(Expansion) – A few days ago, the United States Congress passed the so-called Inflation Recovery Act (IRA). It is a historic decision that involves three main axes. Combat climate change, greater competition in health services and increased tax collection.
In the immediate term, its effect on inflation should be limited, but since that is what most worries the electorate of that country at the moment, it was politically appropriate to name it that way. It doesn’t matter: that politicians call their initiatives whatever they please as long as they are that far-reaching.
Which brings us to Mexico, where politics – and everything else – revolves exclusively around what Andrés Manuel López Obrador does or says.
It seems to me that the problem of the opposition is not only the absence of figures, it is the lack of proposals. True, it is difficult to remain undaunted in the face of morning soliloquies or major nonsense, such as the initiative to reform the National Guard. However, games are not won by playing defense alone. To snatch the narrative from the man of the palace, it is necessary to begin to imagine alternative countries.
For example, Mexico could take advantage of this situation and launch its own IRA. As politicians think of a better name, let’s call it the “Get Back on Track Initiative” and focus on the proactive.
First, on the climate change front, the IRA allocates $369 billion to promote the energy transition between businesses and households. Many of the dollars that the government will spend incentivize investment for many more dollars by the private sector, to the extent that, by 2030, the United States could reduce greenhouse gas emissions by 40 percent compared to 2005 levels.
On the Mexican side, instead of putting the T-MEC at risk due to a misunderstood concept of sovereignty, we should review and adapt our energy matrix to take full advantage of the sectors that benefit from the IRA and take advantage of spillover effects. The incentives that the program offers for the purchase of electric vehicles, for example, are consistent with the rules of regional origin.
But what happens if the segments of the chain located in Mexico use electricity generated from fuel oil? If we don’t get our act together, an energetic divergence will occur that will make us less and less competitive.
On the health care front, our neighbors spend too much; the growth of spending on private consumption in the last 20 years is practically explained by this item. The IRA allows the government to negotiate the price of certain medicines, which ultimately limits the market power of the pharmaceutical industry. However, the health sector is going to demand an enormous number of workers in the coming years and Mexico can offer this personnel.
In the bilateral dialogue, we must stop discussing migration and talk about integration of labor markets. It sounds ambitious because it is, but the sooner we start, the better.
We are also forced to think big on our side of the border, where the health services situation has gone from precarious to deplorable. The universal social security proposals of economists such as Santiago Levy must be taken up again. So far the main limitation is its fiscal cost. The IRA is in this sense fiscally responsible, since the largest public spending is financed with a minimum corporate tax of 15% on companies with a net income of 1,000 million dollars per year.
A few years ago we discussed whether President Trump’s tax cuts were going to make us less fiscally competitive. The situation with the IRA is exactly the opposite and is in fact in accordance with the commitments that our country assumed within the OECD. It is of course necessary to sharpen the pencil and make detailed numbers, but “mirroring” the corporate tax of the IRA and complementing it, for example, with a greater collection of property taxes, could allow us to offer quality social security to all Mexicans, increase formality and leave the land built to form the largest labor market on the planet.
I have always thought that the integration of North America enjoys two competitive advantages that no other region on the planet offers, “the two guides”: energy and demographics. The IRA offers an opportunity to exploit them and effectively pick up where you left off. Time is short.
Editor’s Note: Sergio Luna studied Economics at UNAM and the University of London. He was an economist at the National Bank of Mexico for 33 years and continues in that profession, now independently. Follow him on and/or on . The opinions published in this column belong exclusively to the author.
