MEXICO CITY – Less than two years into Enrique Peña Nieto’s presidency, Mexico is implementing an ambitious structural-reform package designed to lift its economy out of a multi-decade low-growth trap and create new opportunities for its citizens. The reforms involve restructuring economic sectors once deemed politically untouchable, and are backed by constitutional amendments and a bold legislative agenda.
Indeed, thanks to the “Pact for Mexico,” much of this agenda has the support not only of Peña Nieto’s government, but also of the two main opposition parties. This unique arrangement soon will be tested as the reforms begin to bite, and the outcome could have important and lasting consequences for efforts to implement structural reforms elsewhere around the world.
Such reforms are never easy to initiate and are usually difficult to complete. Politicians advocate them when they are in opposition, but rarely embrace and sustain them when in government. The reason is simple: front-loaded costs and back-loaded benefits make structural reforms politically perilous.
Governments that do embark on structural reform often find it frustrating to wait for that often-elusive “critical mass” of revitalized sectors to materialize; and economists find it very difficult to predict the timing and magnitude of the growth liftoff that should follow. Complicating matters further, the inevitability of unanticipated developments, whether homegrown or external in origin, means that course corrections often are needed.