OECD Journal on Budgeting

Frequency :
Annual
ISSN :
1681-2336 (online)
ISSN :
1608-7143 (print)
DOI :
10.1787/16812336
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The OECD journal on public sector budgeting, published three times per year. It draws on the best of the recent work of the OECD Working Party of Senior Budget Officials (SBO), as well as special contributions from finance ministries, and makes it available to a wider community in an accessible format. The journal provides insight on leading-edge institutional arrangements, systems and instruments for the allocation and management of resources in the public sector. Now published as a part of the OECD Journal subscription package.

Also available in: French
 
OECD Journal on Budgeting, Volume 2009 Supplement 1

OECD Journal on Budgeting, Volume 2009 Supplement 1

OECD Review of Budgeting in Mexico You do not have access to this content

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Author(s):
OECD
Publication Date :
06 Nov 2009
Pages :
158
ISBN :
9789264077362 (PDF) ; 9789264073401 (print)
DOI :
10.1787/budget-v9-sup1-en

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Over the past decade, Mexico has undergone significant economic and political reform. This period has witnessed important improvements in the health of public finances which should place Mexico in a better position to withstand the current global economic crisis.

 

Since 2006, the Mexican government has introduced a number of laws and reforms that aim to address structural challenges, improve fiscal responsibility and transparency, and create a budget process and fiscal framework that are more efficient and transparent and more in line with international practices.

This review discusses the recent reforms in Mexico and the current systems for budget formulation, the role of Congress, budget execution and financial management, and accountability for results (performance budgeting), and makes recommendations for further action.

Also available in: Spanish

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    Acronyms and Terms
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    Executive Summary and Recommendations
    Over the past decade, Mexico has undergone significant economic and political reform. This period has witnessed important improvements in the health of public finances. The government’s narrow measure of the budget deficit has been below 1% of GDP for the past five years (2003-08). Furthermore, the public sector borrowing requirement – the broader definition of budget deficit1 – has been below 3% of GDP for the same period. Although these improved fiscal balances have been aided by higher revenues as a result of significant increases in oil prices, Mexico’s recent public finances have clearly reflected an era of fiscal responsibility. This improved fiscal situation should place Mexico in a better position to withstand the current global economic crisis.
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    Fiscal Performance and Challenges
    Over the past decade, Mexico has made significant improvements in its fiscal performance by implementing important reforms to establish macroeconomic and financial stability, to open the economy to trade and investment, and to change the political environment. The prudent fiscal policies pursued by the Mexican government have resulted in strong fiscal performance. Albeit aided by higher oil prices, these policies have successfully lowered public sector debt and reduced the budget deficit to 3% of GDP or below for the past five years (2003-08).1 Economic growth has improved over the past decade, although the economy is not expanding rapidly enough to make living standards equivalent to richer OECD countries.
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    Budget Formulation
    Over the past decade, the evolution of budgeting in Mexico has been driven by two main trends. First, in order to avoid crises like those of the 1980s and 1990s, the government has been working on developing an institutional framework for stable and sustainable fiscal management. Second, the country has completed the process of transition from a political system where one party dominated to a competitive multi-party system.
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    Budget Approval
    This chapter reviews the role of the Mexican legislature in the budget process. Over the past decade, the Mexican Chamber of Deputies has become a much more active participant in the budget process. This development reflects the changes in the political system and the nature of the legislative-executive relationship. On a number of occasions, the budget process has become the focal point of conflict between the two branches. Recent reforms to the legislative budget process have provided tools to strengthen legislative oversight and have helped to some extent to clarify the respective roles of the legislature and the executive. Combined with a growing cross-party willingness to co-operate on the budget and greater emphasis on fiscal responsibility, the legislative budget process has been greatly improved.
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    Budget Execution and Financial Management
    This chapter reviews the implementation and management of the Mexican budget. Financial management is in the midst of an ambitious agenda of reform with the overall goal of improving the quality of public service. The central concepts behind the reforms are to delegate management responsibility to programme managers and to focus greater attention on improving results. This chapter is divided into seven sections: the execution of the budget; cash management; public accounting; internal control and audit; human resource management; procurement; and the conclusion and recommendations.
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    Improving Accountability for Results
    Mexico, like most OECD countries, is under pressure to enhance the efficiency and effectiveness of public spending. An important step in this process is to obtain objective information on the performance of programmes and agencies. Performance information allows governments to measure progress towards achieving their goals and to know what programmes and policies are working and those that are not. The majority of OECD countries are seeking to improve the development and use of performance information through performance management and budgeting reforms. These reforms aim to shift the emphasis of budgeting and management away from a focus on controlling inputs and following rules and regulations towards a focus on results.
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    Annex A
    The PMP is the tool created to comply with the obligation established by the 2007 reform (the Integral Fiscal Reform, IFR) to achieve 20% savings by the end of the current administration, at a rate of 5% per year. It is a programme for reducing administrative expenses and energy costs.
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    Annex B
    Oil prices have been rising significantly since 2002, reaching a high of USD 145 per barrel in July 2008.1 The huge flows of revenues present an excellent opportunity for large oil exporters, providing access to fresh capital inflows that could be allocated to savings, investment, or external debt cancellation. However, oil price volatility and inefficient management of oil revenues can also generate non-desired effects. Some of the symptoms of the so-called "Dutch disease" include overheating the economy, reducing incentives to improve the tax system, and increasing pressure for exchange rate appreciation or exchange rate volatility.
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    Annex C
    The 2006 Budget and Fiscal Responsibility Law required the establishment of rules to ensure that investment projects are properly evaluated. The Ministry of Finance (SHCP), through its Investment Unit, manages the public investment system which is an important element for achieving better results from investment projects undertaken by the public sector. Every year the Investment Unit publishes guidelines for the preparation and presentation of the cost-benefit analysis of programmes and investment projects (Lineamientos para la elaboración y presentación de los análisis costo y beneficio de los programas y proyectos de inversión).
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    Annex D
    Between 2000 and 2005, the Mexican State of Coahuila implemented the social programme called Piso Firme. Its main objective was to replace mud floors with cement ones to improve the quality of life of vulnerable households living in marginal areas. Because the programme was so successful with 34 000 beneficiaries in Coahuila, it was extended to the national level to cover more than 300 000 households. Its success even generated the implementation of a national strategic goal: the eradication of dirt floors by the end of 2012.
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    Annex E
    Strengthening local auditing: The technical capability and independence of state legislature audit organs is to be strengthened (head audit officers are to be appointed by a majority of two-thirds of legislators and for seven-year terms). State audit organs are also bound by principles of impartiality and legality (Mexican Constitution, Articles 116 and 122).
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    References
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