Reforms will boost Mexico's rise to a modern economy
Alicia Buenrostro Massieu says Mexico's ongoing transformation from an agrarian economy to one that's open and modern can only speed up with the current reforms
As we approach our 204th anniversary of independence, it seems a good time to talk about the positive changes Mexico is making to accelerate its rise from an emerging economy to a modern one, looking increasingly attractive for investors.
In his first 20 months, President Enrique Peña Nieto has embarked on a visionary and ambitious reform agenda to raise Mexico's productivity and competitiveness. Over the years, the country has transited from a commodity- and agriculture-based economy to one mainly driven by manufacturing and services. Oil once represented over 75 per cent of our exports. Today, manufactured goods are equal to three out of every four dollars of exports. Further, recent reforms in education, telecoms, financial, tax and the energy sectors will pay off with higher growth, development and social mobility.
Internationally, Mexico's economy is highly integrated. It is a founding member of the North American Free Trade Agreement and a signatory of 45 other free trade agreements, making Mexico one of the most open economies. Along with Chile, Colombia and Peru, Mexico launched the Pacific Alliance, a regional initiative with the aim of expanding trade to Asia.
With integrated supply chains in North America, Mexico has also become a globally competitive manufacturing centre. Automotive, aerospace, electronics and apparel industries have flourished. Hong Kong's Johnson Electric will be opening its second plant in Mexico this year.
Fiscal reform has started to broaden the sources of government revenue. Measures have been taken to strengthen competition in the telecoms industry. With the education reform, teachers will face more scrutiny. Financial reform seeks to encourage banks to extend more credit, while a labour reform aims to cut the size of the informal sector by making it easier for businesses to hire and fire employees.
Among these reforms, the energy one signed into law stands out as a landmark. It represents a historic turn as it ends the state control over the oil industry following nationalisation back in 1938. Now, foreign companies will be able to bid on profit-sharing contracts to either jointly or individually participate in Mexican oil and gas exploration, production, refinement, transportation and storage, which have previously been controlled by Pemex, Mexico's oil company. The country's command over the electricity sector will also change. Lower energy prices will attract more manufacturing companies, which can take advantage of the proximity of our factories to the US, and reduce delivery times.
Hong Kong companies based in mainland China are looking at Mexico with growing interest, while mainland China is increasingly using Hong Kong to invest worldwide. Mexico's government has also presented an ambitious five-year infrastructure investment plan. Public-private partnership laws will create possibilities for profitable investments, from which Hong Kong companies can benefit.
By attempting economic reforms and transforming them into national policy, Mexico is taking advantage of its many assets. We are engaging with the world, seizing the opportunities and responding to our global responsibilities.
