BUSINESSWEEK ONLINE : JULY 17, 2000 ISSUE
INTERNATIONAL -- LATIN AMERICAN COVER STORY

Vicente Fox on the Transition, NAFTA, Corruption, Drugs, the Economy...


Two days after his stunning election victory ended 71 years of unbroken rule by the Institutional Revolutionary Party, Mexico's President-elect Vicente Fox Quesada gave a two-hour press conference for foreign reporters. Looking relaxed and confident, Fox took questions on everything from what he had dreamed the night before the election (he didn't say) to state tax revenue allocation (states should get more). He needed no notes and consulted no aides. Edited excerpts of his general remarks and answers to questions from journalists follow:

He began by outlining his plans for the next five months until he takes office Dec. 1:
"Today I believe that Mexico has proven before the whole world that we have finally reached [our] longed-for democracy and that we are in transition. To everyone's surprise, I would say that we have crossed the transition bridge in just 24 hours in an efficient, quick, stable, and peaceful way."

"Perhaps very few, and I include myself, had imagined such a scenario. Of course, "touch wood" that it continues this way. But it's surprising how we passed from an era of 71 years, of a single-party regime, of an authoritarian regime, an exclusionary regime, to a new state of full democracy, of intense citizen participation -- and we have done it with such stability, speed. and tranquility.

"I would add that this won't distract us from the campaign's No. 1 commitment, which is to put together a transition government, a plural government, and do a truly professional job of transition.

"We will keep you informed week by week on the progress of Cabinet selection, which will be public and open. It will be a rigorous selection processs so that at the end we have the best man or woman in each position. They won't be friends. I don't come with teams in place.

"We will have to finish in two months -- July and August -- so that we have three months, from then to the Dec. 1 inauguration. Three months in which each of the new Cabinet members will work with his or her counterpart...so that each new Minister will be completely immersed in the activities of the Ministry.... The important thing is the software of each secretariat, not the hardware....

"What we're interested in are the plans, the programs, the projects that are under way. What we're interested in is each secretariat's vision of the future to gather up everything that's valuable and put it in the first budget project. We will work together, and the responsibility of the 2001 budget will be shared, although we will have the last word. The budget will include the experiences of [the current] government, but it will also include all the innovations and creations of our government and the main campaign proposals. We want to submit this proposal long before previous governments have, on Sept.1, when the new Congress sits, so there is time to discuss and enrich it. We aren't imposing a budget. We're submitting a proposal to be enriched.

"And finally in the next five months, we will travel through the whole country, through the 32 states. I will sit down with governors from the PRI, the PAN [National Action Party -- Fox's own party], the PRD [Party of the Democratic Revolution], and from party alliances. I'm particularly interested in the PRI governors. I want to assure them that there will be no revenge, that this is a government of harmony. In addition, it is a government that doesn't discriminate and that doesn't have any stepchildren. We will treat each governor the same regardless of party."

In the next five months, Fox also plans to travel to the U.S. and Canada. In the U.S., he'll meet with President Clinton along with Presidential candidates Al Gore and George W. Bush. He'll also visit Spain, Italy, Germany, France, Britain, and Asia. In Latin America, he plans to go to Chile, Brazil, Argentina, Central America, Venezuela, and Colombia.

"Above all, we want to learn from experiences of government and we want to gather ideas from all places.... Our interest is the political relationship, learning from their experiences, and the access and closeness to [their] markets, investors, and trade.

"We will also visit indigenous communities again because our strongest commitment is there. I hope to know of a meeting with the EZLN [Zapatista Army of National Liberation in Chiapas] soon. I will intensify [efforts] to set this date and restart the dialogue."

Edited excerpts of Fox's answers to journalists' questions follow:

On the North American Free Trade Agreement:
"We think that NAFTA can do much better than what it has done up to now. NAFTA has to go down to the level of small and medium-sized companies which up to now have not benefited from the agreement. It has to come down to the level of state-to-state relationships: Mexican states and U.S. states and Canadian provinces.

"Our forecast and our idea is to sell a long-term project where we can move upwards from a trade agreement to a community of nations agreement or a North American common market. To move in that direction implies more than just trading, more than just facilitating the transit of merchandises, products, services, and capital. It has to imply the free flow of citizens, and it has to imply long-term monetary policies, maybe a common currency 20, 30, 40 years from now.

"We have to get beyond the short-term. It doesn't resolve the problems of migration, of income, and of improving income in Mexico's case. We have to put forward more ambitious long-term goals that will give measureable, verifiable steps with objectives for each year. Through this process we can finally reach a common market or something like it. Above all [the final goal] is to level incomes, to raise the quality of life in the three countries."

On fighting corruption:
"The commitment to limit or reduce corruption to normal limits in the government is within six years. We will finish with corruption in six years. Our proposals are deep. We will create a Ministry of Security & Justice. This Ministry will absorb all the federal police forces. The Inerior Ministry will no longer have any police or investigation functions, which have led to high levels of corruption.

"Second: We will substitute the federal Attorney General's Office with a prosecutor...which will separate the two functions the Attorney General's Office now performs. The third step will be to create [a class] of judges to take the prosecution's charge before the judiciary.

"We will separate all the tasks so there is no more corruption in law enforcement. These changes will allow us to renew [what are now] centers of corruption such as the Federal Judicial Police.

"This process, which is dramatic, which is deep, will confront what has become one of the country's most serious problems, which is corruption,impunity, and organized crime."

On prosecuting past corruption and the "transparency commission":
"The audit we will do on taking office will probably discover [corruption]. As a government we are going to look ahead.... But you can't wipe the slate clean and start over. There are affronts to the people of Mexico, there are notorious crimes, there are assassinations, there are acts of corruption which can't be dropped without a formal investigation, without discovering the truth.

"What formula have we found so that the government doesn't get worn out and lost in the past? What we have found is the "transparency commission," a commission made up of citizens who are recognized for their ethics. From outside the government, they will do the work of finding the truth in these cases. They will be behind the institutions that are in charge of applying the law. I will be requiring reports on their advance and bringing to bear all the will and political weight of the presidency so that the truth is known. It's a balance always looking ahead and always discovering the truth looking back."

On drugs:
"The main aspect on drug trafficking will be convincing the U.S. to substitute the current unilateral certification process upon countries in Latin America, substitute it with a multilateral agreement including countries that produce, countries that traffic or transit drugs, and countries that consume. This multilateral effort should have specific obligations for each of the countries, and it should have a long-term plan and the responsibility to meet the challenge of confronting international organized crime on drugs. I don't think that any country by itself alone can solve this cancer. It has to be a coordinated international effort.

"The U.S., through its huge market of consumption of drugs generates millions and millions of dollars that are used to corrupt Mexican policemen and Colombian policemen and public functionaries. The activities of the U.S. to limit or prevent the import of drugs should be enhanced and fortified. Same thing with Mexico. We have a lot of work to do. But when we do our work, it seems to me that internacional crime moves to other channels of transit. When they see things are difficult in Mexico, they move to the Caribbean. So every country has to [make] its share of effort."

On maintaining fiscal and monetary discipline:
"We will [accept] fiscal discipline as something that we're absolutely committed to. We won't play with the fundamental variables of the economy. We will totally respect what the central bank has done up to now and make it responsible by law for monetary policy, exchange rate policy, and inflation policy. This will remove any possible politicization of these decisions which have to be technical and professional. This part of the macroeconomic policy fundamentals merit discipline and our absolute respect."

On the rest of the economy:
"In every other part of the economic package we are going to introduce great creativity, creativity for local and regional development, creativity to rescue the marvelous world of micro and small and medium industry, creativity to put into operation systems of social banking, savings societies, credit unions which in Mexico practically don't exist and which in all the other countries of the world are a fundamental pillar of the financial system."

On attracting foreign investment:
"We don't need to privatize [the energy sector] to attract $20 billion a year in foreign investment. We want to attract this $20 billion with additional external investment. Next week, the trips abroad start. One of the great priorities will be to meet with businesspeople, investors, with the financial community of each country. We have to generate a lot of confidence and certainty so that this investment flows. Third, we have to offer incentives. For example, for the [poor] southeast of Mexico, I have indicated a plan to exempt corporate taxes for 5 to 10 years for any new company which invests and creates jobs.

"We have to form human capital.... The true bottleneck to reaching the growth that we're proposing is the lack of human resources in the country. So we have to [work] with great speed to form human capital."

On poverty:
"We will attack poverty strongly to make the 40 million poor in our country a priority in the budget. Each Secretary of State, each Cabinet member, each civil servant who takes decisions in the next federal government, before taking a single decision will have to ask 'how much will my decision benefit indigenous groups, the poor, and those who are excluded from Mexico's development.'

"There are three or four things that I have a very strong interest in that happen in the country. The first of those is to finish with poverty. There will be a team [in the presidential staff] solely responsible for this."

On Cuba:
"We will continue the relationship and if it's possible, intensify it. At the end, what we would like...is that Cuba moves toward political normalization, that is, a democracy, and that it moves towards the market. We will certainly invite Fidel to the inauguration Dec 1. Don Fidel hasn't called me. Maybe his telephone is out of order..."

On the PRI:
"I think this is a marvelous opportunity for the PRI to rebuild itself. This is a great opportunity for it to become a real political party.... It has many supporters behind it, a lot of ideology behind it, a lot of experience behind it. It just needs to takes this baggage of positive things to be a very competitive political party."

On the PAN:
"It has arrived at this point with great maturity.... I think the PAN will be the party that in great part produces the development of the country in the 21st century.

"[But] the PAN understands that it is not the majority, that it also has a limit, a ceiling. For this reason, it has accepted with pleasure to lead the transition with pluralism."

On negotiating to get his policies through Congress:
"I am a practical person. I always prefer to have a consensus than to impose any will without reaching any consensus. In practice I have learned that with consensus, sacrificing perhaps some of your own ideas, [negotiations] advance very rapidly. On the contrary, when a project is imposed or when you try to push it through with a majority, it simply gets stuck."

On illegal Mexican migration to the U.S.:
"If we [Mexico and the U.S.] are serious, the least we can do is sit down and say 'This is the problem, and the goal is to close this difference in development and manage to become true partners, true neighbors, true friends.' What is the only experience the world has seen of this type? The European Common Market. Today Spain, Portugal, and Greece are at income levels almost the same as their trading partners. There is this example. If there is a better proposal, all the better.

"It's fundamental that we propose a long-term goal. If not, drugs, migration, and the border problems will continue. I would like to propose steps, for example, to form a fund like the one in Europe of $35 billion, for Mexico's development."

On decentralizing power to Mexico's states:
"We think the driving force to lead this decentralization is the budget. Today we have a budget that is totally centralized. Today the federal government collects 98% of all taxes. It returns 20% directly back to the states and municipalities. The federal governments invests another 25% under its conditions. It is investing in the states, but the central government takes the decision. This part is what we want to transfer directly back to states and municipalities. We will have to do this over six years, reaching the goal of 45%."

On picking his Cabinet:
"There are no prior commitments, absolutely none. These two months -- July and August -- will determine the sexenio [for his six-year presidential term]. My experience in my 58 years has been that there isn't a storm you can't overcome with a good team.... This is the most delicate and strategic part of everything I will live through in the next six years."

EDITED BY ELISABETH MALKIN

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