OBG talks to Ildefonso Guajardo Villarreal, Minister of Economy

Interview: Ildefonso Guajardo Villarreal

How can the economic integration of North America be reinforced to increase its competitiveness?

LLDELFONSO GUAJARDO VILLARREAL: When the leaders of North America met in Mexico in February 2014, they reaffirmed their commitment to making North America the most competitive region in the world. Mexico, the US and Canada are working on an agenda to deepen the region’s integration and make the most of our complementary features. This agenda includes reducing transaction costs by enhancing regulatory cooperation and borders management; establishing a North American transport plan to maximise our geographical advantages and become a centre for logistics and transportation; identifying and promoting joint investment and tourism opportunities; and participating in Trans-Pacific Partnership (TPP) negotiations, to link the region with some of the most dynamic economies from the Pacific Rim.

This agenda is rooted in the advantageous elements of North America’s competitiveness. Demographics will continue favouring North America, as Mexico’s average age is just 26 years, complementing the declining “baby boomer” generation in the US and Canada’s smaller population. The development of human capital is also central, given that 110,000 engineers graduate from our universities every year in Mexico, compared with 74,000 in Germany and 59,000 in Brazil. Finally, near shoring the energy sector will bring many opportunities to the region, as it will be more competitive to manufacture in North America than in Asia.

What export sectors do you feel will be growth drivers through the TPP and the Pacific Alliance?

GUAJARDO: The international trade agenda of President Enrique Peña Nieto’s administration is based on linking Mexico to dynamic regions, like Asia and Latin America, while forging ties with countries from other regions that share and promote free trade and our investment values. Mexico’s participation in the TPP and the Pacific Alliance will foster and diversify exports, while also to increasing its stake in regional value chains.

The TPP could enhance NAFTA’s integration to global supply chains by positioning the region as an export platform. With the TPP, Mexico will likely profit from highly competitive industries: automotive, auto parts, aerospace, electronics; and agricultural products, such as fruits, vegetables and natural fibres. The TPP will foster the competitiveness of the Mexican economy as a whole. We are particularly looking forward to the opportunities the TPP holds for NAFTA’s automotive sector, given the high level of integration and competitiveness in the supply chain among the three members.

Once the Pacific Alliance agreement enters into force, 92% of the tariffs will be phased out immediately among member countries, including all industrial tariffs. With this tariff elimination, the sectors in which we have an important competitive advantage for increasing exports to the Pacific Alliance market include the automotive, pharmaceuticals, chemicals, personal care and cosmetic industries. On the agribusiness side, Mexico will consolidate and expand exports in several items, such as dairy products, beef, juices, fruits (fresh and preserved) and tobacco, among others.

By what means can low productivity be corrected?

GUAJARDO: Low productivity has been a crucial factor in the slow economic growth Mexico registered in past decades. Mexico is committed to democratising productivity by ensuring that economic enhancements and growth are distributed across all regions and social groups. The government passed a series of reforms in strategic areas, such as labour, education, telecommunications, fiscal, financial, competition and energy, which mark the beginning of a new period of sustainable and inclusive growth. Mexico has established the National Committee for Productivity as a venue for dialogue and exchange among different sectors, which is a step in that direction. Its main areas are to address informality; support small and medium-sized enterprises; invest in research and technology; strengthen capacity building and labour; and incentivise productivity.