Trimming the fat: new federal agency struggles to cut red tape, streamline Mexico's overweight bureaucracy.

The fledgling Federal Regulatory Improvement Commission (Cofemer) certainly has its work cut out for it. In a country that is consistently downgraded on competitiveness scales for its over-regulated business environment, Cofemer must try to untangle the web of red tape that has vexed businesses here for decades.

The federal government has had a regulatory improvement program in place since 1989, but it was largely ineffective. Not until April 2000, when reforms to the Federal Administration Procedures Law put in place a system of regulatory management, did things become more organized and Cofemer came into being. The law also included sanctions for public servants who try to bypass these requirements.

Envisioned as a kind of regulatory traffic cop. Cofemer is designed to bring order to the onerous system by working with federal agencies to streamline the process.

Cofemer's challenge revolves around four activities: simplifying or eliminating some of the most tedious regulations; reviewing and analyzing all new draft regulations; considering reform to existing laws and regulations; and most importantly, getting the support and cooperation of states and municipalities for regulatory improvement programs.

One of the commission's first undertakings was to tackle the task of identifying and cataloging what it terms "formalities"--all the forms, procedures and legal transactions required to do business in Mexico.

A Federal Registry of Formalities and Services (RFTS) was created and published on Cofemer's Website (www.cofemer.gob.mx), finally making it possible to view all regulatory requirements in one place.

Cofemer has researched, reviewed and proposed improvements to a staggering 1,500 drafts of administrative regulations. To make the process more transparent, each proposal must be accompanied by a regulatory impact analysis (known by its Spanish acronym MIR), which spells out the objectives, alternatives considered, potential costs and benefits and the results of public consultations.

In addition to its own research, Cofemer gathers comments from the Regulatory Improvement Council, a review board comprised of government and business associations. Though not having the power to veto any regulation, all federal secretariats and regulatory agencies must justify any disagreements with Cofemer's rulings.

FLEXING REGULATORY MUSCLE

Cofemer lately has tried to exert some influence on the legislative process by proposing reforms to existing laws and regulations. The Commission helped draft a proposal which became the Federal Transparency and Access to Public Governmental Information Act and helped shepherd it through Congress. The resulting legislation has become a key part of Mexico's regulatory reform process with its clauses on information access rights and disclosure requirements for government authorities.

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Many say Cofemer's most significant accomplisment is the establishment of System for Rapid Business Opening (SARE). SARE, which became operational last year, reduces the number of federal formalities required to open a low-risk business from eight to two. Under this fast-track program, the start-up process for businesses is reduced from around three months to two days.

However, SARE's impact is felt only by small businesses and does not help attract big-scale investments. And for a small business to start up operations, it must also navigate the maze of state and municipal requirements.

Now the Commission is working to help expand regulatory improvement beyond the federal government by attempting to integrate SARE at state and local levels. Since 2000, Cofemer has signed cooperation agreements with 26 states--the states agree to implement regulatory improvement programs, and the federal government agrees to provide technical assistance in return.

On the municipal level, the SARE system is functioning at 100% in 14 major cities.

Cofemer's mandate is to see that government stops being an obstacle to economic activity. In a few years, the program has already made tangible progress. But revamping a complicated system of ineffective and multiple rules and regulations will take much more time. And even if Cofemer fulfills all of its potential, it can only unravel a limited amount of red tape.

Molly Puglisi is the director of program development at AMCHAM.