could an eventual delay on the reform’s approval be interpreted as a political failure?

3- The “surprising” change on the Social Security Act (LSS). On March 19, deputy Sergio Torres Félix, (PRI member) introduced an initiative to reform article 27 and derogating article 32 of LSS. This proposal seeks to amend the calculation formulas used for the collection of assessed contributions on social security and bringing them in line with the current Income Tax (ISR). Generally, money contributed by employers to Social Security relies on the salaries of their employees before benefits (vouchers, bonus, housing), which are integrated when calculating ISR. Mexican Employer’s Confederation (Coparmex) believes that the measure, even though it could raise as much as an additional 8,000 billion pesos, would affect 7.5 million workers who could be deprived of their working benefits. Is this the best way to capitalize Social Security? How much will this alleviate the organization’s critical situation?

4- The crisis of housing companies in Mexico. Housing companies which received a strong boost on the previous government are now facing severe liquidity problems due to “unexpected” changes in the market dynamics. With the purpose of meeting the new housing demand, construction firms contracted debt worth millions of pesos to finance their projects. However, since new houses were not built in central locations or were attractive to potential buyers, the “used” housing market became the largest beneficiary of real estate credits instead of the new housing market. Given the sector’s predictions, on April 15, the Habitat index of the Mexican Stock Exchange fell by 14.32%. Is this a “time bomb” for the economy? How much will the situation improve the current credit flexibilization from banks or governmental institutions?

5- The proclamation of Nicolás Maduro as President of Venezuela. Without concerning that the difference between the successor of Hugo Chávez and opposition candidate Henrique Capriles was less than 2 percentage points (50.6%-49.07%), the National Electoral Council opted to declare Nicolás Maduro as President-elect with just the closing and counting protocols. It is likely that this decision – apart from other suspicions – may have wanted to avoid a long period of protests whose repercutions, given the authority void, may have potentially lead to violence. The decision preferred certainty over strenghtening government legitimacy. This way, demands for a recount were not heard, just like Mexico in 2006 or the United States in 2000. Consequences in both cases were not minor. What comes next for Venezuela?

Antonio De la Cuesta

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