THE
Introduction and Policy Recommendations
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Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Mexico is shown below. The ratings herein are based on the following rating scale:
RATING SCALE
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2005. Used herein with permission]
To read a disclaimer about the analysis in this file, scroll to the bottom of the file.
MEXICO:
Comparison of Mexico's economic policies to MIEPA criteria as prepared by native student of Mexico, Mr. Minoru Marin, studying in San Francisco in Spring, 2005.
RATING SUMMARY
POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE
1 5.0 15.0 15.0 100%
2 5.0 15.0 15.0 100
3 1.0 3.0 15.0 20
4 5.0 15.0 15.0 100
5 2.0 6.0 15.0 40
6 3.0 9.0 15.0 60
7 3.0 9.0 15.0 60
8 4.0 12.0 15.0 80
9 2.0 6.0 15.0 40
10 2.0 6.0 15.0 40
11 2.0 6.0 15.0 40
12 2.0 6.0 15.0 40
13 4.0 8.0 10.0 80
14 3.0 6.0 10.0 60
15 3.0 6.0 10.0 60
16 3.0 6.0 10.0 60
17 3.0 6.0 10.0 60
18 2.0 4.0 10.0 40
19 2.0 4.0 10.0 40
20 2.0 4.0 10.0 40
21 1.0 2.0 10.0 20
22 4.0 8.0 10.0 80
23 4.0 8.0 10.0 80
24 2.0 4.0 10.0 40
25 2.0 4.0 10.0 40
26 2.0 4.0 10.0 40
27 3.0 6.0 10.0 60
28 4.0 8.0 10.0 80
29 3.0 3.0 5.0 60
30 3.0 3.0 5.0 60
31 4.0 4.0 5.0 80
32 2.0 2.0 5.0 40
33 2.0 2.0 5.0 40
34 2.0 2.0 5.0 40
TOTAL 96.0 212.0 375.0 56.5%
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INDIVIDUAL POLICIES
1. Freedom from Internal Control: 5
Mexicans are free to move anywhere in Mexico when pleased, there is no restriction by law for people to move internally or to other countries. Mexicans have the right to travel and engage in any activity they want, that is not unlawful.
Source: Personal Opinion; www.cia.gov/cia/publications/factbook/geos/mx
2. Freedom of Speech: 5
In the Mexican constitution articles 6 and 7 defend freedom of speech and it is well applied there no restriction on people ideas and no law or authority has the right to censor people’s forms of expression, unless of course it is harmful to public order.
Source: Personal Opinion
3. Effective, Fair Police Force: 1
One of the biggest problems in Mexico is insecurity, the population lives with fear not only of thieves, corrupt politicians, and bush but also face injustice from abuse of power of authorities and the police. It is very dangerous for a population to be fearful of its protectors the police force. Mexico has to improve its deficient police force, and must improve the reputation of current police officers.
Source: Personal Opinion
4. Currency: 5
The currency used in Mexico is the Mexican Peso currently there is an exchange rate of 11.15 pesos per U.S dollar. The only institution that can issue pesos is “El banco de Mexico”.
Source: www.banxico.org.mx
5. Private Property: 2
Like most developing nations Mexico promotes protection of intellectual right but its capacity to combat piracy is not sufficient to defend this right. In Mexico one can go to a Market and buy any type of products with name brands such as GAP, Armani, BOSS, Rolex just to name a few, also it is common that people prefer to buy music and videos which are copies of the original, there is such a problem with this issue that fake products are sold in some cases with a guarantee. This phenomena truly affects well established businesses.
Source: www.eluniversal.com.mx
6. Commercial Banks: 3
There banking system in Mexico is slowly but steadily improving competition has increased benefits to the public in offering lower interest rates, although it is a modern banking system there is criticism among politicians due to the fact that most banks are foreign owned. Mexico is trying to improve an imitate the system in use by American banks, there are now several credit ratting companies which improved credit by now businesses being able to better rate the credits of people. The banks are increasing lending to small business but interest rates are still high. After the 1994 economic depression people became distrustful of banks, but confidence in the system is rapidly coming back and people have confidence their money is safe if put in banks.
Source: Personal Opinion
7. Communication Systems: 3
The telecommunication systems in Mexico are of first world, the services offered are highly competitive with those of developed nations, internet usage has been increasing rapidly at about 15% a year, currently only 12% of the population has internet access and yet Mexico ranks at No. 16 in internet usage among nations. There are 16 million telephone lines in service, and 28 million mobile phones. Mexico relies on modern satellites that link Mexico with the rest of the world.
Source: www.internetworldstats.com/top20.htm; www.cia.gov/publications/factbook/geos/mx.html
8. Transportation: 4
Transportation is very effective in Mexico; travel in Mexico from city to city is mainly by Bus although airplane travel is becoming more popular thanks to the increase in purchasing power and the lower airline fares. Mexico has 19,510 km of railways, a total of 329,532 highways, 19 major Ports and Harbors, and 1833 airports, which makes traveling in Mexico very easy and affordable. The major cities have local metros, bus and taxi services and small cities in its majority have taxi services. The only impediment in travel in Mexico is the low income most families live on, making the possibility of travel a financial struggle.
Source: www.visitmexico.com
9. Education: 2
The budget for education purposes is 5.9% of GDP, it is one of the highest compared to even developed nations, this to many is the most critical impediment on México’s social and economical growth, increase on education budget has rose at about 20+% since 1991, and yet the education is low. The problem is that most of this goes into administrative salaries rather than on material or better preparing the teachers to teach. Although the OECD Organization for Economic Co-operation and Development critiques Mexico low spending on education, the critique is erroneous considering that it compares spending of education budgets of U.S, Sweden, Canada against Mexico, the comparison stating that Mexico spends half of what this developed countries spend on education is not taking into account that the cost of living in Mexico is less than a fourth of what it is in this nations. Recently a study showed that the wealthiest nation in the world one that ranks among the top in education spending the U.S ranks at the bottom in educational preparation among industrialized nations and even below some developing nations. Increase in educational spending by itself will not increase the educational level of Mexico there needs to be a program to teach professors on better teaching techniques.
Source: www.oecd.org; http://4brevard.com/choice/teacherPay.htm; Personal Opinion
10. Social Mobility: 2
It is still common in Mexico to have favoritism and have certain groups segregated, creating difficulties on individual/professional societal advancement, the problematic of preference among certain elite groups by the elite continue to impede fast economical advancement allocating friends in key positions not due to their superiority in expertise but caused by friendship connection.
Source: Personal Opinion
11. Freedom from Outside Control: 2
Mexico is a democratic state that does not require permission from any other nation for any matter, Mexican citizens must only follow its constitution, although the economy is heavily tied with the American economy there is a famous say in Mexico that says that when the U.S catches a cold, Mexico gets pneumonia.
Source: Personal Opinion
12. Border Control: 2
The Mexican border suffers from control in both north in the American-Mexican border, and in the south, in the Central America- Mexican border, in both cases there is a lack of security and control. Due to the living standard conditions and disparity from Mexico and U.S many citizens from both Mexico and Central America cross the border illegally.
Source: www.customs.gov
13. Foreign Currency Control: 4
The currency in Mexico is the Mexican Peso, it is 11.15 pesos for one dollar, this currency is the national and only currency in circulation, although in tourist areas some businesses accept dollars at a more expensive exchange rate.
Source: www.banxico.gob.mx 14. Cultural and Language Homogeneity: 3
The predominant language in Mexico is Spanish, although 7% of the population speaks 59 indigenous languages. There is a great disparity in living and economic conditions among the north and south of Mexico. The modern north in some parts has living conditions of westerner standards where in the south people still live in villages and extreme poverty. The large cities adopted a western type of living and the south still retains its indigenous customs and traditions.
Source: www.inegi.gob.mx
15. Political Effectiveness: 3
The current administration in power has changed political policies which harm the nation, currently there is a more stable government and economy, although there is not a real sense among the citizens of economic improvement due to slow worldwide economic growth the current administration has been able to maintain stability in Mexico even with the American economy as bad as it is. Politics are in great part not effective due to the large sector of government of people that are not prepared educationally to govern in a complex modern world. The Mexican government keeps up with the building of roads and highways, but it is not capable of properly maintaining them.
Source: Personal Opinion
16. Institutional Stability: 3
There is a sense of certain stability in the government and in the economy as a result of the new administration which assures there won’t be another typical instability period like the country was used to with previous administrations. And the economic policies back the assurance of stability of President Fox.
Source: Personal Opinion
17. Honest Government: 3
In the year 2000 a new administration replaces the old government that ruled for 71 years, it seems the current president Vicente Fox de Quesada replaced many corrupt politicians, and consequence of its good example the governments dishonest record is improving although there is still a sense of a corrupt government due to the long period of dishonest politicians that led México to been a poor nation. According to Transparency International a Berlin-based organization, Mexico ranks No.64 in the corruption scale that rates countries corruption levels.
Source: Personal Opinion; www.infoplease.com/ipa/A0781359.html
18. Common Laws: 2
The Mexican constitution guarantees every citizen the same basic right under a written law, very similar to the American bill of right the Mexican constitution protects its citizens from authority abuses, requires equality, freedom of speech and forbids discrimination. Consequence of the poor educational level among the society many authorities abuse their power as common people do not know their rights.
Source: www.solon.org/Constitution/Mexico/Spanish/constitution-mex.html
19. Central Bank: 2
The central bank of Mexico, “El Banco de Mexico” is autonomous in nature; its purpose is to seek the stability of the purchasing power of the Mexican peso, as well as to promote the sound development of the financial system and fostering the proper functioning of payments by the government. At this moment the banking system is going trough restructuring after the 1994, “tequila crisis”. Banks are being consolidated, currently the most important banks in Mexico are foreign owned with the latest acquisition of the largest bank Banamex by Citigroup of the U.S.
Source: www.banxico.com/english
20. Domestic Budget Management: 2
The taxation in Mexico is rapidly improving but it is still weak, the revenues the government collected for the year 2004 were 59.9 billion pesos and increase of almost 400% in relation to the previous year. And this improvement is steadily increasing.
Source: www.shcp.gob.mx
21. Government Debt: 1
Mexico carries a 80,840,200,000 dollar foreign debt which represent a 23.5% of its GDP, this in great part slows development in the economy accompanied by a 89 billion internal debt. Almost 10 years after the great depression in Mexico the government is trying to restructure the debt problematic that is been carried for decades, but through out the past decade the debt has been not significantly increased.
Source: www.inegi.gob.mx
22. Economic Statistics: 4
The economic statistics of Mexico can be found at: www.inegi.gob.mx www.economia.gob.mx
Source: www.cia.gov/cia/publications/factbook.geos/mx.html#Econ; www.inegi.gob.mx; www.economia.gob.mx
23. Protection of Public Health: 4
There are two main health institutes in Mexico, IMSS Instituto Mexicano Seguro Social, ISSSTE Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, which currently offer free of charge services to 57 million Mexicans. The services have been improving in quality since the new administration took power. Health services are free in Mexico but sometimes the demand exceeds the capabilities of both institutes. In Mexico there is a 20.91 deaths/1,000 live births infant ratio.
Sources: www.imss.gob.mx; www.issste.gob.mx 24. High Wage Policy: 2
The minimum salary in the capital of Mexico is $46.80 pesos around 4 dollars a day approximately 2% of the minimum salary in the U.S. The government has been unable to maintain a good quality of life for its citizens due to this extremely low wage, although this salary is 10 times less than in most countries the prices are 10 times higher than in most countries
Source: Mexico.com
25. Environmental Protection: 2
Because of the rapid economic growth this economic expansion has succeeded in raising average incomes for Mexico’s growing population, inadequate attention to pollution controls and infrastructure considerations led to significant environmental degradation. Mexico began to seriously address environmental protection in the late 1980s and 1990s. Mexico City has the worst air pollution in the country and ranks among he most polluted cities in the world. Its ozone levels exceed World Health Organizations standards 300 days a year, the capitals pollution problems is aggravated by its unique geography. Mexico City resides in a basin more than 7,400 feet above the sea level and is surrounded on three sides by mountains causing a trap on pollution.
The Mexican government recognizes the severity of its air pollution problem and has proposed innovative solutions to address it, these include providing incentives for using cleaner fuels and smog control measures. Also Mexico ratified the Kyoto Protocol in September 2000, the Protocol will take effect only if 55 nations which accounted for at least 55% of carbon dioxide emissions from industrialized countries in 1990 although because of its status as a developing country exempts it from the need to reduce carbon emissions. Although the pollution situation is bad there is great potential for use of renewable energy in Mexico and the government started investing in renewable sources of energy. Currently hydroelectric power is the largest renewable energy source, providing 20% of Mexico’s total electricity supply. There are plans to construct new hydroelectric capacity over the next decade. The most ambitious of these plans is the 750-megawatt El Cajon project which should be completed by the year 2007. Amongst non-hydroelectric renewable sources of energy, geothermal is the most widely established in Mexico. In 2002, Mexico was the third largest producer of geothermal electricity in the world behind the U.S and the Philippines with 855 MW of installed geothermal capacity. According to the U.S department of Energy Mexico’s installed geothermal capacity in fall 2003 was 955 MW. It is estimated that Mexico could reach as high as 8000MW. At the present there is little exploitation of solar or wind energy in Mexico. This does not reflect a lack of opportunities. Especially with wind, there are rich resources that have not yet been exploited. For example some estimates suggest that just the southern La Ventosa region could support up to 2,000 MW of installed capacity.
These opportunities notwithstanding, México’s 2003 installed capacity from wind energy from wind energy is less than 3MW. According to Energy Information Administration México’s energy consumption and carbon emissions will grow less rapidly than GDP through 2025. Energy consumption is predicted and carbon emissions are expected to grow at the same pace, however. Renewable energy consumption will grow slowly relative to all of the different fossil fuels. The most rapid increase is expected to occur in México’s consumption of natural gas, this reflects México’s industrial energy policy, under which a significant percentage of México’s thermoelectric plants are slated for conversion to natural gas by 2005.
Source: Energy Information Services, eia.doe.gov; Official Energy Statistics from the U.S Government
26. Strong Army: 2
The military branches in Mexico are SEDENA Secretaria de la defense nacional which consist of the army EL EJERCITO, and the airforce FUERZA AEREA MEXICANA, were the government spends approximately 5.168.3 million dollars, 0.9% of its GDP. Their duty is to defend the integrity and sovereignty of the nation, guarantee internal security, collaborate with policy to control drug trafficking and social security and provide a variety of social work. Although there is a considerable amount of spending in the military there is no true proof of real organization or logistic preparedness.
Source: www.mexico.gob.mx
27. Protection of Foreign Currency Earning Enterprises: 3
Mexico encourages its entrepreneurs of exporting products and it has a comprehensive amount of information and resources to do this, but this is not being effective and there is an excess in imports of products that are and could be created in Mexico.
Source: Personal Opinion
28. Foreign Trade Impact: 4
In order to get the foreign trade impact; we must take the total exports (189,200.4 billion dollars) plus the total imports (197,303.3 billion dollars) and divided by the annual GDP (941 billion dollars). This means that foreign trade has an impact of 41.06% over the total GDP in 2004.
The current foreign investment capital entering the country creates money to flow in the economy creating millions of jobs but the weak national market requires a damaging excess of imports.
Source: CIA Fact book on Mexico; Banco de Mexico
29. Management of Foreign Currency Budget: 3
The large amounts of money that enter the country have elevated the income per capita in this nation, although there is more money in the economy the population does not have a real feeling of growth but rather have and complain of the economy going backward, the trade deficit has been increasing significantly and there is no visible improvement due mainly because the national market is foreign owned and there is no true study of competition among businesses creating prices to inflate. Mexico currently carries a trade deficit with the U.S, Asia and Europe.
Exports 189,200.4
Imports 197,303.3
Net exports -8,102.9 Source: Personal Opinion; http://www.afsc.org/trade-matters/trade-agreements/NAFTA.htm; Banco de Mexico
30. Layers of Collective Action: 3
Mexico is a democratic country; people hold the ruling power though elected representatives. The president is both the chief of state and the head of government; he is elected by popular vote every six years with no chance of re-election. Mexicans choose every six years 96 of the 128 senate members, every three years 300 of the 500 Federal Chamber of Deputies members, and the rest is allocated by the president, his political party and the senate. Mexico has 31 states and 1 federal district, every state is divided into municipalities and every municipality into villages. All of them have their own leader. Leaders in villages and small cities are elected through elections.
Source: Personal
31. Pro-Business Climate: 4
Once entrepreneurs have passed the complicated stage of opening a doing business in this growing market is very profitable, the growing potential of businesses in any area are unlimited as Mexico has practically opened doors for the largest markets in the world, having the U.S, Japan, E.U and central and south American markets. The taxing is on average the same as in any developed nation, but with low cost of labor, relative low cost of rent, and low cost of living, Mexico is an excellent place to invest and establish business and society admires new local entrepreneurs.
Source: Personal Opinion; www.sat.gob.mx
32. Government Enterprises: 2
Mexico has a good share of business in its economy, from Petroleum (PEMEX), AEROMEXICO, MEXICANA, CFE (Federal Commission of Electricity), CNA (National Water Commission), as well as many concessions like TELEVISA, METRO, BOSQUE DE CHAPULTEPEC, F.C VERACRUZ. Government involvement in enterprises retards the development of the economy, attempting to participate and compete in sectors were the government does not have sufficient preparation decreasing competitiveness and fairness in business, most times subsidizing business that are not profitable not because of insufficient market but because of lack of preparation in the finger picked CEO’s of this companies. Pemex for example, just announced a debt that puts it at the top, the most indebted petroleum company in the world with a 90 billion last year, a 127% increase over its debt in 2000. Cintra de controller of Aeromexico and Mexicana just announced that it’s not able sustain its debt therefore making it unprofitable to control and must therefore sell its remaining share.
Sources: www.pemex.com
33. International Security Agreements: 2
Although it has implied security alliances with the U.S and Latin America the security of the nation relies on a poorly trained army and it has no indication on logistic preparedness for an invasion. The defense of the country would have to rely on nationalism of its citizens. Mexico has always opposed war and as international military collaborator it contributes mostly doing social work, it no longer has a seat in the UN Security Council. Mexico participates in many different organizations which take decisions that impact the international community, the list of organizations in which México takes part is to extensive to mention in its totality but the ones probably the most important are: United Nations, World trade Organization, UNESCO, Interpol, BIS (Bank for International Settlements), LAES ( Latin American Economic System), LAIA (Latin American Integration Association), OPCW (Organization for the Prohibition Chemical Weapons), just to name a few. Mexico in its attempt to integrate to the international community has been participating in as mentioned, organizations that directly influence other nations.
Sources: Personal opinion
34. Protection of Domestic Enterprises from Government Mandated Cost: 2
It is world wide known that México is and incredibly viable option for doing business after almost a decade of high growth and with incredible international trade treaties with the major economic powers of the world Mexico offers a high return potential. It is very easy to comprehend the cause of the great amounts of foreign investments that occur in this nation, the facilitation that the government gives to foreign entrepreneurs makes doing business very easy, with an economical potential of nearly a trillion dollar doing business there is very tempting. Unfortunately this does not apply to Mexicans, the possibilities of opening a business is limited to large, established corporations. For one thing the new wannabe entrepreneurs need to deal with the mentality that truly slows the burocratic procedures needed for opening a business, and once passed this difficult stage one must deal with licenses and unexplainable requirements that government requires, an example an airport needs 20m of built parking where a carpenter to open a small business is required to have 150m of built parking and public restrooms require 50m of built parking.
The requirements to open a business are:
Permit by the operation and security departments
Authorization by health and environment departments.
Authorization by the corresponding district for parking and license.
License (Licencia de Funcionamiento).
Register at the SAT (IRS in the U.S)
All of this requirements would be difficult to obtain even by a highly educated entrepreneur, and considering that most business are small and owned a large non college educated population it makes no sense why the government makes it easy for foreigners to make money but for nationals very difficult. This explains why millions of people prefer to sell products in the black market which like previously mentioned with a tempting trillion dollar economy makes it very profitable to sell products that paid no quotes and pays no local taxes.
It is absurd that every information available for business opportunities is for foreigners, and information for locals to open small businesses are difficult to obtain even for college educated people due to the complex language used by the people that are supposed to facilitate local entrepreneurship, this absurd, exaggerated, complex language that needs a college degree in Spanish language to comprehend, but adding to this, people need to have above average skills in computer skills to look for this that seems CIA top secret classified information.
Sources: Personal opinion; www.df.gob.mx/tramites; www.mexico.gob.mx; www.sat.gob.mx; www.bancomext.com.mx
DISCLAIMER
All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.To learn more about other countries, click to other files here:
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