The Reduced Growth of the Mexican Economy, the Fight for Immigration Reform in the US and a Fiscal Reform Debate in Mexico

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, Reuters reported that the IMF predicts Mexico’s gross domestic product (GDP) will grow by 1.2 percent this year, down from a 2.9 percent expansion it forecast in July. This is due to low government spending, a drop in construction, and slack U.S. demand for local exports. Similarly, a Forbes op-ed stated that Mexico’s growth this year will be disappointing, as too many major policy decisions are likely to remain up in the air and as the benefits from the all-important energy reform still lie several years ahead. According to the article, Peña Nieto’s reform drive is welcome and long overdue but market expectations of near-term benefits for the economy are far too optimistic.

In contrast, according to USA Today, Chrysler will invest $1.3 billion in two Mexican factories to build more engines and commercial vans, a project that will add 1,570 jobs. Correspondingly, the Federal Government announced it will tender three passenger train projects next year worth $7.4 billion, two of which will service the capital’s sprawling metropolitan area. According to a Reuters article, this project is part of the Governments effort to “beef” up the country’s economy.

On a different topic, immigration advocates converged on the National Mall in Washington on Tuesday afternoon to call on Congress to pass a comprehensive overhaul of the nation’s immigration and border control laws. According to the Washington Post, at least 100 people were arrested, including several members of Congress, after demonstrators sat down in the street in front of the Capitol. Protesters had vowed to engage in civil disobedience, and their fellow marchers cheered as each person was led away in handcuffs by Capitol Police. But opponents of reform say the prospects of a bill leaving the House have been dead for some time now. According to a piece by the International Business Times, for conservatives, the problem with the debate in Washington has been that Democrats are insistent that amnesty must be part of any immigration reform efforts. Until the President is willing to take that off the table, there won’t be much change in the current situation.

Finally, an interesting debate has arisen as to who will suffer the most from President Peña Nieto’s Fiscal Reform. Under the plan, the VAT sales tax will rise 16% in border cities and also include private school tuitions and mortgages. The top personal income tax rate will go from 30% to 32% for those earning approximately $40,000. Taxes on capital gains and dividends will go from zero to 10%. According to USA Today, Fiscal Reform opponents allege that the president is turning to usual suspects to raise new revenues: the middle class, a group that is growing in size, but considered captive since most of its members work in the formal economy. According to The Economist however, middle-class Mexicans are not nearly as affluent as most people imagine and won’t be affected as much by the Reform. Their annual incomes reach less than a quarter of the sum needed to enter the top tax bracket. Only 29% of the middle class have children at private school, and just 9% pay mortgages.

What Mexican Columnists Wrote About…

Mexican opinion columnists address various topics in the past week, reflecting the myriad events and issues of importance in the country. Writing for El Universal, Jorge Chabat argued that while Enrique Peña Nieto’s presidency had a promising start due to a comfortable victory followed by the success of the Pacto por Mexico, the passing of the telecommunications reform, and the arrest of Elba Esther Gordillo, the tides seem to have turned. The author discussed that the economy has slowed down, the passing of the education reform has been complicated by protests, and the PRD is not likely to support the President’s energy reform proposal. In addition to this, the country’s security situation continues to be dire, the PAN has said it won’t support the proposed fiscal reform, and a number of states are devastated following hurricanes Ingrid and Manuel. Chabat claimed that despite all of this, Mexico’s situation will not necessarily continue to deteriorate, nor is Enrique Peña Nieto’s presidency an assured failure. Fiscal and energy reforms will be passed, and these reforms will hopefully strengthen the Mexican economy. What is of concern, however, is how little support the President seems to have – from other parties, from his own party, from governors, and even from members of his cabinet. Chabat concluded that what remains to be seen is how Enrique Peña Nieto will act given all of these challenges, and what type of legacy he will leave behind. Jorge Castañeda also wrote about the President and the need for him to carry out a publicity campaign that promotes the nation’s achievements and culture, and which highlights areas of potential. Castañeda argued that this campaign will be successful if it is accompanied by an emblematic project that is successfully realized and that shows the world what Mexico is capable of.

Several columns discussed the future of the IFE, stating that determining who the new electoral councilors for the IFE will be is no easy task. The new appointees will have to be agreed upon by all parties, and will be appointed in the midst of conversations about dissolving the IFE to give way for a new National Elections Institute. Additionally, the conversion from one institute to another will not be simple. For one, it is not clear if any IFE employees will be asked to work for the new institute or if they will lose their jobs and need to receive compensation. The change comes at a bad time: in January, the IFE is required to determine which political parties fulfilled the necessary requirements to be officially recognized.

Jorge Fernández Menéndez wrote on two important topics: energy reform and corruption. In his piece La apuesta es la energética, no la fiscal, the columnist argued that the true political battle of this government will be the battle for energy reform, and that the key issue will be the proposed reforms to the Constitution. He stated that the approval of the proposed Constitution changes will ensure that energy reform is in fact effective and credible. Although amending the constitution is controversial, he argued, it must be done in order to improve the country’s economy. He also called for Mexicans to consider who wins and what do they win if PEMEX continues to run as it has. He concluded that the federal government cannot compromise on its proposal, as large parts of federal funding and the administration’s credibility rest on it passing. Fernández Menéndez argued that paying close attention to the developments of the fiscal reform will prove useful to those interested in the energy reform, as it may settle some smaller battles and open the way for energy reform. Also addressing energy reform, Lorenzo Meyer contended that Mexico’s historical and political processes have been marked by petroleum, particularly in the last century, and that it seems as though this will continue. He wrote that the current period of can be labeled “petroleum and the dispute for the nation”, and that while examining Mexican history through the lens of petroleum undoubtedly simplifies many things, it also explains a great deal.

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