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THE ROLE OF MEXICO
IN THE G20

Lourdes Aranda Bezaury * sre

MATÍAS ROMERO INSTITUTe


seCreTAry oF ForeIGn AFFAIrs
Patricia espinosa Cantellano

HeAd oF THe MATíAs roMero InsTITuTe
Lourdes Aranda Bezaury

dIreCTor GenerAL oF THe MATíAs roMero InsTITuTe
Pablo Macedo riba

dIreCTor oF PuBLICATIons And InTernATIonAL ProGrAMs
Cuauhtémoc Villamar Calderón

Constanza García Colomé, AreA dIreCTor * didya Fong olmos, dePuTy dIreCTor * María
Cristina Tovar Gómora, dePArTMenT HeAd

The Role of Mexico in the G20 * Lourdes Aranda Bezaury | sre

First edition, 2012
Copyright © 2012 by secretaría de relaciones exteriores
Plaza Juárez 20, Col. Centro, del. Cuauhtémoc, C.P. 06010, Mexico City

The opinions expressed in this book are those of the authors and do not necessarily
reflect the position of the secretary of Foreign Affairs.

Printed in Mexico

sre
337.1
Ar662
Aranda Bezaury, Lourdes.
The role of Mexico in the G20 / Translation of Participación mexicana en el G20 /
Lourdes Aranda Bezaury. – Mexico: secretary of Foreign Affairs, Matías romero
Institute, 2012.
36 p. –(G20 Journals; 1).
Contents: v. 1. Mexico.

1. Mexico – Foreign economic relations. 2. Group of Twenty. 3. International
economic relations. 4. International economic integration. I. Mexico. secretary
of Foreign Affairs. Matías romero Institute. II. Title III. series.


THe roLe oF MexICo In THe G20

Lourdes Aranda Bezaury *

ConTenTs

InTroduCTIon ....... ............. ............. .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

eVoLuTIon oF InForMAL ConsuLTATIons And THe orIGIns oF THe G20 . . . . . . 7

eVoLuTIon oF THe G20 AT THe LeAders LeVeL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

THe G20: sTruCTure And FunCTIon ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

THe MexICAn PresIdenCy oF THe G20...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ConCLusIons ....... ............. ............. ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

* undersecretary of Foreign Affairs and G20 sherpa:
laranda@sre.gob.mx

The author thanks david dávila estefan and Catalina López Portillo
for their contributions to this project, and Berenice díaz-Ceballos, Am-
bassador Gustavo Albín and Mauricio Guerrero for their comments on
the drafts.


InTroduCTIon

Implicit in the institutionalization of the G20 at the leaders’ level is the
fact that the axis of international economic power has shifted, becoming more
multipolar as the political weight and influence of the emerging powers
increase in the global economy.1 At the same time, the G20, as an informal
forum for discussing and seeking solutions to global issues, reflects the
need for innovative means of cooperation in a world in which the problems
that transcend national borders, especially the economic and financial
ones, have become increasingly complex and indispensable, a coordinated
response from both developed and developing countries.
The purpose of this essay is to critically review how the G20, since
it began to meet at the leaders’ level, has evolved into a key forum for
inter national economic consultations that can offer an alternative to address
our global challenges. Principally, the essay evaluates the main achieve-
ments of the G20 and the progress that its collective action has brought
about to global economic stability, as well as its most significant challen-
ges. It also examines Mexico’s role in this informal forum for international
dialogue, including its plans for the immediate future. With the June 2012
Leaders’ summit in Los Cabos, Mexico will have hosted two large-scale
meetings on global governance in the last decade: The International Con-
ference on Financing for development in Monterrey (2002) and the G20
summit in Los Cabos (2012). This confirms Mexico’s commitment to mul-
tilateralism and to building a balanced, representative and effective in-
ternational architecture.

1 Lourdes ArAndA BezAury and BerenICe díAz CeBALLos PArAdA, “México y los cambios en la

arquitectura económica internacional,” in Blanca Torres and Gustavo Vega (eds.), Relaciones
Internacionales, Mexico, el Colegio de México (Los Grandes Problemas de México, vol. xII),
2010, pp. 651-673, at http://2010.colmex.mx/16tomos/XII.pdf.

*5*


eVoLuTIon oF InForMAL ConsuLTATIons And THe orIGIns oF THe G20

Historically, international economic crises have led to the creation of ad hoc
groups that coordinate collective economic policy responses. The first half
of the 1970s saw the collapse of the Bretton Woods international mone-
tary system with the end of the international gold-dollar standard, followed
by a global economic recession triggered by higher international oil prices.
These events had profound consequences on the organization of the global
economy and gave rise to alternative ways of discussing issues between
the largest capitalist powers that were direct, efficient and “between equals”,
something that was not always possible in the traditional multilateral
organizations during the Cold War. In this way, the Group of seven (G7)
emerged in 1975, becoming the G8 in 1998 with the inclusion of the rus-
sian Federation.
However, the G8 has gradually become more and more limited in its
ability to deal with the global financial and economic challenges that re-
quire the participation of the emerging and developing countries. Given
the increasing globalization and the emergence of new economic poles, the
participation of emerging countries such as Brazil, China, India and Mexico
has become vital in the search of solutions to the complex problems that
have arisen. Although the G8 tried to broaden its contacts with other coun-
tries, mainly through the “expanded dialogue” with emerging countries,2
international organizations, business leaders and civil society organiza-
tions, this approach would be eclipsed by the imminent appearance of the
G20 leaders’ summits.

2 specifically, five emerging countries, Brazil, China, India, Mexico and south Africa, were in-

vited by the Group of eight (G8) to participate in the 2005 Gleneagles summit, in acknow-
ledgement of the importance of their economies and their regional leadership, and as a way
of urging them to assume new responsibilities regarding transnational issues. The Group of
Five (G5) came together as a result of the repeated invitations these countries received to
the G8+5 expanded dialogue, and its members held leaders’ and sherpa meetings to coordi-
nate their positions and to speak with one voice, although it did not address the G8 members
on equal terms.

*7*


Lourdes ArAndA BezAury

As was the case with the economic difficulties experienced in the early
1970s, the financial crises in Mexico in 1994-1995, southeast Asia in 1997
and Brazil and Argentina in 1999 spread to the rest of the global economy.
The unusual degree to which these crises expanded led to the creation of an
economic forum that was broader and more representative than the G8. The
Group of 20 thus emerged in 1999 as a forum composed of finance ministers
and central bank governors to start discussing the financial policies that im-
pacted global economic stability. In addition to the G8 countries and the
european union, the G20 included 11 “systemically important”3 countries:
Argentina, Australia, Brazil, China, India, Indonesia, Korea, Mexico, saudi Ara-
bia, south Africa and Turkey.4 It must be stressed that the G20 represents
about 65 percent of the world’s population and 85 percent of the global eco-
nomy.5 Although the G20’s limited membership is debated, it is clearly more
representative than the G8 while at the same time its size makes it swift and
effective at making decisions, at unblocking negotiations and at fostering
mechanisms, due to the regional and international leadership of its members
and their geopolitical and economic attributes.
From the very beginning of the G20, Mexico has promoted the en-
hancement of its role as a representative, inclusive and effective forum for
taking and implementing economic and financial decisions in a world
where the international economy is increasingly interdependent and mul-
tipolar. As John Kirton has suggested, the G20 is “the culmination of an ex-
pansion of the center of global governance to include ascending powers
alongside advanced ones, and to give each equal, institutionalized involve-
ment and influence in the central club.”6 Therefore, the G20 is an achievement

3 This refers to economies that have the ability to impact the stability of the international
economic and financial system as a whole.
4 The most important criteria is the size of the country’s economy in relation to global GnP, but

the extent to which it is connected with the rest of the world, demography and other criteria
are also taken into account. see G8, G7 Statement, June 18, 1999, at http://www.g8.utoronto.
ca/summit/1999koln/g7statement_june18.htm.
5 see “What is the G20?” at http://www.g20.org/about_what_is_g20.aspx.
6 JoHn KIrTon, “G20, G8 & G5 and the role of Ascending Powers,” speech given as part of the

seminar on “The International system and the emerging Powers,” Mexico, Instituto Matías
romero, december 14, 2010, at http://www.g20.utoronto.ca/biblio/kirton-g20-g8-g5.pdf.

*8*


The Role of Mexico in the G20

per se in that it brings to the table for discussion and negotiations global
and regional powers, developed and emerging economies alike, that have
the joint capacity to propose and implement decisions that make the global
economy viable and benefit all countries and their populations, be they
members or not. Mexico’s membership in the G20 since its inception at the
ministerial level in 1999 reflects the weight of its economy (the tenth lar-
gest exporter7 and thirteenth largest economy in terms of its participation
in the global GnP),8 its open trading regime, its regional leadership and its
macroeconomic stability.

7 seCreTAríA de eConoMíA, at http://www.economia.gob.mx/index.php/comunidad-negocios-
padre/estadisticas.
8 THe eConoMIsT, Pocket World in Figure, Edition 2011, London, Profile Books Ltd., 2010.

*9*


eVoLuTIon oF THe G20 AT THe LeAders LeVeL

The G20’s agenda is directly related to the imbalances that led to the 2008
economic and financial crisis and that raised the forum to the leaders’
level. When the crisis became global in scope, neither national policies nor
the international financial institutions were able to respond as quickly
and comprehensively as the situation demanded. In addition, the G8’s limited
membership meant that emerging economic powers that were key to
putting a global solution together were not involved. The G20 filled this
institutional “vacuum” by organizing a collective initiative to avoid the
possible collapse of the global economy. The crisis had a very unique charac-
teristic: its negative effects were felt immediately and deeply in almost
all countries around the world, especially in those that make up the G20.
Although the origins of the 2008 financial and economic crisis have been
debated, most of the observers agree that it developed in a complex manner
with the following key factors:

• A prolonged period of economic growth that created excess li-
quidity, an unsustainable expansion of credit and increasingly
risky behavior by investors, which led to an inflationary “bubble.”

• Lax regulation and supervision of the financial system, based on
the incorrect assumption that the sector was self-regulating.

• The limited capacity of the international financial institutions to
effectively safeguard the health of the global financial system.

Although these conditions had caused previous episodes of financial ins-
tability in emerging economies, in 2008 the epicenter was located in the
financial system with the most weight at the global level: the united states.
on september 13, 2008, after Treasury secretary Henry Paulson refused
to bail out Lehman Brothers, it was clear that the united states’ financial
system was not in any condition to absorb the bankruptcy of one of the
oldest and most important institutions in the global market. The collapse

* 10 *



of Lehman Brothers and the quasi-liquidation of American International
Group (AIG) triggered the beginning of the most severe financial crisis
since 1929.
That same week, several of the most important banking institu-
tions in the united states became unable to insure the deposits of their
creditors. days after Lehman Brothers collapsed, secretary Paulson an-
nounced that the u.s. Congress was being sent a 700 billion dollar bank
rescue package to “restore stability to the system, halt the crisis of con-
fidence and protect the taxpayer.”9
But the u.s. bank rescue was not enough to defuse a global crisis
in confidence and liquidity. What began in August 2007 as turbulence in
the u.s. mortgage market became the origin the biggest crisis since the
1929 Great depression. Countries that did not seem to be immediately
affected by the collapse of Lehman Brothers in september 2008 were
impacted later through their export markets.10 To mention just a few
statistics, the crisis caused the global GnP to contract by 0.5 percent and
global trade to fall by about nine percent.11 Mexico’s GnP fell by 6.1 and
about 700,000 jobs were lost because of the crisis.12
Given the dire circumstances, President George W. Bush convened
the first G20 Leaders’ summit in october 2008 in Washington d.C., in

9 seCreTAry oF THe TreAsury, “Text of draft Proposal for Bailout Plan. Legislative Proposal
for Treasury Authority to Purchase Mortgage-related Assets,” New York Times, september
20, 2008, at http://www.nytimes.com/2008/09/21/business/21draftcnd.html.
10 PAoLA suBACCHI and PAuL JenKIns, Preventing Crises and Promoting Economic Growth: A

Framework for International Policy Cooperation, London, Centre for International Governance
Innovation (CIGI)/Chatham House, 2011, available at http://www.chathamhouse.org/sites/
default/files/public/Research/International%20Economics/r0411_ipc.pdf.
11 BAnCo de MéxICo, 2010 Annual report, April 2011, at http://www.banxico.org.mx/

publicaciones-y-discursos/publicaciones/informes-periodicos/anual/%7B4DD504A9-510A-
F0DC-76B2-D028BE9FB374%7D.pdf.
12 Idem.; and ernesTo Cordero Arroyo and JAVIer LozAno ALArCón, Statements of the Secre-

taries of Finance and Public Credit and Labor and Social Security, Ernesto Cordero Arroyo
and Javier Lozano Alarcón, respectively, at the press conference they offered on the employ-
ment situation in Mexico, January 4, 2011, at http://www.shcp.gob.mx/SALAPRENSA/
doc_discurso_funcionarios/secretario/SHCP/eca_jla_conferencia_empleo_04012011.pdf (acces-
sed september 26, 2011).

* 11 *



order to design a global response to the crisis and agree on an agenda to
maintain the stability of the international economy. since the Washington
summit, there have been six Leaders’ summits: in London (March 2009);
Pittsburgh (october 2009); Toronto (June 2010); seoul (november 2010)
and Cannes (november 2011).
What follows is a brief description of how the G20 has evolved since
it began meeting at the leaders’ level, and of Mexico’s role in the group.

Stability and the Framework for Strong, Sustainable
and Balanced Growth

The G20 has gradually moved from its initial focus on heading off a crisis
to preventive, long-term macroeconomic cooperation. When the leaders
met for the first time in november 2008 in Washington, their main goal
was to reach an understanding on the causes of the global crisis and to
assess appropriate policies to deal with it. Given the critical global eco-
nomic situation, the G20 countries began to cooperate closely on macro-
economic policy in order to restore growth and contain the spread of the
crisis to the most vulnerable economies. The strongest response to the crisis
came at the London summit in March 2009 when the leaders agreed on
a two-year, five billion dollar coordinated fiscal and monetary stimulus
package. six months later, the leaders noted that this package was the
largest in economic history and that it effectively accomplished its goal
of avoiding the collapse of global economic activity, stabilizing the markets
and restoring trade.13 Without a doubt, this swift coordination of stimulus
measures demonstrated the G20´s ability to reach agreements that bene-
fited the world economy and enhanced its status as a credible participant
in world governance.
Thanks to their deeper understanding of the global imbalances
that contributed to the 2008 financial debacle, the leaders drew up a Frame-

13 G20, The Pittsburgh Summit 2009 Leaders’ Statement, preamble, paragraph 6, at
http://www.g20.org/ documents/pittsburgh_summit_leaders_statement_250909.pdf.

* 12 *



work for Strong, Sustainable and Balanced Growth to ensure that the fis-
cal, monetary, trade and structural policies of the member countries
were consistent at the global level. The framework is an ambitious effort to
coordinate policies with the goal of stimulating sustainable and balanced
growth; accelerating job creation; and reducing the risks to economic
stability throughout the world. In very broad terms, the framework tries
to eliminate the most fundamental causes of the crisis, principally the
complex combination of high levels of public and private debt combined
with significant fiscal and trade imbalances in some of the most advan-
ced economies. As a result, the framework proposes that the deficit eco-
nomies move towards fiscal equilibrium by cutting their deficit by half
in 2013, reducing public debt, encouraging domestic savings and making
their exports more competitive.
At the other extreme, the economies that are running a surplus,
which over the years leading up to the crisis showed dynamic growth driven
by external demand, should put reforms in place that reduce their reliance
on foreign markets, develop sources of domestic growth and implement
more flexible exchange rate policies in order to strengthen domestic con-
sumption and welfare. Furthermore, all of the G20 economies should
implement structural reforms that encourage growth, demand and job
creation. Given the wide variety of national circumstances in the G20 and
an economic situation that is continually evolving, it was agreed at the
Toronto Leaders’ summit that the circumstances of each country would
determine the degree to which they implemented the framework.
Although negotiating the framework’s progress has been complex
and not entirely free of disagreements, one big advantage has emerged:
it has led to closer coordination and dialogue between emerging and de-
veloped economies, allowing them to set goals and assess the implemen-
tation of agreements on issues that just a few years ago would have been
impossible to discuss, such as the global consequences of monetary and
exchange policies. Therefore, it has become a very novel instrument for
cooperation that has gradually opened the door to a macroeconomic dia-
logue between developed and emerging countries.
As many observers have noted, preventing future crises, reducing
volatility and stabilizing the global economy will depend on effective

* 13 *



international economic cooperation.14 The challenge for the G20 and the
Framework is to achieve a global understanding of the fact that it is in
the national interest of all countries to manage the risks and global im-
balances within an effective multilateral cooperation framework. This,
of course, is related to another key issue on the G20 agenda: reform of
the international financial institutions.

Reforming the International Financial Institutions

This is, without a doubt, one of the areas where the G20 has accomplished
its goals remarkably, and in a very short period of time. The reform has
come about mainly to satisfy the institutions’ need for sufficient capitali-
zation to help countries in financial difficulties, as well as their need to adjust
their decision-making processes to reflect the structural change wrought
by the new weight of the emerging and developing economies in contem-
porary economic relations.

Capitalization of the International Financial Institutions

The first efforts of the G20 with regard to the international financial ins-
titutions focused on making sure there was a stable flow of capital from
them to the countries that were experiencing difficulties. At the London
summit, the G20 therefore agreed to a capitalization of 850 billion dollars
for these institutions to support emerging and developing economies to
take countercyclical measures, capitalize their banks, invest in infrastruc-
ture and assist with the balance of payments and social programs.15
In order to immediately assist its member countries, the resources
of the International Monetary Fund were doubled to 500 billion dollars

14 P. suBACCHI and P. JenKIns, op. cit.
15 G20, Declaration on Delivering Resources Through the International Financial Institutions,

April 2009, at http://www.g20.org/Documents/Fin_Deps_IFI_Annex_Draft_02_04_09_1615_
Clean.pdf.

* 14 *



through the new Arrangements to Borrow (nAB) credit line, and an ad-
ditional 100 billion dollars was provided to the multilateral development
banks, specifically for loans to the lowest-income countries. At the 2010
Toronto summit, the leaders noted that the IMF’s capitalization now total-
ed 750 billion dollars, and that of the multilateral development banks
totaled 235 billion dollars, surpassing the financing goals that had been
set in Pittsburgh. Mobilization of these resources played a decisive role
in stabilizing the markets and laying the foundation for a recovery. Based
on that progress, the leaders decided at the Toronto summit to authorize
additional resources totaling 850 million dollars to the international fi-
nancial institutions so that they could continue supporting emerging and
developing countries.16
It should be noted that, at the London summit, the G20 encouraged
the oMF to create a Flexible Credit Line (FCL) to ensure that its recapita-
lization translate into effective and timely loans. The FCL represents an
important step forward because it allows member countries with sound
macroeconomic policies such as Mexico access to preventive loans
should they face balance of payment problems or abrupt capital flight.
In a similar manner, at the seoul summit, the leaders announced the
launch of the Precautionary Credit Line (PCL) for countries which, because
of their size or role in the system, are more vulnerable and need precau-
tionary liquidity.

Reform of the Quotas, Voice and Representation
of the International Financial Institutions

In addition to addressing the capitalization of the international financial
institutions, at the Washington summit the G20 committed to promoting
reform of the quotas so that the Bretton Woods institutions more ade-
quately reflect the changes in the global economy, specifically the greater
relative weight of the emerging and developing countries. With this in

16G20, The G-20 Toronto Summit Declaration, June 2010, paragraphs 23-25, at http://
www.g20.org/Documents/ g20_declaration_en.pdf.

* 15 *



mind, between the Washington and seoul summits, the G20 urged a reform
to the IFM that involved shifting six percent of the quota shares of the
overrepresented countries to those that were underrepresented and
doubling the quotas of all of IFM member countries. This is clearly very
important progress: it significantly strengthens the IFM’s capitalization
and its ability to assist its members. Furthermore, in seoul, the leaders
agreed to reduce european overrepresentation in the IFM executive
Board, taking two seats from that region. There have been similar efforts
in the World Bank, including a redistribution of at least 4.59 percent of its
quotas towards developing countries.

Global Financial Safety Nets and the International Monetary System

To the extent that the global economy has evolved towards complex in-
terdependence, financial volatility has become a fundamental source of
instability that has affected even countries with sound macroeconomic
foundations. The creation of financial safety nets responds to the need
to help the most vulnerable countries face the financial fluctuations as-
sociated with abrupt changes in capital flows and with excess reserve
accumulation. Based on the agreements reached at the G20 summits in
Toronto and seoul, the leaders have committed to continuing to work on
this issue to better prevent and manage future crises and, in general, to
make the international monetary system stronger and more stable. Al-
though the international monetary system has supported the expansion
of the world economy, the tensions and weaknesses are increasingly evi-
dent.17 For this reason, the G20 created a working group coordinated by
Mexico and Germany to debate possible measures and alternatives for
making the international monetary system more stable and for strength-
ening the role of the IFM in this process.

17PALAIs royALe InITIATIVe, Reform of the International Monetary System: A Cooperative
Approach for the Twenty First Century, January 2011, at http://www.elysee.fr/president/root/
bank_objects/Camdessus-english.pdf.

* 16 *



Reforming Financial Regulation and Supervision

Irresponsible practices and a high level of risk in the financial system,
along with regulatory and supervisory flaws were “at the root” of the 2008
crisis.18 While regulation is the responsibility of each national jurisdic-
tion and its authorities, the 2008 crisis threw into sharp relief the global
nature of the financial markets and their high degree of interconnection.
For this reason, at the first summit in Washington, the leaders decided
to begin a process of broad reforms to the financial sector and to inten-
sify international cooperation on implementing new regulatory stan-
dards. They agreed that the guidelines for reforming the sector would
be transparency and accountability for the banks, solid financial regula-
tion, the integrity of the financial markets and improving the capabilities
of the relevant international financial institutions.19
one of the most important contributions of the G20 in this area
was the creation at the London summit of the Financial stability Board
(FsB), which replaced the Financial stability Forum (FsF), whose member-
ship had been limited to the G8 and spain, the netherlands, switzerland
and singapore. The FsB is charged with the international coordination of
the regulatory and supervisory authorities of all of the G20 countries, in
collaboration with the Basel Committee on Banking supervision,20 and
the International Monetary Fund, to promote the implementation of effec-
tive regulatory and supervisory policies.

18 G20, The G20 Seoul Summit Leaders’ Declaration, november 2010, paragraph 27, at
http://www.g20.org/Documents2010/11/seoulsummit_declaration.pdf.
19 G20, Summit on Financial Markets and The World Economy Declaration, november 2008,

at http://ww.g2.org/Documents/g20_summit_declaration.pdf.
20 The Basel Committee on Banking supervision is a forum for cooperation on bank super-

visory policies. Its goal is to facilitate an understanding on issues that are key to improving the
quality of supervision around the world. The oversight authorities from the following ju-
risdictions participate: Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany,
Hong Kong, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, netherlands, russia,
saudi Arabia, singapore, south Africa, spain, sweden, switzerland, Turkey, united Kingdom,
and united states. Its secretariat is headquartered at the Bank for International settlements
in Basel, switzerland.

* 17 *



At the Toronto summit, the G20 devised a plan for financial reform
that was based on four pillars: a stronger regulatory system; more ef-
fective supervision; the development of a resolution mechanism to ad-
dress the bankruptcy of systemically important financial institutions
(sIFIs);21 and transparent international assessment and peer review of
compliance with the new standards. After the leaders repeatedly voiced
their support for the new “Basel III” rules22 presented at the seoul sum-
mit, all members have committed to making the necessary changes to
their national legislation in order to implement the new measures be-
ginning in January 2013, with a critical route that concludes in 2019.
This incremental process is to ensure that the new rules are not imple-
mented abruptly, inhibiting access to financing and increasing costs at
a period of time in which it is vitally important to continue the flow of
credit to the economy in order to consolidate recovery. However, the
new standards reduce the incentives for excessive risk-taking and irres-
ponsibility, lessening the probability of a new crisis at the same time that
it strengthens the sector in support of economic growth.

21 The collapse of banking institutions such as Lehman Brothers in 2008 which, because
of its size, complexity and interconnections with the rest of the global financial system, had
consequences for the rest of the world, demonstrated the need for clear rules to minimize
the damage caused by the lack of a procedural framework for bankruptcies and other pro-
blems. In november 2010, the Financial stability Board (FsB) established a new procedural
framework so that the breakdown of this type of institution would not affect the rest of
the system. Currently, the FsB is working on a methodology to identify the sIFIs. It estimates
that it will conclude its work in september 2011.
22 Basel III is a set of proposals for reforming the international capital and liquidity require-

ments for banks and some areas of bank supervision. Its name comes from the fact that it is
the third version of the international rules for capital and liquidity of the 1988 Basel Agree-
ment. Basel II was adopted in 1992. The Basel Committee has urged that the capital rules be
based on the supposition that the level of capital should depend on the level of risk associated
with the bank’s assets. since capital exists to protect the bank from risk, a logical consequence
is that more capital is needed when the bank decides to take on more risk.

* 18 *



An Open Global Economy

At the Washington summit, the leaders acknowledged that global trade
drives prosperity and growth, and they highlighted the importance of avoiding
protectionism. However, at the London summit, they noted that protec-
tionist measures and the contraction in trade financing were exacerbating the
decline in global demand for goods and services. Therefore, they decided
to redouble their efforts to avoid the creation of new barriers to the trade
in goods and services and to take all necessary steps to restore financing
to the sector by ensuring 250 billion dollars of support for trade finance
over two years.23 In addition, at each of the leaders’ summits, the G20 has
reiterated its support for a swift conclusion to the World Trade organization’s
doha round. However, it is in this area that the limits to what the G20 can do
are most clearly seen. A spirit of protectionism has prevailed to the detriment
of greater global growth and wellbeing.

Non-financial Issues and the G20

Because the G20 was able to facilitate consensus decision-making to manage
the 2008 crisis, expectations are now high that this forum will address other
important multilateral issues that, because of their complexity and the many
diverging opinions about them, have languished for a long time. While there
is consensus that the G20 should concentrate on the financial and economic
agenda that gave rise to its creation, there is also a belief that the group can
serve as a forum for discussion of global issues related to financial develop-
ment. For example, World Bank President robert zoellick has suggested that
the G20 promote “responsible globalization” that links sustainable growth
to financial stability, development and climate change.24

23 G20, Declaration on Delivering Resources…, paragraph 22.
24 roBerT zoeLLICK, Democratizing Development Economics, conference, Washington, d.C., George-

town university, september 29, 2010, at http://web.worldbank.org/WB-SITE/EXTERNAL/
EXTABOUTUS/ORGANIZATION/EXTPRESIDENT2007/0,,contentMDK:22716997~menuPK:
64822279~pagePK:64821878~piPK:64821912~theSite PK:3916065,00.html (accessed september
26, 2011).

* 19 *



Development

Various observers have noted that, by including the issue of development
on its agenda, the G20 has signaled the beginning of a new stage in its
evolution. It certainly reflects the impact of the developing countries on
the forum and the fact that their agenda has gained legitimacy, and com-
mitted the G20 more clearly to the less-developed countries and sectors.
The group has the potential and the political leadership to give impetus to
higher levels of development thanks to the impact of its economic poli-
cies. In fact, the G20 could play an important role in promoting the Mi-
llennium development Goals despite the restrictions currently faced by
the international economy.

Climate Change

Without a doubt, the global response to the problem of climate change
is intrinsically related to the international economy. Climate change pre-
sents us with clear challenges but it also represents opportunities for the
global economy. The challenges derive from the need to limit greenhouse
gas emissions through the development of greener industrial technologies.
The transition to the use of low-carbon technologies and production chains
creates new business and investment opportunities that are linked to
growth and jobs. Therefore, the G20, as the most important forum for inter-
national economic cooperation, cannot remain detached from the fight
against climate change.
The negotiations on climate change and its financing have been
addressed by the G20 leaders in their declarations. However, the G20
does not intend to become the main platform for climate change coopera-
tion, but rather to simply support and promote the process as it evolves
within the united nations framework.

* 20 *



Energy

In response to the increasing energy price volatility and its impact on
economic activity, the G20 became involved in this area beginning at the
Pittsburgh summit in order to address several challenges in this sector.
In addition to laying the foundation for dealing with the price volatility, the
G20 seeks to contribute to reducing subsidies for fossil fuels that damage
the environment and to facilitating the exchange of best practices in clean
energy and energy efficiency.

Agriculture

The G20 agriculture ministers meet during the preparations for the sum-
mits to share opinions and seek solutions to problems that impact the
stability of the global economy such as food security and agricultural
price volatility. over the past months, these problems have worsened
considerably, which has had serious consequences in some regions of
the world such as the Horn of Africa.

The Fight against Corruption

In recognition of the serious implications of corruption on economic
growth, such as increased transaction costs and market distortion, at the
G20 Toronto summit in June 2010, an Anti-Corruption Working Group
was created. This group seeks to promote the main united nations and
the organization for economic Cooperation and development (oeCd) in-
ternational anti-corruption instruments; avoid access by corrupt officials
to the financial system; combat money laundering and tax havens;
strengthen agreements on mutual assistance, extradition and the confis-
cation of assets; improve protection for whistleblowers, and to exchange
best practices. To date, significant steps have been taken towards the im-
plementation of the group’s Anti-Corruption Action Plan, and a progress
report was submitted at the Cannes summit. Mexico has participated

* 21 *



actively in the Working Group and will co-chair it with the united King-
dom in 2012.

Employment

The G20 leaders have repeatedly stated that job creation must be at the
center of the global economic recovery. To this end, the G20 labor mi-
nisters meet periodically to discuss strategy and to exchange best prac-
tices in order to respond to the social consequences of the economic and
financial instability. At the september 2011 meeting of labor ministers
in Paris, it was agreed to create a task force to facilitate the development
of job creation strategies, especially for youth.
The agenda briefly described above shows that the G20 is pivotal
in promoting non-financial global issues closely linked to economic de-
velopment, such as the fight against corruption as well as development
itself, in which its leadership can make a difference.

* 22 *


THe G20: sTruCTure And FunCTIon

Although it is true that the G20 is an informal forum for discussion, with-
out its own headquarters or administrative structure, it exists and func-
tions based on a complex network of consultations and communication
between various areas and levels of government of its 19 member coun-
tries and the european union. of course, the leaders are the highest
authority. It is they who provide the political capital and give impetus to
the negotiations at the summits.
It is worth mentioning that the G20—whose main value added vis-
à-vis other international organizations is precisely the political capital and
the level of dialogue made possible by the presence of the leaders—orga-
nizes its agenda along two lines. There is a “finance channel” managed by
the central bank governors and the finance ministers of all of the member
countries with technical assistance from the main international financial
institutions. In Mexico, this channel is the direct responsibility of the Mi-
nistry of Finance and Public Credit (sHCP) and the Banco de México. Based
on the analyses and recommendations of the finance leaders, the goal is
for the leaders to promote coordination of economic and financial policies
at the international and national level in order to achieve a more prospe-
rous, balanced and sustainable order in all regions of the world.
In addition to the “finance channel,” the “sherpa channel” coordina-
tes the non-financial issues. The sherpas are the leaders’ personal repre-
sentatives. The term refers to the guides that lead climbers on expeditions
to scale the Himalayas. This channel addresses issues such as the fight
against corruption, the development plan adopted in seoul, energy effi-
ciency and food security. The sherpas are also responsible, of course, for
the group’s internal coordination and outreach to third-party actors.
The rotating presidency of the summit is supported by a group of
advisors that each government appoints according to its own specific cir-
cumstances. one way of providing continuity from one summit to the next
has been the creation of a G20 “Troika,” made up of the past, present and
future summit chairs. Working in an advisory capacity, the Troika ensures
a certain continuity and consistency to all of the summits without incurring

* 23 *



in the high administrative costs that would come with creating a secre-
tariat. nor does it take away from the G20’s flexibility, which is based on
a direct dialogue between its main participants. It is also important to
point out that the G20 works without a formal secretariat because the in-
ternational financial institutions with a universal and permanent mem-
bership such as the IMF provide it with the human and technical resources
it needs for its decision-making process. Before debating whether or not
it should create a more formal institutional structure for itself, the G20
should demonstrate that it has successfully fulfilled the terms of its agre-
ements. For this very reason, the G20 focuses its efforts on fulfilling its
original commitments and limits its engagement with other issues.
Lastly, regarding the growing debate about the role of the G20 and
the formal multilateral organizations, it is important to stress that the
G20 is a complementary forum for cooperation that does not intend to
replace the existing institutional arrangements. The nature and function
of the G20 are frequently misconstrued, as are its comparative advanta-
ges and strategic relationship vis-à-vis, for example, the united nations.
on some issues, such as development, coordination between the G20 and
the united nations is key to contribute to fulfilling the Millennium deve-
lopment Goals.
In addition, in response to the legitimate concerns of the impact of
the G20’s decisions on other countries and actors, the leaders committed
at the seoul summit to increasing the group’s consultations and outreach
programs in a systematic fashion, based on the G20’s relations with the
international financial institutions, the united nations, regional organi-
zations, civil society and academia.25 The goal is to establish connections
and synergies between the various organizations and actors instead of
juxtaposing agendas.

25 G20, The G20 Seoul Summit…, paragraph 73.

* 24 *



The role of Mexico in the G20

Mexico actively participates in the process of strengthening the G20 as
the main forum for international economic cooperation and discussion
between developed and developing countries. In addition, the G20 also
provides an opportunity for Mexico to increase its interactions with coun-
tries that are particularly important for its foreign policy, because they
are important trading partners, foreign investors or because we share
common positions in international forums.
As a general strategy, Mexico seeks to take advantage of its situation
as a country that bridges regions, benefiting from its geopolitical and geo-
strategic position between north America, Central America and south
America; as a country of both the Atlantic and the Pacific; and from its
historic ties with europe. In addition to the above, Mexico is able to bridge
the gap between developed countries (oeCd members) and developing
countries, with which it shares concerns related to economic growth, food
security, the fight against poverty and climate change, international trade
and reforms of the organizations involved with global governance. These
characteristics make Mexico a natural facilitator in international negotia-
tions, able to reconcile varying positions on the most pressing economic
and financial challenges we face today. That said, Mexico does not encou-
rage the creation of groups within the G20 so as not to alter its current
composition as a forum in which each member country participates on
equal terms.

Mexico’s role in the G20 summits

Global Economic Stability

Mexico’s role in the G20 has been consistent with its macroeconomic po-
licy, which seeks to maintain fiscal stability by increasing tax collection
and maintaining low levels of public debt and a moderate deficit. sound
management of Mexico’s economy led to a growth rate of 5.5 percent in

* 25 *



2010 after a contraction in 2009.26 When the severity of the crisis led to
the first G20 summit in Washington, Mexico favored adopting countercy-
clical policies as the first line of defense. However, Mexico has also stressed
that plans to restore a fiscal balance should be compatible with growth,
as this is a condition for economic development in the future. In addition,
Mexico has confirmed its commitment to the Framework for Strong, Sus-
tainable and Balanced Growth as the way to achieve a full recovery that
has progressed in very different ways among the world’s countries and
regions and has not been strong enough to create new jobs. Mexico be-
lieves that the ultimate solution is the establishment of macroeconomic
policies that are much more responsible and that do not manipulate va-
riables such as the exchange and interest rates, given that one of the most
important causes of the 2008 crisis were macroeconomic imbalances.27
Although the Framework itself is clearly a step in the right direction, there
is a long road ahead on the way to correcting the imbalances, which
makes it important to overcome the resistance to acknowledge the pro-
blem and begin a serious discussion on how to continue to make progress
in the near future.

Reforming the International Financial Institutions

Mexico has actively supported reforms to the most important financial
institutions that enable emerging countries such as our own to participate
in a more balanced fashion and according to their weight in structuring
solutions to the international economic challenges. With this goal in mind,
Mexico has supported increasing the capital of the International Monetary

26 BAnCo de MéxICo, op. cit., p. 16.
27 sre, Report on the participation of the President of the United Mexican States, Felipe Cal-

derón Hinojosa, at the 5th G20 Leaders’ Summit and the 18th Summit of Economic Leaders
of the Asia-Pacific Economic Cooperation (APEC) Forum, Mexico, 2010, p. 5, available at
http://sil.gobernacion.gob.mx/Archivos/Documentos/2010/12/asun_ 2725043_20101214_1292
343974.pdf.

* 26 *



Fund and the World Bank, and has promoted reforms that strengthen the
voice of the developing countries in the decision-making process. specifi-
cally, the role of Mexico in London and Pittsburgh was very important in
arriving at the agreements that created new instruments for flexible credit
lines to developing countries to improve their access to resources in difficult
times.28At the seoul summit, Mexico highlighted the importance of the IMF
reform that will enable emerging countries such as ours to increase their
participation on its governing bodies and will substantially improve the
assistance we can receive if faced with difficult circumstances.29

Reform of the Financial System

The Mexican Government proposed a detailed review of the regulatory
weaknesses of the financial systems, both in the developed and emerging
countries, stressing the problem created by excluding emerging countries
from the main forums for discussion of financial policies. In this context,
Mexico played an important role in the G20’s decision at the London sum-
mit to expand the membership of the Financial stability Board to include
emerging countries.30 In addition, Mexico has urged G20 members to avoid
introducing regulations that could make access to credit more costly, such
as overly strict capital requirements. Mexico has also backed the efforts
of the Basel Committee on Banking supervision and the Financial stability
Board to draft new standards and rules to mitigate the risks in the sector
and agrees on the need to strengthen both the international coordination
between supervisors and the scope of the regulations of the financial ins-
truments, entities and markets that have inherent systemic risks.

28 sre, Report on the State Visit of the President of the United Mexican States, Felipe de Jesús

Calderón Hinojosa, to the United Kingdom of Great Britain and Northern Ireland, and his
participation in the Second G20 Leaders’ Summit from March 29-April 2, 2009, México,
2009.
29 sre, Report on the participation…
30 sre, Report on the State Visit…

* 27 *



Preventing a New Era of Protectionism

Given the export-oriented nature of the Mexican economy, our country
has spoken out strongly against a resurgence of protectionism and increased
tariffs. In addition, President Calderón has stated repeatedly that Mexico
is committed to concluding the doha round negotiations. However, given
the lack of progress with the World Trade organization negotiations, our
country has said that it is in favor of eliminating the trade barriers erected
by the industrialized countries because their slow recovery is affecting the
prospects of the export sector of the developing countries.31

other Issues

Encouraging a Green Global Recovery

In Pittsburgh, President Calderón introduced climate change as one of the
summit’s central issues. His explanation of the Green Fund was received
with interest, and the shared but different responsibility of countries to
finance the problems of mitigation, adaptation and technological change
caused by climate change were acknowledged.32 In addition, Mexico has
strongly promoted eliminating subsidies for inefficient fossil fuels while
at the same time acknowledging the varied circumstances of each of the
G20 members. our country has affirmed its political will to comply with

31 sre , Report on the participation in the 4th G20 Leaders’ Summit of the President of the

United Mexican States, Felipe Calderón Hinojosa, Toronto, Canada, June 26-27, 2010, page 6,
available at http://sil.gobernacion.gob.mx/Archivos/Documentos/2010/08/asun_2674247_
20100825_1282746206.pdf.
32 sre, Report on the working visit of the President of the United Mexican States, Felipe Cal-

derón Hinojosa, to New York and his participation in the Summit of Heads of State and Go-
vernment of the United Nations Security Council and in the 3rd G20 Leaders’ Summit in
New York and Pittsburgh, United States, september 23-25, 2009, at http://sil.gobernacion.
gob.mx/Archivos/Documentos/2010/07/asun_2670291_20100714_1279117757.pdf.

* 28 *



this commitment through an action plan that gradually eliminates subsi-
dies to fossil fuels that damage the environment.33

Climate Change

Although the forum to address climate change is the united nations Fra-
mework Convention on Climate Change and therefore the issue is not part
of the G20 agenda, one of Mexico’s most important goals at the G20 sum-
mit in seoul was to contribute to creating a political environment that led
to success at the CoP16 in november 2010.34 The information session on
the state of the negotiations led by President Calderón no doubt had a po-
sitive impact on the process.

Development

In seoul and Toronto, Mexico supported the creation of a working group
on this issue in the belief that the G20 should promote sustainable develop-
ment on a global scale and that it would help fulfill the Millennium deve-
lopment Goals. In addition, Mexico upholds the commitment to contributing
to the Multi-year Action Plan adopted in seoul to eliminate barriers to
growth and to help move towards a more sustainable economy and job
creation.

33 sHCP, “Las acciones coordinadas pueden asegurar un futuro más próspero para los ciu-
dadanos de todo el mundo: G20,” Informe Semanal del Vocero, november 8-12, 2010, p. 2,
at http://www.shcp.gob.mx/SALAPRENSA/doc_informe_vocero/2010/vocero_ 46_2010.pdf
(accesed october 5, 2011).
34 sre, Report on the participation…

* 29 *



The G20 Today and Priorities for the Mexican Presidency

Three years after the financial debacle that pushed the world’s economy
to the brink of collapse, it cannot be denied that the G20’s first line of de-
fense was successful in avoiding a deeper and more prolonged recession
and in saving millions of jobs, although unemployment continues to be
critically high in some economies. Given the magnitude of the crisis and
the risk inherent in failing to coordinate policies, it was easy for the G20
to reach agreements that made it an important player on the global stage.
However, there are several areas in which its original commitments have
yet to be fulfilled. Among these are the goal of creating the conditions for
strong, sustainable and balanced growth throughout the world that leads
to jobs and wellbeing for all.
In 2011, the outlook for the world’s economy is uncertain, perhaps
moreso than in 2008. While the markets reacted skeptically to the fiscal
plans of the advanced economies in the second half of 2011, the emerging
economies are concerned with the risk that their economies will overheat
and create new financial bubbles.35 However, faced with an increasingly
complex situation and the risk of a new financial debacle, the G20 has not
been able to find a way to promote consultations and collective action as
it did in 2008. While differing views persist on how to address the global
imbalances, the term “currency war” was used by several participants and
observers at the seoul summit to refer to the tensions created as part of
the debate over international monetary policy. The Mexican Government
has openly criticized the inconsistency of various G20 countries that have
spoken against protectionism at each G20 summit only to then implement
protectionist measures at home.
The possibility that the current complex international economic si-
tuation leads to a recession and that the G20 has worn out its ability to
facilitate agreements could put the entire world at great risk. Another re-

35 InTernATIonAL MoneTAry Fund, World Economic Outlook September 2011, Slowing Growth,
Rising Risks, Washington, d.C., International Monetary Fund, 2011, at http://www.imf.org/ external/
pubs/ft/weo/2011/02/pdf/text.pdf (accesed october 5, 2011).

* 30 *



cession that could affect growth, employment and welfare to an even gre-
ater degree than in 2008-2009 makes it imperative for the leaders to act
responsibly and decisively. Therefore, the G20 must maintain the spirit
of cooperation that led to its creation at the leaders’ level in 2008. The
G20 must overcome its differences regarding approaches to the economy
to focus on the current situation. Another global economic crisis is not in
the interest of any nation. There is no place for purely national interests
in this scenario. The G20 must find its long-term vision again. If we lose
sight of the original reason for our cooperation, the G20’s role as the most
important forum for economic cooperation could soon be history.

* 31 *


THe MexICAn PresIdenCy oF THe G20

Mexico will host the seventh G20 Leaders’ summit at a very critical and
uncertain time for the international economy. It will promote a substan-
tive agenda that will address the most pressing global economic challen-
ges. In light of the complex global economic environment, the G20’s role
in coordinating macroeconomic policies that give certainty to the mar-
kets, ensure liquidity and strengthen the recovery of the global economy
becomes crucially important. Given the recent episodes of financial ins-
tability in europe and the united states, it is important for the G20 to
make progress in fulfilling the commitments it has already adopted and
that must be met so that economic growth can recover. Therefore, President
Calderón has said that one priority will be to follow up on issues such as
economic stability in order to re-start growth, boost international trade
and improve financial regulation.
In addition, Mexico will promote specific issues of interest for emerg-
ing and developed countries to which the Mexican presidency can bring
value added. some that have been proposed have to do with food security
and green growth.
We are committed to organizing a process of consultations and an
expanded and transparent dialogue with the united nations, non-member
countries, regional organizations and all of the relevant participants in the
process of finding solutions to the complex economic and financial problems
that the international community as a whole faces today.

* 33 *


ConCLusIons

The G20’s presence on the world stage opens a window of opportunity for
achieving a more effective system of global economic governance. The G20
has proven to be indispensible in times of economic and financial crisis.
But it can also play a key role in non-crisis situations by laying the founda-
tion for a more prosperous, secure and balanced global economy. For this
reason the group must remain united and retain its spirit of cooperation.
one of the most distinctive characteristics of the G20 is its inclusion
of the interests and priorities of both emerging and developing countries
in the governance of the international economy. This clearly reflects the re-
ality of our multipolar and interdependent world. Its role in global econo-
mic governance should be to promote clear rules that are acceptable to all
countries and that lead to a more stable and prosperous world economy.
despite successfully managing the international financial crisis in
2008 and 2009 and its important contributions to reforming the interna-
tional economic architecture, the economic picture remains complex and
the G20 must be on guard. Its creation stems from the awareness that all
of its members, both the developed and the emerging economies, must
share the responsibility of putting collective action before national inte-
rests. This is the only way to achieve economic growth and stability and
better employment rates and wellbeing on the entire planet.
up until now, the G20 has made a difference. Mexico’s presidency will
undoubtedly be an opportunity to move forward and to take further steps
that benefit global economic stability.

* 35 *


Instituto Matías romero
secretaría de relaciones exteriores

república de el salvador no. 43 and 47
Col. Centro * Cuauhtémoc
C. P. 06080 * Mexico City
Tel. (55) 36865100 * exts. 8246 and 8268
imrinfo@sre.gob.mx
www.sre.gob.mx/imr/

responsible for the publication
and electronic version:
María Cristina Tovar Gómora
Gabriel López López

Cover desing:
Luis niebla

Book design:
uli stehlik

Composition:
susana Guzmán de Blas

Translation:
Brett duel

The fonts used are:
Cambria * 10 and 14 pts.
and Trajan Pro * 80, 42 and 24 pts.

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