Here in Guadalajara, Mexico, for our annual Mexico Business Summit, there are a few things to observe that could be of interest and of relevance for India as it slides into election mode. Enrique Peña Nieto, in office for less than one year, has launched a number of reforms which could prove to be real game-changers.
The education reform passed by the government aims at eliminating the absolute control that the teachers union had in the education sector. The union used to be able to decide on the appointment of teachers - leading to a situation where teachers could sell their position, or pass it to their children. In the same breath, the Peña Nieto administration has opened to competition the telecom and media sectors, which have been dominated by two hyper powerful groups - one of them belonging to Carlos Slim, the richest man in the world. This should help reduce business costs and costs for households, improve productivity and help generate new activities.
As - or even more - important, the government is now launching an energy reform that will open the oil sector to foreign companies, involving them in exploration and exploitation of oil resources. This should help boost oil production, which has been in decline in the last ten years because of lack of technological and financial resources. It should also provide additional resources to the government for investment in infrastructure and other public goods. This is something that no other previous president had dared to undertake, as it means amending the Constitution and breaking a 75-year-old national taboo to which the leftist parties continue to cling desperately.
Of course, there is criticism that the energy reform is not going far enough, and that the fiscal reform adopted a few weeks ago is by far too timid - in fact the lowered ambitions for the fiscal reform and the populist aspects in it are the result of a trade-off to ensure that the main leftist party will not block the energy reform. As frustrating as it is for those who expected even bolder moves, this is the result of the give and take that characterises the functioning of a democratic system.
Behind this give and take - which does not lead to optimum results but at least allows for achieving some results - there is a bold initiative taken by President Peña Nieto at the very start of his administration: The signing of a "Pact for Mexico" binding the three key parties - the ruling Partido Institucional Revolucionario (PRI), the National Action Party (PAN) and the Party of the Democratic Revolution (PRD). The Pact sets a number of orientations involving some key reforms.
This is where what is happening in Mexico should give some food for thought to people in India. Because there are at least two key common denominators between the two countries: First, both of them have been for too long punching below their weight when it comes to leveraging their economic potential and having a more important voice on the international scene; second, the legitimate aspirations of the people in both countries for a better future have been for too long betrayed by a political class where there is too much corruption, inefficiency and obsession with pursuing personal interests to the detriment of national interests.
Now, President Peña Nieto is definitely not some kind of godly saint. He is a politician with a number of shortcomings. For instance, the business community is boiling with frustration and impatience because nothing has happened in terms of economic activity since the beginning of the year, one reason why GDP growth is languishing at about 1.8 per cent. The government is not spending the money it is supposed to spend because there have been too many people moving in the government machinery and most energy and bandwidth has been absorbed in getting the reforms through.
In addition to that, there has been the distraction of efforts generated by the two hurricanes that hit Mexico in September, with huge human casualties and material destructions generated. At least, however, Mr Peña Nieto has understood the urgent need for reforms, for eliminating some of the shackles and the obstacles and the restrictions that had constrained growth. He has understood the need to fight and manoeuvre to get some reforms passed as a sine qua non condition to bring the economy to a sustainable five per cent GDP growth path.
There is some expectation that the economy will pick up by the end of the year and that 2014 will be a much more promising year. There is also now, among the international business community, among foreign investors, and among MNCs expanding their activities in Mexico a sense that it is Mexico's moment. The perception in the US has shifted from Mexico as a "threat", as a source of troubles, to Mexico as an opportunity.
This is where India could steal a page from what is beginning to happen in Mexico, because Mexican politics is certainly not less confrontational or antagonistic than the Indian one. Despite all the electoral fever already gripping the country isn't it time for the parties involved to convey the same message - that it is past time to put an end to the self-induced crisis that has been strangulating Indian growth over the last three years? Is there no way for the political establishment in India to realise the damage that its behaviour has inflicted on hundreds of millions of people? It would take some kind of masochistic tendency to continue acting in a way that has India condemned to punch below its weight.
And, by the way, it would also be time to realise much more forcefully that if Mexico and India might be competitors in some domains, there are too many unexplored areas where the two countries could leverage tremendously productive synergies. And this is applicable in the business and economic domains, as well as in the way the two countries could work together and join forces to have their voice count on the global scene.
The writer is president of Smadja & Smadja, a strategic advisory firm
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
