The Institutional Revolutionary Party (PRI), which ruled Mexico from 1929 to 2000 without interruption, will return to power in that country after twelve years under the leadership of Enrique Peña Nieto. The stylish, pragmatic 45-year old lawyer, who is married to a television soap opera star, won the elections on July 1. His victory did not come as a surprise. Peña Nieto led in all of the polls throughout the election campaign. Ultimately, he defeated his chief rivals, leftist Andres Manuel López Obrador and Josefina Vazquez Mota, candidate of the now ruling National Action Party (PAN).
Nevertheless, this was not an easy victory for Peña Nieto. The possibility that the country could return to a political system once described as the “perfect dictatorship” by Peruvian Nobel Prize-winning novelist Mario Vargas Llosa generated some reluctance among the population, and particularly among students, who used social media to rally against the party. Peña Nieto overcame the fact that 38% of voters identified the PRI, which held power for 71 years, with bureaucratic corruption, recession and bank bailouts.
After learning that he had been elected, Peña Nieto uttered the phrase, "I am the PRI, and it is coming!" Nevertheless, Carlos Malamud, chief Latin American researcher at the Elcano Royal Institute, warns that the old PRI has not disappeared from Mexican politics. He notes that two separate souls currently co-exist within the PRI: “One that has the ghosts and dinosaurs of the past; the other, which is new and is more related to modern democracy and to younger staff members. Peña Nieto is not a clear member of either of those sectors, and he is attempting the difficult task of synthesizing [both parts]. We’ll have a better idea of where he is when he puts together his cabinet in the future.”
In Malamud’s view, the importance of the return of the PRI to the government is that it introduces a new stage in the political life of Mexico. The fact that the parties have alternated in power after 12 years of the conservative PAN “validates Mexican democracy as a really stable system,” he notes. This is true despite the fact that López Obrador claimed after the elections that the voting process was plagued by irregularities such as the purchasing of votes. He announced that he will request the electoral authorities to do a total recount of the votes cast in the election. So far, the Federal Electoral Institute (IFE) has announced that it will recount 54% of the votes in the presidential election.
Malamud believes that López Obrador’s reaction was already “in the script.” As early as 15 days before the voting took place, the leftist candidate had spread doubts about the voting process that would leave him a loser and about the electoral process itself. His attitude, adds Malamud, “does not help the process … but neither does it thwart Peña Nieto’s position as the winner…. The other candidates have recognized the results, and the difference between López Obrador (31.59 % of the votes) and Peña Nieto (38.21%) is more than 6 percentage points, or more than three million votes, which is considerable.” This situation is very different from what happened in 2006, when López Obrador lost the presidential elections to Felipe Calderón by the small margin of 0.56%. On that occasion, López Obrador refused to recognize the results and claimed victory for himself in the balloting.
Keys to Victory
The PRI candidate managed to succeed in the election despite his oratorical and intellectual shortcomings, which were strongly questioned and even ridiculed during the campaign — especially when he was unable to name the titles of any two books he had read, and some critics said that he only knew how to read a teleprompter. He managed to achieve his goal in part as a result of others’ mistakes, analysts say. The PAN candidate, Josefina Vazquez Mota, did not figure out how to attract the votes of those who rejected the PRI. Instead, Vazquez Mota focused on attacking leftist López Obrador. The latter candidate made the electorate forget about the mistakes that he had committed when he lost the elections of 2006, and he then refused to accept defeat for months — organizing demonstrations that wound up irritating a large portion of the population and damaging his political image.
“It is clear that, intellectually speaking, Peña Nieto is not a brilliant figure, but that politically speaking, he has some strengths,” notes Malamud. As examples, Malamud cites “his performance as governor of the State of Mexico [between 2005 and 2011]; his skill at fighting the bosses of the PRI in order to win in the primaries; and the fact that he won an election campaign that was as difficult as this one. Beyond that, you have to add the fact that his telegenic image has been well promoted by media linked to the PRI, and that he has been skillful at refusing to debate some crucial subjects.”
In addition, Peña Nieto has been able to overcome negative revelations about his private life, such as infidelities in his previous marriage and the fact that Peña Nieto has had two children out of wedlock. Such news created great distress among his sympathizers, as did accusations of corruption against former governors from his own party.
Peña Nieto, who has a law degree from Mexico City-based Universidad Panamericana (Panamerican University), is considered by many observers to be a pragmatist without a clear ideology. He will take on the challenge of leading the PRI and the government beginning on December 1, following Mexico's traditionally long post-election transition period. Peña Nieto will take the place of Felipe Calderón, who has headed the government for the past six years and, in accordance with Mexican law, cannot run for a second term.
Philip Nichols, professor of legal studies and business ethics at Wharton, noted in a recent Knowledge@Wharton article that he is optimistic about the future of the Peña Nieto government. Over the past twelve years, “there have been totally competitive elections in Mexico,” he said. 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.”
The Challenge of Consensus
At the moment, no one knows how the government of Peña Nieto is going to function, although he has provided glimpses, on numerous occasions, into the areas that concern him. One of those is the weak economic growth that Mexico has had since the 1980s — only a little more than 2% in the last five-year period. That’s below the main emerging economies, especially Brazil, which is its chief competitor in the region.
In that regard, Malamud believes that from a macroeconomic point of view, the Mexican economy is behaving very well, even better than that of Brazil. According to government data, the Mexican economy grew by 4.6% in the first quarter of 2012, year-on-year, while the Brazil economy only grew by 0.8%, year-on-year, because the international economic crisis is having an impact on Brazil, especially in manufacturing. Despite the positive data, Malamud warns that “from here on, the risk facing Mexico is that it could fall into what the economists call the trap of middle-income countries. If a country wants to become a developed country, not an emerging one – the way it is currently – it has to escape that trap. It can continue to grow at modest rates, but if that happens, it won’t break the vicious circle of inequality and poverty.”
In that sense, there is a clear consensus that, because of Mexico’s size, its importance and its proximity to – and dependence on — the U.S., no great changes in macroeconomic policy are expected from the new government. “Clearly, there is confidence that things are going to continue the way they have been going,” notes Gonzalo Garland, an economist at the IE Business School. However, experts also point out that a series of wide-ranging and deep reforms will have to occur for the country to end its period of slow growth.
For this to happen, the political parties will have to reach agreements. That’s because, “contrary to what the surveys indicated a few months ago, the PRI has not won the election with very comfortable majorities in the Congress [lower house] and the Senate,” notes Garland. He believes that this could be something positive for the country. “Total majorities are very useful when it comes to having strong governments that carry out reforms, but during a period of transition [after 12 years of the PAN in power] it can turn out to be better if there is a balance of power, and if the various political forces have to negotiate. They will be forced to reach agreements in order to achieve certain structural reforms.”
Malamud adds that there are two types of reforms that can be undertaken. On the one hand, there are reforms that require the approval of ordinary laws, and which therefore require a simple majority in [both] the [Mexican] Congress and Senate. In such cases, “Since the PRI does not have a majority in either of the two chambers, it will have to negotiate with the PAN." Second, “there are some broader reforms, such as those that require constitutional changes [as in the energy sector], and those that require approval by two-thirds of the legislators. These reforms require a greater consensus that will be difficult to obtain given the ultimate composition of the chambers, as well as the need for support from the PRD (Party of the Democratic Revolution) led by López Obrador.”
Pemex, Poverty and Drugs
One of the main challenges facing the government of Peña Nieto will be energy reform, and state-owned petroleum company Pemex will be the main player there. Over the past ten years, the company has suffered some of the industry's biggest declines in hydrocarbon production. The new government could do something similar to what Brazil has done with Petrobras — that is, the government could turn Pemex into “a company that continues [to operate] under public control but with a larger role for foreign investors, especially in key areas such as exploration,” says Malamud. However, he warns that reforming Pemex will be difficult because Mexico’s “petroleum wealth continues to provide a significant base for the country’s fiscal revenues, and [reform] would require complementary energy reform and fiscal reform.”
Garlandagrees that fiscal reform is crucial. In his view, “Mexico should try to increase its tax revenues because the country has many social needs and infrastructure needs, and the level of tax collections is very limited.” He adds that labor reforms would also be required.
Finally, the goal should be to achieve permanent economic growth that manages to alleviate a problem that Mexico shares with other countries of Latin America: poverty and social inequality. Forty-two percent of Mexico’s population lives in poverty, and the country’s wealth is concentrated in just 10% of its population. In this sense, Peña Nieto has also turned toward Brazil in search of solutions. He has talked with that country’s officials about its successes, with the goal of emulating the significant movement of its population into the middle class in recent years.
Another area that Peña Nieto will focus on is the problem of violence and insecurity. In 2006 President Felipe Calderón declared war on the drug trafficking cartels, and the ensuing conflict has resulted in prolonged violence. The effort has left 55,000 people dead, and thousands of people have disappeared or have been uprooted from their homes. Malamud notes that the subject of violence has strong social connotations. “Mexican society is sick and tired of this, and it needs answers, but there are obviously no short cuts or easy solutions to a subject this complicated and controversial.”
Many Mexicans wonder if this war is useless because no one is winning and so many people are dying. Yet Garland notes that, based on the declarations made by Peña Nieto, “it seems that he is going to continue the policy” [of Calderón]. Recently, Peña Nieto declared that “the war against crime is going to continue with a new strategy to reduce the violence and to protect, above all, the lives of Mexicans. It must be made very clear that there will be no agreement or truce with organized crime.”
Experts note that the United States is going to play a key role in this war. Without the U.S., Mexican authorities have a much more limited scope of action, especially taking into account that the main market for the drugs that the Mexican cartels manage is in the United States, and a large part of the arms that they provide also come from the U.S. For many cartels, the U.S. also functions as an area to which they can retreat when pressured by attacks from the Mexican military. Malamud notes, “The U.S. has to have a much more active attitude” when it comes to fighting drug trafficking.
According to Nichols, Mexico desperately needs 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 drug policy, and to inculcate a culture in which the entire country is united in standing up to the violence.”