THE
Introduction and Policy Recommendations
To learn more about MIEPA, click here
Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Mexico is shown below. The ratings herein are based on the following rating scale:
RATING SCALE
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2016. Used herein with permission]
To read a disclaimer about the analysis in this file, scroll to the bottom of the file.
MEXICO:
Comparison of Mexico's economic policies to MIEPA criteria as prepared by native student of Mexico, Ms. Diana Catherine Lopez Osorio, studying in San Francisco in Fall 2016.
RATING SUMMARY
POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE
1 2.5 7.5 15.0 50%
2 1.0 3.0 15.0 20
3 1.0 3.0 15.0 20
4 4.0 12.0 15.0 80
5 4.0 12.0 15.0 80
6 3.0 9.0 15.0 60
7 4.5 13.5 15.0 90
8 2.0 6.0 15.0 40
9 1.0 3.0 15.0 20
10 5.0 15.0 15.0 100
11 3.5 13.5 15.0 70
12 5.0 10.0 10.0 100
13 1.0 2.0 10.0 20
14 5.0 10.0 10.0 100
15 3.5 7.0 10.0 70
16 1.5 3.0 10.0 30
17 2.0 4.0 10.0 40
18 1.0 2.0 10.0 20
19 1.0 2.0 10.0 20
20 1.5 3.0 10.0 30
21 1.5 3.0 10.0 30
22 1.5 3.0 10.0 30
23 3.0 6.0 10.0 60
24 2.5 5.0 10.0 50
25 1.0 2.0 10.0 20
26 2.0 4.0 10.0 40
27 1.0 2.0 10.0 20
28 3.5 7.0 10.0 70
29 4.0 4.0 5.0 80
30 4.0 4.0 5.0 80
31 4.0 4.0 5.0 80
32 4.0 4.0 5.0 80
33 4.0 4.0 5.0 80
34 4.0 4.0 5.0 80
TOTAL 94.0 196.5 365.0 53.8%
===== ====== ===== =====
Return to MIEPA's Home Page
MEXICO - INDIVIDUAL POLICIES - DIANA CATHERINE LOPEZ OSORIO
INDIVIDUAL ECONOMIC POLICIES
1. Freedom from Internal Control (2.5)
Everybody in Mexico can move freely inside Mexico and get enrolled in any activity that is not prohibited for good reason. Creation of wealth is possible even for people who get enrolled in prohibited activities like piracy. As explained in the Mexican newspaper "El Economista", 48% of the citizens in Mexico buy illegal products because they are cheaper than the legal ones and they aren't punished for doing that. Obtaining permission to start an enterprise in Mexico is not a problem for entrepreneurs. Their problem is the fact that they have to face not only the legal competition, but also the illegal one (which is very popular among half of the population). This is a risky situation for entrepreneurs, considering the fact that this illegal market generated an estimated $43,000 million pesos’ losses to the legal market in 2014. So, even though Mexico is considered a land of great opportunities, entrepreneurs have to beware of their expectations to create wealth in Mexico because of situations like this one.
Sources: 1. http://eleconomista.com.mx/entretenimiento/2015/07/22/pirateria-delito-light-mexicanos
2. Personal opinion
2. Freedom of Speech (1.0)
The freedom of speech and expression in Mexico have never been as limited as they currently are. Most of the journalists have become puppets of the corrupted government. The information they give to the Mexican citizens is completely manipulated, censored, and only serves the government's interests.
The journalists who dare to communicate the truth about the government's impunity could be victims of the worst actions against them. The media, which by the way, rules the country alongside the government, does everything they can to destroy these journalists image. People, especially the ignorant ones, are easily manipulated and alienated, so, they believe in the media's lies.
The following extract from the "PEN AMERICA" website brings some dramatic facts related to what is stated above about the freedom of speech in Mexico:
"Mexico is one of the most dangerous countries in the world for writers. Since 2000, dozens of journalists, bloggers, & other writers have been murdered and at least another 15 have disappeared. Few of these crimes have been properly investigated and fewer still have brought prosecutions and convictions. PEN published an open letter, signed by over 700 writers and cultural figures, calling on President Nieto to investigate these murders and establish mechanisms to protect their lives. The letter inspired an Avaaz campaign that has amassed over 750,000 signatures. Despite mounting domestic and international pressure—pressure which helped secure a law federalizing crimes against media workers—the killings have continued. PEN is committed to ending this “censorship by bullet” in Mexico and restoring the right of all Mexico’s citizens to a free and open exchange of information and ideas. Take action to end the impunity for crimes against writers and journalists in Mexico."
Sources: 1. https://pen.org/campaign/freedom-expression-mexico
2. Personal opinion
3. Effective, Fair Police Force (1.0)
Police forces main purpose is to protect every citizen in a country by making sure that all types of criminals are arrested. Sadly, the exact opposite thing happens in Mexico. Corruption has invaded not only the police forces, but also the military. The situation has gotten as bad as it could possibly get. Mexicans are now so afraid of their own police forces that they prefer to let the criminals free instead of denouncing them. To make matters worse, some citizens face the dilemma of making justice with their own hands. This situation could only cause violence and resentment in any society. And all the blame is on a government that doesn't deserve anything good going their way.
The following extract shows that other people outside of Mexico are also aware of the problem that exists with the Mexican police force. It also shows how the problem was originated by the corrupted political party that has ruled Mexico for a long period:
"Residents of Mexico City have been suffering from a heightened sense of public insecurity for at least a decade. [1] Robberies and muggings are relatively common occurrences, and many citizens fear the consequences of using automatic teller machines or hailing cabs on public thoroughfares, given the rise of “express kidnappings”—being forced to drive from ATM to ATM, usually at gunpoint, to withdraw cash. But it is not merely an explosion in “ordinary” street crime that sustains the rising violence and public insecurity. Rather, much of the violence, crime and insecurity is the result of the ascendance of relatively well-organized purveyors of armed force: a variety of clandestine “business” groups involved in illegal trade—especially drugs and guns—and institutionally empowered forces in the employ of the state, mainly police but sometimes the military.[2] Many members of the armed forces work hand-in-hand with criminals, either through their participation in petty crime rings or in bigger-bucks operations like drug trafficking and gunrunning, a situation that partly explains so much police unwillingness to guarantee the rule of law. At present, the public trust in the police is so low they are practically the last to be called when a crime is committed, in part because citizens fear further abuses at their hands.
Clearly, some of the problems of police corruption grow out of the history of authoritarianism and one-party rule in Mexico. Since police were complicit in much of the dirty politics and everyday repression that Mexico’s Institutional Revolutionary Party (PRI) made use of to undermine opposition forces, the institutions of policing in Mexico have long developed a tolerance for impunity. These problems are so deeply ingrained that even the slow but steady democratization of the Mexican political system has done little to alleviate the problem. In fact, rather than bringing an end to this system of corruption, Mexico’s democratic transition may have exacerbated the problem. With the long-ruling PRI out of power on the national level, and struggling to hold on to, or capture localities all over the country, it has lost its institutional and fiscal capacity to reward police for their political “loyalty.” Thus, police themselves have turned to crime and other forms of “rent-seeking” as a means of recovering earlier privileges."
Sources: 1. https://nacla.org/article/law-enforcement-mexico-not-yet-under-control
2. Personal opinion
4. Private Property (4.0)
According to the Mexican Constitution, the private property in Mexico is a right that has to be respected, no matter if the one owning a property is a Mexican or a foreigner. However, the Constitution enacted in 1917, clearly states that the Mexican nation has the right to legally confiscate or expropriate any property, if the common well-being is being affected in any way by a private property ownership. The Constitution's goal is to make sure the country's public wealth is always distributed in a fair way.
However, the reality is that the Mexican governments aren't making sure the ideals of the Constitution are fulfilled. These governments simply don't care about the common well-being, they just care about getting richer. Consequently, it's easy for foreigners to invest and create wealth in Mexico, because the government allows any type of private property to foreigners, unless it could affect its corrupted interests in a certain way.
Now-a-days, the government makes it easy to foreign enterprises that want to invest in Mexico by stating that it's necessary for the country's continuous growth. And it might be necessary right now in order to rescue a country that has been hit for many years by private property inequality due to government's corruption.
But that's the way things are right now, so, it's a myth that foreigners can't own property in Mexico, as it is clearly stated in the following extract:
"Foreigners purchasing non-residential property can form a Mexican corporation. “Mexican corporations can be 100 percent foreign owned,” James Glover of Baja Real Estate and Consulting and publisher of bajainsider.com said. “A Mexican corporation is a Mexican in the eyes of the law. So, your rights are no different than a Mexican at that point.”
Foreigners purchasing residential property must use a Mexican bank trust called a fideicomiso, a structure established in 1973. In a fideicomiso, the bank holds the title, while the investor or property owner receives beneficial rights.
“I had to really try to get comfortable when I first heard this that I didn’t actually have title to the property,” Alan Axelrod, Baja investor and managing member of Axelrod Capital Management, LLC, said. “But I’ve concluded that you really have all the burdens and benefits of ownership. You can sell it, you can bestow it, you can will it. You can renew it anytime and then it runs for 50 more years, and it has a minimal cost.”
“The net effect of this provision is that the foreign person is permitted to do anything with his/her property that a Mexican citizen can do,” Linda Neil, an accredited buyer representative and real estate consultant based in La Paz, said.
The key difference is that a fideicomiso structure allows for a non-judicial foreclosure process, which means the property can be sold quickly if the beneficiary doesn’t make payments, Russ Schreier, CEO of Finance North America, said. This would make it easier for fideicomiso beneficiaries to lose their properties than fee simple owners.
However, “the Mexican government is fully aware that it would destroy their property values if they just started indiscriminately taking property away from people,” so there is little fear of that happening, Glover said."
Sources: 1. https://revistas.juridicas.unam.mx/index.php/cuestiones-constitucionales/article/view/5609/7303
2. http://www.nuwireinvestor.com/the-myth-of-mexican-property-ownership/
3. Personal opinion
5. Commercial Banks (4.0)
The commercial banks stability in Mexico depends entirely on the central bank's stability. This means that all the transactions that take place in the Mexican financial system are regulated by the Bank of Mexico. This situation is especially true in regards to the commercial banks' decisions, and that it why the Bank of Mexico is called "Banco de bancos", which means that it carries out the same functions that any commercial banks does with its clients, including the setting to credits' limits and interest rates.
The banks in Mexico remain stable and keep making profit because the interest rates are a lot bigger for the clients that ask for credits that the ones that are given to clients that keep their money savings inside the bank. The Bank of Mexico also regulate these interest rates.
Sources: 1. http://mexiconomico.blogspot.ie/2009/07/el-banco-de-mexico.html
2. Personal opinion
6. Communication Systems (3.0)
Mexico has an extensive network of communication facilities. Telephone, radio, magazines, newspapers, and television can be found in almost every place. In fact, there's at least 1 television in 90% of Mexican homes. However, the veracity that television contents have is questionable to say the least, and unfortunately, Mexicans rely heavily on what it is said on TV. Besides that, internet has already overtaken television as the most important mean of communication on Earth because its contents are a lot more diverse and trustworthy than the rest of the media. A high percentage of people living in "first world" countries have access to internet. For example, about 88% of the population in Germany and the USA have access to internet now. In contrast, only 45% of the population in Mexico has this privilege. And neither Germany, nor the USA have the highest percentage of internet users in the world.
The kind of facilities that is provided in first world countries is the same that should be provided in Mexico. Otherwise, Mexicans will keep being less well served than their counterparts in first world nations.
Sources: 1. http://www.internetlivestats.com/internet-users-by-country/
2. http://www.parametria.com.mx/carta_parametrica.php?cp=4088
3. Personal opinion
7. Transportation (4.5)
Mexico has an extensive transportation network, which by the way, meets in an efficient way the needs of its economy. In addition, all the most important markets and population centers are easily accessible to passengers and freight transportation.
All means of transportation of goods and people can be found in Mexico: roads, rail, air, and ship.
The roadway network covers all areas in the country. In fact, Mexico has the largest paved-roadway network in Latin America.
In regards to the railroads, they are mainly used to transport great volumes of freight at a low cost. They connect the most important population centers to the main ports, borderlines, and to one another. Instead of traveling by train, people use the national bus network, which has already become a "first world" experience.
Talking about air travel, Mexico already had 53 international airports in 2005, and its infrastructure is the most advanced in Latin America. It also has the 3rd highest number of airports in the world. Air travel in Mexico is very efficient and safe at the same time.
And finally, when it comes to seaports, Mexico possesses high quality ports where goods exchange can take place effectively, and where people are taken care of well.
There is still a small number of population pockets left, but Mexico has been spending an important amount of money to make sure that doesn't happen anymore.
Sources: 1. http://cuentame.inegi.org.mx/economia/terciario/transporte/default.aspx?tema=E
2. http://www.mexperience.com/lifestyle/transport/getting-around-mexico/
3. https://en.wikipedia.org/wiki/Transportation_in_Mexico
4. Personal opinion
8. Education (2.0)
Starting with the fact that there are 117 countries above Mexico in the literacy ranking, it's obvious there is a huge education problem that needs to be taken care of immediately. In a recent study, Mexico has a 93.50% of literacy. That number doesn't look that bad, but considering there are 8 countries where the percentage is 100%, means that millions of Mexican people don't even know how to read or write. Some of the most industrialized countries like Germany, France and the United Kingdom have a 99% literacy. That's 5.5% higher than Mexico. Even Mexico's neighbor countries like Costa Rica, Panama and Trinidad and Tobago, which aren't considered part of the industrialized world, own higher literacy percentages than Mexico. That's alarming.
The school life expectancy in Mexico is 13 years. This means that in general, Mexicans aren't expected to finish their University studies because it takes about 16 school years to graduate from College. Mexico is ranked in the 95th position in the 2016 CIA World Factbook in regards to this aspect. This also contrasts with the school life expectancy that Germany, France, and the United Kingdom have, which is 16 years.
To be fair, the quality of the education some Mexican schools and Universities give to their students is good. This is shown in the 2015 Fair Reporters' quality of education ranking, in which Mexico sits on the 54th place. That's not amazing but it shows that, if taken care of, the education in Mexico has potential.
Sources: 1. http://www.photius.com/rankings/2016/population/literacy_total_2016_0.html
2. http://www.photius.com/rankings/2016/population/school_life_expectancy_total_2016_0.html
3. http://fairreporters.net/world/the-best-education-systems-in-the-world-in-2015/
4. Personal Opinion
9. Social Mobility (1.0)
The education system in Mexico is completely unfair. Not everybody has the same opportunities and access to education. People from deprived backgrounds are never provided the tools needed to join the middle classes. Least of all are they provided the tools needed to join the elite classes. The Mexican society could easily be considered a classist one. Poor people are seen as inferior by some rich people and are segregated because of that. Jobs in all public sectors (including the most important political positions) are not earned by ability, they are given to cronies or family.
It seems that the few wealthiest families in Mexico have been ruling the country forever. Even the society calls its politicians the "political dinosaurs". Most of the people have gotten tired of this situation, unfortunately, they have learned how to live accepting these abuses. Either, they still want to keep living in their comfort zone, or they are just a fiery leader shy of joining a rebellion against their government.
Sources: 1. https://reporterosenmovimiento.wordpress.com/2015/03/11/observando-quien-detendra-los-cargos-publicos-heredados-de-padres-a-hijos/
2. http://yucatan.com.mx/editoriales/opinion/mexico-y-su-partidocracia
3. Personal opinion
10. Freedom from Outside Control (5.0)
After 300 years of being abused, mistreated and ruled by Spain, people in Mexico got tired of being poor and hungry. So, on September 16th, 1810, led by their fiery leader Miguel Hidalgo, they started a long battle to become independent. It took a lot of sacrifice and battles, but Mexico became an independent nation 11 years after that glorious day. There were other attempts from different countries to conquer Mexico after that. But Mexicans stood up for themselves bravely, and avoided being conquered by the French in another legendary battle called "Batalla de Puebla". They also showed the Americans that they preferred to die before being ruled by foreigners again, in a heroic battle called "La Batalla de los Niños Héroes".
Since becoming independent, Mexicans have been subject only to the laws of their home country and their own Constitution.
Sources: 1. http://lcps.k12.nm.us/wp-content/uploads/2015/10/independencia.pdf
2. Personal opinion
11. Protection of Domestic Enterprises (3.5)
In regards to its trade balance, Mexico had a positive one of $21.3 billion dollars in 2014. It shows a surplus because Mexico exported more than what it imported: $400 billion dollars (exports) - $379 billion dollars (imports). These are positive numbers and shows that Mexico is an above balanced country.
There are some states in Mexico where there's a specific plan to establish some specified industries for future growth and clearly fashions its trade policies to accomplish that goal. An example of this can be found in Puebla City, which has been attracting German investment (companies like Volkswagen and Audi) thanks to a well-made plan, and to the recent amendments that were made to the Mexican Foreign Investment Law. These amendments, according to the "startup-overseas" website, were made in order to:
• Reduce delays in the processing of many government business requirements.
• Promote foreign investment.
• Provide added security to foreign investors investing in Mexico.
• Simplify procedures for investment in Mexico.
This foreign friendly strategy could also be considered as a discouraging one for domestic enterprises because the restrictions to the competition are less than before. However, there are still policies which have some restrictions to foreigners. These restrictions, described in the "startup-overseas" website are the following:
"There are certain industries in Mexico which are limited to ownership by Mexican corporations or citizens only. These include activities involving the production and sale of petroleum and other hydrocarbon products, basic petrochemicals, electricity (including the generation of nuclear energy), telegraph communications, mail processing and delivery, and similar public services. These are all services which the Mexican government have a monopoly on.
Economic activities reserved for Mexicans include the operation of credit unions, retail trade in gasoline and liquid petroleum gas, national surface transportation of passengers, tourism, and transportation of freight.
Foreign investment in cooperative companies or production is limited to 10%. Investment in domestic air transportation, air taxi transportation and specialized air transportation generally is limited to 25%. Since the changes made to the Foreign Investment Law, foreign ownership interest is not considered if the foreign investment is made in a Mexican corporation and if 51% of the capital of such corporation is held by Mexicans.
Foreign investors may now hold up to 49% in companies in almost all aspects of the Mexican financial system, including commercial banks, credit institutions and securities market specialists."
In general, it's safe to say that Mexico, if ruled in an appropriate way, has the potential to be very well balanced and an ideal country for both situations: Protecting its domestic enterprises while attracting foreign investment as well.
1. http://atlas.media.mit.edu/en/profile/country/mex/
2. http://www.startupoverseas.co.uk/starting-a-business-in-mexico
3. Personal opinion
12. Foreign Currency Transactions (5.0)
In Mexico, all the transactions are conducted in the official, national currency which is the Mexican peso. This allows business owners to spend more time on expanding their primary business without worrying about changing currencies. Moreover, changing dollars for pesos isn't allowed to merchants and vendors in Mexico anymore. So, the only ways to get Mexican pesos are in the currency exchange houses and banks. When using a credit card, the exchange is automatically done.
Sources: 1. http://www.visitmexico.com/es/monedas-y-tipo-cambiario-en-mexico
2. Personal opinion
13. Border Control (1.0)
Both Mexican borders are currently ranked as 2 of the most dangerous ones in the American continent. First, the much-maligned Mexico - USA border, is a very dangerous zone due to all the conflicts between drug cartels that take place there. The cartels war is a dispute to gain full control of a border that is considered a strategic area. Even the American security is corrupted by the cartels on this border.
In the southern Mexican border, the Mexico - Guatemala one, the Zetas have been violently trying to take control of the drug-dealing routes since 2007. This violence has been moderately controlled in recent years though. But it´s still considered one of the five most dangerous borders in the American continent.
Sources: 1. http://revoluciontrespuntocero.com/las-dos-fronteras-mexicanas-entre-las-5-mas-violentas-de-latinoamerica/
2. Personal opinion
14. Currency (5.0)
Mexico has one official and government approved currency that is used throughout the whole country. It is called Mexican peso. The use of a single currency allows the economic policies of the government to have predictable effects. On September 1st, 1925, the Bank of Mexico received the exclusive authority to issue money by minting metal coins and printing banknotes. In fact, the Mexican peso was the first coin in the world to use the sign "$", even before the USA dollar did it. This clearly shows consistency in regards to this policy.
Sources: 1. http://www.globocambio.com.mx/en/currencies-of-the-world/mexican-peso
2. Personal opinion
15. Cultural / Language Homogeneity (3.5)
Minority groups in Mexico remain relatively small compared to the majority culture. Despite the fact that Mexico contains 65 different indigenous ethnic groups, people who don't speak Spanish, which is Mexico's official language, account for only 1.6% of the whole population (these people are unfortunately isolated). Even though Mexico is culturally considered homogenized, and its traditions are followed by the vast majority of the population, it has been stroke by ethnic conflicts, especially in its Southern region.
Sources: 1. http://www.indexmundi.com/mexico/demographics_profile.html
2. http://www.sciencemag.org/news/2014/06/people-mexico-show-stunning-amount-genetic-diversity
3. Personal opinion
16. Political Effectiveness (1.5)
Mexico doesn't have any declared enemies, so it isn't target for terrorist attacks. However, natural disasters strongly hit Mexican regions every year. There are victims to these natural disasters quite frequently. That's due to political ineffectiveness. Problems like traffic jams or floods that cause a lot of damage to some neighborhoods have never been fixed correctly. These situations sometimes lead to interrupting normal business activity.
Another disadvantage to the business climate is that it couldn't be extended to all parts of Mexico, because in some cases, there's an abysmal difference in the amount of wealth that could be created in the urban areas compared to the one that could be created in the rural areas. A lot of rural areas are completely forgotten by their governments. Consequently, there are places where it is possible to create a lot more wealth than in others. Big cities like Mexico City, Guadalajara and Monterrey are places where the political effectiveness is good. On the other hand, having decided to declare war on drug cartels in 2006 without an effective strategy, ex-president Felipe Calderón caused some regions in Mexico to become extremely risky ones. By 2010, 18,000 people had died due to his drug-crusade and drug cartels were still standing. Unfortunately for Mexicans, their politicians haven't shown any effectiveness to solve the most alarming problems that the country is facing.
Sources: 1. http://articles.latimes.com/2010/mar/23/world/la-fg-mexico-army23-2010mar23
2. Personal opinion
17. Institutional Stability (2.0)
The institutions in Mexico are mainly stable because they don't change frequently. However, most of them are not efficient and they could be easily corrupted. Institutions' main goal of taking care of its citizens’ well-being is not properly achieved in Mexico. Mexican institutions main objective is generating profit rather than their society. Instead of building around solid long-term goals, they tend to build around short-term goals that are only based on their functionaries’ personal interests.
Sources: 1. http://www.excelsior.com.mx/opinion/luis-f-lozano-olivares/2016/08/20/1112127
2. Personal opinion
18. Honest government (1.0)
The government in Mexico isn't transparent at all. The worst part is that it has being doing whatever it takes to continue ruling the country, even if that involves vote-buying or worse actions. The Mexican government, alongside the mass media, has been obstructing (in every possible way) leaders who truly wish to help poor people since 1988. That year, Cuauhtémoc Cárdenas won the elections, but all the votes were burnt, so there was no proof of his victory. After that, the presidency was awarded to Carlos Salinas. Before the 1994 elections, a strong leader, who genuinely wanted to help the society emerged. The government and the media realized he was going to put an end to corruption in Mexico, so they decided to kill him. Luis Donaldo Colosio was his name. In 2006 and 2012, Andrés Manuel Lopez Obrador should have won the elections if they had been clean. But, as it is perfectly well described in The Guardian's website by its columnist Mark Weisbrot, the government and the media deceived their country again.
Sadly, this means that people worldwide are also aware of how corrupted the Mexican government is.
Mexico is currently ranked 95th in the Transparency International Corruption Index while their North American neighbors (Canada and the USA) are ranked 6th and 16th. That says it all. Unfortunately for Mexicans, they continue having poor governments that contain functionaries who use their office for profit and not for the Mexicans well-being.
Sources: 1. https://www.theguardian.com/commentisfree/2012/jul/09/irregularities-reveal-mexico-election-far-from-fair
2. http://www.transparency.org/country#MEX
3. Personal opinion
19. Common laws (1.0)
The justice system in Mexico is very corrupted and always favors rich people over poor people. It doesn't help that police officers are paid miserable salaries which are never enough to fill all their basic needs. So, whenever rich Mexican citizens violate a law, they know that if they offer a bribe to the police officers, they could easily get away with the bad things they do. On the other hand, if poor people violate a law and don't have money to offer a bribe, they could end up being arrested and put in jail immediately. So, Mexican jails are mostly filled with poor people. Moreover, when rich people are put in jail, they have privileges that poor people can't buy. As a conclusion, rich people in Mexico are almost always able to buy better justice than poor people.
Sources: 1. http://gomexico.about.com/od/glossary/g/mordida.htm
2. Personal opinion
20. Central Bank (1.5)
The management of the Mexican economy by its Central Bank hasn't been efficient and hasn't come up with anything positive when times have gone south. We could just take a look at an extract from the "Bloomberg Markets" website, to realize the Central Bank is not currently producing anything good for Mexico in the long term:
"The Mexican peso posted the biggest loss among the most-traded currencies as it sank to a record, testing the central bank’s willingness to intervene. The peso weakened 0.7 percent as of 12:24 p.m. in New York and traded as low as 19.8723 per dollar Tuesday, missing out on the gains in most emerging-market currencies as policy makers in the U.S. and Japan entered their final stretch before announcing decisions on their benchmark rates. The currency has plunged 5.2 percent this month, more than twice as much as the second-biggest loser among 31 major currencies tracked by Bloomberg."
Sources: 1. http://www.bloomberg.com/news/articles/2016-09-20/mexico-s-central-bank-tested-by-traders-as-peso-falls-to-record
2. Personal Opinion
21. Domestic Budget Management (1.5)
In recent times, Mexico has held a healthy differential between its exports and imports. So, why is Mexico's external debt increasing rather than decreasing? Because of the same thing that has happens to all the Latin American countries that are still paying their external debt: The profit they make by exporting is all destined to paying the interests generated by their foreign debts.
This situation has become a very difficult one for Mexico City, because it has basically become obligatory for it to continue exporting in order to continue paying its external debt. This situation doesn't allow Mexico City to develop its internal market as it has to be entirely focused on a continuous development of its external market.
The external debt has lasted forever and keeps increasing because of the Mexican peso's continuous decline against the dollar. It keeps losing value against the dollar each year, and obviously, part of the foreign debt's interest rates are denominated in dollars, so, that makes it even more difficult for the foreign debt to be paid.
Sources: 1. http://wolfstreet.com/2015/08/08/corporate-dollar-debt-explodes-in-mexico-as-peso-dives/
2. Personal opinion
22. Government Debt (1.5)
In 2012, the government debt in Mexico represented 34.3% of the country's GDP. It has grown a lot during a four-year span. At the end of this year, the government debt will represent 48.5% of Mexico's GDP. That's an alarming increase in a very small period. Unfortunately, Mexico is on its way to becoming an excessively indebted country.
The level of the government debt in Mexico is still moderate in comparison to the level of debt that countries like the USA or Japan have. However, the debt's rates are bigger that the economic growth's rates in Mexico. Consequently, that could severely affect the future generations of Mexicans, and perhaps the foreigner’s intentions of investing in Mexico.
Sources: 1. https://es.panampost.com/elena-toledo/2016/08/29/alarma-en-mexico-el-crecimiento-de-la-deuda-publica/
2. http://www.elfinanciero.com.mx/opinion/el-crecimiento-irresponsable-de-la-deuda-publica-en-mexico.html
3. Personal opinion
23. Economic Statistics (5.0)
At first sight, the numbers seem very encouraging to opening a business in Mexico. Foreign investors have been significantly attracted by those numbers in recent years (that explains why Mexico held the number 9 spot in terms of foreign investment in 2015). However, in 2016, Mexico experienced the steepest decline of all the countries in the top 25 of the foreign investment ranking, dropping 9 spots in just one year. This means that investors have begun to doubt the accuracy of the numbers.
There are 3 main factors that foreign investors consider before carrying out an important investment abroad: The size of the target market (which in Mexico is one of the biggest in the world), the cost of labor (which unfortunately for Mexicans is one of the cheapest in the world), and the transparency and corruption perception. Mexico is very attractive in regards to the 2 first factors and didn't suffer significant changes from 2015 to 2016. So, the reason its foreign investment ranking plummeted, is that it has started to be perceived by the rest of the world as a lot more corrupted than before. And that is really worrisome to say the least, because it means that the current management is quickly leaving Mexico in a shambles. Actions must be taken immediately before one of Mexico's strengths becomes a nightmare.
Sources: 1. http://www.revistaneo.com/articles/2016/08/22/¿es-méxico-atractivo-para-la-inversión-extranjera-directa
2. Personal opinion
24. Protection of Public Health and Safety (2.5)
Mexico's public health statistics for indicators like infant mortality and tuberculosis aren't encouraging. As we know, infants are the most susceptible and sensitive human beings, so, to measure a country's level of health, we must pay attention to the "Infant Mortality Rate" study, brought by one of the most prestigious organizations in the world: the CIA (Central Intelligence Agency) from the USA. This study shows the number of deaths of infants under 1 year old in each year per 1000 live births in the same year. Mexico is way behind the countries with the lowest number of deaths. While there are approximately 11.90 deaths in Mexico, there are 2, 3.40 and 5.80 deaths in countries like Japan, Germany, and the USA respectively. Another useful study for this case, called "Incidence of Tuberculosis (TB)", shows that, in 2014, Mexico had 21 cases of tuberculosis per 100,000 people while Japan, Germany and the USA had 18, 6 and 3 respectively. It's not a big difference, but again, Mexico hasn't reached the elite levels yet. Overall, if we compare Mexico's number of deaths to those of the worst ranked countries like Afghanistan, Mali or Somalia, which have 112, 100 and 96 deaths per 1000 live births, the decision of opening a business in Mexico might just probably be very little influenced by its mortality rates.
Sources: 1. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html
2. http://data.worldbank.org/indicator/SH.TBS.INCD
3. Personal opinion
25. High Wage Policies (1.0)
Unfortunately, this is one of the most alarming problems that Mexico has. There are a lot of low income people, who struggle a lot to obtain everything, even their most basic needs. They also tend to be completely forgotten by their government. That's why a lot of people look for dignified living conditions in other countries while putting their own lives in danger in some cases. An example that clearly illustrates the ridiculously low income that some Mexican workers get, is if we compare their minimum salary while working full time (about 8 hours a day) to the minimum salary that Australians can get. The minimum wage in Mexico is $4.58 a day! In contrast, the minimum wage in Australia is $76.32 a day. That's an income of about 20 times less that a Mexican can get for doing the exact same thing an Australian does. Some really alarming statistics: In a research done in 2014 there were 55 million Mexicans living in poverty. That amount represents 46% of the countries’ total population!
Sources: 1. http://rpp.pe/mundo/actualidad/conoce-los-15-paises-donde-se-paga-el-salario-minimo-mas-alto-del-mundo-noticia-956914
2.http://www.eluniversal.com.mx/articulo/nacion/sociedad/2015/07/24/crece-pobreza-en-mexico-hay-dos-millones-mas-coneval
3. Personal opinion
26. Environmental Protection. (2.0)
There's an index that measures how each of the 180 countries in the world is doing in regards to taking care of the environment. It's called the "Environmental Performance Index". Unfortunately, Mexico is doing very badly in this aspect because it is ranked in the 67th place overall. In terms of air quality, Mexico is doing even worse, ranking 96th on this index. Despite the fact that Mexico City has been improving little by little on this aspect lately, it is still one of the most polluted cities in the world. The enforcement is minimal and effective regulations haven't been created to significantly improve the environment's quality in Mexico City.
Sources: 1. http://epi.yale.edu/country/mexico
2. http://epi.yale.edu/country-rankings
3. Personal opinion
27. Strong Army (1.0)
Mexico is a country that doesn't have sufficient armed force to protect the nation's border from attack. That's evidently indicated in the "Global Firepower Index". This index ranks each country's army according to its strengths. The USA, Russia and China lead the way while having the most powerful armies in the world. Mexico ranks 33rd on this ranking. However, there might be a good explanation for having such a low rank. This might be happening because Mexico has always been a "friendly and pacific" country that has never gotten involved in international conflicts. In fact, Mexico has the second highest number of free trade international treaties (12 with 46 different countries) in America (only behind Chile). That's why there's a low risk and the probabilities that it could be attacked are minimal. Consequently, this situation has a neutral effect on wealth creation because it doesn't really affect it. Nevertheless, that doesn't mean that there's zero risk, so it would be better if it had a strong army.
Sources: 1. https://actualidad.rt.com/actualidad/view/133923-lista-35-ejercitos-potentes-mundo
2. http://www.gob.mx/se/acciones-y-programas/comercio-exterior-paises-con-tratados-y-acuerdos-firmados-con-mexico
3. Personal opinion
28. Foreign trade impact (3.5)
In 2015, Mexico's GDP was $1.291 trillion. Its exports and imports combined (foreign trade), account for $779 billion. That's about 66% percent of the economy's GDP. Considering that a well-considered foreign trade would account for about 33% of the GDP of a country, Mexico is not doing well in regards to this policy. Consequently, it can't receive a high grade because a great part of the country's economy depends on trade and is subject to external shocks to its economy.
On the other hand, Mexico City is responsible for $410 billion of Mexico's total GDP. So, the capital City has a huge impact in the country's economy to say the least. That's why, given the circumstances, Mexico City can be considered a place where it's possible to create wealth.
Sources: 1. http://atlas.media.mit.edu/es/profile/country/mex/
2. http://www.investopedia.com/articles/personal-finance/111015/how-much-money-do-you-need-live-mexico-city.asp
3. Personal opinion
29. Management of foreign currency budget (4.0)
Mexico is ranked as the 12th biggest exporting country in the world and the 20th most complex. In 2014, the last research related to Mexico's exports and imports took place. Mexico exported $400 billion and imported $379 billion. Mexico exports a little bit more than what it imports having a positive outcome of $21 billion. This amount reflects that it's a well-balanced country. The oil industry is the main source of income. Mexico makes $37 billion thanks to oil, but also spends $23 billion in oil production equipment. That couldn't necessarily be considered as something positive for Mexico though, because its economy is too dependent on how the oil industry is doing.
In regards to Mexico City, as J. William Carpenter expresses it in a very detailed way in his article related to this great city, one could say that "it's one of Latin America's most important international business centers and financial hubs. As of 2014, the city and its surrounding metropolitan area was home to about 21 million people, making it the largest urban agglomeration in Latin America. In a 2012 study, Mexico City ranked as the eighth-largest urban economy in the world and was responsible for more than $410 billion in GDP. It also serves as Mexico's education capital with dozens of universities and colleges across the city, headlined by one of the top Spanish-language universities in the world, the National Autonomous University of Mexico.
This is all to say that Mexico City is a dynamic place to live, with all kinds of opportunities for work, study, and play. Whether you are considering a move to Mexico City for business, school or retirement, the city almost certainly has a place for you. From low-cost living to urban luxury, Mexico City delivers all the options you need to maintain a comfortable life with any type of budget."
Sources: 1. http://atlas.media.mit.edu/es/profile/country/mex/
2. http://www.investopedia.com/articles/personal-finance/111015/how-much-money-do-you-need-live-mexico-city.asp
3. Personal opinion
30. Layers of collective action 4.0
Even though the Mexican President has had unchecked power through the years, the main decisions in Mexico City haven't gone to the Central Government for 20 years now. Before 1996, the Presidents had full control of electing the people that would take the decisions in Mexico City. These governors were called regents, and the reality was that they weren't more than just puppets, who were named and removed whenever presidents wanted. But in 1996, important changes were made to the Mexican Constitution in regards to this subject. Regents stopped to be elected by presidents, they started to be elected by citizens instead. Moreover, they gained full control over the capital's management. In a sense, they became "The Capital's Presidents". They started to be called "Head of Government of Mexico City".
All things considered, this change has been positive to Mexico City's growth and development in many aspects. Even though the Central Government's inept decisions still affects Mexico City, thanks to the Heads of Government power to decide independently, citizens in Mexico City (considered the most literate people in the whole country) can enjoy some rights that citizens in the rest of the states in Mexico can't. For example, women in Mexico City now have the right to legal abortion in the first 12 weeks of pregnancy, gay couples marriages can be celebrated and are allowed to adopt children as well, etc.
Source: 1. http://portal.te.gob.mx/ventana/jefe_gobierno
2. https://es.wikipedia.org/wiki/Jefe_de_Gobierno_de_la_Ciudad_de_México
3. Personal Opinion
31. Pro-business climate 4.0
Reform in Mexico is making the environment very pro-business, pro-investment, breaking up monopolies, injecting foreign investment into nationalized companies, and moving away from protectionism in the market place. In other parts of the world this has shown great results that led to significant per capita growth. India began reforms in the 1980s and went from 0.3% growth in the 1970s, to 6% since 2000. Chile went from .08% growth from 1964-73 to a 5.8% per capita growth in 1984-1993 after reforms. (Source: Money Morning).
Mexico’s average tariff rate is 5.4 percent. Mexico has reduced tariff and non-tariff barriers both unilaterally and through trade agreements. Oil and gas reserves are owned by the government, but the energy sector is being liberalized. The financial sector has become more competitive and open in spite of the challenging global environment. Banking remains relatively stable, and foreign participation has grown rapidly.
Investors have been encouraged by signs that the new Mexican president, Enrique Peña Nieto, will continue to push for economic change. Mexico’s congress has already approved labor and education reforms and a long-awaited telecommunication bill came through in March to bring competition into a highly-concentrated industry. Other key reforms—fiscal, financial and energy—are expected to come through this year as well.
Source: http://www.realtor.org/educsess.nsf /sphandout/mexicowhitepaper2013.pdf/$file/mexicowhitepaper2013.pdf
http://www.heritage.org/index/country/mexico
32. Government enterprises 4.0
Sectors Reserved for the State in whole or in part:
A. Petroleum and other hydrocarbons;
B. Basic petrochemicals;
C. Telegraphic services;
D. Radioactive materials;
E. Electric power transmission and distribution;
F. Nuclear energy;
G. Coinage and printing of money;
H. Postal service;
I. Control, supervision, and surveillance of ports of entry
The reforms to the energy, power generation, and telecommunications sectors liberalized access to these sectors, but did not privatize any state-owned enterprises.
Mexico's government understands it must be competitive in the newly difficult economic landscape to entice foreign manufacturers to make relocation decisions in these uncertain times. Once again, valuable incentive packages are on the table from several sources. Each package is different as they vary by location, sector, level of financial investment, type/number of jobs created and strategic benefits to Mexico's long term goals. If your company will be creating quality jobs while making a substantial and long term investment in Mexico; the government wants to help you make that happen.
Source: http://www.state.gov/e/eb/rls/othr/ics/2015/241661.htm
http://www.mexicogov.org/incentives.php
33. International security agreements 4.0
One of Mexico's current and closest allies is the United States, and the 1994 North American Free Trade Agreement, or NAFTA, has significantly strengthened its relationship with Canada. Mexico's enemies are the heavily armed drug cartels operating within its borders. Attacks against civilians and clashes between Mexican security forces and armed and organized groups, such as the Zetas, Sinaloa and Jalisco New Generation cartels have resulted in more than 83,000 deaths between 2007 and 2015. In addition to being a United States ally and major trading partner, Mexico is a current member of several international organizations, including the United Nations, the Organization of American States, and the Organization for Co-operation and Development. Although Mexico has traditionally remained neutral in international conflicts, an amendment to the nation's constitution has been proposed that would allow Mexico's armed forces to assist the United Nations in peacekeeping operations.
The principles of Mexican foreign policy are respect for international law and the judicial equality of states, respect for the sovereignty and independence of nations, nonintervention in the domestic affairs of other countries, the peaceful resolution of conflicts, and the promotion of collective security through participation in international organizations. Traditionally, Mexico's foreign policy has been considered leftist, pro-revolutionary, and nationalistic.
Source: https://www.reference.com/government-politics/current-allies-enemies-mexico-ee6293868749723e#
http://www.photius.com/countries/mexico/government/mexico_government_foreign_relations.html
34. Protection of domestic enterprises from government mandated costs (4.0)
Mexico has been a member of the World Trade Organization (WTO) since 1995. Mexico follows all Trade Related Investment Measures (TRIMs) requirements. The top individual income tax rate is 35 percent, and the corporate tax rate is 30 percent. Other taxes include a value-added tax. The overall tax burden equals about 19.7 percent of GDP. Government spending now accounts for 28.1 percent of total domestic output, and budget deficits have been widening. Public debt is equivalent to about 50 percent of GDP.
Most taxes in Mexico are federal; therefore, states have limited opportunity to offer tax incentives. However, Mexican states have begun competing aggressively with each other for investments, and most have development programs for attracting industry. This includes discounted or even free access to land, employee training programs, and reductions of the 2 percent state payroll tax, as well as real estate, land transfer, and deed registration taxes, and even new infrastructure, such as roads.
Nowadays Mexico is working successfully towards government decentralization, and many states have also developed unique industrial development policies.
In order to maintain competitiveness and comply with NAFTA provisions, Mexico has developed Sectoral Promotion Programs (PROSEC) to oversee maquiladoras. Under these programs, most favored nation import-duties on listed inputs and components used to produce specific products are eliminated or reduced to a competitive level. These programs comply with NAFTA provisions because import duty reduction is available to all producers, whether the final product is sold domestically or is exported to a NAFTA country. PROSEC’s 23 supported sectors include electronics, auto parts, textiles and apparel, footwear, and others.
Source: http://www.heritage.org/index/country/mexico
http://www.state.gov/e/eb/rls/othr/ics/2015/241661.htm
DISCLAIMER
All the information and conclusions in each country analysis are solely the responsibility of the indivi dual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.To learn more about other countries, click to other files here:
mckeever.mp@gmail.com
Please place the acronym MIEPA in the subject line.