There is an old saying that voters go out to vote by their own pocket. That is, if their economy is doing well, they vote for continuity and if their economy is not doing well, they vote for change. Now that we are in election times, it is worth reviewing how our country’s economy is performing and what we need to do to overcome this crisis.
Besides the scourge of Covid-19, as the economy has plummeted to historic levels, in Mexico we have been talking about our great potential for more than three decades when we compared the four tigers of Asia: Singapore, Taiwan, Hong Kong and South Korea. It doesn’t take a rocket scientist to know that we are far behind those economies. With a population of nearly 130 million, with a rich cultural history and diversity, and an abundance of natural resources, Mexico is among the 15 largest economies in the world and the second largest in Latin America. In the past three decades, Mexico has underperformed in terms of growth, inclusion and poverty reduction compared to comparable countries. Our economic growth averaged just over 2 percent per year between 1980 and 2018, which limited progress in convergence for high-income economies. The economy shrank by 8.2% in 2020, with a sharp decline in the first half of the year, where it was The big adjustments, stemming from the pandemic, have a profound impact on businesses, employment and households.
The recovery in 2021 and beyond will depend on several external and internal factors, including the speed of vaccine delivery, growth dynamics in the United States, and private investment. If Mexico does not achieve a significant increase in its long-term growth rate, it will take several generations to reach a standard of living comparable to that of other similar countries. It is time to implement effective solutions that will lead us to the much-needed recovery for all in Mexico. The actions to be taken are neither difficult nor surprising. Experience teaches us that with a pragmatic and stable approach, many things can be accomplished. To begin by creating an environment of certainty to encourage investment.
Mexico’s central bank said in recent days that our country’s short-term economic policy should focus on attracting more investment and reducing domestic economic uncertainty to help drive a sustainable recovery from the impact of the coronavirus pandemic. We must maintain a short-term stimulus policy for monetary policy, in light of weak domestic demand and large unused productive capacity. Prudent fiscal policy implementation, given the expected drop in oil production, which currently contributes to most of the fiscal income.
New lawmakers should pursue an agenda that strengthens competition law, broadens the tax base by eliminating ineffective tax expenditures, enhancing incentives to operate in the formal economy, and revising spending efficiency.
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Without a doubt, the next legislature’s budget should focus on boosting the growth of our economy. Time to look for solutions that we know work. Our country enjoys a privileged position thanks to our competitive advantages in production infrastructure and geography. Mexico’s recovery will depend in part on the government’s ability to overcome tensions with companies and encourage investment in manufacturing, which could benefit from pushing for regionalization of supply chains outside of Asia under the T-MEC. #OpinionCoparmex
Louis Doran is General Manager of Primus Strategy and Chair of the COPARMEX Publication Committee *
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The opinions expressed are the responsibility of their authors only and are completely independent of the position and editorial line of Forbes Mexico.