Economics

Competitiveness

  • Economics
    Mexico Energy Talks
    I recently had the opportunity, along with Vianovo’s James Taylor,  to chat with Mexican Congressman Javier Treviño, one of the country’s energy reform leaders. We focused on what investors and analysts can expect from the secondary legislation currently being hammered out in Mexico’s Congress—touching on the development of Mexico’s new energy model, national content requirements, the role of state and local governments, and environmental and security considerations. You can read the beginning of our talk below: 1.  If you could list the key elements present in the secondary legislation that international companies and investors should know about, what would they be? Why? Mexico’s energy reform is historic, real, and transformational. We are defining an innovative Mexican model for energy viability in the twenty-first century. There are several key elements: a)  Transforming Pemex and CFE (Mexico’s public utility company) into true productive enterprises, not bureaucratic agencies, but efficient and competitive companies. b)  Opening the energy sector to private domestic and international investment, to benefit the whole Mexican economy and the Mexican people by providing certainty for investors with clear rules for the types of contracts considered: production sharing, profit sharing, licenses, and the existing services contracts. c)  Strengthening the regulatory framework of the Mexican government and giving new enforcement responsibilities to the Secretary of Energy, the National Hydrocarbons Commission (CNH), and the Energy Regulatory Commission (CRE) to oversee and manage the energy sector. d)  Ensuring the benefits of the reform for present and future generations of Mexicans by creating the Mexican Petroleum Fund for Stabilization and Development, to be managed by the Central Bank (Banco de México), including a mechanism to channel resources for long-term savings and investments. e)  Safeguarding environmental protection, by creating a new Industrial Safety and Environmental Protection Agency, which will design and implement specific public policies. f)  A firm commitment to transparency, accountability, and the rule of law. These are the most important elements of the reform. It isn’t only about oil, gas, and electricity, but also about developing a Mexican model for industrial competitiveness in the twenty-first century. A model that takes into account the energy revolution we are witnessing in North America and that Mexico will now be able to join. It is about a reindustrialization process that relates to competitiveness and job creation in all of North America and about lowering costs to make Mexico more competitive. Ultimately, the energy reform is about increasing competitiveness and creating more jobs. You can read the rest of the interview here.
    Blog Post by Shannon K. O'Neil June 2, 2014 Latin America’s Moment
  • Politics and Government
    Mexico’s Oil and Taxes
    Over the last three decades, oil’s importance in the Mexican economy has diminished, with energy products shrinking from over three-quarters of all exports in 1982 to less than 15 percent in 2012. Still energy’s role in Mexico’s politics has not receded, in part due to the federal budget’s dependence on the sector—taxes and royalties comprise roughly a third of total inflows into government coffers. As the Congress negotiates the secondary legislation that will set the ground rules for opening up the energy sector in Mexico, the government will have to address this dependence as well, weaning itself from Pemex’s largesse. Mexico’s tax system is broadly made up of taxes on hydrocarbons, income, corporate profits, goods and services, as well as contributions for social security. According to the National Institute of Statistics and Geography (INEGI), an autonomous government agency, Mexico’s Tributary Administration Service (SAT) collected roughly US$200 billion in federal, state, and local taxes in 2012. Of the federal inflows, some $70 billion (pre gasoline subsidy) came from hydrocarbons, $58 billion from income taxes, and another $50 billion from the value-added tax (VAT). Source: INEGI “El Ingreso y el Gasto Público en México 2013” There are two basic ways that the Mexican Treasury can lower its dependence on oil. The first is to raise other taxes. At roughly 19 percent of GDP (including hydrocarbon revenues), Mexico’s tax burden is the lowest among the OECD’s member countries, where rates average closer to 34 percent. Within Latin America, Mexico is nearer to the regional median of 20 percent of GDP. Source: OECD Statistics The government started this process with a 2013 fiscal reform. The new law removed VAT exemptions along the U.S.-Mexico border (standardizing the rate at 16 percent), raised income taxes for high earners, and introduced a tax on dividends, among other measures. The government predicts that the reform will raise revenues by 2.5 percent of GDP by 2018, though only by 1 percent in 2014 (roughly $12 billion). Another avenue to fiscal solvency is better tax collection. A Global Financial Integrity study calculated that between 2000 and 2009, about $50 billion a year in illicit outflows were not taxed, nearly the amount collected in VAT or income taxes. Some of this $50 billion comes from illegal goods—drugs, contraband, and the like. But some of it stems from businesses avoiding taxes, reflecting one of Mexico’s most significant economic challenges: the immensity of its informal economy. Some 30 million Mexicans (six out of ten workers) are in the informal sector, not paying any taxes or contributing to social security. This tax loss adds up to an estimated 3 to 4 percent of GDP a year (some $35 to $50 billion). As Pemex shifts from a state owned enterprise to a state productive enterprise, the government would be wise to diversify its revenue base. This will require some mix of higher taxes and better tax collection. One is never popular, the other requires stronger institutional capacity; but both will likely be necessary to replace Mexico’s easy energy money.
    Blog Post by Shannon K. O'Neil May 28, 2014 Latin America’s Moment
  • United States
    Curtailing the Subsidy War Within the United States
    Read Edward Alden's accompanying blog post. Each year, U.S. state and local governments spend tens of billions of dollars to lure or retain business investment. The subsidies waste scarce taxpayer dollars that could better be used to strengthen public services such as education and infrastructure or to lower overall tax burdens to create a more favorable investment climate. No state wants to dole out such subsidies, but most fear losing jobs to competing states if they refuse. States should take steps to curb subsidies, beginning with greater disclosure and cost-benefit analyses, and building up to a multistate agreement that creates strong disincentives for continuing subsidies. Existing international arrangements provide models and tools for achieving this. The Problem State and local governments use targeted subsidies to attract or retain specific businesses. The subsidies can be in the form of tax breaks, cash payments, generous loan terms, or discounted public services. There is no formal accounting of these subsidies in government budgets. The best data so far, compiled by the New York Times, puts the national total at more than $80 billion annually, which is equal to 7 percent of state and local tax revenues. The number of subsidy packages has fallen since the 2008 recession, but the number of new "megadeals" signed per year costing at least $75 million has doubled. In 2013, Washington State granted a subsidy package to Boeing worth $8.7 billion—by far the largest to a single company in U.S. history. Surprisingly few states make serious estimates of the potential cost of these incentives, and few cap the total benefits, potentially leaving state and local governments exposed to large losses. Rarely do the benefits of these subsidies exceed the costs. In highly mobile industries, like film production, the subsidies do lure business from other states, but any job creation is short-term and film crews are usually imported. In many other industries, subsidies have less influence on location decisions; manufacturers, in particular, require local networks of suppliers and employees with specialized training. Local governments usually lack the sophistication to negotiate successfully with big companies, so they end up subsidizing businesses that would have invested in the state regardless. Public money is wasted that could have gone to lower the overall corporate tax rate or to more productive investments like education and infrastructure—assets that matter more for most business location decisions than one-off tax breaks. Although many states dislike the subsidy wars, efforts to curb them have usually failed. After an especially cutthroat subsidy fight for a Boeing plant in the early 1990s, for example, Illinois governor Jim Edgar led an unsuccessful campaign to persuade states to call a truce. Governors in the New York City metro region agreed to a "nonaggression pact" in 1991 to refrain from running ads aimed at luring away businesses from each other. Within months, however, New Jersey violated the terms and the deal collapsed. Some counties in metro areas, like Dayton and Denver, are cooperating to limit subsidy competition. Kansas and Missouri are considering a halt within Kansas City, which straddles both states. These are exceptions, yet there is also clear understanding of the folly of subsidy wars; forty states have restrictions on local municipalities using state funds to entice jobs away from another part of the state. The U.S. Congress could curtail the subsidy war, but has chosen not to do so. Historically, Congress has been reluctant to interfere in what are seen as state-level prerogatives. International Models for Controlling Subsidies The federal government's refusal to intervene in controlling state subsidies is ironic because the United States has led international efforts to get all countries to reduce subsidies that distort business location decisions. The 1994 agreement that created the World Trade Organization (WTO) restricts most "specific" subsidies, or those available only to particular enterprises or industries, and requires signatories to report all subsidies. The language distinguishes targeted subsidies for certain companies or industries, which can be challenged by other countries, from broad tax cuts or other forms of government support like research-and-development spending, which are permitted. The WTO has a dispute settlement mechanism for resolving complaints that allows for trade sanctions against violators. The United States has launched disputes in several cases, such as European subsidies to the Airbus consortium. The U.S. Trade Representative has declined to dispute other subsidies, however, such as Canadian incentives that have lured filmmakers from California. Other countries have also challenged U.S. subsidies. In a 2011 case brought by the European Union (EU), the WTO ruled that some state tax breaks for Boeing were illegal trade subsidies, though they have yet to be repealed. The executive branch has the power to require state and local governments to enforce such WTO rulings, but it has been cautious about exercising it. The United States also led negotiations through the Organization for Economic Cooperation and Development (OECD) dating back to the 1970s that produced agreements to limit government subsidies to exporters through official export credits, such as those offered by the U.S. Export-Import Bank. There was no formal enforcement mechanism, but in practice if one country violated the OECD rules and offered financing on overly generous terms, the United States or other countries would match those offers in an effort to discourage violations. Europe is well ahead of the United States in controlling such subsidies. The European Union tightly regulates business subsidies by member states with its "state aid" law. Member states can only give individual businesses a subsidy under certain conditions—for example, if the subsidy benefits a region that is economically depressed or if it serves an environmental purpose. Most subsidies are preapproved by the European Commission (EC), which carries out a cost-benefit analysis on a case-by-case basis. The EC regularly tallies and reviews existing subsidies, and localities have to list subsidies online, along with the companies that are significant beneficiaries. Member states found in violation of the state aid law can face fines and other penalties. None of these systems is perfect. The WTO and EU state aid rules still permit a wide range of subsidies, and the dispute settlement process in the WTO is excruciatingly slow. The OECD arrangement on export credits has been weakened because big emerging countries like China and India have refused to participate. Despite the problems, each of these systems has established clear expectations that such subsidies should be discouraged and instituted rules for enforcement. Recommendations Reducing wasteful state subsidies to businesses will require a series of steps, starting with greater transparency and moving incrementally toward more enforceable rules. These measures would reverse a growing competition spiral in which states try to outbid each other for investments, and could provide a modest boost to state revenues. The Obama administration should require state and local governments to report all subsidies to a federal data warehouse, and make that data publicly available. The United States is already required to report these subsidies to the WTO, but administrations have done little to press the states for greater disclosure, even while demanding greater transparency by foreign governments. Such disclosure would make subsequent steps easier by highlighting subsidies for public scrutiny. An office in the Commerce Department that already collects some subsidy information to report to the WTO should be directed to collect and publish the data. States should require regular cost-benefit analyses of all business subsidies above a certain threshold. A new law enacted last year in Rhode Island, for example, requires the state to regularly reassess each of its tax incentive programs to determine whether such investments would have occurred regardless and how much of the economic benefit accrued to the state. The federal Commerce Department should also do its own independent analyses of the costs and benefits of state subsidies. States should revisit the idea of a compact to limit subsidies targeted at specific companies or industries. The place to start is with regional cooperative agreements since it is within a regional economy where subsidy competition can be most intense and destructive. The enforcement mechanism should initially be informal and modeled after the OECD export credit arrangement. If one state violates the pact's terms, others would be free to match (though not exceed) the subsidy offer. And in the case of nonparticipating states, or other countries offering subsidies to attract investment, member states would also be free to match any subsidy offers. This avoids the competition escalation spiral and gives other states little reason to cheat because they will gain no advantage. The federal government should challenge more foreign business subsidies through existing WTO rules to prevent other countries from taking advantage of greater restraint by U.S. states. The United States should press for new, tighter subsidy rules in the WTO, building on a 2007 U.S. proposal in the Doha Round. U.S. efforts to curb its own state-level subsidies would add credibility to that proposal. The federal government should also require states to comply with WTO rulings on subsidies, enforcing through the courts if necessary. A successful voluntary system could create an appetite for a more robust federal role. The government, for example, could reward states by increasing federal development aid to those that adhere to subsidy rules, or restricting aid to those that do not, much in the way it uses federal dollars to encourage education reforms. The politics will not be easy because of corporate opposition, but there are potential gains for both parties. Democrats should favor reducing corporate subsidies that rob state governments of revenue. Republicans should support ending government interference that distorts competition in the market; most subsidies go to big businesses, for example, rather than smaller ones, and the savings could be used for broader tax breaks that benefit all businesses. Restricting subsidies through state-to-state agreements also means that each state can decide voluntarily whether to participate. At a time when governments at all levels are straining to stretch every dollar out of tight budgets, there are strong incentives for such cooperation.
    Policy Innovation Memorandum by Edward Alden and Rebecca Strauss May 12, 2014 Renewing America
  • Panama
    Visiting the Panama Canal
    Last week I was in Panama, and had the good fortune of visiting the Canal. In its Centennial year, it is a truly impressive feat of engineering, some forty-eight miles long, rising and falling some eighty-five vertical feet (roughly eight stories) overall through three lock systems and six different chambers. Its storied construction is captured eloquently in David McCullough’s The Path Between the Seas—a great read for those interested in this piece of history. The Canal has been a huge source of growth for Panama. Upwards of 13,000 to 14,000 ships go through the locks each year, paying, on average roughly $250,000 for passage (which they wire to the Canal a couple days before entering the line). This direct influx on money (netting the federal government some $6 million a day) is complemented by a huge supporting transportation and logistics service sector that, combined, have helped Panama grow an average of almost 7 percent a year since it gained control of the passageway in 1999—faster than any other Latin American country during this time period. Still, while the country as a whole has gotten richer, not everyone has benefited. Panama’s middle class remains small and inequality high. The sleek skyscrapers that fill the cityscape sit alongside neglected cinder-block apartments. And outside of Panama City’s metropolitan area (where just over one third of the country’s population lives), almost 70 percent of the population lives in poverty (as measured by ECLAC). In fact, Panama’s richest 20 percent of the population control over 60 percent of the nation’s income—a disparity that rivals neighboring countries such as the Dominican Republic and Honduras. With an expanded Canal set to open in 2015 commerce will only increase; many expect the Canal to double its capacity by 2025. While bringing in even greater revenues, as well as likely investment, this growth will further tax Panama’s already overburdened infrastructure, including bridges, roads, and even sewer systems. The challenge will be to make its economic growth sustainable and inclusive, finding more ways for average Panamanians, and especially those in areas far away from the Canal, to share in the benefits from their country’s continuing economic boom.
    Blog Post by Shannon K. O'Neil January 29, 2014 Latin America’s Moment
  • Economics
    Mexico’s Historic Energy Reform
    Listening to the fireworks for the Virgen de Guadalupe last night from my hotel room in Mexico City, one could have mistaken them for the tumult occurring at the same time in the House of Representatives. Right before midnight, the representatives passed, by a two-thirds majority, the principles of energy reform (following the Senate’s approval earlier in the day). Today they hammered out the final details, making a historic change to Mexico’s energy sector, a political sacred cow, by opening it up to the broader world of investment. The constitutional reforms still need to be approved by seventeen of Mexico’s thirty-two state Congresses, but with twenty-five PRI or PAN governors this seems very likely to occur smoothly. The reform does many things: It establishes different types of possible contracts: service contracts, profit sharing, production sharing, and licensing (where a firm would pay taxes and royalties in exchange for exploration and drilling rights). It allows companies to post reserves, though they must specify that the oil and gas belongs to Mexico. It creates a sovereign fund, the Mexican Petroleum Fund, which will manage the country’s oil revenues. The Fund will allocate the appropriate amount of money to cover the national budget and invest the rest in long term savings. The Bank of Mexico will oversee the fund. The reform calls for increased transparency and mechanisms to reduce corruption. It also removes Pemex union members from the state-owned company’s board, reducing their role (and power). It splits the remaining ten board members between five government appointees and five independent consultants. The changes are profound, even if the reform stops short of giving private companies ownership over subsoil oil (e.g. directly booking reserves). What happens now will largely depend on the secondary legislation—which is yet to be written (or at least introduced and passed). These rules, for example, will determine which oil and gas blocs will be developed and under what terms, and will be presented next year. If implemented, energy experts predict that oil production would steadily increase in the coming years, and natural gas (given Mexico’s significant reserves) could expand rapidly. This increase in production would likely benefit the Mexican Treasury, as even though taxes collected might be lower, the base will surely be larger. But it will also benefit the Mexican people, lowering consumer gas prices, increasing stability of supply, and making Mexico a more attractive place for foreign investment dollars.
    Blog Post by Shannon K. O'Neil December 12, 2013 Latin America’s Moment
  • Brazil
    Public Education in Brazil
    When people talk about what holds Brazil back, education tops the list (along with infrastructure). The poor quality of Brazil’s public education system limits students’ capabilities and adaptability, creates mismatches between workers’ skills and companies’ needs, and stifles productivity and entrepreneurship. These limits affect the entire economy—hampering economic growth, competitiveness, research & development, and even oil production (as Petrobras has struggled to find skilled workers for its pre-salt finds). Brazil now ranks fifty-third (out of sixty-five countries) in reading, math, and science in the PISA exam, up from dead last in 2000 but still behind Mexico, Romania, Thailand, and Russia. But perhaps most striking in the education system are the country’s great disparities. Brazil’s several high quality public universities—including the University of São Paulo, an internationally recognized university—juxtapose a notoriously weak system of primary and secondary schools. In part it has to do with funding. A sizable chunk of the federal education budget—some 5.5 percent of GDP—goes to tertiary education. Brazil spends almost five times more per college student (with its free public university system) than per elementary school pupil. This top heavy investment disproportionately benefits the rich, whose children perform better on the university entry tests after spending their elementary, middle, and high school years in private schools. The lack of money at the lower levels has translated into too few elementary and secondary schools. With more pupils than classrooms, Brazilian students rotate through schools in shifts, with some attending class for just four hours a day. There are also not enough teachers; with twenty-three Brazilian children for every elementary school teacher, far above the OECD average of fifteen. Brasilia began to address this lopsidedness in the years following democratization. President Fernando Henrique Cardoso created a National Education Plan, which worked to systematize the nation’s sprawling school network. He redirected educational resources toward the lower grades, and improved access to and attendance at primary schools through programs such as Bolsa Escola, which pay poorer families to send and keep their kids to school. At the university level, Cardoso’s administration introduced the first racial quota system. President Lula further increased educational funding—now through Bolsa Familia—more than doubling government spending per student, and opened over 200 technical schools. President Rousseff has followed suit, allocating 75 percent of pre-salt oil reserve revenues to fund Brazil’s education system. Today Brazilians stay in school longer than ever, and nearly double the number of young students go on to graduate from college compared to previous generations. Comparative results are improving as well, with Brazil’s international PISA scores slowly rising from the bottom. Still, big challenges remain. Teachers have protested reforms that would mandate a forty-hour work week (right now only 6 percent of teachers work full-time), and create merit-based bonuses. Teacher absenteeism also remains pervasive, disrupting learning in 32 percent of schools in 2008. For now, though Brazil’s education system is moving forward, many feel it is not moving quickly enough.
    Blog Post by Shannon K. O'Neil October 23, 2013 Latin America’s Moment
  • Brazil
    Brazil’s Pre-Salt Oil Six Years Later
    In 2007, Petrobras engineers struck black gold, discovering vast oil reserves in the deep-water off the Brazilian coast and permanently altering not only Brazil’s energy landscape but the country’s economic and political fortunes. Immediate surveys predicted that some 80 billion barrels were trapped in these pre-salt reserves (named after the rock layer they are located in), a number so high that then-President Lula declared the find as proof that "God is Brazilian.” Forecasters heralded Brazil’s coming energy dominance, predicting output to more than double to 5 million barrels of oil a day by 2013, transforming the country into the world’s fourth largest oil producer (behind only the United States, Saudi Arabia, and Russia). Six years later, here is a look at where the fields stand today. Output has increased just 20 percent to 2.6 million barrels a day (some 350,000 barrels from the pre-salt fields), making Brazil the world’s eleventh largest oil producer. The vast difference between initial expectations and today’s reality comes in part from timing, as pre-salt production had a slow start, only really taking off in 2011. But other barriers have also limited exploration and production. One of the structural challenges has been Brazil’s infrastructure. With 30 percent of roads considered to be “bad or very bad,” transport costs are an estimated 66 percent higher than they would be with better quality roads. Ports too are overwhelmed, with trucks routinely sitting in line at some of São Paulo’s ports for an astonishing twenty-four hours. Four new ports are scheduled to open in Rio de Janeiro by 2015 to help alleviate the backlog. Still, these bottlenecks and congestion have constrained output and raised costs so far. Disappointing, too, have been some of the fields themselves. The dramatic saga of Eike Batista and his oil exploration company OGX Petróleo e Gás is a prime example. In 2007, OGX leased large offshore oil fields, and boasted of 4.8 billion barrels in potential reserves and an imminent 1 million barrels a day in production. But as the company’s exploration continued, field after field came up dry, with the most productive well starting at 15,000 barrels a day (disappointing by most oil company standards)—precipitating the decline of both OGX’s market capitalization and Batista’s personal wealth, which fell some $34 billion. Another drag had been finding enough of the right people. Petrobras has rapidly expanded its staff over the past decade (from fewer than 40,000 workers in 2000 to 80,000 today), but the company estimates that it will need some 200,000 on staff by 2015 in order to meet its targets. And with Brazil’s unemployment rates at record lows, skilled workers able and willing to enter the company’s training programs are scarce. Also slowing the process has been the legislative process, which has taken some time to define the rules of the game. Over the last six years Brazil’s Congress has struggled with questions of how best to explore the fields (Petrobras was named the sole operator), distribute the royalties (oil producing and non-producing states are waiting to see if the Supreme Court upholds legislation mandating that they receive roughly the same share), and include foreign companies (Petrobras maintains at least 30 percent control and ownership over all future finds). Brazil also enacted a quite ambitious local content law, requiring between 37 to 85 percent of the oil supply chain to be made in Brazil during the exploration phase (and 55 to 80 percent during the development phase). Taken together, these structural and policy issues have tempered interest from many of the major oil companies skilled in deep water extraction. The most recent instance came in late September, when just eleven companies signed up to bid for the Libra field auction, the crown-jewel of the pre-salt fields (the government had expected forty). This all suggests that though still offering enormous potential, unlocking Brazil’s energy benefits is turning out to be a much more complicated and longer term endeavor.
    Blog Post by Shannon K. O'Neil October 10, 2013 Latin America’s Moment
  • Economics
    Public Perceptions of Mexico’s Reform Agenda
    Vianovo, a strategy consultancy, recently released a poll looking at Mexican impressions of the Peña Nieto government’s economic reform agenda. Interviewing 1,000 people in late August, they found that education reform is the public’s biggest priority—likely due to the teachers’ union protests (which snarled traffic around the capital for weeks) and to the heavy press as the Congress debated secondary legislation (passed in early September). Coming in second is energy reform, with nearly a fourth of Mexicans considering it to be the most important issue at the moment (electoral, tax, and telecommunication reforms all garnered less than 10 percent of responses). Though the poll finds that not that many Mexicans have seen or read much about the current energy initiatives in front of Congress (just 50 percent), a slight majority are in favor of the reform. Woodrow Wilson Center, Mexico Institute The poll shows that while Mexicans are open to reform, they are wary of privatization. This finding dovetails with the more extensive research on political behavior done by Andy Baker, a professor of political science at the University of Colorado at Boulder. In his great book, The Market and the Masses in Latin America: Policy Reform and Consumption in Liberalizing Economies, Baker shows that while Latin Americans are generally in favor of economic opening (feeling the benefits of lower priced, higher quality goods), they are more wary of privatization—as in many cases it raised the price of services such as electricity and telecommunications. Mexico’s government is arguing that one of the most important benefits of the reform will be lowering consumer prices of gasoline and electricity (as well as increasing jobs). This may well happen (both the government and independent analysts estimate that the reform could boost the economy by some 1.5 to 2 percent a year, increasing GDP growth by some 50 percent). But to gain greater support, the government will have to better explain why private investment in energy will differ from that of other sectors, where costs did not recede.
    Blog Post by Shannon K. O'Neil September 24, 2013 Latin America’s Moment
  • Mexico
    Investment is Vital on the Long and Potholed Path to Prosperity
    Mexico faces many challenges in improving its overall competitiveness. In an opinion column in today’s Financial Times, I argue that investing in the country’s infrastructure will be a vital step for creating a more competitive future. Take a trip to see the famed monarch butterfly’s winter grounds, one of Mexico’s most prized tourist destinations and a Unesco world heritage site, and the desperate straits of Mexican infrastructure come into full view. The first stretch of the trip from Mexico City to the western state of Michoacán begins smoothly enough. But once you turn off the main highway, the potholes multiply, slowing drivers to a crawl. On reaching the final road to the butterfly sanctuary, only the sturdiest of vehicles can pass, forcing visitors to hire local drivers for the four-mile, 45-minute drive along the narrow dirt road, steering hard lefts and rights to miss the huge potholes and other obstacles along the way. Though just one hundred miles from Mexico’s capital, it takes nearly four hours to reach the site. This trip is not an anomaly. According to the World Bank, less than 40 percent of Mexico’s roads are paved, unchanged over the last decade. To read the rest of the article, click here.
    Blog Post by Shannon K. O'Neil June 28, 2013 Latin America’s Moment
  • Global
    The Rest Leapfrogging the West: How Rising Incomes and Technological Innovation Are Driving Financial Inclusion in Emerging Markets
    Podcast
    Isobel Coleman hosts Robert Annibale, Global Director of Microfinance, Citigroup, and Shamshad Akhtar, Assistant Secretary-General for Economic and Social Affairs, United Nations, for a discussion about how to reach the two billion people who do not have access to formal financial services. This roundtable was generously supported by the Center for Financial Conclusion at Accion, which is leading the Financial Inclusion 2020 Campaign.
    Event with Robert Annibale, Shamshad Akhtar and Isobel Coleman May 29, 2013
  • United States
    Biotechnology: Innovations, Applications, and U.S. Competitiveness
    Play
    Please join James C. Greenwood and Robert Langer for a discussion of recent advances in the biotechnology industry, areas of potential growth and application, and their significance for U.S. competitiveness.
    Event with James C. Greenwood, Robert Langer and Josh Wolfe May 23, 2013
  • United States
    Biotechnology: Innovations, Applications, and U.S. Competitiveness
    Play
    James C. Greenwood and Robert Langer discuss recent advances in the biotechnology industry, areas of potential growth and application, and their significance for U.S. competitiveness.
    Event May 23, 2013
  • Infrastructure
    U.S. Broadband Policy and Competitiveness
    With the economic benefits of broadband access rising, experts continue to debate how U.S. digital infrastructure compares to its international peers.
    Backgrounder by Steven J. Markovich May 13, 2013 Renewing America
  • Immigration and Migration
    Silicon Valley Takes on Immigration Reform
    As the U.S. Congress looks to embark on immigration reform soon, many things have changed since the last try in 2007. One of the most important is the role of business—which is increasingly vocal and organized. The most recent announcement comes from Facebook CEO Mark Zuckerberg, who has just launched FWD.us along with backers Reid Hoffman, founder of LinkedIn, and Ruchi Sanghvi of Dropbox, to advocate for immigration reform and, in particular, for more high skilled immigrants. They join AOL founder Steve Case in the public debate, as well as Laurene Powell Jobs, who engineered the website “The Dream is Now,” that lets dreamers (undocumented youth) tell their own poignant stories. More traditional business too has come to the table, with the U.S. Chamber of Commerce (which describes itself as representing the interests of more than 3 million businesses) and the AFL-CIO (the largest U.S. federation of labor organization) reaching an agreement on the number and make up of new guest worker visas—an issue that many say sunk the 2007 legislation. Yet as these private sector leaders jump into the fray, they shouldn’t focus only on high tech, high skilled, internet-savvy workers. As baby boomers retire and our economy picks back up, we will need workers of all skills (and especially at the ends—both high and low). According to a study by Barry Bluestone and Mark Melnik of Northeastern University, the sixty million Generation Xers will have a difficult time filling the positions boomers are leaving behind, leaving approximately five million open jobs by 2018—jobs that are likely to be filled by immigrants. Even with the focus on workers, comprehensive immigration reform should not throw out family reunification as a goal and central category. Strong families are vital for happy, productive workers, benefiting businesses. And social networks for those newly arrived are important for the communities in which they will live and for the United States more broadly. With the last major immigration overhaul now almost thirty years old, it is time for another round, to help fix the problems in today’s system and help prepare for tomorrow’s needs. And for this, no single category or individual reform will do.
    Blog Post by Shannon K. O'Neil April 12, 2013 Latin America’s Moment
  • Economics
    Mexico’s Road to Economic Sanity
    President Enrique Peña Nieto and his administration presented a telecommunications bill earlier this week that would, if fully implemented, make sweeping changes throughout the sector. In this op-ed that I published for Fortune, I look at what the bill may mean for Carlos Slim and Mexico’s other moguls, as well as for the country’s overall development. With a bill introduced by the president and backed by all three political parties, Mexico is poised to take on a few of the country’s biggest monopolies and moguls. But for Mexico to truly engage in economic competition, it needs to do much more. A lack of competition pervades the Mexican economy, as one or a few companies dominate sectors as diverse as glass, cement, flour, soft drinks, sugar, and tortilla flour, not to mention the state’s control of energy and electricity. This hits consumers’ bottom lines—an OECD study estimates that it increases the costs of basic goods for households by some 40 percent. It hurts Mexico’s working and middle classes the most, as they must spend a larger proportion of what they earn on these goods and services. It also hits the burgeoning manufacturing sector, which has to pay more for raw materials and basic inputs. To read the entire article, click here.
    Blog Post by Shannon K. O'Neil March 15, 2013 Latin America’s Moment