Mexico: Report on the Observance of Standards and Codes (ROSC) Data Module Volume II

Mexican macroeconomic statistics are in a period of transition as recent laws have strengthened the legal backing and have changed institutional arrangements. Mexico is in observance of the Special Data Dissemination Standard, meeting the specifications for data coverage, periodicity and timeliness, and the dissemination of advance release calendars. Executive Directors suggest enhancing cross-domain cooperation within and among statistical agencies and national accounts, government finance, and monetary and balance of payments statistics with the purpose of improving their international comparability.

Abstract

Mexican macroeconomic statistics are in a period of transition as recent laws have strengthened the legal backing and have changed institutional arrangements. Mexico is in observance of the Special Data Dissemination Standard, meeting the specifications for data coverage, periodicity and timeliness, and the dissemination of advance release calendars. Executive Directors suggest enhancing cross-domain cooperation within and among statistical agencies and national accounts, government finance, and monetary and balance of payments statistics with the purpose of improving their international comparability.

I. Introduction

Mexican authorities agree with the general observations of the Report on the Observance of Standards and Codes (ROSC), and as noted in the report Mexico is in observance of the SDDS, meeting the specifications for data coverage, periodicity and timeliness, and the dissemination of advance release calendars.

As described in the report, Mexican authorities understand the importance of maintaining quality standards in the generation of statistics as a pillar of public credibility. The authorities also agree that the legal framework is adequate overall and, moreover, it has recently undergone several changes that, in the near future, will be reflected in an improvement in the quality of statistical information in the country, consistent with the report’s recommendations.

Mexican authorities agree that there has been progress in the implementation of several recommendations of the 2002 Report. In addition, it is important to note that recently there were two substantive changes to the legal framework for the generation of economic statistics in the country.

First, the National Statistical and Geographic Information System was created. Within the system, the Specialized Technical Committee on Macroeconomic Statistics and National Accounts represents a formal space for the various institutions to interact with the purpose of achieving greater coordination and consistency in the generation of statistical information. Second, with the establishment of the National Council for Accounting Harmonization an appropriate institutional framework has been created in order to advance in the task of standardizing the information on public finances that is generated by all levels of government, which will allow Mexico to address the recommendations of the report.

II. National Accounts

The National Institute for Statistics and Geography is in the transition process from a decentralized government unit to an autonomous entity responsible for promoting the adoption of common statistical standards throughout the National System of Statistical and Geographical Information, so that different subsystems of macroeconomic statistics, including national accounts, may achieve higher levels of reliability, quality and consistency.

The National Accounts office analyzed the recommendations of the ROSC mission, noting that overall, the final report includes recommendations from this mission and from previous technical assistance missions, specially the one held on December 2009. This was done with the goal of implementing those recommendations that were not yet addressed as of the end of the February 2010 visit or that were in the process of being addressed.

Based on the above and on our effort to implement the SNA 2008 new methodological guidelines, we are confident that we will be able to fulfill the assessment resulting from this mission for the benefit of the System of National Accounts of Mexico and, consequently, for the benefit of all its users.

Regarding some specific recommendations in the Report, INEGI has the following comments.

  • Update the business register (directory) continuously and also use it to select samples of small enterprises to expand the population coverage in economic surveys.

We recognize that this proposal would contribute to a better measurement of several economic activities, especially in the stratum of small establishments, which by nature shows different behavior compared with large ones. Accordingly, we will evaluate the best use of the National Statistical Directory of Economic Units (DENUE, Spanish acronym), data from the Tax Administration System (SAT, Spanish acronym), as well as from other public and private organizations.

The DENUE was introduced in July 2010 and offers information on the identification and location of all the operating establishments within the national territory, according to the data gathered by the Economic Census of 2009; therefore, it is a fundamental tool for decision-making in the public and private scopes.

The feasibility of the recommendation will be studied with the responsible areas, to evaluate if it can be carried out in order to strengthen the estimates of the National Accounts System of Mexico.

  • Directly estimate changes in inventories and compile an expenditure measure of GDP independent of the production measure.

Currently, in calculations of the National Accounts System of Mexico, changes in inventories are integrated by applying the flow of goods method, taking as reference the data on economic activities captured by the Economic Census, Administrative Records and Economic Surveys available in the framework of the Input-output tables.

For future work we will examine the feasibility of incorporating methods based on permanent inventory, paying special attention to the valuation and rotation criteria or inventory management. This would allow an improvement in the measurement of GDP from the expenditure side.

  • Consider the use of chain indices for calculating volume measures.

The System of Economic Statistics of Mexico generates its main indicators with a fixed base to reflect accurately volume and price behavior over long periods of time. Changes in base-year have been made every 10 years. Nevertheless, given our interest to make the change every five years, as the SNA 2008 suggests, we will assess this recommendation.

  • Estimate preliminary (before benchmarking to annual results) quarterly intermediate consumption at current prices by inflating data at constant prices with a composite weighted price index of the corresponding producer price and consumer price items, and to the extent it is possible, also consider price indices of imported raw materials.

The annual calculation of intermediate consumption at current prices in most activities is estimated by the method of extrapolation of base year data with a nominal index of the same variable obtained from the surveys that capture the variable and from administrative records in specific activities.

It is important to note that, following the technical assistance of January 2008, which recommended obtaining the intermediate consumption for industrial activities at constant prices by deflating it rather than by extrapolating it, as is currently done, the national accounts office made an exercise for manufacturing industries. The exercise arrived at similar results with both methods, and concluded that the actual method is practical and does not produce bias in the structures or the trends.

In quarterly calculations, we will make an exercise for the main activities of the primary, industrial and services sectors, in order to evaluate the incorporation of the recommendation, with out affecting the timeliness of the quarterly results.

  • Conduct an integrated enterprise/establishment survey for a representative sample of enterprises by economic activity that collects data on production, inputs, fixed capital formation, inventories, income statement, and balance sheet in order to reduce the discrepancies between the estimates by economic activity and by institutional sector for the non-financial corporation sector.

We consider addressing this recommendation is important to strengthen the national accounts estimates leading to important improvements in the institutional sectors accounts, in the variables of the accumulation accounts, and in the implementation of the recommendations for the SNA.

  • Improve the benchmarking technique of quarterly and annual data by applying the BI ratio of the fourth quarter of the previous year to estimate the quarters of the following year until the annual data for that year are available.

According to the alternatives proposed in the Quarterly National Accounts Manual of the IMF, the previous year BI ratio method was selected to standardize it and to preserve the comparability between monthly national, monthly regional, quarterly regional indicators and quarterly national accounts. However, we will make an exercise with quarterly GDP to evaluate the possible differences between the method used and the method suggested by the report.

  • Further investigate the recording of actual rents and private education services in the monthly survey.

Due to the fact that measurement of these activities is a complex task, especially in the short term, we will implement the investigations that are necessary to complement the measurements that are currently calculated, making more extensive use of the Monthly Services Survey and the available administrative records.

  • Study the compilation of a supply and use table of illegal goods including illegal trade (contraband).

This recommendation will be revised in order to explore the data sources that may provide information about the importance of these activities.

  • Explain in more detail the compilation methods and the causes of routine and major revisions to the NA data in INEGI’s national accounts publications.

A mechanism for providing users access to information on major revisions and detailed compilation methods is being assessed.

  • Incorporate annual agricultural work-in-progress in the production and assets boundary, given the importance of agriculture activities in the Mexican economy.

We will evaluate the recommendation, the availability of data and the best practices followed by other countries.

  • Increase the level of detail of disseminated annual data at four digits of the NAICS, or at least at three digits.

It is expected that future releases will include a broader level of detail of the variables of supply and use with an annual periodicity.

III. Balance of Payments Statistics

As to the balance of payments statistics, Banco de México, in general, agrees with the mission’s main findings. As mentioned in the Report, submissions based on BPM5 have regularly been presented to the IMF on a quarterly basis; however, balance of payments statistics were published domestically according to a mix of BPM4 and BPM5 criteria. It is worth mentioning that, with the recent data release of the second quarter of 2010, Banco de México started publishing the balance of payments figures with the BPM5 structure and classification, in addition to the format used previously. Further more, historical data from 1995 onwards were also published with the BPM5 format. Additionally, the metadata for the BOP has already been posted on the website. Thus, some of the main concerns raised in the ROSC Report have been addressed.

Regarding other specific recommendations of the IMF mission, Banco de México is currently working on addressing them. In particular, it is important to highlight the following:

  • With the release of balance of payments figures for the second quarter of 2010, the residency criterion for foreign branches of Mexican banks has been applied. Specifically, foreign branches of Mexican banks are now treated as non residents in the new balance of payments format, as recommended in the Report.

  • Banco de México is working on developing a transition plan to BPM6 for its adoption by 2012, as suggested by the IMF.

  • With respect to the mission’s comment on improving the coverage of services, discussions are already underway with INEGI with the goal of producing more comprehensive and detailed statistics on services, in line not only with BPM5, but also taking into account the future adoption of BPM6.

  • As for the consistency between external debt position data and the IIP, conciliation between the two areas in Banco de México involved in these statistics is underway.

  • As to the recommendation of recording, to the extent possible, external public and private debt on an accrual basis in the BOP using market values, Banco de México will work with the institutions that provide such information to determine the necessary steps to apply the recommended valuation criteria to those operations.

  • Regarding the recommendation on the compilation and dissemination of quarterly IIP, these statistics are currently released on an annual basis in accordance with the SDDS requirements. However, Banco de México has started the process to develop such statistics on a quarterly basis, and is expected to begin publishing them soon.

IV. Monetary Statistics

In the area of monetary statistics, the IMF mission concluded that Banco de México has achieved a high degree of compliance with agreed international standards. The IMF mission recommended reviewing the definition of monetary aggregates with the purpose of improving their international comparability. Therefore, Banco de México has been reviewing the methodology and definitions of broad monetary aggregates to fully comply with the Monetary and Financial Statistics Manual. In addition, as recommended by the IMF mission, Banco de México will continue publishing monetary aggregates under the current definition since they serve as measures of financial savings of the private and public sectors.

Regarding the revision of the treatment of financial derivatives and repurchase agreements, Banco de México has been evaluating different sources of information to avoid overstating the aggregated balance sheet of other depository corporations (ODC) as recommended in the Report.

On the mission’s comment to collaborate with the CNBV to improve timeliness in the submission and processing of nonbank ODC data, Banco de México and the CNBV have established contact with these intermediaries to address the issue.

With respect to the dissemination of the methodology used for compiling monetary statistics, Banco de México has been preparing several documents explaining the methodology of relevant monetary statistics and plans to publish them on Banco de México’s website.

V. Public Finance Statistics

In general terms, the Mexican authorities agree with the remarks in the Report about the situation of government finance statistics in Mexico with regard to recommended practices. The government finance statistics follow the prerequisites of quality and the standards on the assurances of integrity, accuracy, reliability and accessibility of information.

Nevertheless, the Report points out that recommended practices in terms of methodological soundness and usefulness of the information are not fully followed, due to the following:

  • To assess the methodological rigor of Public Finance Statistics, the conceptual framework of the Government Finance Statistics Manual 1986 of the International Monetary Fund and the actions for migrating to the new 2001 Manual were considered, instead of the conceptual framework of government finance statistics in Mexico, which is designed for budget monitoring and structured according to national legal regulations1.

  • For the statistics of the general government, states and municipalities, the practices in terms of time liness (lag between the end of the month and the release of the information), periodicity (frequency with which monthly, quarterly or yearly information is released) and the dissemination of the release calendar are not fully followed.

  • A conciliation of government finance statistics with other macroeconomic statistical systems is not carried out regularly and studies on data revisions are not published.

In this regard it is important to point out that the Government Accounting General Law, enacted in December 2008, meets practically all the observations and recommendations of the Report:

  • It harmonizes the federal, states and municipalities accounting systems; it points out the periodicity and timeliness for the dissemination of information; and it authorizes the National Council for Accounting Harmonization to establish the mechanisms for consolidating information.

  • It establishes the obligation for the Federation and the States to keep their accounting on an accrued basis and to submit financial statements and budget reports no later than December 31, 2012. It also establishes that Municipalities should submit their financial statements and budget reports at least at the economic-administrative level.

Moreover, with the implementation of the Integrated Federal Financial Administration System it is foreseen that information will be generated to integrate national accounts for the Central Government and Federal Public Sector, and government finance statistics according to the GFSM 2001.

During the transition period, the Ministry of Finance will send the following information to the IMF:

  • Monthly data on consolidated central government operations and debt, 30 days after the reference month, according to the GFSM 2001 tables.

  • Monthly data on non-financial Public Sector operations and debt, 30 days after the reference month, according to the GFSM 2001 tables.

  • Data about the operations and debt of the consolidated central government for the IMF Statistics Yearbook, with definitive information six months after the reference year, and for the general government 16 months after the reference year, according to the GFSM 2001 tables.

VI. Cross-cutting Recommendations for INEGI

  • Enhance cross-domain cooperation within and among statistical agencies to support both consistent methodological treatments and proactive responses to emerging issues.

Since the INEGI became autonomous and the SNIEG was created, Executive Committees have been established. These in turn are composed of Specialized Technical Committees with the participation of all the entities of the State that generate information of national interest. In the Specialized Technical Committees different economic and social issues are addressed, and the information needs of specialized users are analyzed, as well as those of INEGI itself.

Furthermore, INEGI has always promoted, at various organizational levels, direct communication amongst the areas responsible for generating basic data in the public and private sectors.

  • Conduct regular reconciliation exercises to verify consistency among the macroeconomic datasets.

The autonomy granted to INEGI (July 2008), requires the Institute to promote in a continuous and coordinated fashion the conceptual and methodological consistency amongst various macroeconomic databases, in order to achieve acceptable levels of consistency and relevance.

  • Begin an active, systematic process of consulting users on the quality of macroeconomic statistics.

The meetings where specialized users express their views on existing national accounts products allow INEGI to obtain an assessment about the quality and relevance of such products. Based on the positive results achieved during the first event of this kind, in the month of December 2009, where a presentation of SNA products was made to the most important specialized users, this kind of consultation has been performed on a regular basis, leading up to two additional meetings with specialized users as of the current month.

  • Establish procedures for informing users about data revision studies.

Currently, the national accounts area keeps track of the changes made to statistics calculations and is studying a mechanism to provide users access to the information on these routine revisions.

  • Consider creating a centralized portal, a “one-stop shop” for macroeconomic statistics, and metadata, in Mexico to assist users.

INEGI will take into account the recommendation and make an assessment within the Executive Committees that make up the SNIEG, by taking into account available statistical systems and looking for synergies with the involved areas and data users.

VII. Other Recommendations for INEGI

  • Take account of the number of working/trading days in calculating economic activity on a seasonally adjusted basis, as the QNAM recommends.

This recommendation will be considered to perform an exercise where any possible differences between the two options will be assessed.

  • Improve the sources and methods of FISIM and central bank’s services at current and constant prices.

The method used for the calculations of FISIM has been corrected following the technical assistance mission in January 2008, taking into account the comments made during this visit. The methodology was disseminated in Volume I of the publication of the Institutional Sectors Accounts 2003–2007.

Regarding the improvement of data sources and methods used for measuring the services provided by the banking services, INEGI will attempt to obtain more information through the Specialized Technical Committees in order to improve the calculations.

  • Improve the estimates of taxes and subsidies on products at constant prices by applying the base-year-tax rates to the volume of transactions (uses) subject to the specific tax/subsidy or by extrapolating the base-year tax/subsidy using a volume index of transactions subject to that specific tax/subsidy.

We will review the methodology for the calculation of net taxes on products, implementing the recommendation to evaluate the results and examine its possible inclusion in a new series.

  • The linked annual series for 1993–2003 should be disseminated in official publications.

The national accounts office has disseminated the quarterly and annually accumulated GDP series by industry for 1993–2003, which covers the information needs related to this variable. The area responsible for annual estimations has begun to evaluate the level of disaggregation for other variables on the basis of the SCIAN.

  • Develop a more user-friendly webpage for posting all national accounts data and metadata together.

INEGI will consider this recommendation and will take the steps needed to assess the feasibility of building an exclusive website for national accounts and macroeconomic indicators, and to make it more user-friendly.

  • Finally, there is a comment indicating that INEGI does not have a publication calendar for the annual series.

In this regard it is important to note that the calendar of the annual products is available on the website of the Institute since January 2010 and is disseminated along with the calendar of short-term products.

1

The GFSM 2001 is focused on the analysis of the Central Government and the General Government, while the budget in Mexico is focused on the non-financial Federal Public Sector. This is because fiscal policy actions in Mexico are not concentrated in the units that form the government, but they transcend to the field of public enterprises. For example, state-owned enterprises issue a significant portion of public debt, and their investment projects respond to the authorization of Congress rather than to profitability criteria. It is worth mentioning that the definition of the public balance, revenues less expenditures, is equal in both conceptual frameworks except for the registration of investment and the indebtedness of the PIDIREGAS projects, while the classification and grouping of revenues and expenditures differ due to national practices based on the legal framework.