The OECD calls on Mexico to tackle the lack of competition to relaunch productivity and growth | Economy


If Mexico wants to increase productivity, one of the always mentioned requirements sine qua non For long-term economic growth, it must first tackle the lacerant and often forgotten problem of lack of competition. "Increasing productivity requires more competition and a continuation of efforts to strengthen the rule of law," says the Organization for Economic Cooperation and Development (OECD) in its latest global economic forecasts, published Thursday. In them, the think tank of the rich countries calls on the Government of Andres Manuel Lopez Obrador to "guarantee competition authorities and sector regulators adequate resources to carry out their mandates", which "would help to intensify productivity and reduce prices (for consumption ), particularly benefiting low-income households. "

In a country as unequal as Mexico – in which more than one third of the wealth is in the hands of 1% of the population – the lack of economic competition goes far beyond productivity or economic growth: it is also , a problem that aggravates an already very different distribution of income and assets between rich and poor. According to a recent study by the Federal Commission of Economic Competition (Cofece), Mexican families have to pay, on average, double what they should for the absence of concurrence between companies in various sectors of the economy. The premium paid by the poorest households is even greater: up to three times the price they would pay if competition were guaranteed, given that the most basic consumer goods are also the ones that make market power more expensive. When a company or group of companies operates a market under a monopoly or oligopoly regime, it has a greater facility to maximize its profit with higher prices. In addition, the incentive of these companies to invest is much lower, which undermines the productivity and growth of the economy.

In a better competitive situation, the Mexican Gini index — one of the most popular metrics of a country's inequality, in which one is absolute inequality — would go from current 0.48 to 0.44: alone It would not solve the entire puzzle of inequality, but it would improve things significantly. During the election campaign that led Lopez Obrador to the presidency a year ago, the then candidate and his team slipped the need to increase competition. But, far from reinforcing the resources destined to this end, in the last two years Cofece has seen the amount allocated in the Federal Budget reduced by 5% and government efforts to increase competition have focused on a single sector: the financial sector .

New Mexican and regional cadre

On the macroeconomic level, the Mexican-led entity Angel Gurria points to a drastic drop in growth in the North American country – from 2% in 2018 it will go to 0.2% this year – weighed down by international trade tensions – despite that Mexico is one of the few countries benefited, individually, by the trade war between the United States and China – the internal "political uncertainty" and the moderation of public spending. Factors, all of them, that have affected the creation of employment in the formal sector, which has fallen, and unemployment, which itches upwards. In the medium term, on the other hand, the OECD expects a gradual improvement of the main vital signs of the Mexican economy, with a growth of 1.2% in 2020 and 1.6% in 2021.

For the great Latin American power, Brazil, the club that brings together the 36 richest countries in the world predicts a "gradual recovery" after a bad 2019 in which the growth of the economy will lose the barrier of 1% to stand at 0, 8% "The approval of the pension reform and the prospect of progress in structural reforms are increasing confidence and supporting investment," a scenario that is also helping to lower interest rates. The improvement of the Brazilian economy is subject, remind the OECD technicians, that "the reform agenda continues to move forward" and remember that, despite the improvement in employment, the majority of jobs created are "low quality, many of them in the informal sector. "

It is also necessary to take with a grain of salt, as the Paris-based organization itself admits, the macroeconomic picture it draws for Chile in its annual forecasts, since the consequences of the social outbreak on the productive sector are still unknown. That important variable aside, the think tank He believes that "the best financial conditions and the increase in the price of copper – of which Chile is the world's leading producer – should underpin investment." After the scissoring of this year, when the South American country will grow 2.2%, almost half that in 2018, growth should shyly raise its head in 2020, up to 2.4%, to finally take off in 2021 -3.5 %, well above the regional average and in line with the forecasts for the global economy.

Colombia, meanwhile, will continue its good streak of "robust growth in the next two years", after closing this 2019 with a GDP expansion of 3.4% thanks to the positive progress of consumption and investment. However, employment will close the current year in double digits (10.1%), a level well above the regional average. The club of the most developed countries, with which Colombia has already agreed to its adhesion, also warns of the need for growth to be "more inclusive" than until now and asks the authorities for measures that lay the foundations for the creation of "formal and high quality" jobs.

The worst part is Argentina, "an economy in recession" in which "uncertainty about future political priorities has triggered capital outflows and a strong depreciation of its currency," the peso. In this context, and still mired in the rescue program agreed with the International Monetary Fund (IMF), the second largest economy in South America will chain three consecutive years in red numbers: if the fall of 2018 was 2.5% of the GDP, in 2019 it will be 3% and in 2020, 1.7%. A clearly recessive tone that will only escape in a still distant 2021, when it should grow around 0.7%.

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