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

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ja Ca

liforn

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evo L

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Méxic

oCh

ihuah

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ahuil

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ia Su

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Tama

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sQu

intan

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Agua

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entes

Jalis

coCo

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More

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Zaca

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Dura

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Pueb

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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

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More

losGu

anaju

atoJa

lisco

Yuca

tánPu

ebla

Tlaxc

alaZa

catec

asMé

xico

Dura

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Mich

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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