Continued structural reform is the goal of Mexico’s economic policy for 2005.

        President Vicente Fox said he wants to follow the models set in countries such as Chile, Canada and Australia.

        Experience shows that those countries that have been successful in keeping the momentum of their structural reform process have achieved productivity growth, he said.

        Successful countries have undertaken new rounds of structural reforms every time that the momentum of previous reforms on productivity has waned. Among those countries that have been successful are: Chile in Latin America, South Korea and Singapore in Asia, Ireland and Spain in Europe, as well as various OECD members such as Canada, New Zealand and Australia. These countries have successfully implemented reforms to improve the fiscal and commercial frameworks, privatization and deregulation, labor reform, competition in the energy and telecommunications sectors, as well as decisive combat against monopolies.

        The structural reform agenda in Mexico comprises six priority sectors of the economy: energy, labor, fiscal, pension system, Pemex’s fiscal regime, and the budget process.

        The energy reform focuses on improving economic competitiveness through two basic contributions — reducing energy costs, and increasing its quality.

        The labor reform seeks to promote a new labor culture which would broaden worker’s development possibilities and stimulate labor productivity.

        The consensus reached in the National Fiscal Convention clearly indicates the direction in which the tax system and fiscal coordination system must evolve to achieve healthy public finances. Further, the agreements reached suggest the creation of a National Public Sector Worker Pension System based on individual accounts, accompanied with a guaranteed minimum pension.

        It is necessary to promote a new fiscal regime for PEMEX, which would allow the firm to compete in international markets under equal footing. Further, a new fiscal regime will increase the return of investment and exploration projects, and will stimulate investment in the natural gas sector to decrease dependency on foreign countries to meet the country’s natural gas needs.

        In order to carry out the government’s public policies, it is necessary to have a clear legal framework for the elaboration of the budget. It is desirable to establish permanent guidelines for budgetary adjustment in case a revenue shortfall is observed. Similarly, it is necessary to establish rules for the use of excess revenues, in case these are received.

        The second priority of economic policy in 2005 is to ensure macroeconomic stability. Therefore, economic policy seeks to generate a better environment for the private sector to boost its investment, to generate more jobs, and improve their quality. In order to achieve this, the government will promote inflation abatement and interest rate moderation. These efforts will reduce the uncertainty related to expected investment projects’ returns.

            Macroeconomic stability helps reduce poverty and improves income distribution. Recurrent macroeconomic and financial crises in Mexico had adverse effects on the population’s well-being and in particular on the poorest segment of the population. For example, in the previous three macroeconomic crises, the real minimum wage contracted 19 percent on average. The macroeconomic stability achieved in recent years has contributed to the recovery of real wages; the real wage has increased...

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