Download JAVIER LOZANO ALARCÓN

C OUNCIL OF THE A MERICAS
T HE 40 TH W ASHINGTON C ONFERENCE
ON THE
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Good afternoon ladies and gentlemen, it is a pleasure to be here in
Washington D.C., and especially to address the Council of the Americas, a
most prestigious organization.
In our current times, the world in general -and our region in particular- faces
new problems, all of which share one common aspect: in an increasingly
globalized and interdependent world, many local or regional issues are likely
to have hemispheric or global impacts.
Last year showed the vulnerability of all nations to systemic crises, whether
in the economic or in the public health areas. On one hand, the appearance
and rapid spread of a new strain of the Influenza virus underlined the
degree of globalization we have reached. A lesson learned from this
pandemic is that, while robust local actions and policies are essential to
protect a country’s population from the spread of disease, coordinated
global action is the only path to effectively control future health
emergencies.
On the other hand, in the economic front, it also became evident that
greater international cooperation, coordination and improved regulation are
needed to reduce the risks of widespread contagion, as the world’s
economies become increasingly interconnected. Thus, regulatory changes
must include prudential measures that improve the solvency and
transparency of the banking and financial systems as a whole.
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One important lesson from the past year is the relevance of discipline in the
handling of public finances, as an extremely effective measure to lessen the
effects of a financial crisis and economic recession.
Practicing fiscal discipline in times of economic downturn is a difficult policy
choice. Furthermore, increasing taxes to close public income shortfalls is a
bitter medicine that no government likes to take, as it is always easier to
increase debt or broaden fiscal deficits, putting a country’s medium-term
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macroeconomic stability at risk and, even worse, condemning future
generations to pay.
Mexico, like many other countries, faced the global financial turmoil in two
ways: by managing domestic public finances responsibly; and by launching
an ambitious and effective countercyclical program. As a result of these
measures, our country is today on the path of economic recovery.
It is now clear to the international community that aggressive yet targeted
public spending programs were vital in avoiding the worst consequences of
the crisis. In particular, it has emerged that the most effective programs
were those which created or preserved jobs, as they lessened the effects of
the economic downturn on the population.
Therefore, Mexico diminished the effects of the crisis on employment. While
last year our Gross Domestic Product fell by 6.5%, employment decreased
by only 1.3%. This contrasts with the previous large economic crisis in my
country, back in 1995, in which a 6.2% drop in GDP caused employment to
fall by 8.2%.
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In addition to dealing with the effects and consequences of the economic
and health crises I have already described, our country faced a major drop
in its production of oil, along with a substantial fall in energy prices, which
had a significant effect in our exports and fiscal revenues.
Mexico also suffered one of the worst droughts in the past seven decades,
which hindered farming activities and water stocks. Furthermore, criminal
organizations increased their patterns of violence in an attempt to intimidate
President Calderón’s brave actions against crime.
Our government faced all these grave adversities without losing sight of our
medium and long-term objectives, namely:
- Economic competitiveness and employment generation;
- Combating poverty while pursuing equal opportunities for all;
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- Environmental balance and sustainable development;
- Effective democracy and responsible foreign policy;
- Public security and rule of law.
Due to the effective handling of these situations, as well as to the efforts and
solidarity of our population, clear signs of recovery are arising in Mexico:
 Our economy has grown for three consecutive quarters;
 Net employment creation has been positive in ten of the last eleven
months. In the first four months of this year alone, more than 380
thousand formal jobs were created, a growth of 2.8% in total formal
employment and the biggest increase ever registered for this period.
 Employment in the manufacturing sector -the most affected by the
crisis- has led the recovery in employment: from August 2009 to April
2010, 235 thousand new jobs were created in this sector.
 The construction industry -also hard-hit last year- has created 85
thousand jobs in the first four months of this year alone.
 In fact, according to the latest OECD report, Mexico has the thirdlowest unemployment rate amongst its members.
 Manufacturing exports grew at an average of 3.1% during the second
half of 2009.
 In March, industrial production increased by 7.6% in annual terms.
 Also, electricity consumption has returned to pre-crisis levels.
The recovery spans across many sectors of the economy, and is reflected in
a multiplicity of other aspects, ranging from foreign investment and the stock
market to tourism and the exchange rate.
Growth forecasts for the Mexican economy in 2010 fluctuate from 4% to
over 5%.
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As the world enters the phase of post-crisis recovery, every country should
develop a long-term perspective, while sustaining short-term measures as
needed.
In Mexico, the Administration of President Calderón is fully aware that the
current signs of recovery, as well as the positive short-term growth
prospects, are not sufficient. That is why our government is already tackling
the structural transformations needed to foster our future growth.
To this end, President Calderón has set forth a series of legal reforms, to
encourage our economy’s competitiveness. In particular, three of these
reforms have already been submitted to Congress, and are awaiting
legislative approval:
One of these proposals is a political reform, which aims to strengthen
democracy and improve its functionality, in order to reach the agreements
our country needs, by empowering citizens and making our democratic
institutions more representative and efficient.
Another reform deals with our antitrust and economic competition
legislation, favoring consumers, and leveling the playing field amongst
competitors in relevant markets.
And last but not least, an overhaul of our legal labor framework that
increases the efficiency of our labor market and fosters job creation, while
adopting international best practices. Our labor law turned 40-years old
last week; it was designed for an entirely different country and world, and
has therefore become a burden to sustained economic growth.
The main objectives of this reform are:
 To create more and better jobs in the formal economy;
 To build a culture of productivity that results in wealth creation and
better income for workers;
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 To offer favorable conditions and legal certainty in labor relationships
to investors, making our country more attractive to capital;
 To foster decent work, which will allow greater labor equality between
men and women, nondiscrimination of vulnerable groups and
enhanced protection of their rights;
 To inhibit child labor by punishing it as a criminal act. This
Administration has set forth a goal to completely eradicate the worst
forms of child labor by 2015.
 To increase union transparency and internal accountability, in order to
strengthen union democracy and freedom, with full respect to their
autonomy;
 To modernize and expedite the administration of labor justice, and
 To incorporate new mechanisms that facilitate compliance with labor
regulations.
We are aware that the approval of this and all other structural reforms
depends on the willingness of our Legislative branch. This is further
complicated due to the fact that the President’s party, the National Action
Party, does not hold a majority in either chamber of Congress; we must thus
rely on other parties to achieve the reforms that Mexico needs. We hope
and trust that in this bicentennial year of our independence and centennial
year of our revolution, Mexico will benefit from these urgent legal reforms.
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Notwithstanding the foregoing, President Calderón’s Administration will
continue working with and enforcing the existing laws. In regard to handling
labor issues, the Secretariat of Labor and Social Welfare will stick to its
three core principles: promotion, conciliation and legality.
In terms of promotion, we have spared no efforts to make our economy
more competitive and more attractive to investment, with the aim to creating
quality jobs. This government values investment as the main source of jobDRAFT
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creation, and in accordance seeks to provide legal certainty to all investors,
foreign and domestic alike.
Our efforts to act as a neutral and trustworthy mediator in labor conflicts
have resulted in obtaining the lowest number of strikes in the modern history
of our country during 2009. Furthermore, the negotiated increases in wages
and collective bargaining agreements were a key factor in maintaining
macroeconomic stability during last year’s global crisis.
The strict adherence to our principle of legality has led us to take difficult
decisions which have been proven correct in spite of being controversial.
This is the case of the extinction of the public power utility Luz y Fuerza del
Centro, as well as the handling of the mining union conflict. In both cases,
the Judiciary branch has determined that government actions have been
taken strictly according to our Constitution and laws.
Luz y Fuerza del Centro was an inefficient utility with growing operating and
payroll costs. Its financial situation was unsustainable: in 2009 it required a
government subsidy of 3.3 billion US dollars, a huge amount if we consider
that it was mainly dedicated to the resale of power in a particular geographic
area of the country. Therefore, each Mexican had to pay twice for electricity:
once through their energy bill, and once more through the taxes used to
maintain this state-owned company.
Despite different attempts to modify the utility’s processes and practices in
order to increase productivity and to reduce losses and burdens, this proved
impossible. Due to the utility’s untenable financial situation, and faced with a
budget shortfall in the midst of a crisis, the Mexican Government decided to
close down Luz y Fuerza in October of last year, in full compliance with
applicable laws.
Former utility workers have been treated fairly by the government, which
offered a generous severance package that was accepted by over 60% of
the workforce. Furthermore, the government has spared no effort to help
former workers re-enter the labor force in different ways.
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The problem of the National Mining Union, on the other hand, is an isolated
case within labor relations in Mexico that goes far beyond labor matters.
The policy of the Mexican Government in labor matters is of full respect to
the rights of workers, particularly freedom of association and union
autonomy and collective bargaining.
However, in this particular case, and due to an intra-union conflict, the issue
has derived into multiple legal and criminal actions whose unfortunate cost
has been three prolonged strikes which have negatively affected Mexico’s
mining sector: the Cananea mine alone accounted for 12% of national
mining production, 46% of Mexican copper extraction and 1% of global
copper output.
After almost thirty five months of attempting to solve these problems, we
finally achieved a legally binding resolution by the Supreme Court that
allows the re-opening of the Cananea mine. This resolution will allow
Cananea to resume operations.
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In sum, we are convinced that sustained economic growth and job creation
must happen through three core targets: competitiveness, productivity and
decent work.
In light of the crisis we are just overcoming and amidst the pressures
stemming from the current Greek crisis, I am convinced that, to foster
sustained and long-term economic growth, it is imperative that we
consolidate free markets and trade, as well as open economic competition.
In times of crisis, the temptations of protectionism are many and they must
be overcome.
We must also ensure that our path for growth is based upon the principles
of sustainable development, to ensure that the prosperity enjoyed by our
generation does not hinder the ability of our children to enjoy a better life. In
particular, we must address the considerable challenges posed by climate
change, a problem that will affect all countries, rich or poor.
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In this regard, we must focus on increasing energy efficiency, boosting the
generation and use of clean-energy technologies and lowering carbon
emissions through the use of adequate market incentives. The benefits of
fighting climate change go beyond the environment: it presents a unique
opportunity to create thousands of new ‘green’ jobs and to develop
innovative technologies.
Global organized crime represents a different type of challenge that we
must face with resolve. Organizations dedicated to trafficking illegal drugs
are of particular concern, because they have become increasingly
globalized and interconnected.
They have considerable economic resources at their disposal, which
translate into great powers of corruption, violence and intimidation. No
society is free from the threat of illegal drugs and drug-related violence; that
is why this phenomenon constitutes a shared responsibility for all countries,
especially for large producers and consumers of these illegal substances.
Fighting these types of activities must rank amongst the highest priorities for
all governments.
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The entire Mexican Government shares a total commitment to legality. This
is why President Calderón’s Administration believes in a frontal engagement
of organized crime.
Mexico has evolved from a country of transit to a market of illegal-drug
consumption. We share an extensive border with the main market for illegal
drugs in the world. In this context, it is not possible to consider organized
crime as a purely domestic problem. The nearness between our two
countries forces us to recognize that this is a shared problem, which calls
for shared solutions.
The organizations that smuggle and sell these drugs are attacking our most
valuable asset: the bodies and souls of our children and young people. They
are slowly attempting to take on roles that belong to the State: collecting
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taxes in the shape of protection fees, controlling streets, city blocks,
neighborhoods, communities and, worst of all, public institutions including
law and order enforcement authorities.
We thus believe that failing to combat organized crime would be an
abdication by the government of the most basic functions of the State. We
cannot and will not allow this to happen. Some have claimed that the
actions of the Mexican Government against criminal organizations have
caused a wave of violence in the country. To the contrary: this government
acted because the increasing violence of drug gangs was affecting and
seriously threatening our country. No previous government had dared to act
in such a bold manner against this phenomenon, and will continue doing so.
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In the current global setting, security and the fight against terrorism have
taken the highest priority. In this context, Mexico must be seen by the
United States as a strategic partner, with whom the issues of migration,
trade and the fight against organized crime are viewed from a perspective of
integration and bilateralism, not from an isolationist or defensive standpoint.
Finally, I believe that President Calderón and his government represent a
new generation of politicians, who work under a new set of basic values,
such as tolerance, solidarity, respect, responsibility, legality and humanism.
The recent immigration bill approved in Arizona contradicts these values.
This law criminalizes the migration phenomenon and creates spaces for the
misapplication of law on the basis of racial profiling. Criminalization is not
the path to resolve undocumented migration, and the Mexican Government
will use all its resources to defend the rights and dignity of Mexicans in
Arizona. The bill does not acknowledge the economic contribution of
immigrants and even disregards their human condition.
The Mexican Government recognizes its responsibility for fostering
economic conditions that enhance development and encourage our people
to remain at home. That is why we have spared no effort to increase the
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creation of quality jobs for our nationals, and why we are strongly pushing
for a labor law reform.
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Ladies and gentlemen:
Our vicinity is a great asset. Mexico and the United States must cooperate
to increase regional competitiveness. Businesses operate highly integrated
chains of production, and this stresses the importance of having secure and
agile flows of people and goods across our borders. Our labor markets are
also highly complementary, even as we do not yet have a legal framework
that fully reflects -and takes advantage of- this reality.
NAFTA has been successful in increasing trade and investment among all
three countries. It has proven to be an important activator of regional
economic potential. Since the agreement went into effect, the size of our
combined economies has doubled, and Mexico’s trade volume has tripled.
Today, Mexico is the third largest buyer of US exports. Mexico has also
proven to be a safe and lucrative destination for US investment: from 1999
to 2009, the US invested almost 125 billion dollars in Mexico.
However, since 2001 integration has slowed, while the emergence of other
regional trading blocs in the last 15 years has partially eroded the
competitiveness of our region. To regain that competitiveness, we must
strengthen our cooperation and work closer together. We must pool our
competitive advantages: Mexico has an abundant and energetic young
workforce, while the United States has advanced technology and
infrastructure.
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Even though our positions are not always the same, in every case we
realize the importance of dialogue and consensus-building. Dialogue,
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respect, institutions and appropriate legal provisions are the basis for mutual
understanding.
To successfully face old and emerging challenges alike, we must find new
and better solutions. These solutions should be built upon our common
values of human dignity, plurality, diversity, freedom in every sense,
democracy, private property, law, order and respect.
Mexico is and will continue to be a loyal and active partner of the United
States.
For your kind attention, thank you very much.
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