Director's Forum Invitation: Ernesto Cordero
Mexico's Secretary of Finance and Public Credit, Ernesto Cordero, discussed the steps Mexico is taking to pull out of economic recession and the economic outlook for 2010. Cordero acknowledged the deep impacts of the recession, stating that it was one of the worst ever and drawing comparisons with the 1930s. He indicated, however, that the economy began to show signs of improvement starting in the second half of 2009. Some of these changes were triggered by higher exports to the United States, and increased industrial production in various sectors, including in automobile manufacturing.
The Impact of the Economic Crisis
Cordero estimated that the economic crisis had caused about 6 million Mexicans to fall into poverty. However, he emphasized that had it not been for the Mexican government's implementation of countercyclical measures starting in October 2008, the number of Mexicans in poverty could have grown to an estimated 9 million. Secretary Cordero reiterated the success of these efforts when discussing economic activity, noting that in the past a 1-percentage-point decrease in economic activity was tied to a 1-percentage-point increase in unemployment. However, in the most recent economic recession the rise in unemployment happened at a rate slower than the drop-off in economic activity. Similarly, the downturn for Mexico's construction sector, which is typically drastically affected by drops in economic output, was less emphatic than normal in the most recent cycle.
Cordero expressed optimism about economic recovery in 2010, saying that due to an increase in global demand, Mexico would continue to recover. Secretary Cordero highlighted increased levels of consumer confidence, stating that Mexicans are feeling the beginnings of an economic recovery, bolstered by a solid financial system. Cordero emphasized that Mexico does not have systemic risk in the financial sector, noting that during much of the economic recession the Mexican system stopped lending, and that it was now important to resume these lending efforts and help extend credit to the private sector. Cordero noted activity in transportation infrastructure projects, and said that Mexico is investing more in the area than only a few years ago.
The Future of State-Owned Entities
Secretary Cordero also discussed state-owned electricity utility Luz y Fuerza del Centro, which was taken over and absorbed into larger state power company Comisión Federal de Electricidad in late 2009. Cordero called Luz y Fuerza del Centro "the perfect monopoly," whose inefficiency had prompted many prior shutdown attempts. Cordero called the takeover an important step forward for enhancing the competitiveness of the economy.
Additionally, Secretary Cordero discussed reforms to state-owned oil monopoly Petroleos Mexicanos (Pemex) that, he said, would enable boosted oil production. Additionally he noted engineering improvements that he said had helped to level the drop-off in output of Mexico's main oil resource, the offshore Cantarell field.
By Miguel Salazar
Edited by Andrew Selee