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Thursday, Nov. 21, 2013

Felipe Calderón, in receiving Institute of the Americas award, emphasizes economic progress made during his 2006-2012 presidency

War on organized crime only given a passing mention

He says he tried for a touchdown on energy reform, but only was able to get a first down, but made great gains on other issues

By David Gaddis Smith, MexicoPerspective

      Felipe Calderón's six-year term as president of Mexico is best known for his fight against drug trafficking and organized crime.

      But Calderón has a much wider view of his 2006-2012 presidency. Calderón, who received the Award for Leadership in the Americas at the Institute of the Americas' 30th anniversary celebration at the Hotel del Coronado on Monday night, focused almost entirely on his stewardship of the Mexican economy in his acceptance speech.

Felipe Calderon       The National Action Party politician indicated that his greatest accomplishment may have been in preventing Mexico into falling into the economic pit that Greece, Portugal, and Spain have found themselves in, and in building public works and educational infrastructure and making other structural changes to the economy that will help Mexico progress and be competitive far into the future.

       His nearly 29-minute speech was quite similar to one he gave in August 2011 in nearby Tijuana, where he made no mention of the war on organized crime. (Two days after his Tijuana speech, the Zetas set fire to a Monterrey casino, killing 52 people.)

"Mexico Once Again Being a Promising Country"

      On Monday, he cited a Nov. 24, 2012 Economist magazine survey titled "The Rise of Mexico," and noted that Nobel Prize-winning economist Joseph Stiglitz said this year that "Mexico is more competitive than China." Calderón said what is remarkable about "Mexico once again being a promising country" is that the changes bringing that about "happened in the worst part of the economic crisis in the world. Not only that, during my tenure, Mexico faced very serious problems apart from this one — the increase in criminal violence, the outbreak of a lethal and unknown virus, the H1N1, the worst drought in (Mexican) history, to mention some of them."

Combating the world recession

       The former president said that when U.S. imports fell as a result of the world financial crisis that began in 2008, "Our GDP began to contract at an annual rate of more than 10% during that first two quarters of 2009, so we had to act, and had to act very quickly." He said his government tried to save jobs and help the poorest through its Oportunidades and temporary public-works programs. He said infrastructure spending was boosted, and credit for small and medium enterprises was multiplied by a factor of six. He said because many international companies had plans to lay off hundreds of thousands of workers at their factories in Mexico due to the recession, "The deal went like this: If workers accepted a pay cut, and companies agreed to keep paying workers a part of their salary instead of firing them, then the federal government paid the workers a part of their salary as well for three to six months. And in that way, we were able to preserve almost half a million jobs in export-oriented industries — automotive industry, electronics, and others." He said that while the government expanded public spending by almost 3 points of GDP that year, it treated this fiscal deficit spending as "a one-shot weapon." Calderón said Mexico then followed the "old recipe" of increased taxes and reduced spending ("at high political cost") to stabilize the economy. He said he thought that if Mexico had gone into a more permanent form of deficit-ballooning stimulus spending it might now be in the poorhouse like Portugal, Greece, Spain and some other nations.

$5 billion saved annually by shutting down federal power company

       The former president said the government made up for some of its losses by closing the grossly inefficient and what he called the "completely useless" Luz y Fuerza federal power company that provided electricity to 25 million consumers in the middle of the country. He said the company was bleeding $5 billion a year. Calderón said the union opposed the use of computers in the company because they threatened jobs. He said people who had billing issues would go stand in line for a very long time, "maybe an hour and a half," and that once a customer got to the counter, the worker there would go into the back and find the person's billing statement with everything written in pencil. Calderón said customers would often pay a bribe to the worker to close that account and whatever amount the customers owed, and then get in line to open a new account. He said the union contract also called for workers, if they crossed a district line of some sort, to be paid hotel, meal and other travel expenditures — even if it was for just crossing a city line as innocuous, say, as "passing from San Diego to Coronado."

Pension restructuring savings

      He said Mexico's move during his administration to individual retirement savings accounts as opposed to a pay-as-you-go public pension system for public employees is saving 30 points of GDP "by avoiding future entitlements."

A first down, rather than a touchdown, on energy reform

      He said private companies now can have flexible contracts with the state oil company Pemex, and that he tried to get a more ambitious energy reform passed. "I was looking for a touchdown on that occasion, and what I got was only a first and 10, but that was enough at that time. Now more ambitious play is required," Calderón said. President Enrique Peña Nieto, whose Institutional Revolutionary Party blocked Calderón's reform, now is trying to pass his own comprehensive energy reform.

Labor law flexibility, betting on free trade, getting rid of red tape and the country's "most stupid rules"

      Calderón said Mexico changed its labor law to provide more flexibility and said Mexico has free-trade agreements with 44 countries, giving Mexico free access to more than 1 billion consumers. "We bet on trade." He said that even for countries with which Mexico had no trade agreements, "We reduced tariffs." Calderón said tariffs on industrial products "were reduced from 11% on average to 4% on average in the middle of crisis." He said that while some in Mexico's business community complained that this "invasion from foreign products" would hurt their bottom lines, the reduced tariffs were crucial for plants — such as ones in Tijuana — to gain access "to the best and cheapest inputs in the world." He said this is why Mexico is the No. 1 producer of flat screens in the world, "and most of them are produced just right at the border." He said this is also why Mexico is a world leader in producing medical services equipment. The former president said Mexico cut red tape by eliminating half of government regulations. He said he required Cabinet members to justify all the rules and regulations their departments were responsible for, and asked members of the public to submit what they thought were the federal government country's most stupid rules. "We received something like 3,000 proposals, something like that — we learned a lot," Calderón said, eliciting laughter. He said that by October 2010, the government "erased 16,000 procedures at the federal level." He said rules for opening businesses were streamlined so that people did not have to go to multiple ministries and departments as part of the process. He said this means that the process can be reduced to two hours.

Public-private projects and infrastructure spending

       Calderón said the government "opened the economy to public-private projects" and privatized existing toll roads. He cited as an example how the government sold the toll road between Mexico City and Guadalajara and used the proceeds to start building other road projects, "such as the new highway between Durango and Mazatlán." He said that highway has more than 80 tunnels — which he said that was more tunnels than were built in the previous 25 years in the country — and more than 100 bridges. One of those bridges was the Baluarte Bicentenario, which he said was the highest cable-stayed bridge in the world, "more than 400 meters between the bridge and the river." He said "more than 14,000 miles of highways, country roads and so on" were built during his six-year term.

Health infrastructure and universal health insurance

        He said Mexico constructed more than 1,200 hospitals and clinics and renovated more than 2,000 more during his six years in office. He said the Seguro Popular health insurance reached universal coverage by the end of his term, noting that before Seguro Popular, seven of 10 children contracting leukemia died, but now seven of 10 live; this was one of his biggest applause lines. He said 1,100 high schools and 140 universities were created, all tuition-free. He cited that 100,000 engineers graduate in Mexico each year, more than in Germany, Britain, Canada or Brazil.

Economic growth, exports, and low inflation

       He said the Mexican economy grew an average of 4.5% during his last 3 1/2 years in office, and total debt was 32% of GDP — compared with the U.S. debt-to-GDP ratio of 85%, and an average in OECD countries of 65%. When Calderón said Mexican foreign reserves are nearly three times the total external debt in Mexico, he also got applause. He said inflation was at its lowest level in history. He said Mexico has moved from being the ninth-largest vehicle exporter when he took office to the fourth-largest, passing Spain, the United Kingdom, and the United States. He also said Mexico accounts for more 60% of the total manufactured exports in Latin America (including Brazil) and the Caribbean region.

       Not everything has been rosy, however. Mexico's growth is expected to be only 1.2% this year. Many experts wonder how the country is going to pay for some of the programs Calderón started.

Economic indicators in Mexico (Calderón's term was from December 2006-December 2012)

Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP growth 5.2% 3.3% 1.2% -6.0% 5.3% 3.9% 3.9% 1.2%* 3.8%* 4.2%*
Inflation 4.05% 3.76% 6.53% 3.57% 4.4% 3.82% 3.57% 3.36%**    
Foreign Exchange Reserves $70.61 billion $69.5 billion $84.8 billion $90.8 billion $113.6 billion $142.5 billion $167 billion $174 billion    
GDP per capita 8,492 9,124 9,501 7,591 8,779 9,699 $9,747      
* OECD projections.
** Inflation from October 2012-October 2013..
2006-2012 GDP data from World Bank.
Inflation data from Inflation.eu
Foreign reserves data from Banco de Mexico

       Calderón also drew applause when he crowed about the net rate of Mexican immigration to the United States being zero for 2010, 2011 and 2012.

       He concluded by saying: "Dear friends of the Institute of the Americas. I know very well that Mexico has huge challenges, but at the same time our promise in the future could come true for Mexico as long (as) its leaders take the right decisions that implies courage and vision. I served my country in very difficult moments. However, I don't complain about it. On the contrary, I learned since I was a child that serving your country is a sublime way to love your neighbor. And to serve Mexico in such difficult moments has been for me a double honor and a singular privilege I will never be able to (give) thanks enough. I want to reiterate my congratulations to the Institute of the Americas because the institute has reached its goal of being puente de entendimiento, as the ambassador (and institute founder and fellow award recipient Ted Gildred) said — a bridge of understanding between our people and countries. And long life to the institute.... Thank you very much for this award."

* * * * *

         Calderón did not talk about his being the inaugural Angelopoulos Global Public Leaders fellow at Harvard's Kennedy School, or that he now heads the newly formed Global Commission on the Economy and Climate.

* * * * *

          Richard Hojel Felipe Calderon IOA awardRichard C. Hojel, chairman of the board of the Institute of the Americas, read the following while presenting Calderón with the Award for Leadership in the Americas:

Whereas Felipe Calderón Hinojosa served Mexico honorably as its president from 2006 to 2012,

Whereas he championed the rule of law, the strengthening of democratic institutions, citizen security, and judicial reform in Mexico,

Whereas he worked to make Mexico more competitive by streamlining regulations, negotiating trade agreements, and investing in infrastructure,

Whereas he negotiated the landmark trans-boundary hydrocarbon treaty with the United States on development in the Gulf of Mexico,

Whereas he was one of founding members of the Alianza del Pacífico which looks to make Latin America a trading powerhouse,

Whereas he expanded educational opportunities by establishing more than 140 new universities and expanding existing ones,

Whereas he supported universal health coverage, expanding health infrastructure to more than 50 million previously underserved citizens,

Whereas he guided Mexico through a world economic recession and led the Mexican economy to a robust recovery,

Whereas he positioned Mexico as a global leader in fighting climate change and continues to marshal world opinion to prevent further environmental degradation,

Be it resolved that the Board of Directors of the Institute of the Americas proudly present his excellency Felipe de Jesús Calderón Hinojosa with the Award for Leadership in the Americas.