Strategy for Inclusive Wealth GenerationWed, 05/08/2019 - 10:36
Q: What will be the Ministry of Economy’s guiding principles during the current federal administration?
A: The Ministry of Economy is responsible for generating wealth and increasing the well-being of all Mexicans, both of which are also the main objectives of President López Obrador’s administration.
Mexico is about to close the second decade of the 21st century with a trajectory of low growth rates and enormous regional, sectorial and social disparities. Over the past 12 years, the country has averaged annual growth of 2.1 percent, of which 69 percent originates from foreign companies, while national businesses contributed 31 percent. Mexico still must take advantage of its close relationship with the global economy and at the same time strengthen its productive force. In other words, the virtuous combination between the global economy and the domestic market will help the country find the path to sustained, sustainable and inclusive growth for the coming years.
Our objective is not only to reactivate growth at high and sustained rates but to do so with a focus on solving existing inequalities. This means generating wealth without leaving behind any social sector, production field or region of the country. We have set three main pillars that will guide our policies: innovation, diversification and inclusion. These pillars are not mutually exclusive; they complement each other. We are in the middle of the fourth industrial revolution, which is changing the way we understand production of goods and services. The challenge is to adopt these technologies inclusively to benefit the entire population.
Innovation is key for our economic policy. We are convinced that only by adapting to and adopting new technologies will we be able to produce new goods and services based on an efficient, competitive and productive supply chain that integrates national added value. The Ministry of Economy will support innovation through programs such as Programa para el Desarrollo de la Industria del Software y la Innovación (PROSOFT) and Programa para la Productividad y Competitividad Industrial (PPCI). We are confident that innovation will help us close inequality gaps created in the past decades.
The second pillar — diversification — is essential to promote exports of goods and services of all productive fields in the country, integrating those sectors and regions that have been left out of global market participation. Investment in logistics, easier paperwork and the provision of market information will be the springboards that help national producers participate actively in international trade.
The US is already our main commercial partner but we still have opportunities to increase the presence of Mexican products in some states north of the border. The same can be said about Canada. An increase in commercial integration and productivity in the North American region will generate significant growth for the Mexican economy. Capitalizing on other areas will also complement our trading activities. There are routes for commercial diversification thanks to the recent ratification of the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), which will link the Mexican economy with one of the most important economic engines of the world, and the finished negotiations for a new treaty with the EU.
The third pillar that we will boost is inclusion, which means promoting collaboration of marginalized regions and population segments in high-productivity activities.
The combination of these strategic pillars will allow us to contribute to the country’s growth and to the consolidation of our strengths according to our industrial calling and cultural identity. We will articulate a real industrial policy through the conjunction of the national industry, society and the government, which will increase the well-being of the national population. The greater challenge is to close the gap between regions and between segments of the population.
Q: What opportunities will the implementation of USMCA bring to Mexican automotive suppliers and automakers with operations in the country?
A: The first highlight from USMCA for the automotive industry is that Mexico's preferential access to the US market remains untouched. The changes agreed in rules of origin will boost a greater degree of integration for this industry in North America. An increase in the regional content value (VCR) from 62.5 percent to 75 percent in light vehicles further reinforces and consolidates production chains and promotes greater use of inputs sourced in North America, providing greater opportunities for Mexican suppliers.
Operational costs for automotive manufacturing in Mexico are competitive and offer advantages over most countries in Southeast Asia. At the same time, VCR requirements are an additional incentive for companies to set up shop in Mexico. Although complying with stricter VCR standards will be challenging, the auto parts industry has developed significant capabilities. Furthermore, Mexico offers greater competitive advantages when compared to the other USMCA members. This treaty, in particular regarding the conditions established for the automotive industry, reflects US efforts to relocate manufacturing production to US territory, as well as the need for a strategic manufacturing partner in the region. Mexico has the opportunity to strengthen European and Asian production chains, creating more incentives for more companies to establish operations in North America.
It is important to highlight that the labor component included in USMCA’s rules of origin has several compensation alternatives through investments in R&D activities that will favor the profile of the automotive companies established in Mexico.
Q: Why is it important for the Mining Undersecretariat to be part of the Ministry of Economy rather than the Ministry of Energy?
A: Mining policy should be part of an integral industrial policy that fosters national competitivity through complete production chains. Mining is a key link in several important production chains that favor the country’s economic development, by acting as a supplier in industries like metallurgy, metal-mechanic and steel. It would be impossible to competitively improve these industries without including effective promotion and regulation of the mining industry.
Q: What is the ministry’s strategy to promote Mexico’s competitiveness as a mining jurisdiction and what incentives will be offered to possible investors?
A: First, we must ensure that all investments have a social endorsement, which comes from full acceptance of all communities involved in the mining activity. When hosting communities welcome mining activities, it generates a virtuous cycle that contributes to prosperity and pacification.
We will also work on a reform to the Mining Law that modernizes current regulations and introduces the figure of a mining grid to ease cadastral administration of lots to avoid splices and litigation. In addition, the Geological Mexican Survey will be reoriented to concentrate the localization of deposits that can be exploited in a profitable manner so they can be offered to the international investment community with certified data and basic metallurgical information.
Q: What changes are needed to promote investment, competitivity and improve the performance of the mining sector in the country?
A: Most importantly, we must incorporate referendums to the regulatory process. This is needed, first, because it is contemplated in international agreements signed by the country, such as Agreement 169 of the International Labor Organization. Second, because these consultations open the door for more satisfactory binding processes between local communities and project developers. With this, our goal for communities is to grow the labor force with competitive wages, as suppliers and as full beneficiaries of mining activities