TBY talks to Felipe Calderón, President of Mexico, on the economic and social achievements of his administration and the need to ensure a stable investment environment.
TBY Mexico is going through a complex time in terms of security. What is the Mexican government doing to guarantee public security?
FELIPE CALDERÓN Security is, indeed, the main challenge we are facing, which is why instead of ignoring it, we have decided to tackle it head on. To do so, we have a comprehensive security policy that includes three basic components: first, to fight and subdue criminals, for which our soldiers, marines, and police officers have come to the aid of the population in those areas where criminals do most harm to society. Our determination has already yielded positive results, such as important arrests and unprecedented seizures of weapons, illicit money, and drugs. Second, we have begun important reforms to purge and strengthen the institutions responsible for security, justice enforcement, and administration. We now have professional police officers and judges who are truly at the service of the public. And third, we are rebuilding the social fabric to offer more scholarships and open more schools for our students, bringing public services to communities that were previously excluded, opening recreational spaces where coexistence will bring society together, and implementing other actions aimed at improving the quality of life of the Mexican people. To summarize, we are tackling this issue from every perspective to build a real rule of law that gives families security and investors legal certainty.
What is the economic outlook in Mexico?
Since the beginning of my administration at the end of 2006 we began to transform our economy to accelerate growth and increase competitiveness. Thanks to these efforts, Mexico currently has a solid and stable economy, despite the difficult global situation. To give you three important facts: average inflation in the last five years has been less than 5%, which has been the lowest in over four decades. Public debt is approximately 32% of GDP, half the average of Organization of Economic Cooperation and Development (OECD) countries. And international reserves are $152 billion, enough to cover the federal government’s foreign debt 2.5 times over. Mexico is currently in a position to grow and face any possible global financial turbulence.
As you mention, competitiveness is a key element to being successful in the global economy. What strategy has Mexico followed to increase the competitiveness of its economy?
We have a very clear strategy for increasing our competitiveness and being successful in the global economy. An essential part of achieving this goal has been to invest in one of our main assets: our human capital or, as I like to call it, human value. In recent years, we have improved the coverage and quality of education at every level. We have reached universal coverage in elementary education. In addition, in the last five years we have created close to 1,000 high schools and 105 higher education institutions, 90% of which are oriented to training engineers and technicians. Thanks to this, every year close to 122,000 engineers graduate in Mexico, more than in countries such as Germany, Canada, or Brazil. This results in a young, talented, and highly skilled workforce for anyone who wants to open a business in Mexico. Another area in which we have worked hard is health. We are one step away from reaching universal health coverage: to date, 107 million Mexicans have medical insurance. And to cater to this growing demand for health services, since 2007 we have built 1,100 hospitals and refurbished 2,200 more.
In addition, to increase the competitiveness of our economy, over the last five years we have allocated unprecedented resources to the construction of infrastructure. In 2000, average annual investment was approximately 3% of GDP, the same as the OECD average. Currently, it has reached historical levels of 4.4% of GDP. And recently a new Public-Private Partnership (PPP) Law was approved that opens up great business opportunities for businesses that build infrastructure. As a result of this boost to the sector, many international companies are setting up shop in our country because they know that producing in Mexico to export to the US and Europe is now much more profitable and efficient than doing so, for example, in China or Brazil. Another example of actions to raise competitiveness is the elimination of procedures. Never before has there been such a profound effort to eliminate the bureaucratic red tape that was such an obstacle to doing business. This has meant that now entrepreneurs can open a company in less than 10 days, and not 60 as before.
In your opinion, what has been the most important change in Mexican society in recent years?
Without a doubt, the first is that we have increased the quality of life of the Mexican people. Programs aimed at increasing the income of the country’s poorest families have been crucial. Another important transformation is that thanks to the economic stability of recent years, for the first time in several decades we have strengthened the purchasing power of the minimum wage and increased the number of workers who earn higher salaries. This has resulted in a broadening of the middle class that is evident in various indicators. For example, today more families than ever are buying their own homes. In just five years we have granted 6 million credits to acquire or improve public housing. In addition, Mexican homes are acquiring more and more durable goods: most of them have a refrigerator, television, and washing machine, while almost half have a car and telephone line. In other words, Mexico is a global exporting power, but it also has a domestic market that is expanding and provides great opportunities for doing business.
Why should investors around the world choose Mexico as a business destination?
Mexico is opportunity. It is a country with a promising future and a modern and competitive economy thanks to the talent and preparation of the Mexican people. I am convinced that this is the best time to invest here because of the great advantages for doing business offered by Mexico. An example is the stability of our economy, which protects us against complex global financial scenarios and, therefore, offers companies an environment of certainty in which to flourish. In addition, we are a real world-class exporting power: in 2011, our exports reached $377 billion, while our share in US imports went from 10.5% in 2005 to approximately 13% in 2011. We are a country that believes in free trade; we have signed free trade agreements with more than 40 countries, gaining preferential access to a potential market of more than 1 billion consumers around the world. Currently, the Mexican government has become an ally for entrepreneurs. Like many other emerging economies that suffer the consequences of insecurity, Mexico has decided to face this challenge and establish lasting solutions. Because of that, what today might be considered an issue for Mexico will be one of its great strengths in the future: a solid rule of law. Furthermore, we go to great lengths to improve the quality of life of all Mexicans, and that means investing in our human capital. Because of all this, Mexico is an opportunity for global companies seeking attractive and profitable investment destinations. It is an opportunity for entrepreneurs who want to expand their businesses. And it is an opportunity to develop businesses that will be successful competitors in the global markets.
© The Business Year