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MEXICO HAS A UNIQUE OPPORTUNITY TO BOOST AND SHARE PROSPERITY MORE WIDELY, ACCORDING TO THE OECD.

Mexico has a unique opportunity to boost growth and share prosperity more widely, according to the OECD


Mexico now has the chance to dramatically boost growth rates and resume convergence of its living standards towards those of advanced economies, reduce pervasive labour market informality and drive down high rates of poverty and income inequality.

The momentous reforms that have now been legislated (in labour, competition, education, energy, the financial sector, infrastructure, telecommunications and the tax system) could have a significant economic impact.

However, they will have to be accompanied by decisive actions that improve the functioning of judicial institutions, strengthen the rule of law, address security issues and reduce widespread corruption, the OECD said.

If fully implemented, these reforms could boost productivity and investment, increasing annual GDP growth by as much as one percentage point over the next 10 years.

Reforms that will introduce competition in sectors traditionally dominated by monopolies are likely to have the most impact in the near term, while those to education will have more lasting effects in the years to come.

According to the OECD Economic Survey of Mexico 2015, presented in Mexico City by OECD Secretary-General Angel Gurría and Mexico’s Finance Minister Luis Videgaray, moving forward with implementation of the recently approved reforms will require ambitious initiatives to improve public administration, the justice system and security.

This could reverse the disappointing economic performance of recent decades.

The reforms, along with the global recovery, could generate annual growth of up to 4% in the years ahead. Converging towards the best OECD international practices in the areas of justice and informality could increase Mexico’s potential growth by one additional percentage point per year.

However, there are risks underlying the medium-term macroeconomic and budgetary perspectives, notably those deriving from decreasing oil prices and tightening of US monetary policy.

In the short term, Mexico is protected by its policy framework and hedging mechanisms. It will nonetheless  need to reduce the high dependency on oil revenues and maintain solid public finances.

Low oil prices should be a catalyst to reduce, once and for all, the Mexican economy’s reliance on this primary resource.

“Mexico has launched an unprecedented effort to break with the past and put the economy on a path of rising income and shared prosperity,” Mr Gurría said. “This ambitious agenda makes Mexico an example to be followed by other countries in need of reform, but full implementation is crucial, and concerted efforts are needed at all levels of government. The fundamental remaining challenge is to ensure that the institutions are robust enough to enforce laws and regulations effectively, uphold the rule of law, reduce corruption and offer sufficient public security to all citizens.”

The OECD also provides detailed recommendations to make Mexico’s growth more inclusive by reducing inequalities of income and opportunity, fighting poverty and promoting the participation of women in the labour market.

These recommendations include further reforms in education, promotion of access to quality healthcare and childcare, new systems of unemployment insurance and universal pensions and the full roll-out of the Prospera cash transfer programme.

“Reducing income inequality would not only improve well-being but also support economic growth,” Mr Gurría said. “Economic growth needs to be shared among the many, rather than concentrated among the few. The reform process has to help reduce inequality, and ensure that every Mexican has an equal chance to succeed.”

An Overview of the Economic Survey of Mexico is available at: www.oecd.org/eco/surveys/economic-survey-mexico.htm