Mexico: Peña Nieto’s big push

By CLALS Staff

President Enrique Peña Nieto / Photo credit: Eneas / Foter / CC BY

President Enrique Peña Nieto / Photo credit: Eneas / Foter / CC BY

President Peña Nieto’s reformist agenda wins kudos from the business and financial class, but both a recalcitrant leftist opposition and mass organizations previously aligned with his party are taking to the streets in protest – raising serious doubts about its prospects.  In his first state of the nation speech, delivered last week, Peña Nieto pledged to plow ahead with “transformational” reforms, giving flesh to the PRI’s slogan that it is Transformando a México. In education, he’s proposed a more rigorous system for hiring, evaluating, promoting and firing teachers who have resisted change despite evidence that the current system is not equipping Mexican youth for employment.  In the energy sector, he wants to open up the oil and gas industry to foreign investment, an idea that was strictly off-limits in the past even though lagging investment has caused production in Mexico’s leading export industry to decline steadily.  He is also pursuing tax reforms that, although watered down when announced on Sunday, entail political risk and, tellingly, raise marginal rates by 2 percent for higher earners and impose a levy on capital gains.  In June, he picked a fight with powerful business leaders over control of the country’s telecommunications industry, an oligopolistic structure that imposes excess costs on consumers and producers alike, diminishing Mexico’s economic competitiveness.

The teachers unions, whose symbiosis with the PRI in the past ensured cooperation, mobilized huge protests in Mexico City, forcing Peña Nieto to delay his speech by a day and then causing monstrous traffic jams during it.  The President cloaked his announcement of the energy reform in nationalistic rhetoric, and PEMEX, the oil company, followed it up with predictions of positive results – huge increases in oil investment and production that purportedly would help to create 500,000 new oil-sector jobs by 2018 and 2.5 million by 2025. But opposition to the reform has been strident, and tens of thousands filled the Zócalo on Sunday to protest it as a “covert privatization.”  Opposition leaders are already pledging demonstrations to oppose taxes, though the likelihood of this may be diminished because the long rumored reform unexpectedly left untouched the value-added tax exemption for food and medicines, which would have been a major rallying point for the Left.

Some Mexican commentators say Peña Nieto’s leadership is already losing its shine and that his Pacto por México, the loose coalition he engineered in Congress, is at risk of falling apart.  He prevailed in his congressional showdown over the long overdue education reforms, but success in transforming the underperforming education sector appears uncertain, as the teachers are threatening more protests.  The arrest of narco bosses from the Gulf Cartel and the Zetas have not given him a bounce on the security front; indeed, Mexican press reports indicate that kidnapping, extortion and other crimes that more directly affect citizens’ lives continue to rise. Further complicating Peña Nieto’s life is news last month that the economy is slowing down.  The first contraction in four years has forced the government to cut its 2013 GDP growth forecast in half, to 1.8 percent.  The administration will undoubtedly point to data showing that PEMEX production has fallen by about a quarter in the past decade because of low investment, and will emphasize that this makes modernization of the oil sector all the more imperative.  But Mexicans have heard promises before, during NAFTA debates and since, that economic reforms and greater openness to trade and investment will massively improve their lives.  Whether there is any fuel left in that rhetorical tank remains to be seen.