Question

What should Mexico do to achieve economic development?

Answer 1

In recent years, Mexico's economy has performed well, but is now facing extreme headwinds from the outside world and major structural challenges at home. "The only response is to continue to develop and introduce new reforms to instill confidence, improve the quality of public administration, increase opportunities, reduce inequality and create a better, more equitable society for all Mexicans.

Improving institutional efficiency would have the greatest growth benefit of all systemic reforms and would increase the effect of all other policy reforms. Implementation of newly developed national and local anti-corruption programs should be completed, along with the creation of a professional, autonomous anti-corruption agency, taking into account the federal structure. Efforts are required to ensure that the current competition authorities and sectoral regulators continue to be effective and autonomous.

A new tax reform is required to increase enforcement, restrict avoidance and ensure support for investment in infrastructure and policies to reduce poverty and inequality. A comprehensive medium-term tax and benefit reform will aim to expand the value-added tax base by raising exemptions and removing discounted rates while compensating targeted subsidies for low-income households. It also proposes introducing more progressivity to the personal income tax system through a lower income level for the highest rate and also reducing tax exemptions and allowing more use of property taxes.

Continued efforts are required to minimize the duplication of social services and the overlap of recipients while extending access to the poor who do not already receive benefits. Reforms are also needed to reduce Mexico's persistently high informality, which restricts economic growth and the fiscal ability of the government to provide public benefits and redistribute. The logistical burden of doing business should be reduced by a systematic approach to reducing informality. Reducing the costs of tax enforcement, reducing the costs of creating new jobs and reducing contributions to social security for low-wage workers are all defined as desirable and feasible.