A. Introduction

1. Gender gap in labor force participation in Mexico remains among the highest in the OECD and Latin American countries. This gap is estimated at about 32 percent in 2021, significantly above the OECD average of 13.5 percent and the LA5 average of 23 percent. At about 14 percent, the gender gap in terms of wages is slightly above the OECD average of 11.9 percent. While the informal sector is large, employing more than half of Mexico’s workforce, the gender gap in informal employment is relatively small, estimated at only about 2 percent. In addition, the gender gap in educational attainment in Mexico is relatively small compared to the OECD average.

2. The gender gap has, however, narrowed in the last decades. The gender gap in labor force participation has narrowed since 2005 by 10 percentage points, as female participation increased and male participation declined. However, at about 48 percent, female labor force participation is still significantly below the rate for men (about 81 percent). Mexican women in the labor force have on average more years of education than men, across all income percentiles, while non-economically active women have fewer years of education than men and economically active women. In addition, women on average work more hours per week than men, as they carry the bulk of unremunerated domestic work.

3. Gender gaps in the formal sector remain relatively more elevated in rural Mexico. In line with the national trend, the gender gap in labor force participation has narrowed by 10 percentage points in both urban and rural Mexico since 2005, though the gap remains 11 percentage points higher in rural areas. Labor informality is higher for women than men in urban areas, while there is virtually no gender gap in informality rates in rural areas, which is overall significantly higher.

4. This Selected Issues Paper explores policy options to close gender gaps in Mexico. It analyzes policies to boost both female labor force participation and formal employment, looking at regional differences, showing how significant gains could be achieved, especially in rural areas. It also takes stock of fiscal policies with gender implications implemented so far and considers additional steps to address remaining gender inequalities. Finally, it analyzes legal impediments for women’s economic empowerment, focusing on labor market reforms.

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Mexico: Gender Gaps

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

Sources: ILO, OECD, ENOE, and IMF staff calculations.1/ Labour force participation rate by sex- ILO modelled estimates, Nov. 2022 (%).2/ Proportion of informal employment in total employment by sex and sector (%). Gap were calculated between male and females stats.3/ The labor force particiopation rates were calculated as the economically active persons over the estimated persons 15-65.4/ Participation gap is the difference between labor force participation rates between men and women.Wage gap is the ratio between men average income over women average income.5/ Gap between Male and Female Share of Population with Tertiary Education, 25-64 years

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5. Section B uses an overlapping-generations model calibrated to Mexico to explore policy options to boost female labor force participation in the formal sector. The analysis targets childcare policies alone that would increase female labor force participation by about 10 percentage points. This increases to 11 and 13 percentage points when childcare is combined with higher education and anti-discriminatory practices, respectively. Given the disparity in educational attainment, the impact of implementing such policies is more pronounced in rural areas compared to urban regions.

6. Section C explores the role of fiscal policy in closing gender gaps in Mexico. In addition to highlighting the need for better data to facilitate better policy, the section identifies three broad and interrelated fiscal policy measures:

• Reduce barriers to female labor force participation and economic integration: via, inter alia, tax policy measures that distort incentivizes for secondary earners, typically women; measures to better tailor service and administrative procedures to small businesses, often disproportionately owned by women; and childcare and parental leave policies that affect the cost of women working and, thereby, labor participation decisions.

• Directly tackle gender-based distributional issues: efforts typically center around spending policies with higher spending on education and health access often improving the outcomes particularly for women and girls.

• Mobilize and monitor resources for tackling gender inequality: through measures—such as targeted cash transfers, shown to boost female economic empowerment and to be more effective when paid to female heads of household—to ensure that sufficient resources are allocated. Overall, general revenue mobilization that is reinvested in equity-enhancing spending policies is preferable to tax relief with a differential gender impact, while gender budgeting is a powerful tool to ensure that sufficient resources are allocated to, and utilized in, tackling gender gaps.

7. Section D analyzes legal and institutional issues to further support women’s economic empowerment in Mexico. While Mexico has made significant strides in recognizing women with equal rights under the law and removing legal impediments to women’s economic empowerment, persistent gender disparities in labor force participation, wage earnings, and opportunities continue to cast a shadow over its progress. This section will analyze the remaining legal barriers that contribute to these gender disparities including implementation and enforcement challenges. The section will also provide recommendations on legal and institutional reforms to further incentivize women to enter, remain, and advance in the workforce.

B. Female Labor Force Participation, Productivity, and Gender Policies¹

Introduction

8. Boosting female labor force participation (FLFP) is essential to closing gender gaps. Expanding childcare programs, strengthening education policies, and reducing discriminatory policies can help increase FLFP. Using model-based analysis, this section illustrates the effects of implementing these policies on FLFP, as well as on growth, informality, and welfare.

9. This section uses an overlapping generation model (OLG) to examine policy options to boost both female labor force participation and formal employment. Building upon Malta, Martinez, and Tavares (2019), a model is calibrated to replicate prominent macro- and microeconomic characteristics of the Mexican economy. The model simulates the impact of a childcare program to boost FLFP, along with other policies that aim to increase the level of education and reduce discriminatory practices. The analysis provides insights into the positive spillovers of implementing childcare programs that foster female labor force participation with policies that strengthen the formal sector.

10. The analysis shows the importance of implementing policies efficiently to increase FLFP, while boosting formal employment. Women in Mexico are more susceptible to enter the informal sector relative to their male counterparts. As such, implementing policies solely with the objective of increasing FLFP could exacerbate informality and yield only partial returns to the formal sector. Incorporating policies that strengthen the formal sector, such as boosting education or reducing discriminatory practices, could help contain informality for female workers, support formality, leading to a reduction in the wage gap.

11. Furthermore, the analysis sheds light on the effects of such policies in rural and urban areas in Mexico. Disaggregating the framework to rural and urban areas, it shows that implementing policies that support formal employment in parallel to expanding childcare programs is particularly relevant in rural areas. Besides, the structure of the economy in rural areas, this is also because education levels in such areas are lower than in urban areas, making female workers more vulnerable to informality.

The Model

12. The model provides a stylized representation of an economy with several gender-related frictions. The framework is based on a small open economy model, incorporating both formal and informal sectors, where the government levies taxes on formal labor income, consumption of formal goods, and formal firms’ profits. Government expenditure is allocated to education and formal goods. The model encompasses three distinct phases of the working life for families: as young adult parents, adults, and seniors. The household consists of a couple which is differentiated by gender, remuneration from their hours supplied to work, and their human capital evolution. In addition, the couple has two children in their young adult parents’ phase, who will replace the following period senior population. Over the course of their lives, couples make decisions regarding their consumption patterns of formal and informal goods and their labor participation in both formal and informal sectors of the economy.

13. Women encounter several impediments to achieve economic empowerment throughout their lives. The framework includes three main differences between women and men that lead to different outcomes in their labor participation decisions: (i) social norms barriers that include expenses associated with managing a household and family responsibilities, (ii) lower returns to their working hours in the labor market, and (iii) lower returns on experience and seniority.

where $\overline{\chi }$ reflects a parameter that targets the female-to-male labor force participation ratio and X₀,X₁,X₂ are the quadratic best fit of number of children by household income percentile.

15. Women also face lower returns to working hours in the labor market compared to men. There are several reasons why returns to work differ by gender. Women tend to specialize in different industries and job categories than men and public investment in infrastructure, transportation and health coverage by public and private employers yields differential benefits for men and women. Additionally, discrimination helps explain differences in returns to work (regarding seniority and promotion see Blau and DeVaro, 2007 and Cobb-Clark, 2001; and regarding wages see Azmat and Ferrer, 2015). In the model, these lower returns to work for women are captured via two different channels. First, lower returns to experience for women are incorporated into the human capital accumulation law of motion:

Accordingly, men and women can only accumulate human capital when they work in the formal sector, which is captured by the parameter ${\gamma }_s^g$ that differs in the life cycle stage the agent is in s, and its gender g. Using wage growth across different stages in life, returns to experience for men is higher than for women. Second, different marginal productivities are assumed for men and women in both the formal and informal sectors, described by

where the gender wage gaps and returns to working hours are captured by the parameters φ^informal, φ^formal to describe lower marginal productivity of labor for women than men. These factors have significant implications for the economic prospects and choices available to women.

16. The model is calibrated to match the specificities of the Mexican economy. The calibration matches standard macroeconomic indicators from Mexico using the National Survey of Occupation and Employment (ENOE) database for micro-founded statistical moments. Parameters of the model are calibrated to match the female-to-male labor force participation, gender wage gap, labor force participation rate for men and women, informality rates for men and women, inequality measure as the Gini coefficient, and government policies such as public education spending, government expenditure and public education as a share of GDP, and tax rates. A detailed moment comparison between data and model is shown in Table 1. In addition, the calibration tailors for the parameters characterizing education for both genders and the penalty for households when women decide to enter the labor market.

Text Table 1.

Moments Captured in Calibrated Model

Text Table 1.

Moments Captured in Calibrated Model

Data	Model	Moment
0.61	0.67	Labor force participation female-to-male ratio
0.55	0.53	Informality rate
0.06	0.07	Gender informality rate qap
0.30	0.30	Share of informal sector to GDP
0.18	0.18	Share of government expenditure to GDP
0.03	0.03	Share of public education expenditure to GDP
0.07	0.07	Revenues from formal sector to GDP
0.52	0.60	Debt-to-GDP ratio
0.39	0.38	Gini coefficient

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Text Table 1.

Moments Captured in Calibrated Model

Data	Model	Moment
0.61	0.67	Labor force participation female-to-male ratio
0.55	0.53	Informality rate
0.06	0.07	Gender informality rate qap
0.30	0.30	Share of informal sector to GDP
0.18	0.18	Share of government expenditure to GDP
0.03	0.03	Share of public education expenditure to GDP
0.07	0.07	Revenues from formal sector to GDP
0.52	0.60	Debt-to-GDP ratio
0.39	0.38	Gini coefficient

17. The analysis comprises three different calibrations of the model: for Mexico overall, rural areas and urban areas. This is done to reflect significant difference between urban and rural areas in Mexico and, hence, to identify more tailored policy recommendations. For example, in rural areas gender differences in education levels across household income percentiles tend to be more pronounced than in urban areas. Likewise, households in rural areas tend to have more children than in urban areas, across the household income distribution. Disaggregated analysis can thus provide insights into how policy choices affect differently urban and rural areas.

18. The main policy variable is childcare policy, aimed at boosting female labor force participation. Following the calibration strategy for social norms and the burden families incur when women enter the labor market, introducing or strengthening childcare policies is captured via a reduction in the utility cost. The reduction in the utility cost is calibrated to increase female labor force participation by 10 percentage points.

19. The analysis introduces two alternative policies—education and antidiscrimination policies—that could be implemented in parallel with childcare. The education policy consists of having a minimum requirement of 10 years of education, setting a minimum standard for the overall population. Antidiscrimination policies improve the working conditions for women by allowing them to be as competitive as men; such policies could encompass measures limiting direct gender biases to transportation and/or health programs and address women’s personal safety concerns. In the model, antidiscrimination policies are captured by increasing the marginal productivity of women in the formal sector, implemented by reducing the parameter that controls the wage gap in the formal sector production function. Marginal productivity in the formal sector parameter is increased to match the increase in formal sector output experienced by childcare and education policies described above.

Results

20. Female labor force participation increases when childcare policies are introduced or strengthened, and this effect is boosted when education or anti-discriminatory policies are implemented in parallel. Implementing childcare policies make the burden of providing care inside the household less demanding, reducing the utility cost associated with it. Because of this, the model simulates an increase in FLFP of 10 percentage points However, the model indicates that when implemented in tandem with education or anti-discriminatory policies, FLFP increases by an additional 3 and 1 percentage points, respectively. This aggregate impact masks differences between rural and urban zones. In rural areas, implementing education or anti-discriminatory policies in tandem with childcare policies increases FLFP by an additional 5.5 and 3.5 percentage points, respectively, while in urban areas, the additional increase in FLFP is only 1.6 and 0.5 percentage points, respectively. Education and anti-discriminatory policies, in combination with childcare policies, may be more effective in increasing FLFP in rural areas due to lower education levels and a higher cost for women to enter the labor force (the utility cost in the model).

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Female Labor Force Participation

(In percentage points)

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

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21. Women who decide to enter the labor force are vulnerable to informality. Women who enter the labor force following the introduction or strengthening of childcare policies tend to have middle-low education levels. They tend to have low returns to labor in the formal sector, pushing them into informality. Childcare policies increase the female informality rate by 0.8 percentage points for the overall calibration. These increases in informality for women are exacerbated in rural and urban areas, reaching 2.1 and 1.2 percentage points, respectively. However, when childcare policies are implemented in tandem with education or anti-discriminatory policies, the female informality rate declines by about half a percentage point in the baseline calibration for Mexico. This reverse effect is magnified in rural and urban Mexico. The decline in informality rates reaches 3.5 percentage points in rural areas, whereas, for urban Mexico the decline is 2 and 2.5 percentage points for the education and the anti-discriminatory policies, respectively. The intuition behind this result is that education and anti-discriminatory policies strengthen the formal sector disincentivizing informality. In other words, the returns to female labor hours in the formal sector increases pushing incumbent women into the formal sector instead of informality.

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22. The positive impact on economic growth from implementing childcare policies is magnified by education or anti-discriminatory policies. Economic growth in the model is measured via the formal sector output. When implementing childcare policies alone, growth in formal output reaches 6.5 percent. In contrast, when implementing education or anti-discriminatory policy, growth reaches about 9.5 percent.³ This result is explained mainly by additional policies that disincentivize informality, pushing workers into the formal sector. Growth in the rural sector increases when implementing policies in tandem. When implementing childcare policies alone, growth in formal output reaches 5.1 percent, while when policies are implemented in tandem, output growth rises to 12.8 percent. In urban areas, growth increase from 1.9 percent with childcare policy alone to 5.9 percent when combined with other policies. This is mainly because in rural areas, education levels are quite low across all income percentiles. Therefore, strengthening the education system to guarantee at least 10 years of education for all workers offers a bigger potential of formal sector participation and formal output growth.

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Formal Sector Output Growth

(In percent, growth rate)

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

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23. Simultaneous strengthening childcare policies and formal sector policies yields substantial improvements in household welfare. Adopting both types of policies in tandem fosters a more equitable and supportive environment, encouraging greater female labor force participation, thereby generating positive outcomes for families and the overall economy. Welfare gains are assessed by measuring the utility growth resulting from the introduction of these policies during the initial stage of couples’ life cycles, as compared to the baseline parameterization. The results indicate that combining childcare policies with anti-discrimination policies has the largest effect on welfare, while adding improvements in education outcomes to childcare policies has a positive marginal effect on households in rural areas.

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Household Welfare Gains

(In percent, growth from baseline)

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

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Conclusion

24. This section analyzed how policies that encourage female labor force participation, specifically childcare policies, influence macroeconomic outcomes. Findings indicate that childcare policies are indeed effective in increasing female labor force participation. However, childcare policies implemented in isolation could also lead to a rise in female labor informality, thereby hindering productivity growth. To fully realize the benefits of having more women in the labor force, the model recommends that childcare policies be complemented with other policies that foster the formal sector. Specifically, implementing anti-discrimination policies in the formal labor sector and strengthening education, and combining them with childcare support would maximize positive effects of increasing female labor force participation on the overall economy.⁴ Improving the quality of budget allocations and increasing targeted spending for supporting these policies would be paramount for closing gender gaps. In addition, this comprehensive approach will help create a more balanced and productive workforce in Mexico.

C. Fiscal Policies to Tackle Gender Gaps in Mexico⁵

Introduction

25. Fiscal policies can either perpetuate or address gender inequalities. The redistributive— and therefore equity-enhancing—aspects of fiscal policies have long been understood in both academic and policy settings. However, the focus solely on income inequality in much of the literature can discount the salient individual characteristics that structure inequalities as well as a wider set of relevant inequalities, such as inequality of opportunity. In many countries, gender biases are a key driver of inequality, helping explain income inequality (through gender-based differences in labor force participation, gender wage gaps, and barrier to female entrepreneurship) and inequality of opportunity (through differential access to education and health services). When fiscal policies are made without an understanding of the importance of gender, even seemingly ungendered policy decisions can serve to exacerbate or perpetuate inequalities. For example, adopting the household as the unit for income taxation can generate greater labor disincentives for secondary earners, who are typically women, compared to income tax systems based on the individual. Examining even seemingly ungendered policies for gender impacts is then critical to diagnosing policies that can improve gender equity.

26. Fiscal policies are one of the most important levers that governments have when addressing gender gaps. Fiscal policies can be used to achieve three broad and interrelated objectives when it comes to tackling gender gaps: (i) the reduction of barriers to female labor force participation and economic integration; (ii) addressing gender-based distributional issues; and (iii) mobilizing and monitoring resources for tackling gender inequality. Although tax policy and spending measures typically form the crux of efforts to address each objective, both tax administration and public financial management can also play a critical role and we explore how each strand of fiscal policymaking can contribute to addressing gender gaps in Mexico. Across all aspects, an overarching theme is the necessity of better data for pinpointing where gender gaps lie and designing policies to tackle them. This is especially the case in Mexico where notable advances have been made on numerous fronts, but inequalities remain stark.

Expenditure Policies: Tackling Inequalities in Income and Opportunity

27. Mexico has made strong progress in tackling gender gaps across a range of social indicators. With successive generations, gender gaps in poverty and extreme poverty rates and education have narrowed considerably, while women have tended to persistently have better access to healthcare services (Figure 2).⁶ However, since the pandemic, the gender gap in poverty and extreme poverty rates has widened somewhat overall and remains stark for women aged 65 years-old and over. Nonetheless, the decrease both in poverty and extreme poverty rates for both women and men aged 65+ since 2018 likely reflects the impact of pension reforms introduced in 2019, which increased the generosity and coverage of the Mexican pension system. The introduction of the social pension, in particular, is likely to be a key driver in the rapid reduction in extreme poverty rates for women aged 65+.

28. Further advances can build on progress to-date by focusing on key areas. Spending policies centered on improving access to good quality education and health services, expanding affordable childcare offerings, and investing in the social safety net can address the gender main objectives of fiscal policy. In many cases, this can take the form of building on recent and past policy innovations in Mexico. In particular, policy could consider the following areas:

• Education. Mexico has recorded notable improvements in the educational enrollment of girls compared to boys in recent decades. Despite a less prominent gap between boys and girls in performance in reading, mathematics, and science in Mexico than in many other OECD countries, young people are the most likely to leave school without having obtained an upper secondary qualification at 44 percent (OECD, 2019 & 2023a). The Benito Juarez Basic Education Welfare Scholarship program, introduced in 2019 as a replacement for the educational support provided by the Prospera conditional cash transfer scheme, aims at tackling some of these issues (Diario Oficial de la Federacion a & b, 2019). The program providing scholarships to families living in poverty and with children who study in initial, preschool, primary, or secondary education with conditionality based on school attendance and prevention of child labor, amongst other factors. However, the program is paid per family, not per student, creating scope for gender biases in who receives educational support in the household. Improving the program, by introducing payments per student could promote children’s school attendance more actively and increase this program’s impact, especially for girls. More generally, Hannan et al (2021) outlines a range of areas in the education sector where increased spending is needed to close gaps with OECD peers, such as teacher-to-student ratios. Addressing these gaps would be beneficial for all children.

• Childcare and Care Leave. At 12 weeks, the length of paid maternity leave in Mexico lags the OECD average by 2 months. Moreover, compared to an OECD average of around 10 weeks, father-specific parental leave in Mexico is just one week (OECD, 2023a). The limited availability of parental leave creates trade-offs between work and caring responsibilities which can disincentivize female labor supply and which could be addressed by more generous parental leave practices. Indeed, many countries have sought to increase the ability of fathers to take paternity leave, in part to boost female participation. This is particularly the case for European Union countries—for example, the Netherlands introduced up to five weeks of additional paid leave for the mother’s partner in 2020 while Austria introduced an additional one-month job protection period for existing leave arrangements (OECDb, 2023). As pay for those on leave is split between the employer (paternal) and IMSS (maternal), this may require greater budgetary allocations. Additionally, greater provision of affordable childcare services would go some way to reducing trade-offs between caring responsibilities and labor supply. Working-age women in Mexico spend more than double the amount of time of their male counterparts on unpaid work at 331.3 minutes per day, with a large share of this time devoted to caring activities (OECD, 2023a). Better quality and broader childcare provision could free up substantial amounts of time that women could then use for labor force participation. To this end, the Federal government has begun to scope and design a national childcare service and has commissioned the statistics office, INEGI, to conduct a survey of childcare demand which could be used for planning purposes. This is an important initiative that, if successful, could have broad implications and enable working-age women to participate more actively in the labor force. Such efforts could also dovetail with needed increases in education spending, particularly for young children, as outlined above. However, more transformative reforms in the space of care policy would also recognize that women’s caring responsibilities also tend to include older family members as well as young ones and integrate services for adult social care. The binding constraint for these policy reforms is likely to be the fiscal cost. As discussed below and in Hannan et al (2022), tax policies can play an important role in financing these outlays.

• Social Protection. Prior to the pandemic in 2018, and despite having a poverty rate below Latin American peers, around 40 percent of households with children/adolescents and a working age household head in Mexico did not have any social protection (Hannan et al, 2021). As the Article IV 2023 for Mexico reports, the Mexican economy’s recovery from the pandemic has been relatively robust, data from CONEVAL shows both poverty and extreme poverty rates for women to be slightly higher than those for men. Moreover, despite a substantial drop in poverty relative to the preceding six years, over one-third of the total population lived below CONEVAL’s poverty line in 2022. While poverty is a debilitating condition for all who face it, studies suggest that there are important gender aspects to poverty and low incomes. In particular, there is a notable gender dimension to how poverty is tackled and a large share of the literature on this topic draws on Mexico’s past success with the PROGRESA and Oportunidades conditional cash transfer (CCT) schemes, which were typically paid to women rather than men.⁷ In particular, Attanasio and Lechene (2010, 2014) find that PROGRESA/Oportunidades payments to women served to increase their intra-household bargaining power and thus resulted in greater resources for the whole household by way of increased food expenditure. Moreover, Skoufias (2005) found strong evidence of the positive social impact of the PROGRESA program, including for girls’ educational enrollment. While concerns about stalling poverty reduction and corruption led to the current administration’s decision to end Prospera (the successor program to PROGRESA and Oportunidades) in 2019, Mexico’s broadly successful history with CCTs highlights that there are important gender dimensions to poverty and to the design of social protection. The payment of the Benito Juarez scholarship for primary school-aged children to mothers would seem to recognize the importance of gender dynamics within households. However, the design of this payment to cover the household - and not the child - may serve to ignore gender-based decisions on which children receive an education in the household. Additionally, to the extent that social transfers that were previously paid to women have shrunk since 2019, recent policy may have served to directly impact women’s household bargaining power.

• Pensions. Recent pension reforms appear to have had a substantial impact on both pensioner poverty and gender gaps in pensioner poverty. However, older women still fare worse than older men and further reforms to pension policy can continue the progress in addressing this inequality. As documented in Bonthuis (forthcoming), the minimum weeks of contribution requirement before individuals can access their accrued contributory pension benefits creates sharp non-linearities in pension entitlements that are difficult to justify. Given the gaps that many women have in their working histories due to caring responsibilities for children, the minimum contribution period may also have a disproportionate impact on female workers and lowering—or removing—the minimum contribution period could serve to improve gender equity. Gaps in entitlements due to childcare can also be tackled with targeted spending measures. For example, Joubert and Todd (2022) find that 2008 pension reforms in Chile that provided a per-child pension bonus (amongst other measures) served to help tackle gender gaps in pensions.⁸

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Gender Gaps in Selected Social Indicators

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

Sources: CONEVAL and IMF staff calculations.Notes: i) Lacking access to healthcare (‘carencia por acceso a los servicios de salud’) is defined by CONEVAL as when an individual does not have affiliation or the right to receive medical services from any institution that provides them, including Seguro Popular, public social security institutions (IMSS, federal or state ISSSTE, Pemex, Army or Navy) or private medical services.ii) According to CONEVAL, a person is lagging in education (‘rezago educativo’) when:a) They are between 3 and 21 years old, does not have compulsory education and do not attend a center formal education.b) They have not completed the mandatory education requirement that was in place when they were school-aged.

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Tax and Revenue Administration Policies: Mobilizing Revenues While Supporting Women as Taxpayers

29. Explicit and implicit gender biases in the tax system can entrench gender inequality. Tax policies that are explicitly biased against women can be easy to identify, but implicit biases can be harder to detect. Even where the legislation is notionally neutral across genders, the incidence or behavioral response to the tax code provisions differs between men and women, leading to economic inefficiencies and (gender) inequities. For example, household-level taxation and familybased tax provisions in personal income tax systems often discourage female labor force participation because women tend to be secondary earners. Similarly, lower capital income taxation rates relative to taxes on labor income in dual income tax systems often serve to privilege men as they tend to own more capital than women.

30. Mexico has recognized the role the tax system can play in perpetuating gender inequality with recent reforms, but a comprehensive tax policy strategy could be adopted. In 2022, a notable bias in the tax code was addressed by equalizing the VAT treatment of feminine hygiene products with that applied to other healthcare products (Secretaria de Hacienda y Credito Publico (SHCP), 2021). Additionally, the individual, rather than household, basis of Mexico’s personal income tax system avoids a common design flaw seen in many countries that disincentivizes secondary earners, who are typically women. However, the lack of extensive analysis of the gender implications of the tax code and the current administration’s policy of limiting tax policy changes mean that there may be lost opportunities for identifying specific aspects of the tax code that could support women’s labor force participation and addressing explicit and implicit biases in the tax system.

31. Data-driven analysis of tax policy and focus on general revenue mobilization would support a comprehensive strategy. Although the government has addressed an explicit gender bias in the tax code by reforming the VAT rate on feminine hygiene products, a holistic data-driven analysis of the tax code would shed light on implicit biases in the tax system and integrating data into policy analysis would ensure that gender equity is embedded in policy decisions. Moreover, the federal government currently collects the data necessary to undertake this analysis. In 2020, the government reported having disaggregated data available for policy analysis across various taxes (compared to 58 percent of countries surveyed) and that this data was fit for purpose (compared to 21 percent of countries surveyed) (OECD, 2020). Additionally, in its annual analysis of tax expenditures the SHCP publishes a range of gender-disaggregated statistics related to employment subsidies and income tax deductions (SHCP, 2023). Yet, given the importance of spending policies in ameliorating gender gaps (as outlined above) and Mexico’s comparatively low revenue-to-GDP ratio, there are strong arguments for using tax policy as an instrument to support efforts to improve equity simply by raising more revenues that can be invested in targeted improvements in education, health, and social protection (see for example, Hannan et al (2022)). However, gender-disaggregated data and its use in policy design and analysis could ensure that revenue mobilization is calibrated in such a way as to not entrench any gender biases in the tax system and to enhance gender equity.

32. The Mexican revenue authority could help improve women’s economic integration by tailoring its services and products. Baer et al (2023) highlight that revenue administrations can greatly influence gender equity by administering tax laws in a way that reduces barriers to women’s employment, entrepreneurship, and trade. This includes understanding the barriers that prevent women from accessing systems, tailoring services and products for women taxpayers and traders, and reducing enforcement bias against women. The latter may be particularly important in Mexico given the notable share of women in informal employment and revenue authorities in countries such as Australia and Jamaica have developed schemes to support small businesses, in part due to the high proportion of women owning and operating them. Better data is crucial to such efforts. However, despite reporting collecting gender-disaggregated tax compliance data, Mexico’s Servicio de Administration Tributaria (SAT) also reported that it does not undertake any analysis of the gender implications of tax administration or compliance, does not make any adjustments to tax administration processes to respond to the needs of a specific gender, and does not design any gender targeted taxpayer education or awareness campaigns (OECD, 2020). Exploiting the data that has already been collected in these ways could represent low hanging fruit in terms of understanding and then tackling specific aspects of gender inequality.

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Revenue Authority Gender Balance

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

Sources: OECD, ISORA, IMF staff calculations.Note: Countries included in the IMF’s Western Hemisphere Department constituency include: Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Sint Maarten, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, United States, Uruguay, and Venezuela.

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33. The SAT could lead by example by adopting gender-sensitive employment practices. The positive role that revenue administrations can play extends to leading by example in terms of employment practices. Given the size and autonomy of many revenue administrations worldwide, building a gender-balanced and inclusive workforce and embedding appropriate employment practices can have an appreciable impact. On this score, SAT is notable in having a workforce that is majority female, although less than one-third of executive positions are staffed by women compared to an average of more than 40 percent in emerging market and advanced economies. In this regard, the SAT trails OECD peers as well as peers in the IMF’s Western Hemisphere Department constituency (Figure 3). To improve gender balance at senior levels within the workforce, identifying specific barriers for women as they move up the career ladder can be a practical and useful exercise to promote changes in policies. Providing for more flexible working can be especially important for enabling women to take up senior positions as many women balance work with caring responsibilities. Assessing cross-country data on revenue administrations, Baer et al (2023) find that, flexible work arrangements, including flexible working hours and the accommodation of regular remote working, are associated with higher proportions of female staff members and higher proportions of women executives.

Public Financial Management Policies: Deploying and Monitoring Public Resources to Tackle Gender Inequalities

34. Mexico has embraced gender budgeting and is one of the most advanced practices in the region. Gender budgeting is an important and effective tool in ensuring sufficient public sector resources are allocated to tackling gender disparities and to providing a framework for assessing the impact of policies that do not necessarily have an explicit gender dimension. Such practices are well advanced in Mexico, especially when compared to other G20 countries. The National Development Plan must be formulated with a cross-cutting gender perspective. The Federal Budget and Financial Responsibility Law states that resources assigned to budget programs and investments for addressing equality between women and men are identified in the budget and the performance evaluation system, and cannot be removed or diminished. Also, a cross-cutting Annex to the budget presents the programs for gender equality. A gender perspective has been incorporated into the program structure, and gender-related indicators into the performance evaluation system with in-year and end-year reporting. Importantly, Mexico has developed comprehensive budget tagging to Sustainable Development Goals (SDGs) including gender, and linked it to budget performance information (Alonso-Albarran et al., 2021).

35. However, closer attention should be paid to two areas where practices are limited as these present powerful opportunities to ensure the full benefits of gender budgeting are realized.

• Integration of a gender lens into the budget decision making process through deployment of Gender Impact Assessments (GIAs). Ex ante GIAs could help policymakers to better understand the impact on gender equality of their decisions—both intended and unintended— and in advance of policies being approved. A better understanding of the intended and unintended impact of the budget on gender equality leads to better informed policy choices. Policy makers are more aware of the potential impact of decisions on gender outcomes and design changes can be made if the estimated impact is not in line with the achievement of gender equality goals. In order to be effective, the assessment of the impact of policies on gender equality should be done before new proposals budget submissions that modify existing programs or even that remove them. Enhancing GIAs will improve the quality of gender budgeting in practice, in particular the tagging would improve, broadening the programs included in the Annex of Gender Equality in the budget. Also, having a more reliable and quality tagging will improve the usefulness of the monitoring process on gender-related expenditure already in place. Finally, the supporting framework for introducing GIAs and a better tagging system should rely on enhanced interinstitutional coordination between the Ministry of Finance (in charge of the budget), INMUJERES (in charge of gender equality policy and planning) and the line ministries (in charge of budget submissions). Gender impact assessments would have to be presented by the line ministries with assistance of INMUJERES and with the quality review of the Ministry of Finance. The regulations can also embed this practice to make it more sustainable over time (as discussed in Section D).⁹

• Gender disaggregated data. Gender disaggregated statistics can enhance the soundness of GIAs and help with the construction of credible performance indicators. The availability of gender-disaggregated statistics can foster gender impact assessments (GIAs) and helping to integrate better informed budget decisions. While Mexico’s statistical office, INEGI, collects a range of data on gender and related issues, the disaggregation of fiscal data along gender lines appears less common. Ensuring that administrative tax and expenditure data can be disaggregated by gender and then utilizing this data in GIAs could be an area for improvement. The gender incidence analysis of tax expenditures in the government’s annual report on tax expenditures suggests that this is feasible in Mexico and close working with INEGI, such as in the case of the recent childcare demand survey, could further augment the data available for policy making.

Conclusion

36. Mexico has committed to addressing gender gaps, but the fulfillment of this commitment could be boosted by key fiscal policy changes. Mexico has been quick to adopt policy innovations such as gender budgeting and the country’s largely successful history with conditional cash transfers and education policy included notable inroads in addressing gender gaps. More recently, pensions reforms appear to have had a notable impact on poverty amongst pensionage women. However, inequalities remain stark in a number of areas and a more holistic, data-driven strategy centered on tangible reforms could greatly build on past progress. This includes widening access to quality childcare services, bringing parental and care leave practices in-line with OECD peers, removing the minimum weeks requirement for contributory pensions, and using the wealth of data already collected by the government to assess and address the gender implications of current tax and revenue administration policies. Greater usage of gender-disaggregated data in policy formulation—in itself an extension of gender budgeting principles—will also be critical in the calibration of much needed spending on social protection, health, and education and the revenue mobilization that is required to fund this. In addition, gender impact assessments are critically important for gaining a clearer insight into the effects of policies on equality prior to the approval of the budget and new initiatives.

D. Key Legal and Institutional Issues to Further Support Women’s Economic Empowerment in Mexico¹⁰

Introduction

37. Removing legal barriers to, and providing incentives for, women’s economic empowerment is key for positive macroeconomic outcomes. It is well established that a wide range of legal impediments in countries’ constitutions and laws have prevented women from achieving full economic empowerment.¹¹ These barriers are often based on customary norms, traditions and belief systems that lead to differential treatment of women e.g., restrictions on women’s mobility; discrimination in the workplace; unequal rights in marriage, parenthood or in the ownership/management of assets; restrictions for entrepreneurship, etc. Once these legal encumbrances are eliminated, robust implementation and effective enforcement must follow to ensure that these rights are fully exercised. At the same time, policy incentives for women to enter, remain, and advance in the workforce are equally critical to be introduced through law reform, such as promoting greater presence of women in leadership roles, parental leave rights, childcare services to address the disproportionate distribution of unpaid care work, etc. Such a holistic approach to legal reform has been shown to be a highly effective method in actuating greater participation of women in the economy, enabling women to pursue equal opportunities, changing mindsets regarding the role of women, and holding institutions and individuals accountable for reducing gender gaps—along with its related macroeconomic benefits, including higher economic growth, greater economic stability and resilience, and lower income inequality.

38. Several categories of laws directly impact women’s economic participation and are often characterized by their interdependencies. As elaborated in the IMF staff’s analytical work (Christopherson et al. 2022), the main categories of law impacting women’s economic empowerment are constitutional law (including civil rights), property law (including inheritance), family law, labor law (including employment and social security), tax law and public financial management legal frameworks. The next section of this paper elaborates on these (with priority given to labor law) in order to address the gender gap in labor force participation, large informal sector and uneven distribution of unpaid care work identified in the introduction of this SIP. This section will also analyze the implications of the relevant social and cultural norms and customary law for implementation, including enforcement challenges.

Constitutional Law and Civil Rights—Equal Status, Political Voice and Access to Justice

39. In Mexico, gender equality enjoys constitutional protection, and the legal framework provides safeguards for the exercise of women’s civil rights. Constitutions are normally the supreme authority in the affirmation of equal status, political voice and access to justice for a country’s citizens. The Mexican Constitution recognizes the right to gender equality and requires the Mexican State to take affirmative action to eliminate gender-based discrimination. Mexico has further ratified international treaties and agreements that promote women’s rights, such as the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). The Nationality Law grants married women the same rights as men to acquire, change and retain their nationality, and to confer nationality to their spouses and children. Equal administrative procedures and requirements are also in place for women and men to secure national identification documents and passports, and there exist no discriminatory restrictions on women for travel outside of the country.

40. In addition to these rights, women’s participation in the political system has achieved remarkable progress owing to the introduction of legislated gender quotas. Key reforms in Mexico’s electoral procedure enabled gender parity in Mexico’s Congress in the 2018 election. A phased legal reform process enabled the transition from a voluntary system that encouraged gender parity for nominations to a mandatory system of gender quotas supported by sanctions for noncompliance, and judiciary construction to prevent the circumvention of the legal provisions (see Box 1). Other initiatives for the promotion of women’s leadership in the public and private sector will be discussed in the next section.

^{Box 1.}

Legal Reform Milestones in Mexico to Achieve Gender Parity in Congress

The Federal Code of Electoral Institutions and Procedures achieved six key reforms in the last 30 years to advance women’s political representation in Mexico.

• 1. In 1993, the law recommended political parties to promote gender parity in their nominations for deputies and senators for Congress.

• 2. In 1996, for the first time, a quota on the gender composition of the lists of candidates was introduced, imposing a maximum of 70 percent for a single gender.

• 3. In 2002, the legal framework was further reinforced to ensure tangible opportunities for the election of women candidates. This was achieved by introducing the concept of “zipper lists,” dividing candidate lists into segments of three nominations, mandating that at least one nominee of each segment to be of a different gender. This reform also introduced penalties for non-compliance, including public reprimands for political parties failing to meet the stipulated criteria, including the possibility of denial of registration.

• 4. In 2008, the gender quota was further restrained to a maximum of 60 percent for a single gender.

• 5. In 2011, the Electoral Tribunal of the Federal Judiciary ruled to bar a recurring practice of elected congresswomen resigning to give up their place to their male alternates. Cultural and customary norms that created constraints on women for holding office needed to be addressed. The ruling required that a candidate’s alternate be of the same sex as the primary candidate.

• 6. Finally, in 2014, the law introduced a mandatory 50 percent gender quota in the nomination of candidates in both federal and local congressional elections.

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Sources: InMujeres, Chamber of Deputies, and Senate.

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Source: IMF staff based on reforms of the Federal Code of Electoral Institutions and Procedures and General Law of Political Parties.

Labor Law—Equal Pay for Equal Work Value, Workplace Rights and Protection Against Sexual Harassment in Employment

41. Under the law, women and men in Mexico enjoy equal rights and protections in the workplace; however, there remain factors that may hamper women’s integration into labor force participation. The law explicitly and comprehensively prohibits discrimination in employment based on gender. A married woman is able to be hired in the same way as a man and there are no restrictions on women’s choice to work in fields deemed dangerous or at night, for example. Dismissal of pregnant workers is also prohibited. Despite these rights, however, as described in the introduction of this SIP, women in Mexico continue to suffer from several barriers for integration into the labor force: on average women work 48.5 hours a week in unpaid care work, compared to men who only work 19.5 hours a week (PROIGUALDAD, 2020); women are fifty percent less likely than men to receive an equal wage for similar work (Mexico is ranked 117^th out of 146 countries for wage equality in the WEF’s Global Gender Gap Report 2023); discrimination incidents in the workplace are frequent (21.7 percent of women aged 15 and older have suffered discrimination in the workplace, INEGI, 2021a); and gender-based violence in the workplace remains high (INEGI, 2021 b). To address these systemic hindrances and provide women equal access to opportunities to enter, stay and advance in the labor force (referred to as “substantive equality” by the Federal Labor Law), Mexico could consider the following additional legal and institutional reforms:

• Ensure the provision of a comprehensive care system. In 2020, the Chamber of Deputies approved a constitutional reform that guarantees the right to ‘decent care’ and empowers Congress to enact a law creating a National Care System defining the required competencies among the Federation, states and municipalities (Articles 4 and 73 of the Constitution). At the local level, the right to care has been also recognized in 2017 in the Constitution of the City of Mexico. As elaborated in Section B and C, the provision of quality childcare programs in boosting women’s labor force participation is critical in Mexico, as it helps address the unequal distribution between women and men in unpaid care work due to the persistence of traditional gender roles in the household. Efforts in supporting legislative initiatives defining the state (federal, state and local levels), private sector and community responsibilities in the provision of these services (which are currently too fragmented) should be prioritized.

• Provide adequate maternity and paternity leave, in line with international commitments. Paid maternity leave of 12 weeks is mandated by law. ILO Maternity Protection Convention No. 183, already ratified by Mexico, calls for an increase to a minimum of 14 weeks of maternity leave after childbirth. Paternity leave is also provided by law, though for a period of only five days. Despite this differentiated treatment in federal labor law, the judiciary has recognized in several rulings the right of fathers to paternity leave equal to that provided to mothers. For example, in 2022 the Electoral Tribunal ruled that the National Electoral Institute (INE) Statute had made an unwarranted distinction between the time given to men for paternity leave and to women for maternity leave, which constituted not only gender-based discrimination prohibited by the Constitution and law, but which perpetuated a gender stereotype and contravened the best interests of children. The ruling directed INE to modify its statutes to recognize an equal period of 90 days for paternity leave. Similar modifications were introduced to the Supreme Court statutes. Such measures also eliminate the incentives for companies and the marketplace from discriminating against a single sex (generally women) to evade the costs of providing paid leave after childbirth.

• Strengthening the legal provision of “equal pay for work of equal value” and its implementation. While the right of ‘equal pay’ is recognized in the Constitution and Federal Labor Law, the legal principle has not been further elaborated in either primary or secondary legislation. Pay discrimination practices against women remain prevalent, but they are challenging to uncover. Women’s ability to bring pay equity claims in the courts, or alternative dispute resolution mechanisms, is further hampered by the paucity of defined criteria with which to assess equal pay. To address these issues, some jurisdictions have introduced legal provisions defining the concept of “equal pay for work of equal value” as the right of women and men to be paid the same amount when engaged in identical or similar jobs. Equal pay for work of equal value means that even when men and women do different work, they should receive equal pay if the work can be shown to be of equal value when based on “objective” criteria e.g., hotel housekeeper/bartender.¹²

• Strengthen regulations to eliminate gender-based discrimination in the workplace. In 2015, the federal government issued the Norm for Labor Equality and Non-Discrimination (NMX-R-025-SCFI-2015) creating a voluntary certification process for public and private entities and civil society organizations (administered by a third party audit) that, among other conditions, requires: adopting an equality and non-discrimination policy, and monitoring of its implementation; introducing a gender lens for recruitment, selection, mobility and training processes; establishing gender-neutral job classifications and pay scales; and providing adequate breastfeeding spaces, childcare services, and flexible work arrangements for mothers. As of May 2020, the number of certified entities, particularly in the private sector, has been modestly successful (33 percent of the private sector, including only 1 percent of financial sector entities). To strengthen compliance with these norms, consideration should be given to mandating the norm with appropriate tailoring of requisites to the size and type of entities, a phased implementation, and assignment of monitoring and enforcement responsibilities to federal, state and local authorities, as needed.

• Extend social security and pension law for the most vulnerable. As analyzed in Section B, the large share of informal employment also affects women disproportionally. Six of every ten women within an economically active population lack access to formal employment opportunities (INEGI, 2019). Women also tend to be represented in the most precarious and low-paying categories of informal employment. For example, 99.2 percent of domestic workers lack a written contract that outlines their job duties, working hours, benefits, and vacation entitlements (INEGI, 2021). Judicial construction has supported developments on this front. For example, in 2018, the Supreme Court set an important precedent when it required that the Mexican Social Security Institute (IMSS) stand up a pilot program aimed at introducing a distinct social security framework for domestic workers (UNWomen, 2020).

42. With respect to representation of women in leadership positions, the public sector is progressing while the private sector is lagging behind. Reforms to the General Law for Equity of Women and Men promoted women’s representation in the public sector, including leadership positions. However, in the private sector, despite several initiatives to promote gender equality at senior management positions (e.g., the Mexican Corporate Governance Code recommends gender diversity and the Sustainability Guide of the Mexican Stock Exchange use data on gender composition for indexing listed companies), only 9.7 percent of board seats are held by women and 1.6 percent of CEOs are women (Deloitte, 2022). In the financial sector, women’s participation in senior management and boards is higher (26 percent, as of 2022) owing to the disclosure requirements mandated by the supervisory authority (CNBV) and coordination efforts promoted by the newly created Interinstitutional Committee for Gender Equality in Financial Institutions (CIIGEF). Drawing from experiences in other OECD jurisdictions (OECD, 2020), additional legal reform could be considered to further empower women in leadership roles which may range from softer to more forceful approaches, particularly when nominations are less professionalized. For example, requiring disclosure of the gender composition of boards and/or diversity policies (e.g., Australia, UK); encouraging the adoption of voluntary targets for gender diversity on boards and/or in senior management; or setting a minimum quota of women on boards, supported by law (e.g., Germany, France, Norway, Sweden, Italy). Even for the latter case, success relies on adequate law reform design including on the scope of application (e.g., listed/non listed companies, percent of revenues/assets or number of employees), timeline for implementation (e.g., intermediate and final targets) and penalties for non-compliance.

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Federal Public Administration Appointee by Gender, 2021

(In percent)

Citation: IMF Staff Country Reports 2023, 357; 10.5089/9798400258893.002.A001

Source: Secretaria de la Funcion Publica.

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Family Law—Rights and the Role of Women in the Household, Recognition of Women’s Contributions and Protection from Child Marriage

43. In Mexico, women have equal legal rights as men in the household, including over assets upon marriage. There exist no legal mandates for a married woman to obey her husband. A woman may be the head of the household and choose where to live, in the same way as a man. Women have also the same rights as men to be designated as legal guardians of their children during marriage (or in informal unions), and to remarry and receive child custody following divorce. However, they do not have the same grounds to initiate divorce as men.

44. In addition, important legal safeguards have been put in place to abolish child marriage. In 2019, reforms to the Federal Civil Code set the minimum legal age for marriage at 18 years, without exception or legal waiver. Despite these important reforms, the rates of child marriage have not decreased measurably which may indicate a shift from legal marriages to informal, illegal unions (INEGI, 2021) prevalent among rural, poor, indigenous and/or less-educated girls and adolescents and where customary laws prevail over state and federal legislation. The enforcement of these reforms are critical to ensure full implementation and incentivize change of prevalent social norms. The 2023 reform of the Criminal Code, which introduced an autonomous criminal type forced cohabitation with minors, was an important step in strengthening enforcement.

45. While women have equal access to justice, several barriers persist. The Constitution explicitly observes that all individuals are entitled to the full protection of their rights. It further establishes that all authorities, including the judiciary, must promote, respect, protect, and guarantee human rights in accordance with the Constitution and international treaties. The laws also provide women with the same rights to provide testimony in court and sue, and women’s testimony carries the same evidentiary weight in court as men in civil, criminal, family court and tribunals. This said, women in Mexico face impediments to have accessible and affordable legal advice and representation in courts, as they continue to experience physical and linguistic barriers (e.g., in rural areas). The number of public prosecutor’s offices specialized in handling such cases is inadequate to address the incidence of such crimes (INMUJERES, 2021). Additionally, other key challenges will need to be addressed, such as, lack of capacity, training, and resources in courts to handle gender-related cases, including work overload in courts and public defenders’ offices.

Property Law—Access to Productive and Financial Resources

46. Mexico’s legal framework grants women the right to collect, own, manage and transfer assets, including during marriage. The law provides equal ownership rights to men and women over movable and immovable assets. It also grants spouses equal administrative authority over assets during marriage and recognizes the valuation of nonmonetary contributions. With regard to inheritance, sons and daughters have equal rights to inheritance from their parents. Female and male surviving spouses have also equal rights to inherit assets. In the case of rural property, applicable laws recognize ejido rights (a system of communal tenure of agricultural land in which members have usufruct rather than ownership rights) for both women and men.

47. This said, social norms impact the exercise of these rights, particularly in rural areas. In practice, social and cultural practices are driving factors in the unequal allocation of land use and succession rights. This is further complicated by the fact that such decisions are commonly taken by community leaders who are predominately male. As of 2020, only 25.9 percent of ejidal communal parcel certificate holders were women, and only 7.4 percent of ejidal and communal entities were led by women (INMUJERES, 2020). Lacking ownership of real property, women cannot be beneficiaries of subsidies, credit (e.g., they can’t use land as collateral) and/or equipment. A 2023 amendment of the Agrarian Law established mandatory gender parity quotas for the candidates to ejido commissariats and supervisory councils. It further mandated that commissions and auxiliary secretariats of the ejido be composed equally of men and women. It will be important to closely monitor the implementation of these reforms to promote land ownership and women’s economic empowerment in rural areas.

48. Equal access to financial services is guaranteed by law. There are no legal impediments for woman in Mexico to open a bank account at a formal financial institution, sign a contract or register a business in the same way as a man. The Law of Credit Institutions provides that development banking must promote gender equality and financial inclusion by adopting gender neutrality in their products and services. The supervisory authority (CNBV) has also made important progress to produce sex-disaggregated data and indicators in regulatory reports, databases and surveys. In addition, the CNBV has executed some regulatory amendments for loan loss reserves to promote credits to women by banks (2021 Single Banking Circular). The law further prohibits discrimination in access to credit based on gender. Discrimination complaints against financial sector entities are channeled through the National Commission for Consumer Protection of Financial Services (CONDUSEF) and the National Council for the Prevention of Discrimination (CONAPRED). Other jurisdictions have adopted special legislation to define in more detail what are considered discriminatory practices in the provision of financial services, including market segmentation, advertising, pre-screening, application requirements and information, evaluation of applications, etc. Such legal instruments usually facilitate enforcement by providing a more robust legal basis for customers to file complaints about financial institutions discriminatory practices (e.g., US Lending Discrimination Statutes and Regulations based on the Equal Credit Opportunity Act). Mexico could consider such approach, also to change prevalent social norms that tend to discriminate women.

Tax Law and Gender Bias

49. It is crucial to evaluate the potential for gender-based impact of tax laws to ensure effectiveness of gender equal policies in tax law design. Mexico’s tax laws are drafted in gender neutral language and there is no apparent explicit bias in its tax law framework. The Service Tax Administration (SAT) reported that Mexico’s tax laws make no distinction in taxes between men and women, though no analysis has been conducted to expose implicit bias or whether the tax laws result in different impacts on each gender. To foster gender equality, targeted tax reforms on consumption or other socio-economic aspects, including sectors where women are more concentrated, were adopted. As noted in Section C, a recent legal amendment applied zero rating VAT on feminine hygiene products which are consumed only by women. Also, the newly introduced, simplified tax regime “Regimen Simplificado de Confianza (RESICO)” is considered by the SAT to have a greater impact on women as they are more concentrated in the informal sectors toward which the tax regime is targeted (women have a higher representation in part-time, commission-based, or self-employed work).

50. An analysis of the effects of tax laws and their resultant biases through a gender lens can identify and address negative bias arising from the implementation of laws that otherwise appear to be gender neutral. For instance, Canada’s Minister of Finance publishes a Gender-based Analysis Plus report on the federal personal income tax system, including its impact by gender of various deductions, credits and exemptions as provided in the Income Tax Law. Furthermore, other jurisdictions have considered tax law reforms that take gender and other inequalities into consideration (e.g., progressive taxes on incomes and capital based on ability to pay); reducing taxes on low earned incomes and providing earned income credits; increasing taxes on income from property and capital received by those with high incomes; eliminating all tax and benefit penalties that penalize women’s paid work; reducing tax burdens on low-income, self-employed women, among others (UNWOMEN, 2018). However, further research is necessary to analyze the effectiveness of any tax law measures taken to promote gender equality. Ex-post studies of the effectiveness of tax measures are needed, for example whether or not the zero VAT rate on feminine products has made them more affordable (or whether it has simply increased the profit margins for the producers/distributors of these products), and to compare its effectiveness on other direct support measures such as making such products available for free on a more targeted basis. Such analyses can thus provide insights toward the design of gender-sensitive legal reforms.

51. Regardless of the measures that are put in place, providing timely and tailored taxpayer communication and education is equally important to ensure that a tax measure is positively impactful for the intended targets. In a bid to increase tax compliance by women, the SAT has indicated that they engage in taxpayer information programs for women either directly or in conjunction with other organizations that focus on empowering or educating women.

Public Financial Management Legal Frameworks Supporting Women’s Economic Empowerment

52. Mexico embarked on important reforms to institutionalize the gender budgeting process. The implementation of gender budgeting efforts began in the late 90s, spearheaded by the legislature (Equality and Gender Committee in the Chamber of Deputies) and civil society organizations. Since 2006, several reforms have been adopted to the Federal Budget and Fiscal Responsibility Law, Planning Law, and the General Law for Equality between Women and Men to support the implementation of gender budgeting at the federal and local levels. Such reforms can be found in the fiscal strategy and planning phase, budget preparation, monitoring of budget execution, reporting and external audits, as well as accountability to the Legislature (see Box. 2).

53. Implementation of these reforms is advancing, but gaps remain. As discussed in Section C, Mexico could further strengthen the implementation of the current legal framework. To support these efforts, regulations could be developed or revised, particularly in three areas:

• Enhancing inter-institutional coordination for integrating national gender strategies to the budget preparation process. INMUJERES is a decentralized agency under the Executive branch which seeks to influence policy making through the promotion and coordination of the National Policy for Equality mainly through memorandum of understandings with federal, state and local entities. Since its creation in 2001, several laws assigned additional responsibilities to INMUJERES,¹³ though without the respective amendments to its statutory framework (INMUJERES Law). In particular, INMUJERES could benefit from more robust competences for monitoring, evaluating and assessing the integration of gender policies (defined by the PROIGUALDAD) in public sector entities’ programs (UNWOMEN, 2018). Further, the calendar for preparation of the sectorial plans does not allow for gender priorities defined in the PROIGUALDAD to be mainstreamed and included in sectorial programs (UNWOMEN, 2018).

• Defining clear and robust criteria to classify and tag budget programs with a gender perspective. An ASF Evaluation on Public Policy on Gender Equality for the period 2007-2017 (No. 1587-DS) observed the following implementation challenges that will need to be addressed by legal and regulatory reform. Annex 13 of the budget law does not cover the totality of spending agencies with responsibilities assigned by PROIGUALDAD. As of 2017, only 22.5 percent of entities had incorporated the gender perspective in their budget programs. Further, the ASF highlighted the lack of coordination between INMUJERES (with the legal mandate to advance gender public policy), the MoF (budget authority), and entities of the Federal Administration to define the criteria to determine which programs should be incorporated to Annex 13. The ASF evaluation also observed that the classification in three categories mandated by Article 27 of the Federal Budget and Fiscal Responsibility Law does not allow a more granular identification of objectives and indicators for gender equality. Finally, ASF noted that implementation of gender budgeting challenges were more pronounced for autonomous bodies (i.e., the Legislature and the Judicial branches) primarily due to the lack of guidance in the law on the procedures to integrate gender considerations into institutional budgets and responsible entities for coordination (given the higher level of autonomy of these organs).

• Protecting budget allocations of gender-related programs during budget execution. Once the annual budget law is approved, the ASF reported decreases in appropriations of budget programs included in Annex 13 during budget execution in the 2007-2017 period. No information was found regarding whether or not an opinion of the Chamber of Deputies was requested, as mandated by the Federal Budget and Fiscal Responsibility Law. The authorities clarified that rather than a limitation to in-year budget reallocations, the legal provision has been interpreted as the prohibition to decrease the nominal amount of Annex 13 from one fiscal year to the other.

Conclusion

54. Overall, Mexico has made significant progress in removing legal impediments to women’s economic empowerment. Mexico’s legal system provides women with equal rights under the law; it does not legally constrain women’s freedom of movement, decision to work, marry, own, dispose of and inherit property, or to start and run a business. Mexico has also advanced in increasing the participation of women in political and decision-making processes by imposing mandatory quotas for elected positions within the three branches of the federal government and local government. Reforms in gender budgeting have been institutionalized by adopting a comprehensive legal framework requiring resources be allocated to budget programs tasked with promoting gender equality to be identified, monitored and reported. These advances have allowed Mexico to achieve high rankings in relevant international indices which measure the state of women’s rights. For example, in the World Bank’s Women, Business and the Law Index, Mexico enjoys an 88.8 rating on a scale of 100, among the highest of OECD countries.¹⁴

55. Building on the progress already achieved, Mexico would benefit both from strengthening the implementation and enforcement of existing legislation and from targeted legal reform to close remaining gender gaps. Attention should be paid to addressing the gender gaps in labor force participation, as discussed in Section B. In particular, the legal framework could address the impact that social and cultural norms are having on the implementation of legal reforms which constrain the capacity of women to exercise their legal rights to fully participate in the country’s economy, if they so desire. With regard to additional legal reform, the authorities could consider providing for paid maternity and paternity leave in line with international commitments, ensuring the provision of adequate childcare services to address the disproportionate burden on women of unpaid care work (as discussed in Section C), strengthening the principle of equal pay for work of equal value, strengthening implementation of land ownership rights for women in rural areas, and promoting women representation in leadership positions in both the public and private sector. In the fiscal law area, tax laws are drafted in gender neutral language with no apparent bias. However, as discussed in Section C, the tax authorities could undertake a comprehensive diagnostic of tax laws for potential gender biases in tax legislation. Regulations could also be developed to enhance integration of national gender strategies within the budget process, provide clear and robust criteria for the classification and tagging of budget programs with a gender perspective, provide safeguards for those resources from in-year budget modifications during budget execution, and strengthen accountability through the legislature and external audit.