- Contrary to first expectations, our president, Filipe Calderón,
has been making progress in the enormous task of enacting some of the
badly needed structural reforms in México. Following is a short score
card:
Limited government pension reform,
passed. We should mention that México, a low wage country, does pay
its government employees very, very well. Not only do presidential
pensions top those in the US, but also the political class in México ranks
up to or above what you will find in developed countries. The reform in
this case was to reform the pension program in the Mexican Social Security
employees. These retirees were making more money on retirement than while
working, something like 108%. Full retirement in less than 30 years of
working, regardless of age. After many protests by the affected employees,
a reform was passed. The compromise was that the new rules would only
apply only to new hires. Although this is a limited reform, it does set a
prescient. An easy start on the reform path.
Tax reform, passed. México now
collects only 11% of its GDP in federal taxes. This is low even by other
Latin American standards. A tax "reform" was passed to "close loopholes"
in corporate taxes. Well, beware of "closing loopholes". The result was
that accounting rules changed in a manner not to simplify a Byzantine tax
system, but in fact to make it even more complicated. The politicians must
have learned that from our northern cousins. One of the effects of these
changes is to institute a corporate Alternate Minimum Tax. Changes in
treatment of inventory caused many end of the year strategy for companies
this year. In some cases, if you can end up paying lower taxes in the new
system, you must revert to the older system if that rate was higher. And,
of course, the more complex the system is the more real loopholes there
are. On top of this, it gives the government auditors more "discretional"
powers. Ready made for graft.
What is missed here is the fact that between 40% and 50% of Mexican
internal commerce is conducted in the "informal" non-registered and
non-taxpaying sector. You can't exist in México without dealing with the
underground market, yet the government can't seem to be able to cope with
this.
If you want to increase Mexican productivity, why not encourage
corporations to invest in more productive equipment and methods? Something
like offering tax credits as is done in the US. We would end up by getting
a great return on these credits. This is a mixed, at best, reform.
Electoral reform, in process. The
major talking point is much tighter limitations on campaign expenditures
and political donations. In México, the government funds most of the
campaign process, distributed to the parties by the percentage of votes
received in the prior election and including tight limits on
contributions. If a party exceeds these limits, large fines are levied. In
the election that put Fox into office, the loosing party (PRI) was fined
so heavily for over spending that it was temporally bankrupt. The key to
more transparent elections was the Federal Election Institute (IFE) that
was put in by president Zedillo after his election.
As installed, it is one of the most respected institutions in México.
But as it is now, the IFE is being completely reorganized. One of the
reasons is a sop to the barely loosing PRD party of the last election who
claims that Calderón's election was stolen from their candidate, López
Obrador (who still calls himself the "legitimate" president).
Another thing talked about is to allow reelection for most public
offices for at least one term. This would be a very good thing. As it is,
we have a government totally made up of lame ducks. But the bottom line is
that this reform seems to be leaning toward strengthening the large
parties' power at the expense of the smaller parties. We will wait until
February to see how this reform turns out. So far, they can't even agree
who the new members of the IFE will be.
One simple way to avoid the problems of the last election is to
require the winner to have more than 50% of the vote. Otherwise a run off
election would be required by the two top contenders. It works very well
in many countries.
Judicial Reform. Passed by
both houses of congress and minor compromises that must be worked out in
February. This is the real big one. This calls for a complete overhaul of
México's corrupt and inefficient legal system. First is the presumption of
innocence, like what is done in common law countries and most of "code"
law countries now. Americans take this principle for granted, but it
doesn't exist in México. Also, the federal courts will convert to open to
the public "oral" trials instead of the present secret "paper" trials.
Now, when you go to court you never see the judge. Testimony is taken down
(usually by a stenographer banging on an old Underwood typewriter) before
a clerk and the judge reviews the piles of paper (never seeing the accused
or witnesses) and renders a decision behind closed doors. Talk about a
setup for kangaroo courts! And oral open trials, as now conducted in a
couple of the Border States now, are far more efficient. A trial to
decision time of months or years has been reduced to hours. Even straight
forward trials now generate thousands of pages for a judge to ponder over.
Additionally, public defenders will be paid the same salaries as
prosecutors for a leveling of the playing field. About 50% of all
prisoners in México are simply awaiting a decision of the courts. Remember
that if you are charged, you are presumed guilty. It is up to you to prove
your innocence. These are major steps to make the judicial system more
effective, fair and transparent.
Some details to be reconciled in congress are the proposed easing of
the requirements for search warrants. This was one of the big selling
points of judicial reform, to be able to fight the ongoing drug war more
effectively. Also included is the ability to hold suspects for longer
periods (80 days) before charging them. Here we see the same arguments
that are going on in the US in the war on terror, to balance civil rights
against winning the war. Against this background the Mexican people now
have absolutely no trust in the existing system (for good reason) and are
very wary of Mexican justice in general. The direction that judicial
reform is taking now bodes well for Mexico, to increase public trust in
one of our most important institutions, the fair rule of law.
By
Richard N. Baldwin T. /HispanicVista.com