President Felipe Calderón laments, with a frustration that is widely shared, what he calls the catastrophic vision of the nations condition by critics and pundits. But if you take just one aspect of his administrations incompetence, namely government red tape, you begin to understand the reasons for its failure.
Not once or twice but thrice, the current government promised it would dramatically cut bureaucratic red tape to make it easier to open new business, and enhance the competitiveness of the business sector. Today, there still remain more than 7,000 government norms and regulations that demand compliance, and it still takes an average of 57 days for a new company to set up shop.
There are procedures to be fulfilled everywhere you look, from the Environment Secretariat to the Health Secretariat to the Federal Electricity Commission, but the greatest nightmare in compliance among both companies and individuals is in paying taxes to the Finance Secretariats Tax Administration Service (SAT).
In addition to basic annual returns, SAT requires monthly and quarterly updates, and in the case of independent professionals, a monthly report is de rigueur. Not only that, but requesting a refund from SAT can be a totally separate nightmare.
According to such leading business organizations as the Confederation of Chambers of Commerce, Tourism and Services, the Confederation of Industrial Chambers, the Mexican Institute of Finance Executives, the Mexican Institute of Public Accountants and others, the government red tape situation has scarcely improved, while corruption at the various agencies has actually increased.
Banks in Mexico, which are frequently accused of high fees, blame regulatory costs for those fees. They must submit periodic reports to no fewer than seven regulatory agencies.
If its any consolation, things may not be that much better in the United States. After months of fighting over spending, taxes and how to rein in the national debt, President Obama and congressional Republicans this week turned the spotlight to the nations anemic growth and unveiled competing plans to reduce the cost of doing business for U.S. companies.
Washington said it would seek to scale back or eliminate hundreds of regulations affecting workplace safety, environmental protection, endangered species, hospitals and other subjects, saying the measures would save businesses billions of dollars a year. Very similar to what Calderón promised but never materialized.
I hope that this process might inaugurate a broader, less polarized, more evidence-based conversation about how we might promote economic growth and job creation while protecting the health and safety of the people, said Cass Sunstein, the administrator of the White House Office of Information and Regulatory Affairs.
At the same time, House Republicans offered a proposal that would lower the top tax rate on individual and corporate income to 25 percent from 35 percent. The plan would also strengthen patent protections against some lawsuits, require congressional approval of significant new regulations, increase domestic oil protection and promote the partys effort to make large cuts in government spending.
Both initiatives reflect persistent concerns about the slow pace of economic growth. Economic data Thursday confirmed that the economy grew only 1.8 percent from January to March, a period when unemployment claims were higher than expected and consumer spending dropped.
This weeks report drowned hopes that the U.S. economy was doing better than previously thought and led economists to downgrade their expectations for growth the rest of the year.
What could be a useful guidepost for Mexico is that those competing visions seek to spur job growth by reducing the burdens on the corporate world. Neither looks to use government spending to help reduce the countrys stubborn joblessness rate.
While the Obama plan highlights competitiveness, the Republican jobs plan is a shift from the partys focus on cutting government spending and restructuring Medicare, goals that the Senate rejected this week.
Even though the Republicans are not giving up on those positions, which have proven to be politically risky, party strategists are now testing a message focused on reduced taxes, deregulation and pro-business policies.
We are eliminating unnecessary regulatory burdens and tens of millions of hours in annual red tape, Sunstein said. But, as in Mexicos case, it may be a lot easier said than done.