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Mexico and the G20: Rethinking the Global Economic Balance

By David Gacs , Andres Sada and Carin Zissis

AS/COA brought together a group of leading public and private sector officials to analyze Mexico’s burgeoning global leadership, particularly in the run-up to July’s presidential elections.

Mexico’s preparations for the G20 Summit and the World Economic Forum Latin America mark a crucial turning point for the country as an international player. On March 13, Americas Society/Council of the Americas and ProMéxico brought together a group of leading public and private sector officials to analyze the country’s burgeoning global leadership, particularly in the run-up to July’s presidential elections. In her opening remarks, AS/COA President and CEO Susan Segal noted that 2012 is a high-impact for year for Mexico, which, as the G20 chair, holds a key position in terms of global leadership. ProMéxico President and CEO Carlos Guzmán urged for continued focus on international commerce as a motor of global economic growth at a time of economic challenges.

Get complete coverage of the conference at: www.as-coa.org /Mexico2012/

Speakers:

  • Lourdes Aranda, Undersecretary for Foreign Affairs and G20 Sherpa, Mexico
  • José Antonio Meade, Secretary of Finance and Public Credit, Mexico
  • Carlos Guzmán, President and CEO, ProMéxico
  • José Enrique Arrioja, México City Bureau Chief, Bloomberg
  • Susan Greenwell, Vice President and Head, International Government Affairs, MetLife, Inc.
  • Leo Martinez-Diaz, Deputy Assistant Secretary for the Western Hemisphere, U.S. Department of the Treasury
  • David D. Nelson, Senior Manager, Global Government Affairs and Policy, General Electric Company
  • Dan Reed, Corporate Vice President, Technology Policy, Microsoft Corporation
  • Alberto Saracho Martínez, Executive Director, Fundación IDEA
  • Miguel Székely Pardo, Public Policy Advisor, Josefina Vázquez Mota, Partido Acción Nacional (PAN)
  • Fernando Turner, Member of the Executive Board, Movimiento Regeneración Nacional (MORENA)
  • Emilio Lozoya Austin, Coordinador de Asuntos Internacionales de la Campaña Presidencial, Enrique Peña Nieto, Partido Revolucionario Institucional (PRI)
  • Susan L. Segal, President and CEO, Americas Society and Council of the Americas

The Role of México as President of the G20 Meetings in 2012: Lourdes Aranda, Undersecretary for Foreign Affairs and G20 Sherpa, Mexico 

 As keynote speaker, Undersecretary for Foreign Affairs and G20 Sherpa Lourdes Aranda outlined four areas of focus in terms of Mexico’s G20 presidency: why Mexico is well suited to lead this year’s summit, particularly from an economic standpoint; an overview of the economic and policy discussions taking place in tandem with the summit; the opportunities to focus on dialogue; and challenges for the G20 agenda. 

The B20 in Mexico: Private Sector Perspectives

Fundación IDEA’s Alberto Saracho Martínez moderated a panel of speakers focusing on distinct areas for this year’s B20—the business forum held in conjunction with the G20. Opening the discussion, Susan Greenwell of MetLife commended Mexico for taking the B20 a step further by engaging across sectors and stakeholders. Looking back on MetLife’s ongoing B20 role in the financing task force, she noted that this year there is greater consistency in the themes developed by the various groups involved. In 2012, a key focus area is financial inclusion, with a particular focus on emerging markets and small- to medium-sized enterprises (SMEs). Greenwell said that Mexico had set a good example in terms of fiscal management and, as G20 president, has been an active contributor in terms of offering support around the growth of fiscal services. She also pointed out that while it’s important for task force members to offer recommendations—finalized at the beginning of April—what’s more important is “the opportunity to engage in real time” during the June summit.
 
As a participant in the B20 task force on employment, AS/COA’s Susan Segal focused on SMEs and entrepreneurship as engines for job creation; small- and medium-sized enterprises account for 90 percent of Latin American companies and two-thirds of employment in the region. She stressed that teaching about entrepreneurship needs to begin at the high school level to foster SMEs and, in turn, job growth. Speaking about the global economy, Segal said that, around the world, there is about $2 trillion on corporate balance sheets waiting to be invested. She added that the reason these funds are on hold is because of a lack of global confidence. To create that confidence, global consensus around growth-oriented policies is needed at the micro and macro levels, the EU needs to stabilize, and companies need to know the rules of the game. “[S]mall companies need money and banks need to lend that money,” said Segal. “Governments need to set priorities and make sure the rules of game are clear.”
 
With General Electric involved in the B20’s green growth, innovation, and anti-corruption working groups, GE’s David Nelson discussed the importance of the private sector’s role in those areas. He stressed that price matters for new and alternative technologies, such as windmills and solar power. Nelson said that a large portion of G20 members require government stewardship to guide the use of new technologies. To that end, when governments make procurements, they need to look at long-term costs rather than short-term, up-front costs. In the context of Mexico, he gave the example of garbage dumps in Monterrey, noting that there were short-term costs involved with landfills converting methane gas to energy. But the long-term benefit is that the converted methane is being used to fuel the city’s electric grid. Nelson also noted that research and development, along with accompanying patents, needs to be protected; when other countries copy new technologies, it becomes difficult to foster R&D.

Microsoft’s Dan Reed spoke to the role of the B20’s ICT innovation task force, noting that the group is looking at the interplay between education and green technology, as well as how access to information can level the playing field from a business perspective. With technology broadening availability of information and education, SMEs can have the same access to information as major companies—an important factor in job creation.

Mexico: Economic Programs for 2013-2019 

With Bloomberg’s Mexico City Bureau Chief José Enrique Arrioja moderating, the advisors to Mexico’s three main presidential candidates articulated their economic visions for the country. The candidates agreed on what ailed Mexico, but differed on which specific prescriptions are needed to solve Mexico’s problems.                 

Emilio Lozoya Austin, advisor to the PRI’s Enrique Peña Nieto, emphasized the debilitating dependence of the Mexican economy on the U.S. economy. He added that a lack of suitable infrastructure has kept the country from exporting on a greater scale to Asia, home to most of the world’s growth. Lozoya blamed the PAN administrations for periods of sub-2 percent growth and said that, in the past 12 years, 12 million people were added to the roster of the country’s poor. What’s needed, he said, is employment: more and better paid. Lozoya posited that the solution lies in reforming energy, credit, and security and contended that the PRI is the only party with the political capital necessary to accomplish these reforms. Specifically, Lozoya mentioned the need for state oil firm Pemex to be reformed and opened up to private investment, an increase in broadband penetration, and the promotion of biofuels.  
 
Fernando Turner, advisor to MORENA’s Andrés Manuel López Obrador, declared that Mexico’s current economic performance is and has been unacceptable. Touting his long career as an entrepreneur, he said that there are no studies that say labor reform will change anything. Monopolies are the issue, both public and private, said Turner. For the country to leave behind the 30 years of stagnation PAN and PRI governments have produced, investment in the country has to increase, he said. Better investment would come if a market-friendly environment absent of monopolies existed. More investment would spur more growth and jobs, and would eliminate extreme poverty. Turner said that this would be complemented by no increase in taxes, competitive energy prices, and an expansion of the Mexican banking sector. In reference to Pemex, he returned to the theme of monopolies, stating that past privatizations had only created monopolies. Ultimately, the private sector can already work with Pemex, he said, noting that tapping into Mexican oil reserves is what’s prohibited. For Turner, Mexico could be the fifth or sixth largest economy in the world, but not if it stays focused on near-sighted reforms.
 
Miguel Székely Pardo, advisor to the PAN’s Josefina Vazquez Mota, pronounced that Mexico is now seen as a model of macroeconomic stability and management. Because of the country’s experience during the 1994 Tequila Crisis, Mexico has kept its public debt at one of the lowest levels in the world. Székely echoed Lozoya’s call for labor reform and for the modernization of Pemex, citing the example of Petrobras. He agreed with Turner that monopolies must be eliminated. Székely‘s emphasized that the rules of the game must be changed and, as an example, he brought up the quota for hiring of teachers controlled by the teachers’ union. Székely said that while there is no magic recipe for growth, opportunities lie in eight key areas: security, fiscal reform, energy, labor, identifying sectors to prioritize, productivity, education, and the domestic market. He also suggested new areas of expansion such as medical tourism and retirement communities, which are complemented by demographics in the United States. These sectors would be propelled by private-public collaborations under Vázquez Mota’s proposed coalition government, he said.
 

North America and the Prospects for Global Economic Recovery, with U.S. Treasury Department’s Deputy Assistant Secretary for the Western Hemisphere Leo Martínez-Díaz

During his presentation, U.S. Treasury Department’s Deputy Assistant Secretary for the Western Hemisphere Leo Martínez-Díaz gave an overview of U.S.-Mexican economic ties since the implementation of the North-American Free Trade Agreement (NAFTA), as well as what the future holds for relations. Martínez-Díaz said that since 1994, the value of bilateral trade has increased by 350 percent, U.S. investment in Mexico has increased 430 percent, and Mexican direct investment in the United States has increased by 500 percent. While the share of Mexico’s exports to the United States peaked in 2000, it has fallen to 79 percent, demonstrating Mexico’s diversified global trade ties. At the same time, he noted that Mexico is gaining a competitive edge in the field of labor, as China’s labor wages are on the rise. With an evolving relationship, U.S. and Mexican officials now discuss global issues rather than just bilateral ties when they meet, he said. “In many ways, Mexico has led by example,” he said, noting its leadership in openness to free trade, fiscal stability, and pioneering in the area of conditional cash transfers. Looking ahead, he forecast resilience for both economies and increased Mexican direct investment in the United States. In that context, he predicted rising cross-border links in the fields of science and innovation. He closed by noting that elections coming up this year in both countries will allow for an opportunity to reaffirm the bilateral partnership.

 
Closing Remarks: José Antionio Meade, Secretary of Finance and Public Credit, Mexico 

In closing remarks, Mexican Secretary of Finance and Public Credit José Antonio Meade pointed out that Mexico is the first Latin American country to host the G20. He stressed that, with Mexico as the chair, this year’s summit will focus on experiences of both G20 members and non-members in assessing the issue of financial regulation. But in the case of many countries—Mexico included—it is as relevant to discuss how to build financial inclusion as it is to focus on financial regulation. To that end, it is crucial for the G20 to define the best practices for advancing and promoting financial inclusion, he said. He also noted that this year’s G20 will make use of studies on disaster-risk mitigation, green growth, and the potential impact of financial regulation on emerging markets.

The secretary gave his perspective on the G20 finance ministers' meeting held February 25 and 26 in Mexico City, noting that attendees generally see the global economy in a state of recovery. The ministerial summit reaffirmed support to help stabilize EU economies, with the IMF as the chief institution to handle the crisis but with potential availability of additional funds.

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