Bloomberg News

Calderon Would-Be Successors Suffer Lack of Incumbent Stature

March 30, 2012

Mexico’s three presidential candidates will try to convince an increasingly apathetic electorate they can win a drug war that has claimed more than 47,000 lives since 2006 as they start campaigning today ahead of the July 1 election.

Three years after the U.S. Defense Department said Mexico could become a failed state amid mounting violence, none of the candidates has put forth a decisive strategy for curbing the nation’s drug gangs, said Standard & Poor’s analyst Lisa Schineller. That stands in contrast with outgoing President Felipe Calderon, who has maintained a policy of confronting the cartels, she said.

“Do I see any of these three candidates risking all of the political capital needed to reform the institutions to improve the security situation?,” Carlos Ramirez, a Washington-based political analyst for Mexico with Eurasia Group, said in a phone interview. “I’d say no.”

Calderon, 49, who is barred by law from seeking a second term, sent troops to fight cartels days after taking office in 2006 and hasn’t let up even as the death toll soars and his popularity has declined. That has earned him comparisons with former Colombian President Alvaro Uribe, who turned the tide in a 40-year war with Marxist guerillas, according to Ricardo de la Pena, who heads the Grupo Economistas Asociados-ISA survey company.

Voter Apathy

The number of Mexicans who say they are interested in politics has shrunk to 10 percent, compared with 16 percent before campaigning started at the beginning of 2006, when the last election was held, according to Mexico City-based pollster Consulta Mitofsky. About 59 percent of 71 million registered voters cast ballots in 2006.

“There’s a sense that none of the candidates can resolve the problems we have, and for that reason none are generating great expectations,” Leon Felipe Maldonado, Mitofsky’s project director, said in a March 26 interview.

Ahead of the start of campaigning today, when candidates will be allowed to advertise on television, Enrique Pena Nieto of the opposition Institutional Revolutionary Party is leading the race with 39.1 percent support, according to a March 22-25 survey by Mitofsky. Josefina Vazquez Mota of Calderon’s National Action Party garnered 23.5 percent support, while Andres Manuel Lopez Obrador, who lost the 2006 vote by less than a percentage point, had 18.5 percent. The poll of 1,000 people had a margin of error was plus or minus 3.1 percentage points.

Investor Relief

Investors are relieved that no candidate is proposing a shift from free-market policies, as they anticipated Lopez Obrador would do if he had won the last election. Interest in the election may also rise as campaigning gets into full swing, said Roy Campos, who heads Mitofsky.

Voter turnout will be high in July as all the candidates are strong, Fernando Turner and Macario Schettino, campaign officials for Lopez Obrador and Vazquez Mota respectively, said in interviews over the past two weeks.

The peso has rallied 8.8 percent this year, the most among 16 major currencies tracked by Bloomberg and compared with an average drop of 4.8 percent before elections in 2006 and 2000. Mexican peso bonds have handed investors dollar-based returns of 11.7 percent this year, compared with losses of 3.9 percent in the first half of 2006, according to statistics from Bank of America Corp.

Yields on Mexico’s peso bonds due in 2021 have declined 23 basis points, or 0.23 percentage point, this year to 6.28 percent, according to data compiled by Bloomberg. Yields on similar maturity Brazilian debt dropped 16 basis points in 2012 to 11.16 percent over the same period.

The benchmark IPC stock index has gained 5.5 percent over the same period, compared with a 14.3 rise by Brazil’s Bovespa.

Relative Calm

The past four elections in Mexico, a country of 112 million people, were marred by allegations of vote rigging, an assassination, mass protests and computer vote count failures -- all within the context of growth that averaged 2 percent over the past decade. By contrast, Latin America’s second-biggest economy is expected to grow 3.5 percent this year with the possibility of “positive surprises” after recent production and consumption data beat forecasts, Finance Minister Jose Antonio Meade said in a March 8 interview.

The relative calm of the campaign belies the many challenges awaiting Mexico’s next president. Those include reversing a seven-year decline in oil production by state-owned Petroleos Mexicanos and boosting growth to the 6 percent central bank Governor Agustin Carstens says will help lift an estimated 52 million people out of poverty.

Whoever wins will also have to deal with drug gangs such as the Zetas, who are increasingly targeting bystanders and resorting to methods like decapitating their victims and leaving warning signs on corpses.

Nostalgia for PRI

Nostalgia for the relative peace that prevailed when the PRI was in power for seven decades until 2000 may boost support for Pena Nieto even if resignation prevails.

“I doubt anyone can put a stop to the drug lords,” said Jesus Diaz, a Mexico City taxi dispatcher who will vote for Pena Nieto. “The PRI was the only party that could make pacts with cartels and stop the violence.”

Pena Nieto’s rivals have alleged that a comeback for the PRI would reignite corruption that blossomed during the party’s rule. Still fresh in the minds of voters is the arrest and extradition to the U.S. of former PRI Governor Mario Villanueva in 2010 on drug charges.

Pena Nieto said in a Bloomberg interview in November that his party has no ties to drug trafficking gangs, calling such accusations “nonsense” and “propaganda” from rivals.

He has repeatedly stated his commitment to fighting organized crime, while questioning the current strategy which has led to so many deaths, his campaign team said in an e-mailed comment yesterday.

Corruption Concerns

That may not be enough to appease investors, said Schineller in an interview from New York.

“A question in the market has been, with a return to the PRI governance, would they try to go back to a presumably old way of arrangements and agreements to limit the more egregious behavior” of the cartels, Schineller said.

Pena Nieto says he would aim to reduce the role of the military in the fight against organized crime and instead “at least” double the size of the police force. Vazquez Mota, 51, says she will focus on re-training prosecutors to stop judicial system abuses, while Lopez Obrador, 58, has pledged to pull the army off the streets within six months of taking office.

Mexico is “under sustained assault” from drug cartels, the U.S. Joint Forces Command said in a December 2008 report that listed the nation along with Pakistan as at risk of collapse. In 2010, the same organization, which was created to improve coordination among the military services and disbanded in August, said stability in Mexico was central to U.S. security, without repeating the failed state warning.

Escalating Violence

Since 2010 the violence has escalated, claiming 12,903 lives in the first nine months of last year, up 11 percent from the year-earlier period, according to the Attorney General’s Office. The killings leaped 70 percent in 2010 from 2009.

The mounting death toll helped reduce Calderon’s approval rating to 53 percent this month from an average of 62 percent in 2007, according to Mitofsky. That’s lower than all of his three previous predecessors when they left office, according to the pollster.

“The level of violence in this country has a lot of people demoralized,” Ramirez said.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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