MEXICO POLICY PRIORITIES TO UPGRADE THE SKILLS AND KNOWLEDGE OF MEXICANS FOR GREATER PRODUCTIVITY AND INNOVATION MAY 2015

“Better Policies” Series MEXICO POLICY PRIORITIES TO UPGRADE THE SKILLS AND KNOWLEDGE OF MEXICANS FOR GREATER PRODUCTIVITY AND INNOVATION MAY 2015 This document is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. *** This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. *** This document is part of the “Better Policies Series”. Under the guidance of Gabriela Ramos and Juan Yermo, Isabell Koske coordinated the publication, with the help of Hector Tajonar De Lara. Main contributors: Rolando Avendano, Julio Bacio Terracino, Kris Boschmans, Sarah Box, Stijn Broecke, John Davies, Agustin Diaz-Pines, Sean Dougherty, Sean Ennis, Alessandro Goglio, Sandrine Kergroach, Andrew Macintyre, Fabio Manca, Angel Melguizo, Guillermo Montt, Sebastian Nieto-Parra, Stephen Perkins, Beatriz Pont, Jonathan Potter, Andreas Schleicher, Tatyana Teplova, Diana Toledo Figueroa. Isabelle Renaud provided production and administrative support. Photo credits: Cover © Painting by Mexican artist Carlos Torres Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2015 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to rights@oecd.org. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre français d’exploitation du droit de copie (CFC) at contact@cfcopies.com.

Foreword In recent years, Mexico has distinguished itself for having a solid macroeconomic framework with low inflation and strong openness to international markets. This has increased the country’s attractiveness as a destination for international investment, which is increasingly flowing into high value-added sectors. Since recently, Mexico hosts a large number of modern firms, notably in the sectors of aerospace, automobiles, foods and beverages, which employ high-skilled and well-educated workers. But other parts of the economy are characterised by high informality, low-skilled work, weak productivity and out-of-date technologies. As a result, the Mexican economy experienced a prolonged growth slowdown during the past three decades, leaving it behind other OECD countries and hurting the population’s relative living standards. Fully unleashing the country's potential and lifting productivity also in the sectors that are lagging behind requires a comprehensive programme to improve the skills of all Mexicans, both at school and in the labour market. To this end, the objective of the education reform to increase the quality and relevance of education is key, as is motivating students to pursue education. This will also increase the value that Mexican society attributes to education. In contrast to other OECD countries, having a better education in Mexico does not necessarily reduce the risk of unemployment. The education system also needs to become more equitable to guarantee that all Mexicans have the same opportunities to succeed. In addition, it is crucial to avoid a further deterioration of the skills of low-skilled workers employed in precarious jobs that do not provide any training opportunities. This requires a commitment not only by the authorities, but also by businesses that need to invest in their workers and by society at large. This is important to improve the growth and well-being perspectives but also to face the demands of the information economy and the profound changes in the global economy. The improvement of Mexicans’ skills must be accompanied by other policies to enhance the innovation and business environment, including the modernization and expansion of infrastructure. Only a holistic approach is likely to help the country move up the value chain and become a knowledge economy. The current administration, alongside other political actors, managed to approve an impressive package of economic reforms, promoted through the so-called Pact for Mexico (Pacto por México), which aims at boosting growth, fighting labour market informality and reducing the country’s high levels of income inequality. As part of the Pact, major structural reforms have been legislated to raise competition, enhance the quality of education, improve the functioning of the labour market and the tax system, and improve the performance of energy, financial, infrastructure, and telecommunications sectors. The reform package has already improved confidence and promises to help putting the country back on a path of prosperity. If fully implemented, the reforms could increase annual trend GDP growth by as much as one percentage point over the next ten years. Accompanying these reforms with an improvement of the rule of law would add an additional half a percentage point to growth. In order to fully reap the benefits of this impressive reform package it will be crucial to continue insisting and working on their effective implementation and on the construction of solid and efficient institutions to underpin their operation. Strong political commitment is required at all levels. In particular, education reform needs to become a national priority, framed by consensus and long-term policies. Mexicans need to give more importance, both at the individual and family level, to basic education and life-long learning in order to develop new skills in a more dynamic and productive environment. The new Productivity Law, which has human capital accumulation as a key element, is a welcome step in this direction, given its long-term vision. Drawing on the experience and expertise of OECD member countries, this publication also discusses other measures to tackle remaining structural bottlenecks to higher growth, including innovation policies, improvements in the business environment, the strengthening of the rule of law and measures to fight corruption. It also highlights the need to increase regulatory capacities at the regional and municipal levels, and the environmental awareness that must encompass the whole strategy of modern and sustainable development. Mexico has a great potential to continue building a promising future. The economic reforms are already bearing fruits, but their effective implementation must continue. Given the demographic profile of the population, the size of the economy, and the level of development, the key to increase productivity and consolidate growth is to invest in the skills of Mexicans, taking advantage of the demographic bonus. This investment will also contribute to reducing inequalities of income and opportunity, which constitute one of the key obstacles for Mexico’s development. In the OECD we are ready to back the country in this challenging and important effort. Gabriela Ramos Chief of Staff and Sherpa May 2015 

mas en http://www.oecd.org/mexico/mexico-policy-priorities-to-upgrade-skills-and-knowledge-of-mexicans.pdf