The Good, The Bad and The Ugly

The Good, The Bad and The Ugly

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Excerpt from the 2011-2012 World Economic Forum Global Competitiveness Report

The World Economic Forum (WEF) recently published the Global Competitiveness Report 2011-2012 including the performing analysis of 142 economies, contributing to the understanding of the key factors determining economic growth, helping to explain why some countries are more successful than others in raising income levels and opportunities for their respective populations, and offering policymakers and business leaders an important tool in the formulation of improved economic policies and institutional reforms.

As Klaus Schwab and Robert Greenhill, Executive Chairman and Chief Business Officer of the WEF respectively mention on the publication preface, after a number of difficult years, a recovery from the economic crisis is tentatively emerging, although it has been very unequally distributed: much of the developing world, particularly in Asia, is still seeing relatively strong growth, despite some risk of overheating, while most advanced economies, as the United States, Japan, and Europe continue to experience sluggish recovery, persistent unemployment, and financial vulnerability, with no clear horizon for improvement. GDP growth rates for advanced economies in 2011 are expected to remain at levels that, for most countries, are not strong enough to reduce the unemployment built up during the recession.

The Global Competitiveness Report 2011–2012 comes out at a time of re-emerging uncertainty in the global economy. At the beginning of the year, worldwide recovery appeared fairly certain, with economic growth for 2011 and 2012 projected by the International Monetary Fund (IMF) at 4.3 percent and 4.5 percent, respectively. However, the middle of the year saw uncertainties regarding the future economic outlook re-emerge, as growth figures for many economies had to be adjusted downward and the political wrangling in the United States and Europe undermined confi- dence in the ability of governments to take the necessary steps to restore growth.

As in previous years, this year's top 10 remain dominated by a number of European countries, with Sweden, Finland, Denmark, Germany, and the Netherlands confirming their place among the most competitive economies. The economic outlook for Latin America shows a relatively rosy picture for the coming years, notwithstanding some uncertainty linked to a possible slowdown in Europe and the United States, both important trading partners.

In terms of competitiveness, many countries have experienced significant improvements. Mexico (up eight positions), Peru, Bolivia, and Brazil register the largest improvements, while Panama, Ecuador, Argentina, Barbados, and Uruguay have seen more moderate progress. The rest of the countries in the region have either remained stable like Colombia, or have slightly declined.

With one of the highest improvements in the regional rankings, Mexico occupies 58th position this year. The country's efforts to boost competition and its regulatory improvements that facilitate entrepreneurial dynamism by reducing the number of procedures and the time required to start a business seem to be paying off, contributing to an improvement of the overall business environment. This development, coupled with the country's traditional competitive strengths such as its large internal market size, fairly good transport infrastructure, sound macroeconomic policies, and strong levels of technological adoption have led Mexico to improve its competitive edge.

However, the country still suffers from important weaknesses that are holding back its capacity to further enhance competitiveness. Not much progress has been made in addressing the flaws in the public institutional framework. Despite many efforts to fight organized crime, security concerns still exact a high price from the business community.

Adopting and implementing policies to boost domestic competition, especially in strategic sectors such as ICT, energy, and retailing, along with additional reforms to render the labor market more efficient are still needed to increase the efficiency of the Mexican economy.

Moreover, as the country continues to grow and move toward a higher stage of development and production costs rise, sustainable growth and higher wages will increasingly call for further reforms and investment to improve the educational and innovation systems. The current overall poor quality of the educational system, insufficient company spending in R&D, and limited innovation capacity can jeopardize the future ability of the country to compete internationally in higher-valueadded sectors.

MEXICONOW has divided some of the sampled aspects of the report in three categories: the Good, the Bad and the Ugly. Each of the above reflects a set of aspects in which Mexico performs among its competitors.