Economic crisis in Mexico

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mexico flagThe economic crisis has laid a pall over the world in the past years. In Mexico, a set of structural policies have been put in place in order to put an end to low productivity and informality in the labor market, as well as to inequality in incomes. Nevertheless, in order for these policies to operate as they should, Mexico’s government needs to strengthen its institutional and governmental capacity. One of the agreements made between political parties over creating a consensual group of policies is the “Pact of Mexico”. This protocol’s goal is to strengthen the country in terms of education, energy, financial market, employment, and telecommunication, among others. If these policies are well implemented, the GDP should increase immediately.These policies’ main ideas are: to eliminate the restrictions to property, thereby bringing more support to rural income and access to financing, to improve regulations at local, state and national levels, to reform the judiciary institutions, and to reduce widespread corruption through other policies which would focus on the efficiency of judiciary resolutions and on reinforcing the transparency in public bids.

Overall, the financial policy offers to give more independence to the development bank by improving private credit and fomenting competitiveness in financial systems in order to lower rates. Whipping up competitiveness would, in the long run, generate more incentives which, in turn, would allow the bank to lend more. Finally, strengthening the monetary system in order to encourage growth in the financial sector in an appropriate way is this financial policy’s last aspiration.

8ba235_82b678f8b56942429a8c37307da048eaHowever, as was previously stated, the only way that these policies will foster the country’s economic growth is if they are well implemented, which isn’t the case at the moment. In fact, over the past few months, it was announced that the only way to face the loss of income from the State was to reduce the budget spent on public expenditure, as opposed to rising taxes or public debt. This will eventually, and in a short time, lead to counterproductive results–that is, more than it already has.

The ideal solution for this serious economic problem would be to create another program whose policies would be to amplify exportations, substitute importations, to prevent the Bank of Mexico from pretending to manipulate the market by selling dollars, to make more investments and create more jobs, and to finally implement a real fiscal discipline. In the “Pact of Mexico”, most of these solutions are not even stated, or meant to be implemented by its numerous policies.

by Wendy T.