COMPETITIVENESS: the real challenge in the global economy
COMPETITIVENESS: the real challenge in the global economy
Mexico´s dilemmaMexico´s dilemma
DecreasingDecreasing DecreasingDecreasingModerateModerateincreaseincrease
ClosedClosed
economyeconomyTransitionTransition
OpenOpen
economyeconomy
19881988 19981998
Evolution of GDP per capitaEvolution of GDP per capita
19801980
CrisisCrisis
--2%2% 1.4%1.4% --2.2%2.2%
Competitiveness is related to coherence in public and private effortsCompetitiveness is related to coherence in public and private efforts
Energy - IllustrativeEnergy Energy -- IllustrativeIllustrative
Unit cost (US$/kw) Productivity (kwh/US$)
ChinaChina MexicoMexico
The lose of competitiveness, implies loss in market share, among other aspectsThe lose of competitiveness, implies loss in market share, among other aspects
US imports from Mexico and China (99 products)US imports from Mexico and China (99 products)US imports from Mexico and China (99 products)
China Mexico
Δ C.M. México= -22.84%
Δ C.M. México= -22.98%
Δ C.M. México= 1.28%
Source
Won
Lost
Exports to the US Exports from Mexico
Source
Won
Lost
Exports to the US Exports from Mexico
The private must support government in applying country strategy towards competitiveness
The private must support government in applying country strategy towards competitiveness
> It is necessary to
• Give governments and main actors proven, objective tools and
critical paths to reach faster and more efficiently intermediate
goals and monitor progress towards competitiveness,
transparency and human development
What is IMCO?What is IMCO?
> Think tank > Its mission
• Develop public policies that improve the country´scompetitiveness
> Its board• Some of the most influential business men, opinion makers and
academics of the country
> Its tools and approach• Apolitical• Independent• Professional staff and network of intellectuals with strong
analytical skills and mixed prior professional experience (government and private)
BackgroundBackground
> IMCO’s first year challenges (2004) • To define for itself the meaning of competitiveness
• How it affects countries´ development
• What drives it
• Who are Mexico’s competitors
• Mexico´s competitive status (relatively)
Developed model that links competitiveness <-> set 140+ variables• Econometrically robust
• Coherent with data of 45 countries and two years
• Easy for opinion makers and decision takers to understand
Obtained a rank of countries (repeated every year). - Mexico is 31st / 45Deeper quantitative and qualitative analysis of Mexico´s problems and solutions (book). (rep. every other year)
Framework foundFramework found
> Competitiveness
Ability to attract and retain investments that create employment and well-being for the majority
• No other way to develop society in a global and open economy
• Retain” => maintain conditions => develop sustainably
• Investments -> Better jobs -> More wealth -> Better education
-> Healthier people -> More development -> More investment
Framework foundFramework found
> 18 factors affect competitiveness (no one is 30% +important)Rule of law which must be reliable and objective Physical securitySustainable use of environmental assetsInclusive society Prepared society (education and training)Healthy society
Framework found (Cont.)Framework found (Cont.)
> 18 factors affect competitiveness (cont.)Stable economic indicators and a dynamic economyStable and functional political systemProfitable labor force (salary x efficiency)Profitable energy (cost x efficiency)Profitable capital (cost x efficiency)Profitable land (cost x efficiency)Abundant and cheap telecommunicationsAbundant and cheap logisticsAbundant and cheap financial productsEffective and efficient governmentsUse of International relationsProductive fingerprint with potential
How good or bad do we have to be?How good or bad do we have to be?
FindingsFindings
All countries compete in
the same arena
There is a common path
towards
competitiveness
There are no first and
second level countries
INVESTM
EN
TS P
ER
EM
PLO
YEE
CLASIFICATION (ORDINAL)
MATURITYLEARNING DEVELOPMENT
AFRICA
LATINOAMERICA& ASIA
USA Y EUROPE
Mexico: a country of very different circumstancesMexico: a country of very different circumstances
> Mexico is a very big country• 32 states: very different in culture,
skills, development, geographic challenges and opportunities, climate, etc
> National statistics are average numbers not representing any state
• Necessary to apply the international model to each state
> With this … we understand• How each state contributes to
Mexico's competitiveness• Assets and disadvantages of each
state
FindingsFindings
Mexican states comply
with the same law
(R2adj went from
0.84 to 0.92; t-
student > 1.65)
INVESTM
EN
TS P
ER E
MPL
OYEE
CLASIFICATION (ORDINAL)
MATURITYLEARNING DEVELOPMENT
AFRICA
LATINOAMERICA& ASIA
USA Y EUROPE
Findings (Cont.)Findings (Cont.)
The path to increased
competitiveness
within the states is
also clear
INVESTM
EN
TS P
ER E
MPL
OYEE
CLASIFICATION (ORDINAL)
MATURITYLEARNING DEVELOPMENT
AFRICA
LATINOAMERICA& ASIA
USA Y EUROPE
+Environment+State of law+Security
-Int´l relations-Productive
fingerprint with potential
+Effective and efficient governments
+State of law+Security
-Logistics-Telecomm-Financial-Labor force-Energy-Capital-Land
+Health+Inclusion+Education &
training+Dynamic
economy+Stable
indicators
-Effective and efficient governments
--Labor force-Energy-Capital-Land
ResultsResults
> 11 rankings have been obtainedOne for each factor (total 10) and one for general competitiveness
Inclusive, healthy and prepared society
0
10
20
30
40
50
60
70
80
90
100
Distr
ito F
eder
alBa
ja Ca
liforn
iaNu
evo L
eón
Méxic
oCh
ihuah
uaCo
ahuil
aBa
ja Ca
liforn
ia Su
rSo
nora
Tama
ulipa
sQu
intan
a Roo
Agua
scali
entes
Jalis
coCo
lima
More
losGu
anaju
atoQu
ereta
roSi
naloa
Zaca
tecas
Dura
ngo
Naya
ritTla
xcala
Pueb
laYu
catán
Taba
sco
San L
uis P
otosí
Camp
eche
Mich
oacá
nHi
dalgo
Vera
cruz
Guer
rero
Chiap
asOa
xaca
2003 1999
General
0
10
20
30
40
50
60
70
80
90
100
Distr
ito F
eder
alAg
uasc
alien
tesNu
evo L
eón
Baja
Califo
rnia
Sur
Baja
Califo
rnia
Chihu
ahua
Quint
ana R
ooTa
mauli
pas
Coah
uila
Quer
etaro
Colim
aSo
nora
Camp
eche
More
losGu
anaju
atoJa
lisco
Yuca
tánPu
ebla
Tlaxc
alaZa
catec
asMé
xico
Dura
ngo
Vera
cruz
Mich
oacá
nSi
naloa
Naya
ritTa
basc
oHi
dalgo
San L
uis P
otosí
Guer
rero
Oaxa
caCh
iapas
2003 1999
Results (Cont.)Results (Cont.)
> Improving/worsening the same in every variable does not result in same improvements/decreases in competitiveness
Improving and decreasing effect is not symmetrical (64 agendas had been made)
Incr.Inv.= 24%
Pos.Act.= 2 Pos.Fin.= 1
First 4 factors contribute with 68% of changeThis change represents aditional 4556 MM MXN for the state
Aguascalientes, 10%
47.6
59.3
0.10.10.60.71.01.2
1.31.3
1.63.7
45
50
55
60
65
Sit. A
ctual
Socie
dad
Dere
cho
Facto
res
Prec
urso
res
Econ
omía
Gobie
rnos
Secto
res
Políti
co
Relac
iones
Medio
ambie
nte
Sit.F
inal
MXN
000 /
PEA
Incr.Inv.= -47%
Pos.Act.= 2 Pos.Fin.= 15Inver.Act.= 47 Inver.Fin.= 25
First 4 factors represent 78% of changeThis change represents -8592 MM MXN less for the state
Aguascalientes, -10%
-0.1 -0.3
-0.6 -0.7 -1.2 -1.8 -2.3-2.5
-3.6-9.1
Sit. A
ctual
Relac
iones
Medio
ambie
nte
Políti
co
Secto
res
Econ
omía
Dere
cho
Facto
res
Gobie
rnos
Prec
urso
res
Socie
dad
Sit.F
inal
MXN
000 /
PEA
Results (Cont. II)Results (Cont. II)
> Because of the normalization, every one of the 130 variables is a race (there is a 100 and a 0)
• Competitiveness necessarily implies meritocracy
Variable A
Variable B
Same position of the first …
Same position of the last …
Same distance between yellow and first
Same speeding effort
Different race configuration
Different result
Things are already changing in MexicoThings are already changing in Mexico
> The results have been shared already in many forums• The President of the Republic and the entire cabinet• 11 Governors and their respective cabinets• 15 Secretaries of Economic Development• 20 Other secretaries of different states• Governors’ convention (CONAGO)• 5,000+ businessmen
> Impacts will not be seen immediately but there are already signs of change
• INEGI will start reporting IMCO’s set of variables yearly• Discussion between States and INEGI about methodology of
data determination (transparency)• State of Puebla has adopted all variables for internal control• State of Mexico wants IMCO to help design the 6-yr agenda in
order to advance up to be among the first ten positions• Technical efforts at state level want to have IMCO as a partner