Mexico cleared for take off.

Author:Franco, Arturo
Position:COUNTRY REPORT: MEXICO
 
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Starting in 2013, Mexico embarked on what analysts have called "one of the most ambitious reform programs in the world." Strengthened by an unprecedented political pact between its major parties, Mexico seemed to be entering a long-awaited inflection point. The legislative agenda of the. last two years was impressive, with more structural and constitutional amendments approved than in the previous 18 years.

Yet, as the Pena Nieto administration heads into a defining moment, the mid-term congressional elections, there is still little to show for on the economic growth front. Marred in political scandal at home, and with a cloudy external environment, is this the year when Mexico will finally take off?

As a charismatic and fiery candidate in 2012, Enrique Pena Nieto recycled one of the most ingenious political strategies from his time as governor of the state of Mexico: legally rubberstamping his campaign promises to show full commitment. The first of his many presidential promises that year was also the boldest--he vowed to triple Mexico's meager growth rate--and he signed for it. In other words, he promised a sustained growth of close to six percent per annum during the 2013-2018 period, compared to the lousy two percent average of the last decades.

An economic expansion at the aforementioned rates is not far-fetched for a country with the demographic bonus, natural wealth, trade agreements, and privileged geographic location that Mexico has. Moreover, a recovering U.S. economy and increasing labor costs in China would surely create positive tailwinds for Mexico's export competitiveness. The prospect of higher growth rates was not just seemingly attainable, but also necessary to create the jobs that the more than two million unemployed (and several million of underemployed) Mexicans require.

The results, however, have been appalling. In his first year in office, Pena Nieto barely made it out of the red with a 1.3 percent growth rate. Last year, Mexico grew 2.1 percent at most. Both years saw early growth predictions by the Ministry of Finance lose air as the months passed, ending up just halfway down the runway. Unsurprisingly, while the 2015 government estimate is currently at 3.7 percent, the private sector says 3.5 percent, and the panel of experts in "Mexico ?como vamos?" think it will be closer to three percent. This would put the current administration just above the two-percent threshold over the first half of their six-year term...

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