Main findings from the OECD 2014 Economic Survey of Mexico

1. 2015 OECD ECONOMIC
SURVEY OF MEXICO
www.oecd.org/eco/surveys/economic-survey-mexico.htm
Reforms for Shared Prosperity
8 January 2015, Mexico DF

2. After a prolonged period of slow growth
1. Source: OECD Long-Term Growth Scenarios database
GDP growth has been relatively low in Mexico
(constant prices)

3. 1. Source: OECD database
And high levels of poverty and inequality

4. Bold reforms are underway
• The Pacto por Mexico reforms are historic.
• If legislated reforms are fully implemented, they could:
• Raise productivity and living standards by 1 percent a year.
• Reduce informality, poverty and inequality.

5. These reforms will have large benefits
Impact of reform on GDP growth in the medium term
(annual growth rates)
via productivity
growth
via capital
deepening
via
employment
growth
GDP growth
0.41 0.51 0.03 1.0
1. Product market regulation
0.06 0.06
0.32 0.32
0.45 0.45
2. Labour market reform
a) Employment protection 0.03 0.03
3. Tax structure 0.07 0.07
4. Legal reform 0.03 0.03
OECD estimates of legislated and envisioned reforms1
c) Petroleum
Source: Bourlès et al. (2010); USEIA (2014); Bassanini et al. (2009); Dougherty and Escobar (2014);
Thévenon et al. (2012); Johansson et al. (2011); IMF-OECD-World Bank (2014); Dougherty (2014).
Impact after 5 years, assuming immediate implementation
(1) Note: The financial reform and the educational reform are also likely to have a significant impact in
grow th (the later mainly in the long term), but have not been included in the table because of difficulties
quantifying the impact.
A. Pacto por M exico Reforms:
a) Telecoms
b) Electricity & gas

6. And more could be done
Next steps for reforms:
• Strengthen legal and administrative governance.
• Reduce income and gender inequalities.
• Provide all families with high quality health care.
• Improve the equity and efficiency of education spending .

7. The benefits of additional reforms are also large
Impact of additional reform on GDP growth in the medium term
(annual growth rates)
via productivity
growth
via capital
deepening
via
employment
growth
GDP growth
B. Additional Reforms: 0.91 0.00 0.10 1.0
5. Judicial reform 0.50 0.50
6. Labour market reform
0.42 0.42
c) Female participation 0.10 0.10
C. Total 1.82 0.51 0.13 2.0
b) Pro-formality reforms
Source: Bourlès et al. (2010); USEIA (2014); Bassanini et al. (2009); Dougherty and Escobar (2014);
Thévenon et al. (2012); Johansson et al. (2011); IMF-OECD-World Bank (2014); Dougherty (2014).
OECD estimates of legislated and envisioned reforms1
Impact after 5 years, assuming immediate implementation

8. These reforms will put Mexico on a
path of long-term growth
1. Source: OECD Long-Term Growth Scenarios database
These reforms could increase annual GDP growth by one percentage
point a year over the next ten years

9. Outline of presentation
1. The Pacto por Mexico reforms
2. Reforms to go beyond the Pacto

10. 1. THE PACTO POR MEXICO
REFORMS

11. The Pacto makes Mexico a top reformer
Share of OECD reform recommendations with significant action taken in 2013-2014
1. Note: Emerging OECD countries include Chile, Estonia, Hungary, Mexico, Poland and Turkey. Southern Europe countries are Greece, Italy, Portugal and Spain.
2. Source: OECD, Going for Growth (forthcoming) with interim estimates of 2014 reform implementation.

12. Many bold reforms in the Pacto
Reform Secondary
legislation
approved
Main
provisions
enacted?
Constitutional
amendment
(if required)
New or
empowered
regulator
Legislative
approval
Remaining steps to
be taken?
Reforms approved and being implemented
Labour Dec 2012 Yes - - Federal -
Amparos April 2013 Yes Yes - Federal/ States -
Education Sep 2013 Yes Yes Yes Federal/
States
Multiple stages
Tax/Fiscal Oct 2013 Yes - - Federal -
Financial Jan 2014 Yes - Yes Federal -
Transparency
(access to public
information)
Feb 2014 Yes Yes Yes Federal/ some
states
-
National Criminal
Procedural Code
Mar 2014 Partial - - Federal/ some
states
States to use new
code by 2016
Telecoms July 2014 Yes Yes Yes Federal/ States -
Political/Elections May 2014 Partial Yes Yes Federal/ some
states
States to adopt by
2018
Economic
competition
May 2014 Yes Yes Yes Federal -
Energy Aug 2014 Yes Yes Yes Federal/ States Issue new bidding
rules
Reform of criminal
justice
- Partial Yes - Federal/ some
states
States should adopt by
2016
Reforms yet to be approved
Anti-corruption and civil justice No Yes Yes - Pass bill
Expenditure
(Pensions and UI)
- No - - Pass bill
Health - No - - - Introduce bill
Agriculture - No - - - Draft bill

13. Telecom and energy sectors
will be open to competition
Thanks to lower restrictions, regulatory performance will improve sharply
1. Source: OECD, Product Market Regulation database, 2014 and interim estimates prepared in co-operation with Mexican authorities.

14. Petroleum production is set to expand substantially
(Million barrels per day)
1. Source: US Energy Information Administration, International Energy Outlook 2014.
Reforms will help to boost
energy production

15. REFORMS TO GO
BEYOND THE PACTO

16. Rule of law should be improved
and corruption reduced

17. • Strengthen administrative capacity and governance quality at all levels of
government.
• Reform justice institutions, strengthen the rule of law, address security
issues and reduce widespread corruption
• Focus on efficiency of judicial resolution of civil, commercial and criminal
matters, and a strengthening of the transparency of public procurement.
• Improve and simplify the existing stock and quality of regulation at the
local, state and national levels.
• Phase out restrictions on agricultural land ownership and transfer, while
strengthening rural income support and access to finance.
Detailed recommendations
to strengthen rule of law

18. 1. Source: Olaberria (2015, forthcoming)
Higher income inequalities are associated with lower social
mobility
Great Gatsby Curve
Income inequality is high,
Social mobility is low

19. • Mexico has the widest
gender gap in Labour
Force Participation in
OECD.
• Lower maternal
employment is associated
with higher child poverty
rates.
• Mexico spends little in
active labour market
programmes
• And access to child care is
scarce
And there are large gender gaps

20. • Approve draft legislation for unemployment insurance and universal
pension.
• Fully roll-out the new Prospera cash transfer programme.
• Encourage more women to join the formal labour force:
– Improving access to quality child-care for children under three years of age,
– Extend active labour market policies.
• Take steps to delink the minimum wage from other prices in the broader
economy
• Investigate the effects on jobs and informality of raising the minimum wage
in real terms.
Detailed recommendations to reduce
income inequalities and the gender gap

21. 1. Source: Inter-American Development Bank.
• Secondary school
graduation rates are
lower especially for
low-income groups
• States with higher
levels of income
inequality, have lower
educational outcomes
High-school Graduation rates by income quintile
Mean score in mathematics (PISA) and inequality by State
High-school graduation rates are low and unequal

22. • Improve the equity and efficiency of education spending:
– Refocus such spending on pre-primary, primary and secondary education.
– Concentrate on the quality of teaching.
• Enhance investment in dual education and vocational education and
training programmes.
Recommendations to improve education

23. Health outcomes and affiliation to IMSS
1. Source: IMSS and INEGI, Censos de Población y Vivienda, 2010.
Inequalities in health outcomes

24. • Improve coordination across health institutions to reduce
redundancies
– Promote exchange of services between health care networks.
• Standardise procedures across all health care providers
• Make health insurance mandatory.
• Improve coordination between social security and the tax
collection agencies.
• Allocate financial resources to state health services according
to need and give more flexibility to the states to determine
how to spend them.
• Consider converting government hospitals into corporate
entities.
Detailed recommendations to improve
access to quality health care

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OECD Economic Surveys: Mexico 2015
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