comisiÓn federal de mejora regulatoriapublica y difunde informes anuales. 16) anulación de las...

- Policy and Regulatory Governance-

Promotion and revision of national regulation in Mexico:

A focus on regulatory governance for social regulators

Mexico City, Mexico

July 13th 2011

COMISIÓN FEDERAL DE MEJORA REGULATORIA

1

Regulatory Governance

According to the OECD (2010), “regulatory governance means the overallapproach to regulating, including the structure of government, interactionbetween government and nongovernmental entities”.


• Includes public-private partnerships to advance public objectives.

• Includes policy analysis tools based on international best practices

• Is often taken to include the roles of nongovernmental organisations in civil society,and perhaps in business as well

Provider State Regulatory State

The state must regulatebased on efficiency andproductivity.

The state controls theprovision of goods andservices.

Economic liberalisation

process

2


From the elements used to strenghthen the regulatory governance those of theutmost importance are: the role and effectiveness of regulatory agencies andbetter regulation approach based on risk.

Main elements to achieve a solid regulatory

governance

• Leadership and supervision

• Role and effectiveness of regulatoryagencies

• Need to negotiate with all the actors

• Balance between public and privateregulation

• Improve regulation based on risk

• International dimension

Source: OECD (2010)3

The Regulatory State

Since the late eighties, the process of liberalisation that took place in LatinAmerica motivated the creation on independent regulatory agencies (IRA’s) inmany sectors.

4

*Previous 1990: CNB, CNV, CNA, PROFECO y CONASENUSA.1990’s: COFETEL, COFECO, CRE, CNSF, CONSAR, CONDUSEF y CONAPESCA, IPAB.2000’s: COFEMER, COFEPRIS IFAI, CONAMP, CNH, CONUEE y SENASICA.

Source: COFEMER

Whilst in 1979 there werejust 43 regulatoryagencies in Latin America(mainly financial), in 2002the number hadincreased to 134.

In 1979, 21 agencies wereindependent, whilst in2002 their number hadgrown 6 times, to reach119.

Source: Levi-Faur (2003)

5

12

19

Previous 1990's 2000's

Regulatory Agencies in Mexico

Delegation: Principal Agent Theory (P-A)

According to Stephen Ross (1973), an agency relationship arises between twoparties when one, designated as the agent, acts on behalf of the other,designated the principal. Mark Thatcher (2001) says “Principal-agent theoryappears highly applicable to the creation of independent/semiindependentregulatory agencies”.

5

P-A Theory for IRA’s

Objectives

• Reduce information asymetries.

• Avoid guilt associated with unpopulardecisions.

• Undertake long term public policies.

• Reduce transaction costs within thegovernment and with other parties.

In order to determine how solid a regulatory agency is, it’s important to analyseits formal faculties and the way they are used in practice.The first independenceindexes were calculated for central banks.

Measuring the Strength of the IRA’s

Gilardi (2001b)

The author adapts the structure developedby Cukierman et al. (1992) taking someelements from Kreher (1997).

The author considers that the first 3categories used by Cukierman can beapplied to the IRA’s.

Cukierman, Webb y Neyapti (1992)

The authors develop an index for centralbanks based on formal and informalindicators.

They consider 4 elements: i) chief executiveofficer status, ii) policy formulation, iii)objectives and iv) limitations to lending.

6

Credibility and political uncertainty

According to Gilardi (2001), political uncertainty associeted with democraticregimes may be an incentive to create IRA’s.

Creation of IRA’s

Political Uncertainty

• IRA’s can assure political rights to the current government in spite ofdemocratic changes.

• For politicians it’s important to prevent future majorities from changing theirpolicies.

7

The credibility hipothesis states that «political soverigns are willing to delegateimportant powers to independent experts in order to increase the credibility oftheir policy commitments» (Gilardi, 2001). Nonetheless, the hipothesis isincomplete if it does not consider political uncertainty.

Gilardi Index

Gilardi (2001) develops an index that goes from 0 to 1 (where 1 is totalindependence) based on 21 indicators gruped in 5 categories, including«regulatory competencies».

Formal Independence Index

• Agency head status.

• Management board membersstatus.

• Relationship with governmentand parliament.

• Financial and organisationalautonomy.

• Regulatory competencies.

8

0.31

0.54

0.48

0.55

2005 2011 2005 2011

Gilardi Index Evolution for COFETEL and CRE

Gilardi Index for economic IRA’s in Mexico

9Source: COFEMER

2006 Reform

In Mexico, the strength of economic regulators has mantained more attentionin public agenda than that of social regulators.

2008 Reform • In 2006 it wasdetermined thatcommissioners shouldhave fixed terms andname their president.

• There where alsosignificant changes forthe institutional structureof CRE in the 2008reform.

10Source: COFEMER

The institutional design of IRA’s in Mexico has important asymmetries. Socialregulators tend to be less independent than economic ones, even though theyare very competent.

0.54 0.55

0.400.44

COFETEL CRE SENASICA COFEPRIS

Gilardi Index for IRA’s (2011)

Economic Regulators Social Regulators

In general it can beseen that socialregulators presentlower levels offormal strengththan economicregulators.

Gilardi Index for IRA’s in Mexico

11Source: COFEMER

There is an important asymmetry in the institutional design of social IRA’s worldwide.

In some countriesthe faculties toregulate riskyproducts lay on thedepartments ofhealth.

Data

0.400.44

0.52 0.53

0.72

0.84

SENASICA COFEPRIS FDA INVIMA EMA ANVISA

Gilardi Index for Social Regulators

Mexico USA Colombia E.U. Brazil

Gilardi Index for social IRA’s world wide

Results

International experience shows there is great variation between economic andsocial regulators. Gilardi (2005) obtains the results that follow.

12Source: Gilardi (2005)

The precautionary principle states that it’s better to prevent now beforeregretting it tomorrow. This principle tends to over-regulate since it does notrely on a serious risk assesment.

The precautionary principle

13

Minimize Errors

Type I Error

Fail to regulate (under-regulate) when there isneed to do it, creating risks for the population.

Type II Error

Regulate when there is no need to do it (over-regulate), reducing potential benefits to thepopulation.

Regulatory Principles

Given the difficulty that represents to be able to generate regulation thatattends in an optimal way the risks faced by society and, at the same time,generate an efficient and effective use of resources, the OECD (2010) hascreated a set of general principles.

14

The Regulatory Governance Cycle is fundamental to review the regulationissued for years under the precautionary principle.

Administración de la Mejora Regulatoria

The Regulatory Governance Cycle : Precautionary Principle vs. risk based approach

Planning

Disign and Review

Implementation and Compliance

Collect views ofstakeholders, definingthe policy instrumentsand get politicalsupport from thehighest level so that thestrategy is viable.

The 4 c´s

Consultation

Coordinationn

Cooperation

Comunication

Identification of political issuesconcerning government action.

52

3

Development of Political

Strategy

Evaluation and Monitoring

1

Review the existingregulation and designthe new regulation(MIR ex ante and expost).

Evaluate theconsistency ofthe results withthe objectivesoriginally raised.

Put into useregulation, aswell asresources,capabilities andtools.

4

15

Administración de la Mejora Regulatoria

Conclusions

• Regulatory governance must be a central issue in the agenda of regulatoryimprovement. Such governance has a direct impact on productivity and socialbenefits in a country.

• With the transition to the regulatory state, many regulatory agencies havearisen in most countries in accordance to the need to reduce informationasymmetries in technical decisions and establish credible policycommitments.

• Economic regulators have had more attention in the public agenda that socialregulators. Nevertheless, social regulators also require institutional strengthto be able to have a consistent long term policy.

• Social regulators have to analyze their regulations based on the RegulatoryGovernance Cycle

• In particular, the Regulatory Governance Cycle has relevance in the need toregulate based on a risk policy, in accordance to OECD recommendations,especially concerning the precautionary principle.

16

References

• Gilardi, Fabrizio. “Policy Credibility and Delegation of Regulatory competencies to IndependentAgencies: A Comparative Empirical Consideration”. Paper prepared for the First YEN researchmeeting on Europeanisation, Siena, 2-3 November 2001.

• Gilardi, Fabrizio. “The Formal Independence of Regulators: A comparison of 17 Countries and 7Sectors”. Swiss Political Science Review 11 (2005): 139-167.

• Hernández Arroyo, Federico. “La independencia de las agencias reguladoras en México: El casode los sectores energético y de telecomunicaciones”. Gestión y Política Pública XVI (2007): 61-100.

• Levi-Faur, David. “The politics of Liberalisation: Privatisation and regulation-for-competition inEurope’s and Latin America’s telecoms and electricity industries” European Journal of PoliticalResearch (2003).

• Ross, Stephen. “The Economic Theory of Agency: The Principal’s Problem”. American EconomicAssociation Vol. 63 No. 2 (1973): 134-139.

• Stigler, George. “The theory of economic regulation”. The Bell Journal of Economics andManagement Science, Vol. 2, No. 1 (1971): 3-21.

• Thatcher, Mark. “Delegation to Independent Regulatory Agencies in Western Europe”. Paperpresented at the 29th ECPR Joint Session of Workshop, Grenoble, France (2001).

17

ANNEXES

18

19

México E.U.A. Colombia Europa Brasil


(2001) (2001) (1927) (1994) (1995) (1999)

Índice de independencia 0.45 0.46 0.50 0.50 0.72 0.84

Estatus del titular 0.06 0.10 0.18 0.04 0.57 0.691) Periodo en el cargo Indefinido Indefinido Indefinido Indefinido 5 años 3 años

2) Quién lo nombra El Secretario El Presidente Presidente/ Senado El Presidente El Consejo de

AdministraciónEl Presidente

3) Despidos No No No El Presidente NoSi,los primeros 4

meses.

4) Otros cargos Si SiNo existe

disposición.No existe

disposición.No No

5) RenovaciónNo existe




disposición.1 ocasión, por periodo igual.

1 ocasión, por periodo igual.

6) Requisito de independencia No No No No No Obligatoria

Estatus de la junta directiva 0.10 0.10 0.10 0.10 0.38 0.63

7) Periodo en el cargoNo hay período

fijo.No hay período

fijo.No hay período fijo.

No hay período fijo.

3 años 3 años

8) Quién la nombraEjecutivo y sector

privadoEjecutivo Ejecutivo y Agencia. Presidente Países miembros El Presidente

9) DespidosNo existe






disposición.

10) Otros cargosNo existe




disposición.No No

11) RenovaciónNo existe




disposición.Si

Si, por periodo igual.

12) Requisito de independencia No No No No No Obligatoria

ANVISA: Agencia Nacional de Vigilancia SanitariaINVIMA: Instituto Nacional de Vigilancia de Medicamentos y Alimentos

EMA: European Medicines AgencyFDA: Food and Drug Administration

Regresar


20

México E.U.A. Colombia Europa Brasil


(2001) (2001) (1927) (1994) (1995) (1999)Relación con el gobierno y el parlamento 0.75 0.75 0.59 0.75 0.75 1.00

13) Independencia formalÓrgano

Desconcentrado de la SAGARPA.

Órgano Desconcentrado

de la SSA.

Agencia que depende

directamente del DHSS.

Instituto descentralizado

del Ministerio de Salud

Agencia descentralizada

de la Unión Europea.

Agencia descentralizada

14) Obligaciones con el gobiernoResponsable ante

el GobiernoResponsable ante

el Gobierno

Presenta al Ejecutivo un reporte informativo anual.

Responsable ante el Gobierno

Publica y difunde informes anuales.


15) Obligaciones con el parlamento No No

Presentar ante el Congreso un

reporte informativo anual .

No se especifican.Publica y difunde informes anuales.


16) Anulación de las decisiones de la agencia No No No NoComisión decide

en definitivaNo

fortaleza financiera y organizacional 0.33 0.33 0.63 0.63 0.88 0.88

17) Origen del presupuesto Gobierno GobiernoGobierno

(aprobación de proyecto de gasto)

Gobierno y financiamiento

interno y externo

Financiamiento interno y externo

Gobierno y financiamiento

externo.

18) Control del presupuesto Gobierno Gobierno Agencia Junta DirectivaConsejo de

AdministraciónAgencia

19) Organización internaAgencia y Gobierno

Agencia y Gobierno

Agencia y GobiernoAgencia y Gobierno

Agencia Agencia

20) Política de personalAgencia y Gobierno

Agencia y Gobierno

Agencia Agencia Agencia Agencia

Competencia para regular 1.00 1.00 1.00 1.00 1.00 1.00

21) Competente para regular Si Si Si Si Si Si

Regresar


comisiÓn federal de mejora regulatoriapublica y difunde informes anuales. 16) anulación de las...

Documents