This Public Expenditure Review (PER)examines the situation in the State of Guanajuato, Mexico,where striking contrasts prevail in both its private, andpublic sectors. While its private sector has attracted bothdomestic, and foreign enterprises, from an economic andsocial point of view, current private sector growth is notas labor intensive as the declining sectors, andinternational investments have not yet generated full,complementary support to small firms, which are typicallymore labor intensive. Moreover, poorer regions away from theindustrial corridor, lack relevant education, and transportconnections, to allow the population access to steadyemployment. The State however, has not yet planned for aneconomic growth strategy, with the corresponding publicpolicies. Interestingly, the State's public sector hasexceptionally competent management, with no deficits,excellent credit ratings, and creative use of private sectorparticipation in delivering public goods. However, educationcoverage at the secondary, and tertiary levels is one of thelowest in the country. Thus, the strategy for publicspending over the next five years, will expand educationalcoverage at the secondary level, make adult educationavailable, improve transport connections and access tohousing for the poor in the urban-industrial corridor.Furthermore, the State will need to increase currentresources, through a reform of the National System of FiscalCoordination, and/or introduce a payroll tax, explicitly topay for new programs. Both options give the State morecontrol over its revenue. Health care coverage should beascertained, and, a plan to upgrade, and build healthfacilities should be developed. Guanajuato should expandinfrastructure, through good regulatory framework forprivate-sector operators, and, a program of mortgage (orleasing) financing of buses should improve public transportation.
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