Economics: Risks of federal government overhaul

MEXICO - Report 29 Oct 2018 by Mauricio González and Francisco González

A recent proposal by the next governing party’s leader in the Chamber of Deputies to amend the Organic Law of Federal Public Administration included many changes that had been expected and clarified some of the mechanisms for achieving objectives that had already been announced. But it and other initiatives emanating from the incoming administration and its supporters in Congress have raised concerns among many observers on two main levels: uncertainty surrounding the repercussions of specific economic policies that some fear could have adverse outcomes over the medium and long term, and whether the entire government's re-engineering effort, including new expenditure and procurement rules, could mean the administration will be slow to begin dispensing or freeing up funds in specific areas of government.

A case in point is the shift by the agriculture ministry (Sagarpa) to a new focus on food security, with the Diconsa and Liconsa systems to be merged into a new organization called Mexican Food Security (Segalmex) that will be responsible for acquiring at guaranteed prices specific products comprising the basic basket and distributing them at “low” prices to low income Mexicans, with the government playing the role of buyer of last resort. In addition, plans apparently call for the Ministry of Economy to assume a major role in the supply, distribution and sale of basic consumption items, mostly to low income Mexicans, measures that pose multiple risks. The decision to “sectorize” the energy and hydrocarbon regulatory bodies (CRE and CNH) to the energy ministry is similarly troubling, with concerns especially as to whether the ministry might use the change to wield pressure, such as in any effort to tilt the scales in favor of Pemex and the CFE over private investors.

One positive point in the bill calls for establishing a unified registry of all federal pubic program beneficiaries. However, the improvised way this initiative is to begin poses questions about its credibility and whether it can be misused to build patronage systems.

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