Assessment and Recommendations 11
Introduction 29
Chapter 1. Territorial Disparities and Development PotenUals 31
1.1. Disparities 31
Macroeconomic performance and inequality 31
Potential sources of inequa]ity and poverty 36
The territorial dimension of inequality and poverty 47
1.2. Unused potentials, local comparative advantages and development challenges 74
Land regularisation 74
Infrastructure 75
Natural and cultural resources 76
Industrial dusters 84
Chapter 2. Territorial Governance in an Emerging Federation 95
2.1. institutional background 95
2.2. Strengthening institutional capacity and intergovernmental governance 98
2.3. Fighting corruption: Rule of law and accountability 101
2.4. Main features of fiscal federalism 107
2.5. Reshaping education finance 118
2.6. Conclusions and recommendations 121
Chapter 3, Strategies and Policies for Territorial Development 127
3.1. Strategies 127
Recent changes in territorial po]icy 131
Conclusions and recommendations 135
3.2. Alleviating poverty 137
General framework of poverty alleviation policy 138
Increasing the educational level of the poor 145
The Micro-region Programme 149
Rethinking urban poverty 157
Reaching more social cohesion: Indigenous peoples 159
Conclusions and recommendations 163
3.3. Competitiveness policy, foreign investment and support to SMEs 164
Mexico: A fragmented economy 165
The prooucctivty and Innovation gap 167
Conclusions and recommendations 178
3.4. Enhancing connectivity: Transport and telecommunications infrastructure 179
Connectivity infrastructure: The main issues 179
Plan Puebla-Panama and connectivity for the South 185
Conclusions and recommendations 192
Acronyms 197
Bibliography 199