Bloomberg News

Vote Gives Mexico Chance Not to Change: Enrique Krauze

September 13, 2011

(Corrects share of vote obtained by Fox in 2000 elections in 12th paragraph of article published Sept. 12.)

Sept. 12 (Bloomberg) -- Even with the global crisis, Mexico’s economy has expanded in recent years.

The growth, while modest, has been surprising, considering Mexico’s dependence on the U.S. market. But over the last 15 years, Mexico has shown clear signs of maturity in its macroeconomic policies, a significant change.

Every six years, for far too long, a change of government would eventually lead to a new economic crisis. This was true of 1976, 1982, 1988 and 1994. Since then, there has been a steadier and more responsible management of public finances. Yet a central problem remains unsolved. The economic expansion is insufficient to mitigate, let alone reverse, the poverty that afflicts more than 40 percent of the population.

There is a way out, as many independent Mexican observers and international publications have noted. Deep structural reforms are needed in the areas of energy and labor relations, among others. And the dominant structure of monopolies in Mexico (both private and public) must be opposed.

Such reforms would surely add two or three points to growth, and help make Mexico a true economic power. Why have such improvements not been implemented?

In the Iberian world -- Portugal, Spain and Latin America - - modernization hasn’t been the product of right-wing governments. Instead, such transformations have been carried out by the left.

Spain, Chile

In Spain, the Socialist Workers’ Party ascension to national power moved the country from a hierarchical, closed and backward society to a dynamic economy with full democracy. In Chile, the cruel dictatorship of Augusto Pinochet proposed economic reforms, but those only took root and flourished with the return to democracy, accomplished by left and centrist forces uniting to win a referendum that deposed the strongman.

In Brazil, two presidents of the left spearheaded change: the sociologist Fernando Henrique Cardoso (who in the 1960s proposed a radical “theory of dependency” but later proved capable of honest self-criticism), and his successor, Luiz Inácio Lula da Silva, a union leader who combined a strong social commitment with economic pragmatism. They achieved the miracle of establishing democracies that fused economic development with effective aid programs for the poor.

In Mexico, however, the dominant parties -- the PAN, the PRI and the PRD -- seem incapable of promoting or approving necessary reforms.

Social Views

The PAN has held national power since 2000, but is likely to lose it in the legislative and presidential elections of July 2012. Certainly, the PAN has shown it is favorable to economic change, but its history and its views on social morality situate it firmly as a party of the right. In its origins, in 1939, the PAN supported the Spanish dictator Francisco Franco, sympathized with fascism and sought (unsuccessfully) to keep Mexico neutral in World War II. (In some quarters of the party, these origins haven’t been forgotten.)

The contemporary PAN is a liberal party, at least politically and economically, but anti-liberal (much like the U.S. religious right) in matters such as abortion and the rights of sexual minorities.

In 2000, the PAN ended the 71-year hegemony of the PRI when Vicente Fox, a candidate with charisma who was outside the political establishment, took office with overwhelming backing from the public in polls. With such popular support, Fox might have pushed through the necessary reforms, but he let the opportunity go by, due to his lack of experience and his personal irresponsibility.

Oil Industry

President Felipe Calderon, without a majority or any stable alliance in Congress, hasn’t secured parliamentary approval for any significant reforms. Since 2007, Congress has debated the opening of the oil industry, which is necessary because of the absurd limitations (in this case imposed by a state monopoly and a state-sponsored union) on the efficiency of this central source of Mexico’s wealth.

Only superficial changes have been approved, and the same is true of any effort to reform labor, a fundamental step toward broadening the workforce. The power of private monopolies remains undiminished, though they have become the targets of fines. And the national tax code (particularly the process of collection) needs considerable revision, with far too much evasion among the highest earners through the use of ploys that aren’t available to middle-class wage-earners who are taxed through payroll deductions.

PRI Lead

For the moment, the PRI holds a substantial lead in opinion polls. But the party has shown no willingness to make necessary reforms and doesn’t promote any concrete changes. This isn’t surprising as the PRI dominated Mexican politics for more than 70 years through the very corporate and monopolistic patterns that most require change.

For example, the party created the public union that dominates the oil industry as well as other federations of workers whose income levels and perquisites (especially retirement pensions) place them in the upper echelons of the middle class. Their favored position blocks access to the labor market for millions of young workers.

If the PRI wins the presidency and majorities in both houses of the legislature (a result that now seems probable), it will have no great incentive to alter these arrangements. Instead of a party, the PRI resembles an employment agency for public jobs, a system of corruption, a machine for electoral control, all of it daubed with a populist message. It won’t regain the almost total electoral control it once had -- now irrevocably in the hands of an autonomous Federal Institute -- but it is highly probable that a PRI administration will want to return to the good old days of the 20th century.

Candidate of Left

On the left, a minority understands Mexico’s problems and would use a historical opportunity to begin a new stage of reform. And they have a possible presidential candidate, Marcelo Ebrard, the successful and efficient mayor of Mexico City. He fits the model of other reformist leaders on the left elsewhere in the Hispanic world: former Prime Minister Felipe Gonzalez of Spain, former President Ricardo Lagos in Chile and Lula in Brazil.

Ebrard would attract votes not only from his party but also from discontented PAN supporters and the progressive wing of the PRI. But he has little chance of becoming the PRD candidate. The majority of PRD backers (and of members of other small parties of the left) supports Andres Manuel Lopez Obrador, who lost the last election by the narrowest of margins. His program, ideology and public image aren’t those of a reformer leader, but instead are characteristic of a common political type in Latin-American history: the inspired “redeemer.”

The conclusion is simple and sad. Starting in July 2012, no matter who wins the presidency, Mexico is likely to forgo its opportunity to create economic growth. And we Mexicans will be left in the station as the train of history passes us by yet again.

(Enrique Krauze, author of “Mexico: A Biography of Power” and “Redeemers: Ideas and Power in Latin America,” is a Bloomberg View columnist. The opinions expressed are his own. This article was translated from the Spanish by Hank Heifetz.)

--Editors: Max Berley, Stacey Shick

Click on “Send Comment” in sidebar display to send a letter to the editor.

To contact the writer of this article: Enrique Krauze at ekrauze@prodigy.net.mx.

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net.


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