Interview: Graciela Márquez Colín
How will the Mexican economy fare in times of growing global protectionism?
GRACIELA MÁRQUEZ: The Mexican economy has firm foundations that guarantee its stability despite global challenges. The government is committed to maintaining fiscal discipline, which ensures a sustainable trajectory of public finances. In addition, Mexico has solid economic institutions, particularly Banco de México, the autonomy of which is essential to guaranteeing price stability and a flexible exchange rate.
The Mexican economy is dynamic in terms of exports. Trade balance data shows that non-oil exports grew by 8.9% year-on-year in August 2019. The US-China trade war will likely provide an advantage to Mexican automobile, aerospace and electronics exports, which are set to maintain their growing trajectory. Another factor is the steady attraction of foreign direct investment (FDI). Though global FDI flows decreased in 2017 and 2018, more than $18bn in FDI flowed into Mexico in the first half of 2019, which shows strong investor confidence despite challenging global economic conditions.
At the same time, there are areas for improvement. For instance, there is opportunity to create mechanisms that will help facilitate regulatory enhancement across all levels of government, to generate a unique framework to attract FDI and external trade, and to strengthen ties with our primary commercial allies through the ratification of treaties such as the US-Mexico-Canada Agreement, the EU-Mexico Trade Agreement, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
To what extent will the current administration support growth through public investment as well as incentivise private investment?
MÁRQUEZ: The federal government has several strategies to incentivise the private sector to invest. The first is the National Infrastructure Fund, which aims to create new construction projects – especially road infrastructure – by encouraging the largest possible amount of private sector investment. It also seeks to accelerate existing government contracts and the anticipated bidding rounds for infrastructure.
Another initiative to promote investment comes from the pension fund administrators (administradoras de fondos para el retiro, AFORES), whose goal is to introduce incentives for investment in long-term maturing projects, and to promote better return on investment for both workers and investors. Development banks will have a strong role in promoting and financing both AFORES and the government’s National Infrastructure Plan. Lastly, there are some ambitious national infrastructure projects on the way, including the Otay Mesa II border crossing, which seeks to relieve traffic at other US-Mexico border crossings. Other projects include the upcoming fertiliser plant in Camargo, the Guadalajara Metro and the Toluca-Mexico commuter rail.
What steps are being taken in order to boost labour productivity, and support entrepreneurs and small and medium-sized enterprises (SMEs)?
MÁRQUEZ: Productivity often comes as a result of solid economic policy measures. For that reason, initiatives such as the Programme for Industrial Productivity and Competitiveness and the Programme for the Development of the Software Industry are currently on the way. To be jointly implemented, both initiatives focus on developing human capital, productive capacities and intelligent manufacturing; improving product offerings and processes; integrating companies into value chains; and strengthening sectoral development.
As part of a broader strategy to reactivate the economy, the government aims to boost support for SMEs, with an eye to redistribution in favour of smaller enterprises. Certification programmes could help connect SMEs with supply chains and global value chains. It is also important to boost access to credit for low-income entrepreneurs to help them join the formal economy.
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