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

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.

Two articles, one in the New York Times and the other in the Wall Street Journal, compared Mexico’s taxing of sugary drinks to the policy introduced in New York by Mayor Bloomberg. The former noted that the tax “will make Mexico a rare test case of a national soda tax directed at a severe obesity problem”, as almost 70 percent of Mexicans are now overweight, and about a third are obese. The WSJ piece discussed the 5% tax on packaged food that contains 275 calories or more per 100 grams, on grounds that such high-calorie items typically contain large amounts of salt and sugar and few essential nutrients. The article noted that there has been an “alarming rise in chronic illnesses like adult-onset Type 2 diabetes, which afflicts an estimated 15% of Mexicans over the age of 20, the highest rate for any country with more than 100 million inhabitants. Illnesses related to excess weight cost the Mexican public health system more than $3 billion a year, and Mexico is Latin America’s biggest consumer per-capita of sweet and savory snacks, and the world’s top consumer of pastries.

Newsweek published an article called Mexico’s Streets on Fire which discussed the growing number of violent protests in Mexico City. The article stated that while “Street protests have long been a staple of Mexican politics and culture, over the last year, they have become more frequent, volatile and violent, a response to major domestic policy shifts and growing alienation among the young and unemployed.” The article noted that protestors have taken to the street to demand myriad things, from a halt to energy and education reforms to the creation of more uncensored media outlets, to higher acceptance at public universities.

Mexico’s national men’s soccer team made the headlines this week after losing to Costa Rica on Tuesday night, a defeat which almost ruined  the country’s chance at qualifying for the 2014 Soccer World Cup. Some news sources estimated that the total cost of Mexico missing the World Cup would be $600 million in lost TV, merchandise, sponsorship and other revenues. As the New York Times reported, however, the US saved Mexico when it beat Panama 3-2. This result “”knocked the Panamanians out and gave Mexico an unexpected — and some might say undeserved — reprieve.” A later article covered reactions to the two matches, quoting Mario Delgado, a Mexican senator and former local education secretary, who tweeted “Thank you USA!!!! You can keep Texas and California!! Thaaaaaanks!!”.  The US men’s national team, moments after its victory and well before the morning papers hit the streets, had already tweeted a response: #YoureWelcomeMexico.

Finally, the New York Times and Washington Post both published articles on the continuous discrimination and disadvantage faced by indigenous Mexicans – particularly women and children.

What Mexican Columnists Wrote About…

This week’s columnists penned several Op Eds about the fiscal reform. For Leo Zuckerman, one of the most important consequences of the Reform is the increase of the public deficit to 4.1%, the highest for the country since the nineties. He doubts the government has a well-defined public spending strategy and fears it will be misused due to corruption and bad public policy planning. Jorge Fernandez Menendez followed a similar line arguing the reform should be more deeply debated and expenditures should be made clearer.

In another column, Fernandez Menendez discusses the new PRI – PRD relationship of the past few weeks. In his view, the federal government has achieved one of its primary goals in this period of reforms: obtaining a long-term agreement with the PRD in order to ensure the passing of the fiscal reform. They did so by agreeing to some terms set by Mexico’s left-wing party and giving additional resources to Mexico City (which is governed by the PRD). He predicts the PAN will begin to distance itself from the federal government as a consequence.

On another note, Jose Woldenberg offers his insights about the Political Reform and the consequences of the country’s state-level electoral institutes disappearing. He argues that although one of the reasons to remove the local institutions is to prevent political intervention from the State Governors, the strategy should be focused on strengthening the institutes instead of eliminating them. Secondly, Woldenberg opposes the argument that public resources will be saved if the Reform is passed since the new National Institute would have to expand its bureaucracy and would probably hire back all laid-off local public officials. Additional implications include losing proximity between the electoral authorities and the local political realm, and the difficulties that will arise from managing the cultural and procedural differences within Mexico’s regions.

Last but not least, José Antonio Crespo makes an interesting analysis of the political power that Mexico’s special interests hold. He argues that one of the undesired effects of Mexico’s democratization has been the increasing political power of these non-governmental entities (media and communication moguls, “official” labor unions, etc.).  While Enrique Peña Nieto has tried to change this through some of his reforms and the “Pacto por Mexico”, it seems that they will continue to hold sway.

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