International Outlook
Edited by Cristina Lindblad
Mexico: The Fox Revolution Is Spinning Its Wheels
When Vicente Fox swept into Mexico's presidential palace last December, after dislodging the long-ruling Institutional Revolutionary Party (PRI), he had a bold plan: He would wipe out government corruption and waste. He would forge a new relationship with the U.S., winning legal residency for millions of undocumented Mexicans laboring there. Perhaps most important, he would undertake an ambitious tax reform and so reap the revenues needed to deliver the improved schools, infrastructure, and social services that Mexicans have long craved.
After nearly a year, Fox's revolution has run smack into reality. The U.S. slowdown has clobbered Mexico's export-powered economy and erased 500,000 jobs, making a mockery of his pledge to create 1.3 million jobs a year. September 11 dampened American support for immigration reform. Cops are still shaking down motorists for bribes. And Fox has been fighting a 10-month battle to push tax reform through the opposition-dominated Congress. Legislators of all stripes are loath to back a bill that slaps a 15% value-added tax on food and medicine when nearly half of Mexicans live in poverty. "People still want to give the benefit of the doubt to the President, but his political capital is deteriorating quickly," says PRI Congress member Carlos Ramírez.
TOO LATE? The tax legislation may yet be approved, by yearend. But it will probably be a watered-down version that will generate too little revenue to fund Fox's ambitious social programs or give his presidency renewed momentum. Meanwhile, faced with plunging prices for oil, the source of one-third of state funds, the administration has had to draw up one of the most austere budgets in years.
Analysts regard tax reform as the litmus test for Fox's entire agenda. If legislators are balking at hiking taxes, they are just as reluctant to heed Fox's call to open the state-run energy sector to private investment. The country needs to plow more than $50 billion into its power grid over the next seven years to meet soaring demand. Fox wants to let private companies foot part of the bill for electricity and natural-gas development. But foreign involvement in energy is a hot-button issue in nationalistic Mexico.
Fox, who once ran Coca-Cola's Mexican operation, has done little to market either the tax or the energy initiatives. Having carefully cultivated his image as a political outsider, he has been dismissive of legislators--even those of his own National Action Party. Instead of inviting members of Congress to the palace for friendly one-on-ones, he has delegated lobbying to one of his ministers, Santiago Creel, a crisp lawyer with presidential ambitions of his own. "The relationship between the executive and legislative branches is even worse than it was under PRI rule," says Rosario Tapia, a congressional member of the Party of the Democratic Revolution.
Perhaps most worrisome is the impression that Fox, seeing how difficult bold change is in the new democratic Mexico, may be content just to stay the course. If he's lucky, the U.S. economy will recover by the middle of 2002, giving Mexico a boost. And while his approval rating has fallen, it's still a healthy 70%. That may not last, though. "Fox didn't campaign on doing just a little bit better than the PRI. When people voted for him, they expected grandiose things," says Denise Dresser, a political scientist at the Autonomous Technological Institute in Mexico City. For that to happen, Fox the revolutionary needs to become Fox the negotiator. Otherwise, his next five years in office may prove as frustrating as his first.
By Geri Smith in Mexico City
GLOBAL WRAPUP
Britons Brace for Tax Hikes
Prime Minister Tony Blair is losing his fear of raising taxes. Blair's aides, including Chancellor of the Exchequer Gordon Brown, are hinting that big tax increases will be needed in the next few years to shore up the sagging National Health Service and fix up the schools. Just a few years ago, such an admission would have spelled certain electoral death for Blair's Labour Party. But the public mood has changed. Britons are clamoring for better services. Labour, which has ruled out privatizing the NHS, is gambling that it will be able to persuade the middle classes to foot the bill for the improvements. For instance, the government wants to ramp up health-care spending from the current 7% of gross domestic product to the European average of 9%.
GLOBAL WRAPUP
No Winner in Taiwan Poll
None of Taiwan's major political parties is expected to secure a majority in legislative elections scheduled for Sunday, Dec. 2. That's bad news for President Chen Shui-bian, whose 17-month administration has had to contend with legislative paralysis in the face of Taiwan's worst-ever recession and record unemployment. The Nationalist Party, whose 55-year monopoly on power ended last year, will probably remain the largest party in parliament, dashing Chen's hopes of cobbling together a coalition encompassing his Democratic Progressive Party and smaller opposition forces. While the economy has lately shown some bright spots, continuing political deadlock could further hamper needed economic and financial reforms.
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Copyright 2001, by The McGraw-Hill Companies Inc. All rights reserved.
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