Weekly Report - 23 December 2003

TAX REFORM | No movement until February. As we had anticipated just under three months ago (WR-03-38), the real discussion of Mexico's tax reforms will not begin until early February. This was acknowledged last week by Roberto Madrazo, leader of the opposition PRI, when he served notice that there was just no time to fit it in the agenda for the extraordinary period of sessions, which must come up with a budget by the end of the year. Real progress on tax reform, he said, will be in the hands of the Convención Nacional Hacendaria, the broad fiscal convention that includes the state governments, and which has been convoked for February. From the convention, he said, will emerge `a long-term financial system that will assure the state of the resources it needs in order to advance.' This is a reply to President Vicente Fox's reiteration last week that a fiscal reform is `an indispensable condition' for development.

UNEMPLOYMENT | Rate rises again. The open unemployment rate in November rose to 3.8%, reversing the trend of the past few months, when it declined from the six-year peak of 3.96% in August to 3.63% in October. Under the Mexican measurement system, that rate is taken to mean that 1.54m people were unable to find even one hour's work in the week prior to the survey. The survey does not cover cities and towns of fewer than 100,000 inhabitants, or rural areas.

The reversal was particularly disappointing after October figures showed employment up by 1.3% since September in the maquila (assembly) industry, which accounts for about half of the country's gross export earnings. Employment in that sector was 1.8% lower in October than a year earlier. The biggest declines were in textiles (-14.9%), furniture and wood products (-7.6%), footwear and leather (-6.9%) and services (-6.3%).

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