Mexico’s New President

Enrique Peña Nieto and his centrist Institutional Revolutionary Party (PRI) won yesterday’s presidential election in Mexico with talk of creating more jobs and bringing in more private investment, among other campaign promises. What he and his two opponents did not talk about, however, was how to tackle the drug cartels that have terrorized certain portions of the country and show no signs of letting up.

Mexico’s big problem, says Philip Nichols, Wharton professor of legal studies and business ethics, is “the insinuation of the drug cartels into government in general — regardless of who is in powear — and the astonishing violence that the cartels are willing to exercise against democratically elected or politically appointed people, journalists and others.”

All three leading candidates “avoided conversations about the cartels, although they acknowledged the need to control the violence,” Nichols adds. “I don’t think it’s because they are beholden to the cartels. My guess is they don’t know how to deal with them.”

Peña Nieto, 45, will have other issues besides the drug cartels to contend with if he hopes to take Mexico in new, more legitimate, directions. His PRI party, which was in power for more than seven decades before its defeat in 2000, was often associated with corruption and patronage. But since then, says Nichols, “sunshine has been let into Mexican bureaucracy, including into the PRI, which is not the same kind of calcified party it used to be.” The result has been “truly competitive elections in Mexico” over the past 12 years. If Peña Nieto “continues the kind of open policies and business maturity that the PRI now claims to have, the combination of those two things could work out well.”

Indeed, according to an article in The New York Times, Peña Nieto “campaigned without an ideological bent … and presented himself as a pragmatic manager…. He made the economy his centerpiece, saying that he would create jobs, lift wages” and open up Pemex, Mexico’s national oil monopoly, to private investment.

Peña Nieto will replace President Felipe Calderon, who steps down from a six-year term in December and, according to Mexican law, cannot run for a second term.

One likely direction for the new president, a former governor of Mexico State and the husband of a television actress, is to forge greater ties with Latin America, which has shown slow but steady growth over the past decade. “Mexico could, for example, further develop its already strong financial services and construction sectors,” Nichols points out. “The country could also further encourage foreign investment, which has already benefited from a policy of openness adopted after the country dropped its foreign investment code which, in the 1990s, prohibited most types of outside investment as a way to shelter its own industries. In reality, the country wanted to construct higher hurdles so it could accept higher bribes,” Nichols says.

But that is in the past, he adds, and the emphasis is now on moving ahead and focusing on the country’s strengths, including an educated, sophisticated population and an impressive transportation infrastructure that connects the country to the large markets that surround it. The stakes are clear, Nichols notes. “If Mexico grows, investment comes in. If the drug violence breaks the backbone of Mexico, then investment will dry up.”

In addition to Latin America, Mexico must also deal with its huge neighbor to the north. “Mexico is very dependent on North America, and to the extent the U.S. doesn’t get its economic house in order, there is not a whole lot Peña Nieto can do.” What the country desperately needs is for the U.S. “to rationalize its drug policy, because the appetite for Mexican drugs is destroying Mexico. The criminalization of drugs patently hasn’t worked,” says Nichols, adding that while the U.S. has coordinated policy with countries like Colombia and Peru, it has yet to do the same with Mexico.

Nichols suggests that Peña Nieto’s first two priorities “should be to work with the U.S. on a clear a drug policy, and to inculcate a culture in which the entire country is united in standing up to the violence.”

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