Promoting security and transparency to enable Mexico to pursue a growth agenda

As the new government, headed by Andrés Manuel López Obrador, of the National Regeneration Movement, prepares to take office in December 2018, the intertwined challenges of security, corruption and economic growth will be at the forefront of the political agenda, with the incoming administration working to meet the promises of the campaign trail to secure further growth via investment and efficient use of state resources. In addition to protecting citizens from kidnappings, disappearances and extortion by enforcing the rule of law, the new government will also be hoping to send a message to investors that Mexico is a safe and secure destination for conducting business by curbing crimes such as theft from fuel pipelines, road and rail freight transport.

Corruption Metrics

According to Transparency International’s Corruption Perceptions Index for 2017, Mexico ranked 135th out of 180 countries. On a scale of 0-100, in which zero represents the highest corruption and 100 the greatest transparency, Mexico scored 29, on a par with Russia, Paraguay, Papua New Guinea, Laos, Kyrgyzstan, Honduras and the Dominican Republic. The index is led by New Zealand, which has a rank of 89.

While corruption is not a new phenomenon, from 2012 to 2018 Mexico saw a number of scandals involving an array of actors from state governors and high-ranking executives, to local and federal politicians. Given this legacy, fostering confidence among both citizens and investors will likely require the development, implementation and maintenance of a more transparent, accountable system through simplified processes that are answerable to impartial regulators. In addition to restoring citizens’ confidence in the government and its institutions, prioritising the fight against corruption should allow the new administration to facilitate investment, given that corruption, red tape and cronyism are perceived by the international community as obstacles to transparency, competitiveness and production. Indeed, building a better reputation as an investment destination will be key as the country seeks to develop more public-private partnerships for public works and infrastructure projects. Increasing the transparency of the tendering and award process for such contracts will help maintain a system of accountability that will build confidence in both public procurement and the projects themselves.

Economy

Spurring economic growth and reducing social inequalities will also be policy prerogatives for the new administration. Moves to extend social security and financial services to rural communities, raise the minimum wage, provide universal access to education, and encourage higher education attendance with grants and stipends are among the activities that could feature in the government’s plans.

In addition, investment in infrastructure is expected to act as a stimulus to industrial growth and job creation. This is crucial given the cancellation of projects resulting from budget cuts during the previous administration. Financial shortfalls are cited by some as having stymied economic growth and widened regional disparities. A lack of infrastructure in the Bajío region, for example, has been the greatest impediment to the pace of growth, topping even corruption in the area, according to Gustavo Tomé, the CEO of Némesis Capital. “Given the high production targets of industries, especially the automotive sector, the relevant state and federal entities need to ensure sufficient infrastructure is in place so that growth is not slowed,” he told OBG. At the same time, showcasing the opportunities Mexico offers will help attract investors with the promise of better returns on investment, he added.

The economy would also benefit from diversifying its trade partners, taking advantage of the country’s geographic position to minimise its dependence on its northern neighbour, where relations are strained.