Friday, December 27, 2013

Mexico - the 2013 champion of reforms

"If an award could be given in 2013 for Country of the Year, Mexico might deserve it. No other country has done more this past year to put reforms in place to transform a nation – and with startling democratic consensus", wrote Christian Science Monitor on 15 December. It is a rare compliment from the American media which have been obsessed with negative portrayal of Mexico headlining issues such as drug trafficking, illegal immigration and violence. Mexico has brought about more fundamental reforms in the last twelve months than any other democratic country. 

The reforms were initiated by Enrique Penha Nieto, the young and dynamic President of Mexico since December 2012 as part of  the " Pact for Mexico"( Pacto por Mexico) signed by the four major political parties of the country committing consensual support to vital policies and reforms of national importance. He started the negotiations with the other parties as soon as he was elected in July 2012 and  signed the Pact on the second day after his inauguration. The Pact has brought together the ruling centre-left Instituitional Revolutionary Party(PRI) and the three principal opposition parties; the leftist PRD party, the Conservative  PAN ( which was ousted from power in 2012 after two terms) and the Green Party which joined the Pact in January 2013. The political parties came together for the Pact after the realization that the polarization of politics had weakened the country alarmingly especially in the last decade.

The 95- point agenda of the Pact ranges from tax overhaul to barring junk food in schools. The Pact has already helped in passing six major reforms in the last twelve months: (1) reform of the educational system (2) legal reform  (3) a telecommunications law that limits the quasi-monopolistic powers of the biggest companies including that of Carlos Slim, the world's richest man (4) a  tax reform increasing the tax for more social spending (5) Electoral reform  and (6) the energy reform.

The energy reform bill passed by the Congress on 12 December is the most dramatic and historic one, since it was considered as the most difficult to achieve. The Petroleum sector had remained as a holy cow in Mexico since the nationalization in 1938 because of the fear of  domination by the giant US firms. The inefficient monopoly of Pemex has resulted in fall in crude output by a quarter. The new law allows entry of foreign and private investment which will rejuvenate the energy sector with investment and technology. The production of oil is expected to increase by a million barrels by 2020 and energy costs for consumers and the industry will become lower.  
The energy reform of Mexico is good for India which has been importing Mexican crude oil regularly in recent years. In 2012, India imported US $ 2.83 billion worth of crude oil from Mexico. India is Mexico's third-largest market for oil after the US and Spain. As Mexico increases its production capacity, India can count on Mexico as a regular longterm source of supply in future. The reform has also opened opportunities for Indian companies to invest in the Mexican oil sector, as they have done in Venezuela, Brazil and Colombia.
 Every one of the reforms was ferociously opposed by the vested interests, unions and ideological warriors of the country. Mexico city was paralyzed for many weeks by the protestors in the last one year. But the government firmly stood its ground and carried the reforms through. Still, the reforms would continue to face challenges by the forces opposed to them as well as in implementation through secondary legislations. Mexico also faces serious problems of drug trafficking, crime and violence, besides high levels of poverty and inequality as well as slow growth. But what is important is that the reforms have given a new confidence to the people in the political system that it could deliver and have made them more optimistic about the future. 
The reforms have heralded a new paradigm of democratic functioning besides opening a new era of economic and social transformation for Mexico. The manner in which the the ruling party and the opposition parties have worked together and brought about so many reforms under the Mexico Pact is an example and inspiration for other democracies of Latin America and the world. The Economist magazine commended, "Mexico appears to have found the medicine for political gridlock" and commented,"plenty of Americans must have cast a jealous eye south of the border this year".  Wall Street Journal wrote, " At a time when politicians in Washington struggle to agree on anything, their Mexican counterparts sit down almost daily to talk about thorny issues".  The Mexico Pact shines even more brightly against the dark background of the US government shut down in October 2013 and the policy paralysis in Washington DC due to the irreconcilable ideological polarization and fight between the Republicans and the Democrats. The next prime minister of India could start off with a "Pact for India" by reaching out to the opposition parties and forging a consensus on some of the issues of vital national interest.

This article was published by Mint Newspaper on 27 December 

Friday, December 06, 2013

Poverty and Inequality are declining in Latin America

Poverty rate has decreased signifcantly from 48.4 % in 1990  to 27.9 % in 2013 and extreme poverty has declined from 22.6%  to 11.5 % in the same period, according to a report “Social panorama of Latin America” released on 5 December by ECLAC ( Economic Commission for Latin America and Caribbean), a UN organisation based in Santiago, Chile. The other highlights of the report are:

The rate of poverty reduction has slowed down in the region in recent years due to the impact of the global financial and economic cris, the fall in commodity prices and slower domestic growth.,  The per capita GDP growth in 2012 was just 1.9% in 2012 as against 3.2% in 2011 and 4.5% in 2010.

Venezuela tops the list with the largest drop in poverty reduction. Brazil, Peru, Argentina and Ecuador have also seen significant fall in poverty. On the other hand poverty rate has gone up in Mexico.

Inequality in income has reduced in Venezuela, Brazil, Peru, Bolivia and Uruguay  while it has increased in Paraguay, Panama and Costa Rica.

Share of social spending as a percentage of GDP in 21 countries of Latin America and Caribbean has gone up from 12.5% in 1992-93 to 19.2% in 2010-11. The share of social spending as a percentage of public spending has also increased from 50 % in 1992-93 to 65.9 % in 201-11 in the same group of countries.

My comments:

The credit for the reduction in poverty and inequality in Latin America goes to the proactive poverty alleviation programmes of the Leftist governments in the region. Brazil’s Bolsa Familia is a role model for the region and for the world too.

The region needs to keep up its Leftist orientation in the coming years since even now poverty rate is substantial. The number of people living below the poverty line in Latin America is 164 million accounting for 27.9 percent of the total population. The number of people who are extremely poor in the region is 68 million representing 11.5 % of the total population.

Honduras elections

While the Chilean elections held in November have brought back to power the Left which is a role model for the region, the elections held in Honduras in the same month has returned to power the right wing National Party which colluded with the military coup and overthrow of the democratically elected President Manuel Zelaya in 2009. If Chile is an inspiration for the Twenty First Century Latin America, Honduras is a reminder of the bad old times of the last century of coups and conspiracies.

In the elections held on 24 November 2014, Juan Orlando Hernandes, of the National party has been declared as the winner by the electoral authority of Honduras. Hernandes got 36.8% of the votes while his main rival Xiomara Castro, the centre-left candidate of the Libre party got 28.8 percent. She is the wife of ex-president Manuel Zelaya who was ousted in the 2009 coup. She has alleged irregularities in the counting and has rejected the official results. She has claimed victory and her supporters have been in the streets with protest demonstrations. In response, the electoral authority has agreed to recount in some cases. But the Libre party does not agree with the way the recounting is proposed to be done by the electoral authority. So there is going to be more street protests and uncertainty for sometime. However, the chance of Xiomara winning the election after recount is very slim, given the overwhelming strength of the right wing forces including military which are opposed to the Left.

Honduras is the original " Banana Republic" and is continuing to be true to its derogatory meaning. It is the only Latin American country to have had a coup in the Twenty First Century Latin America. Manuel Zelaya, the President was ousted in a classic military coup in 2009, put in a plane and dropped in Costa Rica as an exile. This came as a total surprise and shock since the twenty first-century Latin America has transformed into a democratic region ( exception-Cuba) having sent the military back to barracks irreversibly. So this was the first and only case of coup in the region in this century. The conservative National party, supported by their US patrons was the villain behind the coup. The reason for the overthrow of Zelaya was that he was trying to seek reelection through a referendum. Such a blatant and untenable excuse! The real reason for the coup was to punish him for being close to Chavez and give a message to other pro-Chavez presidents in the region.

Honduras has the notorious distinction as the murder capital of the world with 82 murders for every 100, 000 of the population and 20 murders a day. The ruthless Mara gangs, said to have tens of thousands of members, strike terror all over the country and are involved in drug and human trafficking. President-elect Hernandez, has promised tough measures to deal with the crime by putting the military and more police in the streets.

Many Hondurans emigrate to escape the terror inside the country. 25% of the foreign exchange comes from the remittances of Hondurans who work abroad. In US alone there are over 700,000 Hondurans, almost ten percent of the total population.

Honduras is one of the poorest countries in the region. About fifty percent of the population are below poverty line. Poverty alleviation is not a priority for the conservative party which has won the election, in contrast to most other Latin American governments which have pro-poor policies and programmes. This means that there is no immediate hope for Hondurans suffering from poverty and inequality.

Honduras is the second biggest coffee producer of Central America and an important banana exporter. The country is diversifying into textiles and exporting to US taking advantage of the FTA with US.

An interesting fact: Honduras has the second largest number of people of Palestine origin( 280,000) in Latin America, after Chile (350,000). Carlos Flores Facussé, who was President of Honduras from 1998 to 2002 was a Palestine descendent.