IN MEXICO Democratic INSURGENTES SUR 1605, PISO 24, TORRE MURAL, COLONIA SAN JOSE INSURGENTES
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37293 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized GOVERNANCE IN MEXICO Democratic INSURGENTES SUR 1605, PISO 24, TORRE MURAL, COLONIA SAN JOSE INSURGENTES. Public Disclosure Authorized MEXICO, DISTRITO FEDERAL. 03900 DEMOCRATIC www.bancomundial.org.mx Governance Beyond State Capture in Mexico: and Social Polarization PPortada_Gobernabilidad_INGLES.in1ortada_Gobernabilidad_INGLES.in1 1 22/17/07/17/07 22:38:45:38:45 PPMM Institutions andGovernance BEYOND STATE CAPTURE in Mexico AND SOCIAL POLARIZATION PPortadilla.inddortadilla.indd 2 22/1/07/1/07 33:20:26:20:26 AAMM Democratic Governance in Mexico: Beyond State Capture and Social Polarization Copyright © 2007 by The International Bank for Reconstruction and Development / The World Bank. 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Internet: www.worldbank.org.mx All Rights Reserved Printing and Manufactured in Mexico / 2007 First Printing: March, 2007 The findings, interpretations, and conclusions expressed in this book are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. The World Bank encourages dissemination of its work and normally will promptly grant permission to reproduce portions of the work. For permission to reprint individual articles or chapters, please fax a request with complete information to Gabriela Aguilar, Communications Officer – The World Bank Colombia and Mexico, fax number (55) 5480‐4222. All other queries on rights and licenses should be addressed to the Communications Officer, The World Bank Mexico at the above fax. The World Bank ‐ Mexico Editorial Coordination: Odracir Barquera; Cover Design: Alejandro Espinosa. World Bank Democratic Governance in Mexico: Beyond State Capture and Social Polarization. – Mexico : The World Bank, 2007. 109 p. : il. – (Report No. 37293‐MX) 1. Mexico – Government ‐ Democratic. ‐‐ 2. Mexico – Government – Transition – 2006‐2012. ‐‐ 3. Mexico – Politics and government – 2006‐2012. – 4. Mexico – Economic Policy ‐ 2006‐2012. 320.972 / W67 PREFACE The Institutional and Governance Review (IGR), entitled Democratic Governance in Mexico: Beyond State Capture and Social Polarization, was coordinated by Yasuhiko Matsuda (Sr. Public Sector Management Specialist) and Roby Senderowitsch (Sr. Social Scientist and Institutional Development Specialist). Team members included Phillip Keefer (Lead Economist), Alberto Leyton (Sr. Public Sector Specialist), Ana Bellver (Public Sector Management Specialist), Guadalupe Toscano (Public Sector Management Specialist), and Odracir Barquera (Analysis and Liaison). Specific inputs were provided by Arturo Alvarado, Javier Aparicio, Sigrid Arzt, Sabino Bastidas, Marcelo Bergman, Jorge Chabat, Felipe Hevia, Ernesto Isunza, Fabrice Lehoucq, Eric Magar, Alejandro Monsiváis and Vidal Romero. This Report was produced in a highly participatory manner. A series of consultations were held with different Mexican experts and stakeholders, given their rich knowledge of political and institutional issues in Mexico. Also, workshops were carried out with the counterparts in the Office of Public Policy of the Office of the President of Mexico, which resulted in rich input to the design of the study and the production of the final document. The team greatly benefited from the comments provided by Alain de Remes from the Office of Public Policy of the Office of the President of Mexico, who also accompanied the whole process and agreed to write the rejoinder that precedes the main body of the report; and by the peer reviewers: Steven Webb (Lead Evaluation Officer at the World Bank’s Independent Evaluation Group), Stuti Khemani (Economist at the World Bank’s Development Research Group), and Luis Rubio (President of CIDAC). Participants at the review meetings provided comments, including Gabriela Aguilar, Juan Carlos Alvarez, Dan Boyce, Mauricio Cuéllar, Joost Draaisma, Teresa Genta‐Fons, Linn Hammergren, Gladys López‐Acevedo, Ernesto May, Ron Myers and Fernando Rojas. Valuable contributions were also made by the public servants, experts and analysts we consulted, especially: Sergio Aguayo, Jorge Alcocer, Manuel Arciniega, Joel Ayala, Alberto Begné, Genaro Borrego, Enrique Cabrero, Diódoro Carrasco, Alejandro Chanona, Ernesto Cordero, Luis De la Barreda, Fernando Elizondo, Emilio Gamboa, Ricardo García Cervantes, Genaro García Luna, René González de la Vega, Felipe González González, Rosario Green, Juan Pablo Guerrero, Angel Gurría, Jorge Islas, Ernesto López Portillo, José Loyola, Carlos Macías, David Maldonado, Agustín Martínez, Germán Martínez, Lorena Martínez Rodríguez, Mayolo Medina, Gustavo Merino, Jesús Mesta, Juan Molinar, Luis Miguel Pando, Dionisio Perez Jácome, Yeidckol Polevnsky, Rafael Ríos, Allison Rowland, Juan Salgado, Eduardo Sojo, Carlos Sotelo, Martha Tagle, Jorge Tello Peón, Miguel Angel Yunes, Alfonso Zárate, Emilio Zebadúa, Guillermo Zepeda, Jorge Zermeño, and state government officials who provided their support. i Special thanks to Michael Walton, Isabel Guerrero, and Luis Felipe Lopez Calva for their contributions via their paper “The Inequality Trap and its Links to Low Growth in Mexico”; and to David Rosenblatt and Rodrigo Morales for their insightful comments on this report. The World Bank’s Vice President for Latin America and the Caribbean is Pamela Cox; the Country Director for the Mexico and Colombia Unit is Isabel Guerrero; the Sector Director for Poverty Reduction and Economic Management (PREM) in Latin America and the Caribbean is Ernesto May; the Sector Manager of Public Sector and Governance for Latin America is Fernando Rojas; and the Sector Leader for PREM in the Mexico and Colombia Unit is David Rosenblatt. ii TABLE OF CONTENTS EXECUTIVE SUMMARY “MEXICO BEYOND STATE CAPTURE vii AND SOCIAL POLARIZATION” REJOINDER TO THE MEXICO INSTITUTIONAL AND GOVERNANCE REVIEW xv 1. INCOMPLETE TRANSITION AND THE CHALLENGE OF DEMOCRATIC 1 GOVERNANCE Political Transition in Mexico 6 Summary 15 2. THE POLITICAL OPENING AND PRESSURE FOR PRO‐POOR POLITICS 17 Increased Electoral Competition and Pressure for “Pro‐poor” Policies 18 Political Obstacles to Deepening Pro‐poor Policies 22 Summary 32 3. ECONOMIC LIBERALIZATION, COMPETITIVENESS, AND GOVERNANCE 35 Constraints to Economic Competitiveness 35 Monopolies, Competitiveness, and Governance 37 Summary 53 4. POLITICAL OPENING, DIVIDED GOVERNMENT, AND ECONOMIC REFORMS 55 Mexico’s Reform Performance 56 Petroleum Reform: Case Study 64 Political Reforms and Policy Outcomes 66 Summary 77 5. OBSTACLES TO FULL ELECTORAL ACCOUNTABILITY AND PRIORITIES FOR 81 REFORM Overcoming Legacies of Corporatism and State‐led Capitalism 83 Overcoming Obstacles to Electoral Accountability and Strengthening the 87 Voice of the General Public Summary 99 REFERENCES 103 iii LIST OF TABLES Table 1 Constitutional Reforms by Legislative Period, 1988 – 2006 x Table 2 Reforms to Selected Federal Laws, 1998‐2006 xi Table 1.1 Chronology of Political Opening in Mexico 3 Table 1.2 Main Social Bargains between State and Society under the PRI 9 Table 1.3 Governors’ Legislative Successes: Tamaulipas, 1981‐2001 11 Table 2.1 Government and Social Spending in Latin America 18 Table 2.2 Measures of Policy Quality 20 Table 2.3 Mexican Policy Performance compared to Other Countries with 21 Competitive Elections Table 2.4 Quality vs. Quantity in Mexican Education 22 Table 2.5 Main Problems of Mexico according to Citizens, 2001‐2006 28 Table 3.1 The Environment for Job Creation in Mexico, Compared to Other 36 Countries with Competitive Elections (2004) Table 3.2 Constraints to Competitiveness 37 Table 3.3 High Telephone Rates (US$) 40 Table 3.4 Acquisition of Large‐scale State‐owned Enterprises, Mexico 1988‐92 49 Table 4.1 Executive’s Ability to Introduce Legislative Initiatives 57 Table 4.2 Constitutional Reforms by Legislative Period, 1988 – 2006 58 Table 4.3 Constitutional Reforms by Presidential Administration, 1988‐06 60 Table 4.4 “Productivity” of the Federal Lower House, 1991 – 2006 61 Table 4.5 Reforms to Federal Laws by Administration, 1988 – 2006 62 Table 4.6 Reforms to Selected Federal Laws, 1988 – 2006 63 Table 4.7 Political Institutions, Democratic Consolidation, and Policy 74 Performance Table 4.8 Institutions, Democratic Consolidation, and the Environment for Job 75 Creation in Mexico (2004) Table 5.1 Vote Share of Major Presidential Candidate by Voters’ Region and View 96 of the Economy, 2006 (%) Table 5.2 Vote Share of Major Presidential Candidate by Voters’ Income Level, 97 2006 (%) iv LIST OF FIGURES Figure 1.1 Percent of Municipalities and States Governed by Parties other than the 2 PRI, 1985‐2006 Figure 2.1 Population by Institution of Affiliation, 2004 23 Figure 2.2 Citizen Confidence in Police 31 Figure 3.1 Electricity Cost USDcents/KWh 38 Figure 3.2 Investments in Telecom 39 Figure 3.3 Net worth of Local Billionaires in Relation to GDP (Mexico and other 50 countries) Figure 4.1 Structural Reform Progress,