Check out our latest Expert’s Take article from Gildardo Gutierrez on the importance of parents in educational reform in Mexico. This will be the first article of a series on education by Gutierrez published in partnership with the Mexico Institute.
By Duncan Wood
As the Mexican congress debates two major economic reforms (fiscal and energy) a third reform debate, this time over changing the rules and institutions of the Mexican political system, is in full swing. Recent proposals by the opposition PAN and PRD parties have highlighted rival but complementary plans for addressing what are seen by some as the most problematic weaknesses of democracy in the country. As a central element of the Pacto por Mexico, we should expect that political reform will occur, and its implications for Mexico’s political balance will be profoundly felt.
Over the past three decades, piecemeal political reforms in Mexico have played a role in the gradual transformation from a closed authoritarian system to an evolving democracy. The true significance of many of these reforms was not apparent at the time, but they have played important roles in the path of democratization. The creation of the Instituto Federal Electoral (IFE) stands out as perhaps the most important of these but, as Rod Camp has pointed out, other reforms have proven to be highly significant in the long term.
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By Roderic Camp
As President Enrique Peña Nieto continues to pass new legislation, much of it highly controversial, are his efforts breaking new ground, or does Mexico have a well-established track record of major reforms? A brief look back at the last two decades alone suggests the extent to which current legislation, both proposed and passed, is unique in content and in the legislative process. Several path-breaking political reforms in the 1990s, under the last two PRI presidents in the 71 year reign of that party, illustrate some revealing precedents.
A strong case can be made that the most challenging political reform introduced under President Carlos Salinas, which has not received the attention it deserves, was his decision to introduce major alterations in Article 130 of the 1917 Constitution, which focused on the lengthy and deep conflictive history of the Church-State relationship. Provisions in that article imposed severe restrictions on the Catholic Church and other religious institutions, a product of the 1910 Revolution, as well as a nineteenth century conflict between Liberals and Conservatives represented in the 1857 Constitution. The president initiated these reforms in 1992, which for the first time in seven decades, allowed religious institutions to have legal standing, thus they could own property, and permitted priests and ministers to vote. It removed other outdated limitations as well.
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On August 11th, President Enrique Peña Nieto sent his energy reform proposal to Congress, despite the fact that he did not have the full support for the reform from all parties included in the “Pacto por Mexico.” The proposal, as he had promised, is transformative, suggesting several significant changes to the Constitution.
The reform, which will be discussed in the Senate this October, seeks to amend articles 27 and 28 of the Mexican constitution. Although it has not been recognized as such, the President’s proposal is revolutionary not because of the language it adds, but rather, because of the language it omits. The reform erases the word“contracts” in the phrase “For oil and solid, liquid or gaseous hydrocarbons or radioactive minerals, no concessions or contracts shall be granted” found in Article 27. From Article 28, it omits the words “oil and other hydrocarbons, basic petrochemicals, electricity” from the list of strategic areas.
By proposing to eliminate these words and phrases from the law, President Peña Nieto has crossed the Rubicon, laying the foundation for a reform devoted to transforming the energy sector. These changes have the potential to convert the sector into a competitive energy market that promotes the country’s industrialization.
2013 Tax Reform Proposal in Mexico: A New Chapter of a Never-Ending Reform Process – The Expert TakeSeptember 23, 2013
The tax system prevailing in Mexico is the result of a long and unfinished process of reform. During the last three decades, the tax system has been subject to a series of overhauls aimed at efficiency, competitiveness, and revenue goals as the Mexican economy undertakes transformation. While some of the desired policy objectives have been accomplished, the tax to GDP ratio in Mexico is still insufficient to meet the social and infrastructure financing needs at the outset of the 21st century.
by Christohper Wilson
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Five years ago, the United States and China launched the Strategic and Economic Dialogue, a reflection of the growing complexity and enormous importance of US-China relations. Earlier this year at their meeting in Mexico City, President Obama and President Peña Nieto agreed to a similar initiative, the US-Mexico High Level Economic Dialogue (HLED), for much the same reasons, and Vice President Biden is in Mexico today to officially launch the initiative.
Before looking at the content of the Dialogue, let’s take a quick look at why this matters:
Mexico is the United States’ second largest export market (Canada is first), and since 2009, exports to Mexico have grown faster than exports to any of our other top trading partners. Some six million US jobs depend on trade with Mexico. Investment and financial flows between the two countries are also important, but the massive trade relationship is still the centerpiece of the economic relationship.
On the evening of Sunday September8th, President Enrique Peña Nieto announced his government’s much awaited fiscal reform package, which he had sent to the nation’s congress earlier that day. To the surprise of many, the proposal was ambitious, far-reaching and opted not to apply the national sales tax (IVA) to food and medicine, which had been seen by many as the only viable option available for raising tax revenue for the government. Mexico suffers from one of the lowest tax takes of all the OECD countries, with non-oil tax revenue reaching only 12-13% of GDP. Even when combined with substantial monies collected from the national oil company, Pemex, government revenue in Mexico has only been able to reach a paltry 19% of GDP.
The fiscal reform package laid out by the government is focused on increasing revenue, increasing government spending on social programs, and on forcing the wealthier elements of Mexican society to pay more taxes. The government has promised to provide universal social security and pension coverage, unemployment insurance, universal health care and increased spending on education. Each of these will be embodied in a constitutional reform. Pemex will also see a reduced tax rate, falling from 70% to 60%.
Monday’s energy reform announcement by the government is one of the most important in Mexican recent history, as it is a proposal for a wide-ranging constitutional reform. The proposal was made in an area that has long been a taboo in the country, to the extent that the left took up its usual argument to “not making any changes to the Constitution.” By doing this, they gave preference to the “how’s” instead of to the “what’s”, subsequently excluding themselves from a hugely important and transcendental debate.
The fact that President Peña Nieto only sent the Congress reforms to Constitutional articles 27 and 28 could facilitate the legislative debate. At the same time taking up former President Lazaro Cárdenas’s version of Article 27 is a sign of wisdom and political pragmatism given that, according to the government, its benefits are larger than its costs.
While Mexico’s society is evolving fast, it surely has not become a fully transformed, democratic, wealthy Western country, but it is clearly moving in that direction. In our book,Mexico: A middle class society, Poor No More, Developed Not Yet, we argued that the country is no longer fundamentally poor. The numbers published by CONEVAL recently, together with other data previously produced by INEGI do not contradict our basic thesis. If one agrees that companies such as Cinemex, Cinepolis and Walmart are not in the business of losing money, then there is no way to explain their extraordinary pace of growth throughout the country. Mexicans are becoming better off even if not wealthy in any sense, the subtitle of our book.