Mexico growth failing to combat poverty - OECD
Mon Sep 12, 2005 1:32 PM ET
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MEXICO CITY, Sept 12 (Reuters) - Mexico is achieving healthy economic growth rates but is failing to filter its wealth downward to narrow the huge gulf between rich and poor, the OECD economic research organization said on Monday.
The Paris-based Organisation for Economic Cooperation and Development predicted in a report that Mexico, Latin America's second-largest economy after Brazil, would register annual economic growth of just over 4 percent over the next two years.

The OECD said that level of growth would still be too low to narrow the income gap and urged Mexico to push ahead with structural reforms that could help raise living standards across the country.

The outlook was a more optimistic one than that of Mexico's central bank which last week cut its growth forecast for 2005 to 3 percent

"Living standards are lagging far behind the OECD average and, although decreasing in the last 4 years, poverty is still widespread," said the OECD, a 30-member body that groups the governments of leading free-market industrialized economies, including Mexico.

It said nearly half the population lives in poverty and one Mexican in six lives in extreme poverty with limited access to goods and services.

Two priorities should be improving the education system, and bettering conditions for business and investment, it said.

President Vicente Fox has been lauding a government-funded study showing poverty levels have fallen during his five years in office, but the drop is mainly due to state handouts and the migration of rural dwellers to towns.

The study, published in June, said the poverty rate fell to 47 percent in 2004 from 53.7 percent in 2000, with poverty defined by average per capita income of less than $137 per month in towns and $92 in rural areas. The drop was chiefly in rural areas, with urban poverty showing a negligible fall.

Mexico recovered last year from a three-year slowdown, its economy bolstered by robust exports of manufactured goods and crude oil.

Tourism and remittances are bringing in more dollars than ever before, but the government has kept the lid on inflation.

Yet despite its success in clawing back from economic crisis in the mid-1990s, Mexico still has rampant unemployment, with millions making an informal living in a "gray" economy. Continued ...


Mexico growth failing to combat poverty - OECD
Mon Sep 12, 2005 1:32 PM ET
Printer Friendly | Email Article | Reprints | RSS (Page 2 of 2)

Many well-qualified professionals are badly underpaid, and decades of corruption has concentrated a large chunk of the country's wealth in the pockets of a tiny elite.

Fox has failed to deliver on an election pledge to create a million jobs a year. He has also been unable to push key fiscal, labor and energy reforms through an opposition-dominated Congress.

Separately, the OECD said Mexico should seize the opportunity of competition from China in the low-cost manufacturing industry to push through structural reforms.

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