Mexico’s Macroeconomic Strength Improves its Competitiveness


Here is a link to my latest article on AQBlog, titled “Mexico’s Macroeconomic Strength Improves its Competitiveness” , published on Sep 16th, 2011. Please feel free to visit and comment. Here is a verbatim copy of it in case you prefer to read it on my personal blog, though I recommend actually going to the site because of additional content, other blogger’s articles, etc.



Mexico received some excellent news recently when the World Economic Forum (WEF) published its Global Competitiveness Report, calling attention to the fac that the country has made significant progress in improving its relative position in the world competitiveness rankings.
From last year to the 2011-2012 ranking, Mexico moved from 66to 58 place, an eight-spot improvement. Only seven other countries had a larger jump in the list. As competitiveness expert Beñat Bilbao explains, “(this variation) is very relevant. Fluctuations from year to year tend to be very low.”

Besides drops suffered by other countries closely competing with Mexico, such as the Russian Federation, Jordan and the Slovak Republic, Mexico’s improvement in the ranking results from progress made in efforts to boost competition and facilitate entrepreneurship by reducing the number of procedures and the time it takes to start a business. The report also mentions Mexico’s large internal market size, sound macroeconomic policies, technological adoption, and a decent transport infrastructure as helping it to move up in the WEF Report.

This is no doubt a great triumph for President Calderón. He has continuously boasted over TV messages and radio spots that his administration has invested more resources than previous governments into improving federal bridges and highways in Mexico. Calderón has also been vocal about an open market economy and sound financial policies as key ways to face the global economic crisis. According to WEF, he’s on the right track.

However, WEF also reports that Mexico’s largest shortcomings continue to hinder its capacity to compete with the strongest service economies in the world in terms of efficiency.

The obvious elephant in the room is security and the concerns it raises with regard to the ability to conduct business. As the Casino Royale tragedy in Monterrey and a number of cases in Reynosa, Ciudad Juárez and Tijuana have shown, extortion and protection quotas paid to organized crime (and presumably colluded municipal law enforcement officials) have reached a point where they have become disincentives for business and job creation in many Mexican urban areas.

Failure to comply with criminals has resulted in a number of arson attacks that have in the best cases end up in total loss for the business owner and in the worst ones, in horrific scenes with multiple civilian causalities. One newspaper in Ciudad Juárez reports that as many as 90 percent of businesses in this city to have fallen victim to protection quota extortion. The business community and government need to urgently work together to find a practical solution to this matter.

The rest of the weaknesses include an urgent need of reforms to improve education and innovation systems. From 149 countries listed in the WEF Competitiveness Index report, Mexico ranks 107th in terms of quality of education. As I mentioned in “Mexico Lowers the Bar on Education” this has less to do with budget issues and more with the system in itself. Professionalization of teachers is urgent. Addressing how the teacher’s union led by Elba Esther Gordillo (Sindicato Nacional de Trabajadores de la Educación, or SNTE) has become an obstacle for the effectiveness of the education system is a tough issue to tackle, but clearly a must.

On innovation, if Mexico is to improve its competitive position and continue migrating to a service economy, private enterprise also needs to do its part. Companies and private universities need to risk more and invest in R&D in order to improve the country’s inventive capacity. Obviously, government can help by providing research and development incentives and funding academic investigation in the public university, but historical global experience has proven that the largest breakthroughs come from the hands of private institutions, even in cases when they were government contractors. The business community needs to spearhead innovation development.

Now, while macroeconomic indicators show progress another important issue for Mexico’s long-term competitive position is definitely wealth distribution. At a current 48/100 score in the GINI index, some advancement has been made in the past 20 years but inequality remains a real and relevant issue.

The open market economy has been insufficiently capable of trickling down the wealth to the lower socioeconomic levels of society. As a result, the informal sector and organized crime’s participation in it continue to grow, feeding into impunity in a vicious circle. Raising taxes to the very few captive taxpayers (some studies indicate that only 10 percent of Mexicans pay their taxes) is not the answer. Formalizing the informal sector, thus broadening the taxation base and hence having a larger amount of government resources to development of social assistance programs, unpopular as it may be, is a sounder policy.

One last reflection: if Mexico’s competitiveness is advancing in spite of its current challenges, imagine where the country would be if it was able to effectively address and overcome them.

*Arjan Shahani is a contributing blogger to He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.

Mexican President Targets Corruption


Here is a link to my latest article on AQBlog, titled “Mexican President Targets Corruption” and published on March 15th, 2011. Please feel free to visit and comment.

Here’s a copy of it:


Felipe Calderón is changing the rules of the game for fighting corruption. Earlier this month, Calderón announced a series of initiatives targeting corrupt practices in public service and for the first time, providing rewards to whistleblowers and citizens who provide information leading to identification of these practices.

Mexico’s President recognized that “the depth at which corruption has penetrated our society is a problem we can no longer permit.”  These types of declarations, which candidly and honestly recognize our fragile state, are unbecoming of what we are accustomed to hear from him.

Possibly wanting to shift public discourse away from the violence and crime dialogue (which is obviously linked to corruption), Calderón talked about this new legal framework and what it looks to achieve in more economic terms: “we must not allow corruption to continue hurting Mexicans, reducing our competitiveness or blocking our country’s ability to grow.”

Calderón praised the effectiveness of a process called Denuncia Ciudadana through which citizens denounce public officials for illegal practices such as corruption. However, actual follow through on these claims is the real problem in Mexico. Enforcement and the capability to prosecute is a definite must if we are to see a successful outcome of these initiatives. Reforma newspaper recently ran a story on the fact that out of 1,779 public officials who have been denounced for corrupt practices only one has been prosecuted and was set free on bail. The rest of the cases continue piling up on the docket.

What is new and sends out a powerful message to all of our citizenry is the fact that the federal government is actively seeking and promoting more civil participation in this battle by offering economic stimuli to individuals denouncing offenders.  He did not mention amounts of money, but if implemented correctly, this change in the game could prove to be most successful in a country where people do not denounce crimes, partly because of lack of trust in the system.

Another part of the initiative, the Ley Federal Anticorrupción en Contrataciones Públicas (Federal Anticorruption Law on Public Contracts), targets the private sector by setting sanctions against companies that offer public officials any type of gifts (usually money or some type of benefit) in favor of winning public contracts. These sanctions include removing the company’s eligibility to obtain contracts for up to eight years and a fine of up to 30 percent of the contract in question.

It seems Felipe Calderón was holding off on some of the most important and popular governmental initiatives until they became relevant toward the next presidential elections. Recently, we’ve seen a more publicly active President being the spokesperson for transformational efforts that could give the Partido de Acción Nacional (PAN) a better shot at retaining power. With the PRI swinging back, the PRD falling apart from within and PAN-PRD alliance talks still up in the air, the 2012 process could prove to be one of the most interesting elections we’ve seen in recent history.

We can only hope that pre-election jitters become the catalysts for many more of these very needed reforms and that they are actually and successfully implemented. It’s unfortunate that we always have to wait until election times to get the ball rolling but for now, let’s enjoy a step forward.

*Arjan Shahani is a contributing blogger to AQ Online. He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.

Ciudad Juárez’ Silent Cry of Dolores


Here’s a link to my AQBlog article “Ciudad Juárez’ Silent Cry of Dolores”, published on September 21st, 2010

Here’s a copy of it:


Mexico celebrated its Bicentennial Independence Day last week by honoring the Grito de Dolores (Cry of Dolores)—Miguel Hidalgo’s call for the people to join him in arms that is re-created across the country every Independence Day.  

On the morning of September 16, 1810, Hidalgo rang out the Dolores bell and after a motivating speech yelled, “¡Viva la Virgen de Guadalupe! ¡Abajo el mal gobierno, ¡Viva Fernando VII!” (Long live the Virgin of Guadalupe! Down with bad government! Long live Fernando VII!).  This act, referred to as el grito, is recognized as the beginning of the struggle for autonomy and independence in Mexico.

In present day, the tradition is that at 11:00 pm the President, governors and city mayors each step out to a balcony in a public square, ring out a replica bell and honor the heroes of our independence through a modification of the Cry of Dolores.  Each chant for every hero mentioned is followed by a loud retort from the amassed people in the squares, yelling “Viva!”  In the major cities, these festivities are accompanied by popular concerts, pyrotechnic shows and gatherings of up to millions of people.  

El grito is a manifestation of freedom and joy, and the Bicentennial was geared up to be a huge celebration nationwide.  Though security measures were heightened in access points to public squares and during the ceremonies, most of the country was able to honor this important occasion regally.  However, nine cities in the border state of Chihuahua fell hostage to fear from organized crime and drug cartels and were forced to cancel their celebrations.  The harshest case was Ciudad Juárez, a city in which rule of law has become as plausible as the tooth fairy.  

Known as the most violent city in Mexico, Ciudad Juárez (estimated population 1.4 million) became a ghost town as citizens refrained from public parties and gatherings, too afraid to go out late at night.  In past years ¡Viva Mexico! chants had been yelled in unison by as many as 35,000 congregated in the town square.  Yet escalated violence, peaking with a car bomb two months ago, murders and decapitations, and the appearance of narcomantas (threats presumably from drug cartels, printed in signs and placed in different places in the city) just days before the celebration, were enough reasons for a whole city to decide to stay at home.   

Mayor José Reyes Ferriz, who has repeatedly been a target of public threats from the drug cartels, caved in a couple of days before Independence Day and declared that he would cancel the ceremonial gathering.  Instead, he invited citizens to view the grito through their television sets at home.  

It was a sad scene as Reyes, notably nervous and fearing for his own life, stepped out to a balcony hovering over an empty square.  Sweat pouring down his face and trying to control his trembling, the mayor of Ciudad Juárez whimpered his Vivas without any response other than utter silence.  The only ones present at the 200th anniversary of our independence in Juárez were a dozen soldiers (called in for security purposes) and about 15 neighbors who stepped out to witness the heartbreaking scene.  Fireworks were banned in Ciudad Juárez, under the assumption that people would confuse them with gunshots and bomb explosions.  This was the silent cry of Dolores.

Ironically, just a couple of miles across the border in El Paso, Texas, 7,000 migrants felt safe enough to hold El Grito as Mexican Consul Roberto Rodríguez led them through each of the Vivas.

I asked a person from Juárez (who requested to remain anonymous) how she felt about the way her city had celebrated 200 years of independence.  She said “I love Mexico, but I don’t love it enough to risk my life in order to attend its party.”  She consoled herself by saying, “At least we were able to see the fireworks from across the border.”  

Mexicans hiding or having to go to a neighboring country to commemorate their own independence because they fear for their lives in their homeland… is that what we are celebrating?

*Arjan Shahani is a contributing blogger to He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.

Seven Ideas for Defeating Drug-Related Violence in Mexico


Here’s a link to my AQBlog article “Seven Ideas for Defeating Drug-Related Violence in Mexico”, published on Feb. 17th, 2010

Here’s a copy of it:


As headlines continue to report a tale of horror, violence and massacre in what had seemed to be a peaceful country, a growing debate stirs on whether or notMexico’s government stands a chance to win the war on drugs.

The general consensus is that President Felipe Calderón has inherited a cancer that the Partido Revolucionario Institucional(PRI regime) had contained through institutionalization of corruption. This is a cancer that former President Vicente Fox was unable to effectively cope with when he took office, ending the PRI’s hold on power. Now Felipe Calderón is trying to get rid of this disease by beating it with a big stick and empowering the military to crack down on criminal organizations such as the Zetas and Beltrán Leyva’s group , but as Ana María Salazar has stated recently, “Mexicans are paying a huge price

Calderón’s war on drugs seems limited if the goal is to effectively address the complex issue of drug-related violence. A recent conversation I had with a group of Thunderbird School of Global Management and Tec de Monterrey postgraduate students proves there are at least seven more ideas that the President should consider incorporating into his strategy:

1. A hard line political and militarily line is needed, but we should recognize this is not the path to a solution. This part of the strategy should be seen as mere containment. Just like the Planarian worms if you try to cut the head off a criminal organization, it will grow back and sometimes even multiply , but you need to keep doing so to prevent the worm from growing stronger.

2. Strengthen the rule of law. Don’t just prosecute dealing. Make possession and consumption outside of tolerance areas punishable by law. Help law enforcement not just by providing better salaries, but by providing the means for officials to get access to credit and health insurance. Bring the police back to your side. Work enforcement and border officials to crack down on arms trading.

3. Accept that the problem is not going to go away entirely. Create drug-use and related industry tolerance zones (relocate casinos and gentleman’s clubs) and tax entry to these areas. Inject the funds allocated though taxation of unhealthy habits into the comprehensive strategy to combat drug-related violence.

4. Create an alliance with the media. Get the national media to understand that its sensationalism is hurting Mexico’s reputation worldwide. Most of Mexicois not facing the level of violence of Ciudad Juarez, but the printed press is making it out to be that way. Responsible, objective coverage is needed to avoid a contagion effect with creative yet less powerful deviants.

5. A comprehensive strategy to strengthen education. This does not relate to the naïve idea that educated people don’t do drugs. However, better schools give children the tools to go out into the world and to have better possibilities of succeeding with an honest job. Investing in education does not just mean a “Don’t do drugs” campaign. It should be seen as a long-term strategy to make it harder for drug dealers to recruit “mules.”

6. Make the economy work for you. Drug consumption inMexicobecame relevant when theU.S.economy dropped and security tightened to the point where profit margins for drug sales plummeted in It will be way more effective to figure out ways to cut their margins inMexicothan it will be to capture or kill a drug leader and wait for the next one to come along.

7. Make it easier for businesses to become your allies. Instead of overtaxing private enterprise, the government should provide incentives to grow. This creates more jobs. People with full-time jobs that are fairly paid have neither the time nor the need to engage in illicit activity. Help business by running an international public relations campaign. Just like he recently did inJapan, Calderón needs to become a better spokesperson and attract foreign direct investment back intoMexico. Volume drops resulting from the recent crisis have temporarily leveled the playing field with regard toChina. This window of opportunity is closing and Calderón needs to act on it now.

Mr. President, you need to be more intelligent and creative than they are.

*Arjan Shahani is a contributing blogger to He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.