Transcript Slide 1

Regional Policy and Fiscal
Reform in Mexico
OECD Encounter with Mexican Legislators on Fiscal Policy
and Public Finance
Regional Competitiveness and Governace Division, OECD
March 2007
The general argument: A fiscal reform is needed to
foster economic growth
FISCAL
REFORM
+
+
Revenues
+
Public Investment
+
Investment
+
Private Investment
+
+
Economic Growth
But, the issue is not straight forward, there are
several details that can influence the outcome
FISCAL
REFORM
+
+
+
Federal Revenues
Local Revenues
+
+
Revenues
+
Is the current
federal / local
distribution
adequate?
Is growth reducing
Disparities?
+
Public Investment
in areas i, ii, iii...
In which areas?
in
regions x, y, z...
In which regions?
Regional
Disparities
+
Investment
+
Private Investment
in sectors a, b, c...
in regions x, y, z +
In which sectors?
In which regions?
+
+
Economic Growth driven by
sectors a, b, c... and by
regions x, y, z...
Driven by
which sectors?
By which regions?
+
Competitiveness
Is growth building
regional
competitiveness?
Regional Policy can be a powerful complement to Fiscal Reform to
strengthen the dynamics conducive to higher growth, reduce regional
disparities and increase competitiveness
FISCAL
REFORM
REGIONAL
POLICY
+
+
+
Federal Revenues
+
Local Revenues
+
+
Revenues-
+
+
+
Public Investment
in areas i, ii, iii...
in regions x, y, z...
+
Private Investment
in sectors a, b, c...
in regions x, y, z +
Public Policies (Education,
Health, Labour, Poverty
Alleviation...)
+
Investment
+
+
Economic Growth driven by
sectors a, b, c... and by
regions x, y, z...
-
Regional
Disparities
+
+
Competitiveness
Summing up…
FISCAL
REFORM
REGIONAL
POLICY
+
+
Regional
Policy
+ as a
+
Local Revenues
Federal Revenues
tool to strengthen
Fiscal Federalism
Informality
+
+
(Institutional
RevenuesArrangements and
+
Sub-national
Finance)
Public Investment
in areas i, ii, iii...
in regions x, y, z...
+
Private Investment
in sectors a, b, c...
in regions x, y, z +
+
+
Public Policies
Regional Policy
as(Education,
a tool to orient +
Health, Labour, Poverty
Regional
policies to reduce
regional disparities
Alleviation...)
- Disparities
(Place based approaches)
+
Investment
+
Economic Growth driven by
sectors a, b, c... and by
regions x, y, z...
Regional Policy
as a tool to foster
+
regional economic growth and
competitiveness
+
+
Competitiveness
Supporting Slides
Central/Local Tax Revenue Distribution, 2000
Is the current
federal / local
distribution
adequate?
Central/Local Taxation Distribution (2000)
Central Share of Tax Revenues
Social Security
Federal Countries
State
Local
Unitary Countries
100%
80%
60%
40%
20%
Source: OECD 2001, Tax and the Economy, A comparative assessment of OECD countries
Japan
France
Czech Republic
Spain
Finland
Netherlands
Sweeden
Poland
Italy
Norway
Hungary
Denmark
Portugal
Luxemburg
Greece
Turkey
Korea
Iceland
United Kingdom
Ireland
New Zealand
Germany
Switzerland
Belgium
Canada
United States
Austria
Australia
Mexico
0%
In which areas?
In which regions?
Orienting public investment to specific regions, the case of Microrregiones
Index of Marginalisation
High
Very High
Source: OECD based marginalisation data from CONAPO
Most developed clusters in Mexico
In which sectors?
In which regions?
Tijuana
Electronics
Ciudad Juarez
Electronics
Chihuahua
Autoparts
Torreon
Dairy Products
Saltillo
Autoparts
Monterrey
Glass
Cement
Steel
Chemicals
Beverages
Biotechnology
Los Cabos
Tourism
Jalisco
Tequila
Puerto Vallarta
Tourism
Guadalajara
Electronics
Leon
Transportation
Footwear
Garments
Women footwear
Mexico City
Pharmaceuticals
Cancun, Costa
Maya
Tourism
State GDP growth relative to national growth, 1994-2004
Percentage point deviation from the national average
-2
Southeast
Center
Center-West
Northwest
Northeast
Driven by
which sectors?
By which regions?
-1.5
-1
-0.5
0
0.5
1
1.5
Coahuila
Tamaulipas
Nuevo León
Chihuahua
Durango
Baja California
Baja California Sur
Sonora
Sinaloa
Aguascalientes
Querétaro
Guanajuato
San Luis Potosí
Zacatecas
Michoacán
Colima
Jalisco
Nayarit
Tlaxcala
Puebla
México
Morelos
Hidalgo
Distrito Federal
Quintana Roo
Yucatán
Campeche
Chiapas
Veracruz
Tabasco
Oaxaca
Guerrero
Source: INEGI, “Producto interno bruto por entidad federativa; Cifras anuales del periodo 1993-2004”
2
2.5
Is growth reducing
Disparities?
Territorial disparities in OECD countries, 1998 and 2003
Gini index of inequality in GDP per capita across regions within each country
0.30
0.25
1998
2003
0.20
0.15
0.10
0.05
Note: * Denotes Territorial Level 2 (states), the rest is at the lower level, TL 3
Source: OECD Regions at a Glance 2007 (forthcoming)
Sweden
Japan
Greece
Australia*
Netherlands
Finland
France
Norway
Denmark
Czech Republic
Spain
Germany
Italy
United States*
Portugal
OECD (26) average
Austria
Canada*
United Kingdom
Ireland
Korea
Poland
Hungary
Belgium
Slovak Republic
Mexico*
Turkey
0.00
Is growth building
regional
competitiveness?
Disparities in Regional Competitiveness, 2005
Index of Regional Competitiveness
51.2 – 58.0
44.5 – 51.2
37.7 – 44.5
31.0 – 37.7
Source: OECD based on competitiveness data from the Mexican Institute for Competitiveness (IMCO-EGAP)