special economic zones New special economic zones announced yesterday by the president.

Poorest states are focus of new zones

Infrastructure investment, tax breaks will be offered to promote development

In what could either be an innovative new plan or simply a slush fund for state politicians was among the initiatives announced yesterday by President Peña Nieto when he presented 10 measures in response to the Iguala crisis.

Three special economic zones will attempt to deal with the low levels of development in Michoacán, Guerrero, Oaxaca and Chiapas that have contributed to most of the country’s social and political conflicts, the president said during his address at the National Palace.

Building infrastructure, relaxing taxation levels and offering preferential financing will be among the measures designed to boost investment and economic development in the three areas: the municipalities in both Michoacán and Guerrero that border the port of Lázaro Cárdenas in the first state, a zone referred to as the trans-oceanic corridor in the Isthmus of Tehuantepec in Oaxaca, and Puerto Chiapas, near the Guatemala border.

“These special zones need to have modern infrastructure, security, preferential financing from the development bank, additional facilities to promote foreign trade, as well as key tax and benefits discounts,” said Peña Nieto.

He described the plan as unprecedented for Mexico, but pointed out that the experience of other jurisdictions where such zones have been created has successfully attracted domestic and foreign investment, encouraged employment and improved competitiveness.

“The development of the south cannot wait any longer,” the president said.

Encouraging that development will not be restricted to the three zones, however. There will be money for Acapulco for a temporary employment plan along with tax measures to reactivate the economy.

As well, the president announced youth training programs, support for rural normal schools, or teacher training colleges, and science and technology scholarships as further initiatives to promote growth.

This is not the first time that the south has been the focus of development plans.

“Fifty years ago, the World Bank and the Inter-American Development Bank said the states of Michoacán, Guerrero, Oaxaca and Chiapas were regions with a lower level of development relative to the rest of Mexico,” said Raymundo Tenorio of the Tecnológico de Monterrey, in response to the announced zones.

Measures to encourage local development should be put in place, it was said at the time, particularly investment in sectors that were already productive.

“They should avoid odd projects such as the second level of the Mexico-Toluca highway,” added Tenorio, and instead put the money into a trans-Pacific freeway from Michoacán to Chiapas. Infrastructure is needed more than anything else in order to attract investment, he said.

There wasn’t a lot of detail in the president’s information yesterday, but he also said the necessary legislation would not be ready until February, which gives planners some time to fine-tune the plan.

Regarding some of those details, Luis Miguel González asks in El Economista today how much will be invested, where the money will come from and what role state governments will play.

Timing, he said, is also important. It doesn’t matter that social and economic stagnation go back decades — the waters are troubled and will perhaps remain so until there are significant changes.

He also wondered who will be responsible for such an enormous task, suggesting that perhaps the president’s chief of staff, Aurelio Nuño Mayer, might be a good choice.

One analyst warns that it will take time to see results. “Long-term policies are required. The zones are a good idea for boosting investment; what’s necessary is some type of pact between government, business and society . . . I see a delay of various decades to turn things around,” said David Franco of Banco Santander.

He sees “enormous potential” in the Isthmus of Tehuantepec for electrical generation with wind power, and hailed a current project by Pemex to move petroleum products for export to Asia through a pipeline that will link the Gulf of Mexico with the Pacific Ocean.

In Chiapas, 74% of the population lives in extreme poverty. In Guerrero the figure is 67% and in Oaxaca, 61%. GDP per capita in those states is one-quarter or less of what it is in Nuevo León or the Federal District, good reason to give them some kind of special attention.

But the devil will be in those missing details and, as González wrote, implementation will be the name of the game.

Sources: CNNExpansion (sp), El Universal (sp), EFE (sp)

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