World Economic Forum on Latin America in Mexico

By Felipe Calderón Hinojosa, President of Mexico

Mexico is hosting the regional meeting of the World Economic Forum, which analyses the situation Latin America is currently experiencing. This is an excellent opportunity to learn about development opportunities for Latin American countries and appraise the methods and actions these nations are applying in an effort to speed up their economic growth.

Regarding the Mexican case, over the last 14 months we have fostered an audacious transformation and change process, which had not been attempted for a decade. In less than two years, the civil servants’ pension system, fiscal and electoral legislation, and the criminal justice system have been reformed. Currently, a bill is being discussed to strengthen the oil sector. Even though not all reforms are of immediate impact, they will certainly bring about a context for Mexico’s development.

From the beginning of my tenure, we established three priority areas on which we have focused our efforts: 1) the rule of law and public security; 2) a competitive economy that generates jobs; and 3) combating poverty.

Regarding the first of these areas, the Mexican government has kept up an offensive to restore order and guarantee conditions of security in the regions most afflicted by crime. In the last year and a half, over 28,000 criminals have been arrested, among them many kingpins of organized crime. Over 13,000 weapons have been seized, as well as the largest confiscations of illicit proceeds – more than 205 million dollars in a single operation and over 24 tons of cocaine in a single raid – in history. In total over 17 billion doses of drugs have been prevented from reaching the streets of Mexico and other countries. This has had an impact on drug prices. Between January and December 2007, the price of methamphetamines in the US market increased by 84%, while pure cocaine prices raised by 21%.

With the reform of the criminal justice system, the Mexican state will be better equipped for fighting crime, as it endows police forces with better legal tools to do their job. We will also move from an inquisitorial to an adversarial justice system, with the adoption of oral trials that will safeguard the rights of both prosecuted and victims. We will have more efficient, simplified and transparent legal processes that encourage citizens to turn to the justice system to exercise their rights.

Meanwhile, electoral reform has given way to a restored consensus between parties on the political rules of the game, and the reform to article six of the Constitution compels all three levels of government to guarantee transparency regarding public information.

In the economic realm, a number of actions have been promoted to guarantee sustained growth. With the reform of the public sector pension system, we have moved from a traditional pay-as-you-go system to one of individual accounts. This has provided a solution to Mexico’s public finance problem in the medium term. Meanwhile, fiscal reform will increase public revenues in the medium term by approximately 2% of GDP as an annual average, providing the government with more resources to finance social and infrastructure expenditure.

The recently submitted bill to reform the oil sector seeks to strengthen Mexico’s state-owned oil company – Pemex. It aims to bolster the financial and administrative autonomy of Pemex and guarantee accountability, transparency and the control of Mexicans over the company. It will introduce improvements in its corporate governance by the inclusion of independent and professional board members. Without privatizing Pemex, the reform grants it access to state-of-the-art technology and complementary investment to multiply its execution capacity, as other national oil companies have already done.

Unfortunately, the slowdown in the US economy strongly affected our own, yet my Administration has not sat back; we have set in motion a range of measures to invigorate our domestic market. We put the National Infrastructure Programme into operation, which will increase investment in this area from 3.2% to 5% of GDP. This amounts to public-private investment of 50 billion dollars a year over the next five years. We have also promoted a programme to foster the economy, which includes actions to reduce companies’ production costs, fiscal incentives and a job creation programme for poor and secluded areas, with innovative policies that reduce fiscal costs for those who create jobs in Mexico’s poorest communities.

The approved reforms and the stability of the Mexican economy allowed us to expand public spending allocated to social policy programmes. This is essential to strengthen poverty alleviation efforts. A responsible management of economic policy and public finances is precisely what has made it possible to reduce the number of Mexicans living in extreme poverty from 34 to 14 million over the last ten years. Nevertheless, there are still many lags in this area that my Administration is determined to confront.

Thus social spending has increased in Mexico to an unprecedented budget of 100 billion dollars for 2008. With these resources we hope in the next three years to achieve a very ambitious goal: universal health coverage, through medical insurance aimed at families with no access to traditional social security. We are also awarding scholarships to students at all levels of education so no one has to abandon school for economic reasons. Further, we are giving unprecedented support to the network of nurseries and child-care facilities so that more women can integrate themselves into the labour market; economic support for people over the age of 70 in rural communities has been established, and we are taking basic services to the 100 poorest municipalities in Mexico to increase the quality of life of their inhabitants.

The economic and social challenges facing Mexico are shared by all the nations in Latin America. The debate about their solution has nothing to do with the origin of their governments, whether right or left. The real debate lies between repeating the practices of the past, or forging a new future for the benefit of the region. We need to strengthen our democratic systems and secure efficient markets which promote competition and economic growth. These measures must be accompanied by active participation from the state to ensure social justice and the reduction of inequality and poverty. To set out on a firm path towards development, it is of enormous value to share our ideas and experiences, and the World Economic Forum in Cancún is an excellent opportunity to do so. It is an ideal forum for laying the foundations of a complete vision to bring about a decade of progress in Latin America.