Energy Reform Necessary to Maintain Mexico’s Moment, Michoacan’s Vigilante Groups and Mark Zuckerberg “Hacks” for Immigration Reform – Weekly News Summary: November 22

November 22, 2013

coffee-by-flikr-user-samrevel1The Mexico Institute’s “Weekly News Summary,” released every Friday afternoon summarizes the week’s most prominent Mexico headlines published in the English-language press, as well as the most engaging opinion pieces by Mexican columnists.

What the English language press had to say…

This week’s press had interesting reports on the Mexican economy. The New York Times published an article describing how dozens of foreign companies are investing and filling in new industrial parks along central Mexico. As a result, middle-class housing is popping up and new universities are waving in classes of students eager to study engineering, aeronautics and biotechnology, signaling a growing confidence in Mexico’s economic future and what many see as the imported meritocracy of international business. On a similar note, the Wall Street Journal noted that even though Latin America has been a laggard among developing markets this year, some advisers are convinced the resource-rich region is poised for a turnaround. But instead of investing once again in Brazil, portfolio managers are finding smaller markets in Mexico and Chile as better bets to tap into Latin America’s long-term growth. Finally, the Economist claimed that to implement and to boost sustaining growth, a bold energy reform is needed. Without it, Mexico’s moment may prove to become fleeting one.

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In the Middle of Mexico, a Middle Class Is Rising

November 19, 2013

iStock_000008876270MediumThe New York Times, 11/19/2013

A decade ago, Ivan Zamora, 23, might have already left for the United States. Instead, he graduated in May from a gleaming new university here, then moved on to an engineering internship at one of the many multinational companies just beyond the campus gates.

His days now begin at dawn inside the new Volkswagen factory a short walk away, and when he leaves at night, he joins a rush of the upwardly mobile — from the cavernous new Pirelli plant next door, an array of Japanese car-parts suppliers and a new Nivea plant on a grassy hillside.

“There’s just a lot more opportunity to study and to succeed,” Mr. Zamora said at the factory, surrounded by robots, steel, glass and young technicians. “Both my parents are teachers. They lived in an entirely different era.”

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Fiscal Reform and the Impact on the “Middle Class”, Violent Protests, and the US Saves Mexico in Soccer (for now!)

October 18, 2013

coffee-by-flikr-user-samrevel1The Mexico Institute’s “Weekly News Summary,” released every Friday afternoon summarizes the week’s most prominent Mexico headlines published in the English-language press, as well as the most engaging opinion pieces by Mexican columnists.

What the English language press had to say…

Mexico’s tax reform, which was passed by the lower house late in the evening of October 17th, was one of the most prominently featured topics in the English language press this week. A New York Times article noted that Mexico’s lower chamber of representatives approved a revised government tax plan which aims to boost receipts by 3% of GDP by 2018. The bill raises the “top income tax rate on a sliding scale to 35 percent, imposes a 5 percent tax on junk food and rolls back plans to apply sales tax on rents, mortgages, property sales and school fees.”  According to the piece, Finance Minister Luis Videgaray said that the revisions will leave the government with a revenue shortfall of 55.7 billion pesos ($4.4 billion), which will be collected from the oil revenue forecasted. The bill must now be passed by the Senate before mid-November, as it is tied to the 2014 budget. A Wall Street Journal piece noted that the vote was 317-164 in favor of the bill, with the support of the ruling Institutional Revolutionary Party and the leftist Party of the Democratic Revolution. Business groups and the conservative National Action Party strongly opposed the tax increases. Although the reform presented by the President didn’t include an extension of sales tax to food and medicines, it caused a storm among business because it raises taxes and eliminates dozens of deductions and corporate loopholes. The lower house also passed Mr. Peña Nieto’s proposed tax of one peso a liter on sugar-sweetened beverages, an increase in the sales tax to 16% from 11% in border states, and a 10% tax on capital gains also remained in the bill.

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Middle worth

October 16, 2013

woman with shopping bags and credit cardThe Economist, 10/14/2013

In the hallowed name of the middle class, Mexico’s politicians have been doing a lot of huffing and puffing lately. The source of their indignation is the president’s plan to raise income tax on annual salaries over 500,000 pesos ($38,000) and impose value-added tax on private schooling and mortgage payments. That, the people’s representatives complain, would beat the stuffing out of ordinary, hard-working families, so they plan to spare them the tax on schooling and housing.

If only the middle class were so lucky. According to measurements by the national statistics institute (INEGI), most of its members earn nowhere near the 500,000-peso threshold, let alone send their children to private school or pay mortgages.

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Mexico president to whack middle class with taxes

October 11, 2013

USA Today, 10/11/2013

Photo by Flickr user Angelica RiveraPresident Enrique Peña Nieto has proposed overhauling the country’s tax system to raise more revenue, increase social spending and curtail the informal economy – all in a country where tax evasion, loopholes and fiscal privileges are considered problematic.

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Defining class in Mexico: Middle worth

October 11, 2013

The Economist, 10/12/2013

woman shopping for water in big box storeIn the hallowed name of the middle class, Mexico’s politicians have been doing a lot of huffing and puffing lately. The source of their indignation is the president’s plan to raise income tax on annual salaries over 500,000 pesos ($38,000) and impose value-added tax on private schooling and mortgage payments. That, the people’s representatives complain, would beat the stuffing out of ordinary, hard-working families, so they plan to spare them the tax on schooling and housing.

If only the middle class were so lucky. According to measurements by the national statistics institute (INEGI), most of its members earn nowhere near the 500,000-peso threshold, let alone send their children to private school or pay mortgages.

Read more…


Mexico’s Fiscal Reform Leaves More Questions than Answers

October 4, 2013

The Huffington Post, 10/3/2013

currency - coinsThe energy reform may be the one on which global investors’ attention is focused, but  the fiscal reform would be the make or break deal for the agenda’s success, one without which the government’s lofty commitments in infrastructure and social spending would be impossible to fulfill. Unfortunately the reform leaves many questions unanswered.

  • The reform is mostly progressive, but various measures will hit the middle class hardest.
  • The reform will raise nearly 3% of GDP, but from a lower 2013 base and mostly from oil.
  • The planned stimulus spending appears extraordinarily high for a country that is facing only a slowdown in growth rather than an outright recession.

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It’s a dog’s life: Fiscal reform in Mexico

September 16, 2013

The Economist, 9/14/2013

Since 2000, woman with shopping bags and credit cardwhen a Mexican film director made “Amores Perros”, a gritty tale about dogs, crime and violence, the status of canines in society has improved a lot. In middle-class parts of Mexico, dog hotels, stylists and even “organic” dog-poo bins are so prevalent that having a pooch has become a symbol of upward mobility. No wonder, then, that the middle class is howling over a proposed tax reform unveiled on September 8th. Not only does this seek to raise taxes on everything from salaries over 500,000 pesos ($38,000) to private schools. It even slaps a levy on dog biscuits.

The main aim of President Enrique Peña Nieto is to raise the tax take—which at 14% of GDP is below the Latin American average—and cut the government’s dependence on oil revenue. The most pressing question is whether the new tax code will help or hinder the revival of a stagnant economy.

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Mexico’s Government Willing to Revise Tax Plan Seen Hitting Middle Class

September 12, 2013

The New York Times, 9/11/2013

The Mexicpiggy bank with coinsan government said on Wednesday it was open to exploring alternatives to some of the more divisive proposals in a newly unveiled tax overhaul, faced with a growing chorus of resistance to measures that critics say hurt the middle class.

Political opponents have voiced dismay at measures like taxing private education, ending mortgage rebates and lifting the top income tax rate to 32 percent from 30 percent for those who earn more than 500,000 pesos ($37,800) a year. Senior officials from Pena Nieto’s ruling centrist Institutional Revolutionary Party have acknowledged the concerns.

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Mexico: Still a Middle Class Society? – The Expert Take

July 31, 2013

shutterstock_70763086By Luis Rubio and Luis de la Calle

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.

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