Mexico needs a new strategy to boost growth, fight poverty and improve well-being for all

Mexico

San Miguel de Allende (Mexico Jezael Melgoza, Unsplash)

This article is brought to you in association with OECD.


The Mexican economy is expanding at a moderate pace, underpinned by a strong macroeconomic framework and robust exports tied to the country’s deep integration into global value chains. A new strategy is now needed to boost growth, reduce high levels of poverty and inequalities, and improve well-being for all Mexicans, according to a new report from the OECD.

The latest OECD Economic Survey of Mexico discusses the links between low living standards and stagnant productivity, poor educational outcomes, weak rule of law, obstacles to competition and widespread informality. The Survey projects growth of about 1.6% this year and 2.0% in 2020, in the context of a slowing world economy and persistent trade tensions that risk disrupting exports, private sector investment and global value chains.

The Survey, presented in Mexico City by OECD Secretary-General Angel Gurría and Mexican Finance Minister Carlos Urzúa discusses the need to address the growing divide between the more modern and productive economy in the north and centre of the country and the more traditional economy in the south, which is a source of both inequalities and poverty. It also looks at how implementation of recent reforms, institutional improvements and changes to the tax and transfer system can better support more inclusive and sustainable growth.

“The Mexican economy has performed well in recent years, but is now facing serious headwinds from the external environment and important structural challenges at home,” Mr Gurría said. “The only response is to continue designing and implementing new reforms to  instill confidence, improve the quality of public administration, increase opportunities, reduce inequalities and bring about a stronger and more inclusive society for all Mexicans.”

 

Improving institutional quality would have the largest growth benefits among all structural reforms and would increase the impact of all other policy reforms, according to the Survey. Implementation of recently created national and local anti-corruption systems should be completed, alongside consideration of the introduction of a specialised, independent anti-corruption agency, taking into account the federal structure of government. Efforts are needed to ensure the continued strength and independence of new competition authorities and sectoral regulators.

A new tax reform is needed to improve collection, limit evasion and ensure financing for infrastructure investment and policies to reduce poverty and inequality. The Survey suggests a comprehensive medium-term tax and benefits reform should seek to broaden the value-added tax base, by cutting exemptions and abolishing reduced rates while compensating low-income households with targeted subsidies. It also suggests adding greater progressivity to the personal income tax system, via a lower income threshold for the top rate and further cutting back tax allowances and making better use of taxes on immovable property. Continuing efforts are needed to reduce duplication of social programmes and beneficiary overlaps while expanding coverage to the poor not already receiving benefits, the Survey said.

 

Reforms are also needed to reduce Mexico’s persistently high informality, which constrains productivity growth and the government’s fiscal capacity to provide public benefits and redistribute. A coordinated approach to reducing informality should ease the administrative burdens of doing business. Lowering tax compliance costs, reducing the cost of creating new jobs and reduced social security contributions for low-wage earners are all identified as desirable and possible.

Better educational outcomes will help fight persistent inequalities and boost productivity growth. Education spending should be re-focused on early childhood, pre-primary, primary and secondary education, and more should be done to increase the capacity of schools in poor neighborhoods and to support students from disadvantaged backgrounds, the Survey said.

Integrating environmental and metropolitan governance concerns into policy making has wide scope to improve both economic and environmental outcomes. Reforms in the governance of large metropolitan areas would enable local governments to plan land use, public transport and housing in an integrated manner, boosting productivity and lowering congestion and air pollution, which affects low-income households the most.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

COVID-19 pandemic: The war inside our heads

Asking for more restriction on intra EU immigration: Unproductive and politically dangerous

Coronavirus: a Disease that spreads as fastly as its fake news

Can the Tokyo Olympics help bring the world together?

European research priorities for 2021-2027 agreed with member states

The Eurogroup protects Germany and blames others

Myanmar military target civilians in deadly helicopter attack, UN rights office issues war crimes warning

The price of centralization of human resources for health

Children of ISIL terrorists likely held in ‘secret detention facilities’, UN human rights office warns

EU: Divided they stand on immigration and Trump hurricanes

COVID-19 and the pursuit of financial inclusion in Pakistan

Coronavirus: Commission launches data sharing platform for researchers

Infringement – Commission takes Italy to Court for its incomplete regime of access to genetic resources

Human rights champions from across the world receive top UN prize

Germany may have a stable and more cooperative government

How income-sharing agreements can improve access to education

Lagarde discusses the European Central Bank’s policy revamp with MEPs

Macro-Financial Assistance: Europe’s way to control Ukraine?

ECB asks for more subsidies to banks

COVID – ACT III, When do I get off the stage?

SRHR and Ending HIV : Can one be achieved without the other ?

Sign language protects ‘linguistic identity and cultural diversity’ of all users, says UN chief

Who really cares about the 26.2 million of EU jobless?

19th EU-China Summit: A historical advance in the Chino-European rapprochement

‘Foreign children’ in overwhelmed Syrian camp need urgent international help, says top UN official

EP survey: EU recovery funds should only go to countries respecting Rule of Law

FROM THE FIELD: West Africa’s wishful gold diggers

Moving from commitment to action on LGBTI equality

Tokyo 2020 Olympics: from cardboard beds to recycled medals, how the Games are going green

Commission’s action plan: financial world mandatory links to environmental targets

Fostering intergenerational solidarity and cooperation through age-friendly environments: the right answer to Europe’s demographic challenge

The Eurogroup+ is born to govern the EU Banking Union

European Youth Forum demands immediate action & binding agreement on climate change

How to create a transparent digital economy and rebuild consumer trust

Coronavirus reinforces the importance of empathy

To all far-right partisans who exploit Charlie Hebdo atrocity: a peaceful reply given by a peaceful student

For how long and at what cost can the ECB continue printing trillions to keep euro area going?

What is the European Super League and how would it work?

State aid: Commission approves German scheme for very high capacity broadband networks in Bavaria

To feed 10 billion people, we must preserve biodiversity. Here’s how

Ramped-up emergency preparedness, part of ‘changing the DNA’ of the UN’s health agency

New Report Offers Global Outlook on Efforts to Beat Plastic Pollution

How African countries can benefit from plan to reform global tax

Destabilizing Lebanon after burning Syria; plotting putsch at home: King and Crown Prince of Saudi Arabia

COVID-19 is an unmissable chance to put people and the planet first

Take care of your borders and then expand them

The Juncker Plan at work: bringing investment back on track in Europe

Africa-Europe Alliance: European Commission committed to a sustainable African agri-food sector

Mindfulness: a freedom we can still have in the pandemic

If you live in a big city you already smoke every day

Employment and Social Developments in Europe: 2018 review confirms positive trends but highlights challenges, in particular linked to automation and digitalisation

Safer products: EP and Council close deal to beef up checks and inspections

Coronavirus global response: EU Humanitarian Air Bridge to Iraq and new funding

Top UN Syria envoy hails ‘impressive’ start to historic talks in Geneva

UN rights chief slams ‘unconscionable’ US border policy of separating migrant children from parents

EU-US resume trade negotiations under the spell of NSA surveillance

The world’s economy is only 9% circular. We must be bolder about saving resources

How many websites are there?

State aid: Commission approves €650 million Polish support to LOT in context of coronavirus outbreak

Nepal faces a crisis as COVID-19 stems the flow of remittances

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s