Here’s to the next 10

Mexico: Progress in Implementing Regulatory Reform
OECD Observer

Mexico celebrates its tenth anniversary at the OECD this year, and an eventful 10 years it has been. Apart from the creation of NAFTA in 1994, there were the currency runs on the peso and, of course, recent debates about international investment, labour and outsourcing. Since joining the OECD, many of the achievements of Mexico’s regulatory programme have dealt with strengthening political transition and economic resilience and growth.

Mexico: Progress in Implementing Regulatory Reform reports that the country has made progress in improving its regulatory framework and institutions, putting in place a consistent and transparent trade policy, with clear rules and greater openness to investors from abroad.

Yet Mexico: Progress in Implementing Regulatory Reform recommends that the government needs to push further forward, particularly in key infrastructure sectors, such as telecommunications, water and financial services. The electricity sector especially needs attention; a stronger regulator is needed, while the introduction of competition principles and a transparent system for tariffs and subsidies are recommended.

Mexico’s Regulatory Improvement Programme has been updated, and the government has created a national regulatory authority, COFEMER, which has already accelerated procedures for business start-ups. By eliminating or simplifying formalities such as land-use permits and licenses, and streamlining dealings between federal, state and municipal agencies, entrepreneurs are now able to register their firms and open for business in a day or so, instead of a previous average of nearly 60 days. Nevertheless, the report recommends that Mexico simplify its tax system and make changes in the labour market to improve the climate for small business.

But reform is only half the battle. Mexico: Progress in Implementing Regulatory Reform finds that while there are plenty of rules and regulations, there is not enough compliance and too little enforcement, and the country still has a substantial underground economy. Indeed, in May, President Fox announced a one-year moratorium on creating new industrial regulations, from May 2004 to April 2005, so that the government can better order and prioritise existing policies. By taking the time to make regulation more transparent and strengthen the rule of law, the government hopes to thereby stimulate investment, generate more employment and enhance competitiveness, and so further build on the progress of its first 10 years at the OECD.

©OECD Observer No 245, November 2004

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