Mexican President Enrique Pena Nieto has resorted to the internal structural reforms to boost Mexicos growth
because the country had exhausted other instruments, such as looser fiscal and monetary policy and opening
up the global market. Photo: EPA.
Mexican President Enrique Pena Nieto has achieved an international reputation for swiftly carrying out the sort of sweeping reforms which South Africa seems to be balking at.
In under two years in office, Nieto, 48, has admitted private companies, including foreigners, into the previously state-monopolised energy industry, has liberalised the previously rigid labour market, has faced down the powerful teachers’ union by introducing mandatory evaluations for teachers and has liberalised telecoms which had been a virtual monopoly, among many other reforms.
The labour market and education reforms were particularly impressive since Nieto represents the Institutional Revolutionary Party (PRI) which, like the ANC, has historically been strongly supported by the unions.
On a visit to South Africa earlier this month to co-chair, with his South African counterpart Maite Nkoana-Mashabane, the second Binational Commission between the two countries, Mexican foreign minister Jose Antonio Meade said his government was eager to share its experiences with the South African government on how to tackle their common problems of poverty and inequality.
He added, perhaps diplomatically, that his government was also keen to learn from South Africa’s experiences.
Meade said Nieto had resorted to the internal structural reforms to boost Mexico’s growth because the country had exhausted other instruments, such as looser fiscal and monetary policy and opening up the global market.
Nieto’s structural reforms “touched on almost every element of our economic architecture”, Meade said.
The biggest reform was to the energy industry which had been a state monopoly since 1938.
Meade said that a regime created over 70 years ago clearly did not allow Mexico to take full advantage of its energy resources.
And so Nieto changed the constitution to enable the state to license private, including foreign, energy companies to exploit the country’s oil, gas and other energy resources – though the state remained the owner of the resources themselves, Meade stressed.
The aim of the reforms was to attract more international capital and technology into a moribund industry which was still key to Mexico’s economy even though it had diversified so much that commodity exports now constituted only 20 percent of all exports.
Another major reform, clearly relevant to South Africa, which Nieto pushed through was to the labour market making contracting more flexible but also providing more protection, especially to women.
“So today we have more flexible labour markets than we did in the past,” Meade said.
That was boosting employment and so, for example, in September, 185 000 new jobs had been created in the formal economy, “the third-largest job creation in a month that we have had in our history”.
And South Africa clearly also should be studying Nieto’s substantial educational reforms – essentially introducing mandatory evaluations of teachers’ abilities – which broke the power of the teachers’ union – the equivalent of Sadtu – which had such a stranglehold on education that some teachers were bequeathing jobs to their offspring.
Remarkably Nieto pushed through these tough reforms against very powerful interest groups without enjoying majority support at the polls, by building alliances with opposition parties in Parliament.
Nieto has been criticised, especially from the left, by those who contend his reform programme is only benefiting a small elite at the expense of the majority.
Mexico for the first time is earning A-investment ratings from international credit rating agencies but his local popularity rankings have slipped.
Meade acknowledges that inequality is still a problem in Mexico as it is in Latin America in general.
But he said Mexico was one of the Organisation for Economic Co-operation and Development (OECD) countries that had been able to reduce inequality the most over the last four or five years.
“That trend will continue and will be fostered by the reforms. Because the idea behind the reforms is precisely to open up many of the elements that were previously in control of few, to be part of everyday life in Mexico.”
That was the spirit behind the anti-trust reform, behind the fiscal reform, which made the tax system more progressive; and behind the telecommunications and even energy reforms.
Nieto’s anti-trust reform made it harder for private companies to collude in setting prices.
The telecommunications reform has broken up the virtual monopoly on telephony which Carlos Slim, Mexico’s richest person and the world’s second-wealthiest, had enjoyed since the state telephone company was privatised two decades ago.
“In a way it was the large players in Mexico who were able to find ways to go around the inefficiencies within the energy sector,” Meade said. “And the fact that we have now moved into a better regulatory framework will allow for those benefits to be more widely spread.”
And he said Nieto had also introduced social reforms, not only improving education but health care and unemployment benefits too. It had also introduced important political reforms to strengthen democratic institutions.
The sceptics are growing fewer but they still question whether Nieto will be able to implement his ambitious reforms.
Meade acknowledged that Nieto and the party had to pay a high political price for the reforms because they were broad and structural. And the returns on these investments were necessarily delayed.
“But I think that as the reforms start to work and we are beginning to see that in some of the numbers, the president is recuperating part of that political capital. And the country has moved towards generating better numbers and the reforms are starting to provide a positive result for Mexico and the Mexicans. We think that is what is striking in the case of Mexico is not the reforms that we did today, but the fact that we took so long in doing them.”
Meade also dismissed criticism that Nieto was not putting as much effort into fighting Mexico’s notorious and violent drug cartels as his predecessor, Felipe Calderon, had.
Meade said Nieto’s emphasis was different, relying more on intelligence and social programmes for the worst regions, but that he had achieved better results.
Drug violence had peaked in 2011 and had since decreased “quite dramatically”.
“Almost all of the heads of all the cartels have been dismantled with higher degree of use of intelligence... many of the cartel heads have been apprehended without a single shot being fired,” he said, referring particularly to Joaquin “El Chapo” Guzman, head of the Sinaloa cartel, and Miguel Angel Trevino Morales, head of Los Zetas cartel.
But Mexico still has much to do to solve the drug violence, as emerged last month when 43 students who were protesting against the links between the mayor of the city of Iguala and the local drug cartel disappeared.
Meade acknowledged such pockets of drug violence still plagued the country.
The federal government was doing all it could to find the students and to ensure action against any local government officials involved. Already 22 local police officers had been arrested.
A week after he spoke the country’s attorney-general issued arrest warrants for Iguala mayor Jose Luis Abarca, saying he was suspected of having arrested the students and handing them over to the drug cartel.
Meade said that Mexico and South Africa faced many similar challenges, including poverty, inequality and how to design public policy to address those challenges.
He agreed that Mexico’s reforms of the energy industry, the labour market and education were critical to South Africa as they were to Mexico.
“And we are willing to share to see if South Africa finds value in that,” he said.
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The country climbed from the 43rd to the 39th spot. In Mexico opening a business takes 6.3 days, six procedures and costs 18.6% of the per capita income.
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