Political Risk Latin America Blog @PolRiskLatam

Mexico trails OECD economies

Posted in News and Articles, Political Risk by politicalrisklatam on May 18, 2011

by Adam Thomson for Financial Times – Beyond Brics, May 18th, 2011.

new study released on Tuesday by the Organisation for Economic Co-operation and Development is a timely – if somewhat unsurprising – reminder that Mexico remains a laggard in the OECD club of industrialised economies.

It is timely because it reminds us that while investors are now looking at Mexico more favourably – in the past month, foreigners have piled into fixed-rate Mexican bonds, and now hold a record 35 per cent of the outstanding securities – they should remember that the country still has its work cut out.

For example, the report points out that at just 20 per cent of gross domestic product, Mexico has the lowest government tax take of all OECD members. Not only that, but about one-third of that figure is thanks to oil, making Latin America’s second-largest economy highly exposed to swings in the international oil price.

The study advocates tax reform to eliminate loopholes and broaden the overall base. It also recommends addressing a whole range of so-called structural bottlenecks, which act as a drag on the economy, making it less efficient and reducing growth. (continue reading… )


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