Mexican Reforms-Cont.7 Jul 2014 00:05
Such scepticism is understandable. Mexico has been in the grip of monopolies and duopolies for so long that people know little other than high prices and poor service.
Big business, too, has its misgivings. It is widely rumoured that Carlos Slim, owner of a phone empire that has made him one of the world’s richest men, has stopped investing in his existing telecoms networks in Mexico and is worried that a telecoms-and-broadcasting reform unfairly favours his arch-rival Televisa, the biggest TV company (and a staunch backer of Mr Peña). A plunge in telecoms investment is a big factor behind the economic slowdown.
A movement, not a moment
What is more, businessmen have looked in vain for infrastructure contracts that were supposed to rain down this year. Though the finance ministry has boasted of a surge in money allocated to public spending, hardly any of it has been spent, says Rogelio Ramírez de la O, a consultant. Some accuse Luis Videgaray, the finance minister and brains behind the reforms, of micromanaging public-spending projects too zealously. They hope that a series of big projects, such as a long-awaited new airport for Mexico City, will get under way once the energy reform is completed.
Others still believe the main aim of Mr Peña’s administration is to consolidate central-government power (via a higher tax take and the creation of numerous regulatory bodies) rather than to support free enterprise. As one investment banker puts it, there is a growing concern within the private sector that a cartel of big businessmen is being replaced by an over-powerful gang of politicians.
Supporters of the reforms contend that the complaints from big firms reflect a healthier relationship between the government and the private sector. They note that Mexico has a low tax take relative to other members of the OECD, a rich-country club, partly because big companies have been so good at dodging taxes. “Some of their anger”, one official says, “is that they [were] used to being very close to the government and negotiating with it. This government is hearing them but not negotiating with them.”
Even the squeals of small firms are given short shrift. Though they too have found the fiscal reform tough, government officials say much of the pain is caused by the closure of tax loopholes. They argue that a payoff will come eventually through more business opportunities thanks to the energy and telecoms reforms; cheaper credit via more competitive banks; and less informality as a result of incentives for small firms to register with tax authorities.
The government hopes that the benefits of the reforms—jobs growth, more credit, better education, more oil—will be visible before Mr Peña’s term ends in 2018. Lower electricity bills, the most obvious sign of success, could arrive sooner still if cheap natural gas is imported in greater quantities from the United States, and
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