Canales looks toward 2005: economy secretary confident in face of challenges.

Economy Secretary Fernando Canales Clariond emphasized the solid economic foundation Mexico enjoys during an AMCHAM/MEXICO International Forum in October, although his appearance coincided with the release of troubling negative indicators.

The upbeat presentation was validated the following day when Canales made a major policy speech outlining four strategies aimed at forestalling the negative trends. The former governor of Nuevo Leon previewed these strategies at the AMCHAM event.

Canales acknowledged that the Mexican economy faces challenges--the World Economic Forum reported that same day that Mexico had slipped from 47th to 48th in its global competitiveness rankings--but he was confident that these challenges could be met.

"The current (global economic) climate presents a variety of problems," he said. "But it also offers enormous opportunity for growth and resurgence.

"With hard work, we can overcome any and all obstacles."

Secretary Canales focused his remarks on fiscal and macroeconomic trends, arguing that the first four years of President Vicente Fox's term have exhibited significant advances. He cited steady control of inflation, reduction of public debt, rising industrial output and a spike in manufacturing exports.

"The important aspect to consider is the tendency upward even though the global environment in 2004 has been difficult," he said. "These macroeconomic indicators are rising and this gives us a fresh basis--particularly as our GDP climbs--upon which to focus on the elimination of poverty."

After making mention of the struggles to reactivate the internal market, Canales identified several strategies for strengthening Mexico's integration into the North American market.

Among the priorities were: making tariffs more uniform; making rules of origin more flexible; facilitating border-crossing procedures; modernizing border infrastructure to streamline cross-border trade; and, modernizing payment systems and electronic transfers.

Canales also spoke of the hope that cargo transport arrangements could be finalized. While recognizing that Mexico's cargo and logistics infrastructure is not state-of-the-art (there have been no new railroad border crossing improvements since the Porfiriato), the Cabinet official lamented the objections to Mexican truckers operating in the United States.

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"The Teamsters union continues to prevent our truckers from operating (north of the border) as provided by Nafta, but at least negotiations are ongoing," he said.

The failure to win congressional passage of much-needed structural reforms also came in for some criticism. The four specific areas Canales mentioned were fiscal reform, labor reform, energy reform and telecommunications reform. The economy secretary singled out the Institutional Revolutionary Party for its resistance to allowing private sector involvement in the energy sector.

"We cannot improve our competitiveness in the global economy unless Congress acts to bring our laws into the 21st century," he said, while also suggesting the failure to pass these structural reforms is a primary reason that Mexico is no longer a favorite in the eyes of foreign investors.

The previous day, AT Kearney released the results of an annual poll conducted among 1,000 top CEOs. The poll indicated Mexico fell from 3rd to 22nd in the list of preferred countries in which to invest. Ricardo Haneine, vice president of AT Kearney, confirmed that Mexico's standing suffered because of the lack of structural reforms and the rising interest in China, Reforma newspaper reported.

During the question-and-answer segment of the event, Canales was asked about the challenge of China.

"Our main concern is protecting the domestic industry and to do that we have established--or will establish--compensatory quotas and tariffs," he said. "However, our approach is not one of confrontation, but one of compromise and collaboration.

"The idea is to seek mutual benefits and mutual opportunities, but also to face the reality that China is rapidly realizing its modernization and poses a very real challenge."

Canales argued that a strong and effective relationship with China could strengthen Mexico's participation in the North American market.

Finally, Canales announced that the strategy for the coming year would be based upon tariffs and compensatory quotas aimed at eliminating contraband, new policies to strengthen the internal market and a simplification of bureaucratic requirements in an effort to reduce the country's costs and facilitate foreign trade.

Tom Buckley is the editor of BUSINESS MEXICO.