On the 32nd Ordinary General Assembly of the Business Coordination Council, President Peña launched six actions that seek to enhance productiveness. However, not all of these points actually boost it, which is worrisome when considering Mexico’s lackluster scenario on the matter. The country’s internal market is disjointed. The exports market has readjusted with the strong fiscal modifications coming from the 2013 miscellaneous tax resolution and whose effect directly hampered its competitiveness. Although there are several reforms and changes within the secondary legislation that promise growth, the rate has not adjusted as expected – and, in the short term, will not do so – and productiveness, a key factor in the country’s development, remains at the same level as it had in 1979: in other words, more than three decades of potential progress have been lost.
Productiveness means doing more with the same or doing the same with less. Of the six points proposed by the President, the second one, which deals with “mechanisms to ease trade and eliminate barriers to exports” and the fifth, which prioritizes “reducing the time period in which an infrastructure work has been awarded with a concession and its construction begins” are the only ones that truly enhance productiveness. Likewise, a greater access to credit for MSMEs (micro, small and medium enterprises) is an attempt to improve the allocation of input factors within the country. However, the rest of the proposals (reducing the hostile impact of restrictions to the use of dollar cash at the U.S.-Mexico border; improving the operational ruling of social programs; as well as guaranteeing a nationwide substantial amount of hydrocarbons, gas and electricity) do not equal an improvement in production.
It is true that some of the points arising from the 2013 Constitutional reforms’ secondary legislation do boost productiveness. Examples of the aforementioned include the full adjustment made to the electric sector or the resolution that the Secretariat of Economy is now able to advocate for a clear technological transfer within hydrocarbons’ exploration and production contracts. It is equally true that the Program to Democratize Productiveness contains several recommendations that intent to boost productiveness, particularly to promote the reallocation of input factors. A common pattern found on the six actions to enhance productiveness, which were announced by the head of the Executive Power on May 30th, is the increase of the budgetary flow and the cash flow towards specific companies. It is worth remembering that the aforementioned sector faced several fiscal obstacles, as well as considerable production downtimes due to the sluggishness of public expenditure, especially the one regarding infrastructure, on the government’s first eighteen months in charge. Within that context, the announcement seems to be more of a Presidential political and electoral attempt to please Mexican businessmen rather than an endeavor to build a solid strategy for boosting productiveness.
That being said, six points that could comply with the objective of the much referred enhancement of productiveness are listed as follows: (1) boosting the development of skills that could reduce the gap between labor supply and demand within Mexico, particularly in strategic activities (such as energy) and with high added value (like the service industry); (2) optimizing public expenditure, one of the most important factors in economic dynamics, especially due to the prevalence of doubling of funds, public programs that are counterproductive with their targets and expense in aspects that are not related with the nationwide productive development; (3) ensuring technology transfer within the energy sector (something quite different from pretending to guarantee a “relevant” amount nationwide); (4) establishing a clear policy for regulatory improvement as well as a following up the process at state levels (one only needs to look at the Doing Business index to acknowledge the explicit need for the latter); (5) promoting, via public funding, an increase of the innovation rate of production design and procedures, as well as to assess the potential promotion of the National Council of Science and Technology as a State Secretariat; (6) abandoning the concept of sectorial development and putting the development of similar functions in industrial processes as a priority, thereby modifying the concept of strengths and areas of opportunities in order to develop the country’s supply chain.
In short, Mexico has a thirty-year lag in productiveness. The six actions proposed by the President will do little to reverse that trend.
CIDAC
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