| | |  Business News | November 2009 
Ortiz Says Fixing ‘Screwed Up’ Mexico Should Be Easy
 Fabiola Moura - Bloomberg
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November 15, 2009
| | Mexican central bank Governor Guillermo Ortiz | |
Mexican central bank Governor Guillermo Ortiz said it should be easy to fix problems holding back the country because “things are so screwed up.”
“Fixing Mexico is quite easy - you just twink a few reforms here and there,” Ortiz said today at an event at Yale University in New Haven, Connecticut. “Things are so screwed up that it is relatively easy to make a jump.”
Mexico, which sends 80 percent of its exports to the U.S., needs to shift its economy away from manufacturing and focus more on services, tourism and health care to better protect itself from future economic crises, Ortiz said. The country should change rules overseeing the energy industry to encourage foreign investment in offshore oil drilling, Ortiz said.
“We have been wasting opportunities for many years for economic reform,” Ortiz said. “We just have a horrible political establishment, and that is part of the problem.”
Mexico’s economy plunged 10.3 percent in the second quarter as exports slumped, remittances from workers living abroad declined and tourism revenue shrank. Latin America’s second- largest economy may grow 3 percent next year, the government estimates.
Annual economic growth in Mexico averaged 2.4 percent over the past eight years, according to the International Monetary Fund. Meanwhile, Brazil posted average growth of 3.7 percent.
Oil Production
Mexico’s peso rose 2.8 percent this week to 13.0406 per dollar, the best weekly gain among the world’s major currencies, on improving prospects for the economy and speculation the government will rein in spending enough to avoid a credit rating downgrade. The Bolsa index rose 0.8 percent to 31,002.09 today, contributing to a 39 percent increase so far this year.
President Felipe Calderon is seeking to widen the tax base after the fastest drop in crude output since 1942 last year led to Mexico’s first budget gap in four years. Output from state- owned Petroleos Mexicanos funds 38 percent of the budget.
Pemex, as the national energy company is known, has been unable to increase production as mature fields yield less. It also can’t find new ones fast enough and exploration in deep waters is slowed because of a lack of technology. Foreign oil companies have shown little interest in working in Mexico because laws that were changed last year to allow them to explore for oil still ban them from being equity partners or owning the oil they find.
“The ridiculous thing is that the Gulf of Mexico is full of oil and we can’t get to it because we don’t have sufficient flexibility in our legal framework to induce foreign investment in these fields,” he said. “We used to produce 3.3 million barrels per day a few years ago, and this is down to 2.5” million barrels, Ortiz said.
Ortiz said that Mexico is benefiting from investments in the aeronautics industry, and that inflation expectations are “stable.”
“There are a lot of things that can be done easily to increase productivity and the competitiveness of the economy,” Ortiz said. “We just need a little bit of leadership.”
To contact the reporter on this story: Fabiola Moura in New Haven at fdemoura(at)bloomberg.net
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