Those tax reforms were widely seen as creating as many issues as they solved and having little overall impact and a lack of coherent fiscal strategy. The government backed away from the more politically sensitive reforms to value-added tax despite signalling an intention to withdraw certain costly exemptions.
Worse, the reforms did little to improve the governments overall tax haul, which at just 14% of GDP is below the average for Latin America. Now, however, we know why. Peña Nieto had been doing deals behinds the scenes with the political parties he would need support from to pass his ambitious energy reform bill.
The energy reforms surprised all but the most optimistic observers in their potential scope in particular, allowing foreign oil companies to book reserves against projects. State oil company Pemex will likely be radically different in five years time, and the political decision to remove the workers union from Pemexs board is bold. Again, with the caveat of the need to see the content of the secondary laws, FDI should boom.
Suppliers, contractors and a whole host of other industries will benefit. Cheaper electricity will lower manufacturing costs across the board, and the country could become a competitor in energy-intensive industries such as aluminium and steel production. And, circling back to fiscal matters, that growth should improve Mexicos overall tax take too.