UNCHAINED AMBITION

Mexico 2013 | ECONOMY | INTERVIEW

TBY talks to Juan E. Pardinas, Director General of the Mexican Institute for Competitiveness (IMCO), on working to promote trade, discrepancies between states, and sectors with potential.

Juan E. Pardinas
BIOGRAPHY
Juan E. Pardinas is director of the Mexican Institute for Competitiveness. He has previously worked as a consultant for the World Bank, the Inter-American Development Bank, the Secretariat of Finance, and the Institute for Liberty and Democracy in Peru. As a journalist, he was a CNN correspondent in India and Japan. He also writes a weekly op-ed column for Reforma in Mexico City. He obtained his PhD from the London School of Economics, a Master’s in Economics at Sophia University in Tokyo, and a BA in Political Science at the National Autonomous University of Mexico (UNAM).

What role is the Mexican Institute for Competitiveness (IMCO) playing in promoting international trade development in Mexico?

IMCO has advocated for competitiveness for the last 10 years. We define competitiveness as the ability of a country to attract and retain investment and talent. IMCO is an independent think-tank with an emphasis on fact-based public policy improvement. As a result of our advocacy strategy, we have partnered with world-class institutions such as the World Economic Forum (WEF), the Inter-American Development Bank (IADB), International Finance Corp (IFC), Emerging Markets Forum, the OECD, and the Open Government Initiative, to mention just a few. We are international advisors for the National Council on Competitiveness of Nigeria, together with Harvard Professor Michael Porter. IMCO advocates on a broad spectrum of specific policies such as transparency, public procurement, security and drug policy, productivity, drivers of economic growth, and small business policy.

The flow of FDI and international trade are key components of Mexico's economy. What are the main competitive strengths of the country?

Mexico is a democratic country with stronger institutions than many of its competitors in the global landscape. Of course, there is room for improvement, but the authoritarian, un-egalitarian, and un-civil stigma attached to the country is nothing but a historical reminiscence. We have an open regime for FDI in most sectors, and those that are still secluded from the international markets are undergoing radical reforms. Mexico is not a cheap manufacturing base; it is a place where the middle class is thriving, which entails limitless possibilities in terms of industrious, innovative people, and a large consumer market. Violence figures have had some improvements during the last couple of years, and are still lower than in many other countries in the region—the free flow of information about crime attests to the institutional strength of a country that is continuously making efforts to provide open government data to anyone interested. In trade activity and the attraction of FDI, the country is quite heterogeneous. While some states such as Chihuahua trade more than 250% of their GDP, others such as Michoacán do less than 15%. Those states with a tradition in free trade, such as those on the border and in Central Mexico, are comparable to the most prosperous regions in Asia and Europe. Nonetheless, our southern states and other landlocked localities still face serious challenges in terms of integration to the export effort, FDI, and development.

What sectors of the economy do you think hold particular potential?

Mexico won't become Latin American's largest economy in the near future just because of the sheer size of the population difference between the country and Brazil. We would have to increase our per capita income to more than twice that of Brazil's in order to become as large in economy terms. However, Mexico has the potential to become the most productive and highest-growing country in the Latin American region. Our growth figures for the last few decades are not too bright, due to the very astringent adjustments that the economy had to suffer, from resolving its debt crisis to improving its productivity in a competitive landscape. Due to Mexico's openness to the world, flexible exchange rate, and low public debt, it has focused its economic activities, concentrating on the core of manufacturing sectors with a very high potential in automotive, aerospace, electronics, and bio-medical equipment. In the service economy, things such as hospitals, resorts, and restaurants also have an international reputation for outstanding service and quality at an attractive price.

What would you say are the key challenges that need to be addressed to enable Mexico to optimize its potential as an economic hub?

Education, quality of public services, corruption, and openness in activities still reserved for the state, such as energy, still need to undergo first-generation reforms. In the case of energy, its openness to the participation of private operators is fundamental to unleash a Mexican version of the North-American shale revolution, an indispensable change to preserve the competitiveness of our manufacturing and service economy. Informality is prevalent in the economy, which entails costs in terms of productivity. A financial system that channels savings into productive ventures while keeping public monies unexposed to entrepreneurial risk is a must. Mexico directly needs to develop equity financing for small businesses, both to unleash their power as engines of growth and to provide new investment opportunities for its thriving middle classes.