Mexican Political Reforms 2013
Americas Society/Council of the Americas
http://www.as-coa.org/articles/explainer-mexicos-2013-reforms
Andres Sada
December 17, 2013
Over the past year, Mexico
witnessed a variety of reforms passed after the signing of the Pacto por Mexico, a
December 2012 agreement struck by the country’s three main political parties.
The ruling Institutional Revolutionary Party (PRI), the National Action Party
(PAN), and the Party of the Democratic Revolution (PRD) approved education,
energy, political, fiscal, and telecommunications legislation, making sweeping
changes to everything from taxes on soda to the country’s oil industry.
President Enrique Peña Nieto made the reforms the centerpiece of his administration,
brokering the pact as a means to push through legislation. Though the PRD
announced it would leave the Pacto in late November, party heads agreed that the accord
wasn’t intended to last forever, but rather to push through reforms more
quickly than in previous administrations. While reforms made it through
Congress this year, some await implementation legislation to pass before they
can go into effect.
With the education reform
already implemented, AS/COA looks at four other major reforms, what they
entail, and where they stand.
Explore by section:
Political Reform
Energy Reform
Fiscal Reform
Telecommunications Reform
Political Reform: Reelections for Congress and Mayors
Passed by Congress on December
13, Mexico’s political reform will instate reelection for federal and local
congressmen, senators, and mayors. (Legislative reelection
was previously legal until 1933.) Now, senators will be eligible for one
reelection, while federal deputies can be reelected up to three times.
Officials currently in office will not be eligible for reelection. In addition,
at least 50 percent of congressional candidacies must be reserved for women.
Local and federal elections
will now be overseen by a new body, called the National Electoral Institute,
replacing the Federal Electoral Institute. Previously, local officials oversaw
local elections, whereas the new institute will ensure that federal best
practices are used in all elections. Local and federal elections can now be
nullified in cases where campaign spending limits are not respected and the
margin of difference between first and second place is less than 5 percent.
In addition, the Chamber of
Deputies will be charged with approving the country’s finance secretary, and
the Senate must ratify the pick for foreign affairs secretary. Presidential
transitions will also be shortened; the president, elected in July, will now
take office on October 1, rather than December 1.
The next elections take place
in 2015, when Mexicans will elect representatives to the Chamber of Deputies,
governors in five states, and mayors and local congressmen in 10 states.
Changes to the presidential elections will take place beginning in 2018.
Observers say the reform could potentially shift power away from the executive
branch and add more power to the legislature.
Energy Reform: Opening to Private Investment
On December 12, Mexico’s
Congress passed landmark energy reform, bringing an end to a 75-year state
monopoly on petroleum by opening the oil and gas industries to private investment.
The legislation allows for profit-sharing agreements, production-sharing
agreements, and licenses, and creates a sovereign oil fund operated by the
Central Bank. The law also opens the door for private companies to generate and
distribute electricity. Finally, state-run oil company Pemex will no longer
include representatives from its workers union on its board—for the first time
in 75 years. The energy secretary will become the Pemex board president.
The reform was also approved by
a majority of Mexico’s state legislatures by December 16; at least 17 states
must approve all constitutional reforms. (Mexico has 31 states plus the Federal
District). Now, Congress will have four months to write and pass secondary
legislation.
By attracting private
investment and reducing energy costs through competition, the reform could
generate at least a 1 percent boost in GDP during Peña Nieto’s administration,
according to the secretariat of energy. The legislation also aims to stem
Pemex’s declining production.
Backed by the PRI, PAN, and
Green Party, the reform is opposed by the PRD, which left the Pacto por México as a result. The
PRD has pushed for a referendum on the law in 2015, collecting over a million
signatures in support. In the short term, further legislative changes by the
PRD are unlikely, given that the PRI and its allies control 77 percent of the
Senate and 71 percent of the lower house.
Fiscal Reform: Boosting Tax Revenues
At around 10 percent of GDP,
Mexico has one of the lowest tax revenue levels in Latin America, and the
government depends on Pemex for a third of its revenue. Although the
president’s original fiscal proposal sought to increase tax revenue by 1.4
percent of GDP in 2014, the final reform will increase revenue by no more than
1 percent. This increase will be destined toward investment, rather than
current expenditures.
Passed by Congress on October
31, the country’s fiscal reform will tax junk food and sugary drinks, and
increase taxes on upper income brackets. It will also unify the value-added tax
throughout the country, ending lower tax rates in border regions. Mining
profits will experience tax increases, and 50 percent of those revenues will
benefit the municipality where the mining project is located. There will be a
10 percent tax on stock market profits and dividends. The fiscal reform also
aims to formalize 5.2 million small businesses through an electronic tax
system.
The reform was met with
resistance by the country’s leading private-sector advocacy group, border states, and soft-drink companies. The International
Monetary Fund noted that the reform represented progress, but said more could
be done to reduce the country’s reliance on oil revenues.
The tax increases are expected
to go into effect as of January 1, 2014.
Telecommunications Reform: Increasing Competition
Approved on June 11, Mexico’s
telecommunications reform will create a new autonomous telecommunications
regulator, the Federal Institute of Telecommunications (Ifetel),
which will have triple the budget of the old regulator—the Federal Commission
of Telecommunications. This new regulator can revoke operating licenses for
companies employing monopolistic practices. A second new regulator, the Federal
Commission of Economic Competition, will promote competition and seek to
prevent companies from controlling more than 50 percent of market share.
The legislation creates two
open television channels, and makes access to information and communication
technologies a constitutional right. It also allows foreign investment in
telecoms to grow from 49 percent to 100 percent, though it limits foreign
investment in radio to 49 percent. The reform defines rules around “must carry,
must offer,” requiring paid TV operators to offer free channels, and for open
TV operators to provide free transmissions to paid operators. Finally, the
reform aims to improve access to broadband and other telecom services.
Mexico’s telecommunication
reform awaits secondary legislation before implementation. However, the 180-day
deadline to pass these laws ended on December 9. The Secretariat of
Communications and Transportation says the president finished drafting
secondary legislation, but it must be sent to the Pacto
and Congress. These laws are expected to be passed by early 2014; Ifetel will have the bidding process ready for the two new
TV channels by March 9.
While the economic impact of
the telecommunications reform may not be seen for another two to three years,
Carlos Slim’s Telmex put a
roughly billion dollar investment on hold due to uncertainty surrounding the
secondary legislation.