Energy and fiscal reform top the wish list when it comes to structural reforms. With proven reserves declining, Mexico’s state-owned oil company, Pemex, could become a net importer within the next decade if it doesn’t find more sources of oil. But privatization is anathema, and even opening it up to foreign production is strictly prohibited under Mexico’s Constitution. Mexico lacks the technology to explore in areas such as the deep waters of the Gulf of Mexico. At the same time, Mexico relies on tax revenue from oil to fund more than a third of its budget, meaning Pemex has no surplus to reinvest in technology or education. Yet Mexico’s overall tax rate is so low that the nation has had no choice but to rely on its oil company to make up the difference. Mexico’s tax to gross domestic product ratio of 20 percent, according to the OECD, is low by international standards, and Mexico’s complicated tax system is rife with evasion.
“[Spending] is inefficient and deficient,” says Francisco Davila Suarez, the secretary-general of the Colosio Foundation. The foundation is aligned with the Institutional Revolutionary Party, which ruled Mexico for most of the 20th century.
