KeatingEconomics.com

The July 2000 elections undoubtedly marked the dawn of a new era in Mexico. The Mexican people enthusiastically brought about a peaceful and stable change in their long-standing regime by casting their votes for Vicente Fox, the presidential candidate backed by the opposition–a coalition of the right-of-center National Action Party (PAN) and the Mexican Green Party. This has been a huge development for AMIFE.

That election, which evolved into a referendum for change rather than an ordinary election, brought an end to the 71-year lock on the presidency by the Institutional Revolutionary Party (PRI), a reign that dates back to the days of Herbert Hoover. It is no wonder that Fox’s electoral victory was immediately heralded throughout the free world, which equated its significance to the fall of the Berlin Wall or Nelson Mandela’s election as president of South Africa.

President George W. Bush, comprehending Mexico’s importance to America, and Fox have placed a high priority on the relationship between their two countries. Indeed, the American president’s first international trip, in February 2001, was to San Crist-bal, Guanajuato, Fox’s equivalent of Bush’s Crawford, Texas, ranch, a fact clearly demonstrating the friendly tenor and focus on the bilateral relationship. In addition, Bush’s first state dinner was reserved for Fox in September 2001.

Both presidents have placed so much emphasis on the relationship because of three factors:

* The high degree of social and economic integration between the two countries.

* Recognition that Mexico is at a critical juncture from a democratic standpoint and needs all the support it can get to make its newfound democracy sustainable.

* Changing demographics in the United States and the increasing political importance of the Hispanic vote in U.S. politics.

After his historic 2000 election, it appeared that Fox would charge on, overcome any and all obstacles, and bring about the change mandated by the Mexican people–something he had repeatedly promised throughout his campaign. However, the same election that delivered him the presidential sash also handed him a less than desirable party composition of Congress, particularly since the PAN had never before occupied the presidency. As he grapples with the pitfall-ridden Congress, Fox must address intricate domestic policy challenges, such as the economic slowdown, widespread corruption, the drug war, and the outstanding social and indigenous issues that are the remnants of the ethnic Mayan rebellion that started in Chiapas state in 1994.

The new government is facing an identity crisis. For the first time in its modern history, the country’s bicameral Congress is completely divided, with no single party holding an absolute majority in either the Chamber of Deputies or the Senate. While this composition has invigorated Mexican democracy, it has also complicated the task of governing the nation.

Gone are the presidential good old days derived from having a rubber- stamp Congress–a situation enjoyed by all 12 preceding PRI “imperial” presidents, though former President Ernesto Zedillo benefited from it only during the first half of his term, that is, before the PRI lost its majority in the Chamber of Deputies in 1997.

POLITICAL EARTHQUAKE

The current composition of Congress requires Fox to garner not only the support of his own party, the PAN, but also that of either the PRI or the left-of-center Democratic Revolutionary Party (PRD) if he is to gain the votes necessary to get his legislative agenda passed.

A little more than a year into his six-year term in office, Fox is engaged in a relationship with Mexico’s fifty-eighth Congress that thus far has been one of adjustment and incremental change. This situation should surprise no one, given the number of unprecedented political firsts that Mexico is living through today.

Like a child with a new toy, Congress is enthusiastic about exercising its newfound power at every opportunity–even while, at times, lacking a full grasp of the issues that would enable its members to make sound legislative decisions. The Mexican Congress has wasted no time in trying to perform as a true legislature, sparking congressional debate, counterproposing its own legislative agenda, passing a relatively high number of bills, and amending all bills submitted by the president.

From the standpoint of instituting separation of powers, enabling effective congressional oversight, and bringing accountability to government, all of the above are positive developments for Mexico. Nevertheless, the shift will undoubtedly come at the expense of the swift and sweeping policy changes that people, both in Mexico and the United States, had anticipated with Fox’s arrival.

On the flip side of his electoral victory are the profound repercussions on Mexico’s political party system. These have influenced the new president’s ability to govern in various ways. For example, in years past, the PAN and PRI usually voted together on economic issues; the PAN and PRD usually joined on issues involving political reform. Will these alignments change now that the PAN is the ruling party? And will the recent elections of PRI, PAN, and PRD leaders affect the direction these parties take?

While losing the presidency dealt a major blow to the PRI, the party remains a major political force in Mexico, and one with which the Fox administration must negotiate. Aside from the PRI’s plurality in the federal Congress, 17 of the country’s 32 governors and 1,208 of 2,443 city mayors belong to the PRI. The party also holds absolute majorities in 17 of the 32 state legislatures and a plurality in an additional 5.

Despite such political prominence, the defeat in the presidential race has taken the party to the brink of its very existence. Adjusting to being in the opposition–after seven decades in power–is no small feat. While the electoral defeat forced the party to be introspective, it also created deep internal division. Fox has had to undertake complex, fragile negotiations with several PRI factions at a time on legislative issues. The cohesiveness achieved and ideological direction taken will depend on its recently elected party president, Roberto Madrazo.

Fox cannot even count on the unconditional congressional support of his own National Action Party. Having been the perpetual opposition party since its founding in 1939, the PAN has had to adjust to being the party occupying Los Pi-os, Mexico’s version of the White House. Given the collusion that existed between the president and the PRI during its 71-year occupancy of Los Pi-os, the PAN is making every effort to maintain a healthy distance from the president– including frequently disagreeing with him on his legislative agenda–to avoid the same type of relationship.

Coming to terms with the PRD is easier said than done. The party is ideological and often uncompromising in its stance on important congressional votes, leading some in Mexico to perceive it as obstructionist. Yet Fox needs to gain its support because it holds enough seats in both the Chamber of Deputies and Senate to be a significant factor in any legislative strategy.

FIGHTING RECESSION AND CORRUPTION

As if the political challenges were not enough, he has had to contend with widespread domestic problems, among them the current unexpected economic slump, corruption, the drug trade, social and indigenous issues, and a judicial system sorely in need of reform.

A year and a half into Fox’s term in office, one can imagine his advisers saying, “It’s the integrated economy, stupid!” Indeed, the economic picture has changed since July 2000. The slowdown of the U.S. economy has had a major impact on Mexico, and the September 11 terrorist attacks have exacerbated the situation.

Having projected optimistic economic growth of about 7 percent for 2001, Fox instead faced an economic decline of 0.3 percent last year. Mexico’s economic sluggishness is partially attributable to the high level of integration between the U.S. and Mexican economies, especially after the North American Free Trade Agreement (NAFTA). Since NAFTA’s ratification, Mexico has risen in the trade ranks to become the U.S. second-largest trading partner (after Canada), with a quarter-trillion dollars worth of trade crossing the U.S.-Mexican border every year.

Another headache was the loss of about a half-million jobs in 2001, a figure that reflects the impact of the U.S. recession on Mexico’s expert sector and the terrorist threat on the tourism sector. It is conceivable that Fox may have been the happiest man in the country in late January, when he heard Federal Reserve Chairman Alan Greenspan say that signs of economic recovery were being detected.

A widely accepted solution to the much publicized ethnic rebellion in the state of Chiapas–a problem Fox inherited and promised to resolve when he campaigned for the presidency–has proved somewhat elusive. Although the president extended an olive branch to the Zapatista National Liberation Army (EZLN) by allowing the group to march to Mexico City and ultimately enabling it to address the Chamber of Deputies, thereby placing the movement on the national stage, the EZLN has vowed to continue its resistance.

In April 2001, the Mexican Congress passed the Indigenous Rights Bill. It guaranteed indigenous and cultural rights to ethnic minorities but fell short of some of the EZLN’s demands–particularly self- determination and control over lands. Thus, the EZLN does not acknowledge the constitutional reform. In the end, it suspended all dialogue with the federal government and has renewed its low-intensity resistance.

One of the most daunting challenges facing Fox is the immense task of abating the corruption that has permeated all levels of government over the years. According to a Transparency Mexicana survey, the problem has cost Mexican families between 6.9 percent and 13.9 percent of their annual household income because of the need to use these funds for paying bribes. Fox recognizes the pervasiveness of the problem, which cannot be solved without the active participation of all segments of Mexican society. He is well aware that a solution requires a multifaceted strategy that encompasses prevention, detection, and successful prosecution.

The new administration’s first step in the campaign to eliminate corruption was to require the cabinet to take an oath pledging ethical behavior. Fox has vowed that corruption will no longer be tolerated, and he has launched a massive public relations campaign to “just say no to bribes.” Nevertheless, his administration’s progress on this issue will ultimately be subject to the efficacy of Mexico’s judiciary. As long as the country’s culture of impunity persists, so will its corruption problem.

Closely linked to the corruption conundrum is the drug trade. Aside from the corrosive effect on the country’s law enforcement apparatus and judicial institutions, illegal drugs present a multitude of other domestic problems, including rising drug consumption accompanied by high social costs, illicit arms trafficking, and money laundering. Fox’s ability to combat drug trafficking is severely hindered by a judicial system in dire need of reform–from the institutional strengthening and professionalization of its law enforcement agencies to improvement in the court and the country’s long-neglected penal institutions.

TIES THAT BIND

The United States and Mexico are highly integrated with one another, both socially and economically. As Bush said in a toast to Fox at the White House state dinner last fall: “The most important ties between your country and mine … go beyond economics and politics and geography. They are the ties of heritage, culture, and family. This is true for millions of Mexican and American families, including my own.”

Despite these ties, the subject of immigration–a major focus of the Fox administration–continues to be a highly contentious issue in the United States. The status of the millions of unauthorized Mexicans working and living in America is a priority on Fox’s bilateral agenda. According to the latest estimates by the U.S. Immigration and Naturalization Service, there are between seven and eight million unauthorized immigrants residing in the United States today, and some 55 percent are believed to be Mexicans. The Fox administration is seeking an agreement that encompasses a temporary-worker program and the regularization (referred to as amnesty) of the unauthorized Mexicans already living in the United States.

The temporary-worker program is politically viable, particularly in certain sectors that are still experiencing labor shortages. Regularization, or amnesty, is much more complex and, some would argue, not a political option, given its implications for overall U.S. immigration policy.

Mexico’s efforts to deal with the drug trade are also relevant to the United States. Fox’s tough talk against drug trafficking has earned him an incredible amount of goodwill from both the Bush administration and Capitol Hill, as evidenced by the passage of legislation imposing a one-year suspension of the annual drug certification process–a kind of report card grade the United States assigns to a country’s level of cooperation on counternarcotics measures.

Many observers believed that the intensity of the bilateral relationship would subside after September 11. If anything, however, the terrorist attacks and their aftermath have resulted in a readjustment of the bilateral agenda to include Mexico as part of a North American security arrangement–an extension of U.S. homeland security. The 2,000-mile border between the two countries and the one million crossings per day give Mexico added importance.

The United States and Mexico are committed to ensuring that certain measures are in place to safeguard both nations against terrorism without hampering the legitimate flow of goods and people. Indeed, Homeland Security Director Tom Ridge underscored this commitment during his official visit to Mexico in early March.