MEXICO Enhancing trust in institutions for Regulatory

Policy

Virgilio Andrade Head of The Federal Commission for Regulatory Improvement

Bali, Indonesia March 25, 2014

OECD Southeast Asia Regional Forum: Fostering Regional Competitiveness and Sharing the Benefits of Sustained Growth

Contents

I. Evolution of Regulators in Mexico

II. Mexican Map of Regulators

III. Institutional framework of the Regulatory Agencies

IV. Principles for governance of the regulators

V. How to ensure trust in regulators?

VI. Regulatory Governance in Mexico

VII. Elements of the Regulatory Reform Policy in Mexico

VIII. Oversight of regulatory agencies

IX. Main Lessons

I. Evolution of Regulators in Mexico

(Only Offices from Ministries)

• Traditional Decrees • Traditional Bureaucratical Decisions

(From Offices to Agencies)

• Specialized bodies • Technical Resolutions • Specialized output rules

• Continuity • Accountability

(Telecommunications, competition, energy, healt,

banking, pensions)

(Implementation of OECD Principles)

• COFEMER • RIA • Consultation • Transparency • Ex Post Evaluation • Administrative burden reduction

• Regulatory reform across levels of government

• Total Autonomy from Government

• Highest level of authority

• Checks & Balances

Before 1990 1990-2000 2000-2013 2013 ->

Old Regulators Specialized Regulators

Regulatory Governance

Constitutional Regulators

Closed Economies Limited Democracy

Opening the Economy More Democracy Globalization

II. Mexican Map of Regulators

Regulators outside the government IFE (soon to be INE), Electoral

BANXICO, Monetary policy

CNDH, Human Rights

INEGI, Statistics

INEE, Evaluation of education

COFECE, Competition

IFT, Telecommunications

CONEVAL, Evaluation of poverty

Attorney General of the Republic (Today PGR), Law Enforcement

IFAI, Transparency

Anti-Corruption Body

Autonomous Constitutional Organisms

Executive Branch

Ministries

Offices (13)

Agencies (40)

Legislative Branch

(Congress)

Judicial Branch (Courts)

Traditional Constitutional Powers

• Inside a Ministry (ocassionally outside)

• Technical autonomy (ocassionally financial autonomy)

III. Institutional framework of the Regulatory Agencies

In Mexico there are three types of regulators:

Agencies

• Units inside a Ministry • No autonomy

Administrative Offices

Autonomous Constitutional

Organisms

• Outside the Federal Powers • Collegiate bodies with fixed

period (named by Congress, involves other instances)

Technical Trust Mixed confidence (Government/Body)

Confidence in the body (independent from confidence in the government) Political /Technical Trust (Autonomy & Sovereignity)

Inconsistent Trust (Depends on Confidence in Government)

13 (Transport)

40 (Health, Energy, Banking)

10 (Elections, Human Rights, Competition,

Telecommunications, others)

IV. Principles for governance of the regulators

OECD: “Best practice principles for the governance of regulators” Applicability of the principles in Mexico

Principle Office Agency Constitutional Autonomous

Clarity of Roles LOW MEDIUM - HIGH HIGH

Decision-making and governing body structure for independent regulators

NO NO / YES YES

Accountability and transparency DEPENDS ON GOVERNMENT MEDIUM - HIGH HIGH

Performance evaluation ACCORDING TO GOVERNMENT

Funding DEPENDS ON GOVERNMENT MEDIUM - HIGH HIGH

Preventing undue influence and maintaining trust RISKY RISKY RISKY

Commitment ACCORDING TO GOVERNMENT TECHNICAL

•TECHNICAL •SOCIETY &

PUBLIC OPINON

V. How to ensure trust in regulators?

Clarity in Roles

Clarity in Specific Rules

Clarity in Principles

Continuity in body structure

Consistency with principles Certainty Impartiality

Regulatory Governance (RIA-Transparency-Consultation-Ex post Evaluation)

Duplicated Roles

Ambiguous Rules

Lack of principles

Continuous changes in body structure

Inconsistency

Ambiguity

No Transparency

Lack of Policy Evaluation

Laws

Structure (Mechanism of

nomination)

Decisions

Strategies

VI. Regulatory Governance in Mexico

The OECD has played an important role in the development of the Regulatory Policy in Mexico through its recommendations, country reviews and best practice principles.

The 4 Cs

Consultation Coordination Cooperation

Communication

1. Development plan of policy

and policy instrument

choice.

2. Design of the new

regulations and reviewing

existing regulations.

3. Implementatio

n of the regulation

4. Monitoring and evaluating

the performance of the regulation

Public policy issues for

government action

Regulatory Governance Cycle

VII. Elements of the Regulatory Reform Policy in Mexico

Explicit Policy

Oversight body

High Level Support

The Regulatory Reform Policy (RRP) is established in the Federal Law of Administrative Procedure

The Federal Commisson for Regulatory Improvement (COFEMER) is in charge of the RRP

The President of Mexico directly designates the Head of COFEMER

Main Actors Regulatory Agencies + COFEMER + Stakeholders

(citizens, chambers of commerce, entreprises, others)

Tools

RIA (Risk Analysis, Competition Analysis, Cost-Benefit Analysis, RIA Ex post, etc)

Public Consultation (through: Internet, meetings with stakeholders, comments into the COFEMER´s opinions)

Transparency (Electronic files related to the Regulatory Process of each regulatory proposal are made public via COFEMER website)

Regulatory Reform Programs (deregulation & administrative simplification)

Measurement of Administrative Burdens (Standard Cost Model) Capacity building on Regulatory Reform Skills Regulatory Reform at the Subnational Level

VIII. Oversight of regulatory agencies

Executive Branch

Ministries

Agencies

Units with regulatory functions

Ministry of Economy

COFEMER Legislative Branch

Autonomous Constitutional

Organisms

Challenge: Universal application of the regulatory reform policy

IX. Main Lessons

Lessons Trust is an optimal value for good regulators

Enhancing trust on regulators should consider:

Types of regulators

Best practice principles (OECD)

Regulators need technical and political trust

Laws, body structure, decisions and strategies influence the level of trust in regulators Regulatory Governance / Reform is strategical for enhancing trust in regulators

Thank you

March, 2014

Virgilio Andrade

virgilio.andrade@cofemer.gob.mx www.cofemer.gob.mx