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C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. ___ 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 DRAFT Página 1 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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%. ___ 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; DRAFT Página 2 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS - 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%. DRAFT Página 3 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS ___ 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; DRAFT Página 4 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. ___ 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 Página 5 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. DRAFT Página 6 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. ___ 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. DRAFT Página 7 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. ___ 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 DRAFT Página 8 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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. ___ 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 DRAFT Página 9 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS creation of quality jobs for our nationals, and why we are strongly pushing for a labor law reform. ___ 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. ___ Even though our positions are not always the same, in every case we realize the importance of dialogue and consensus-building. Dialogue, DRAFT Página 10 de 11 C OUNCIL OF THE A MERICAS T HE 40 TH W ASHINGTON C ONFERENCE ON THE A MERICAS 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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