Monday, March 5, 2007

Mexico and the Calderon Challenge

By Allan Wall

Mexican President Felipe Calderon has just completed three months of his presidency.  It is a presidency that began in controversy, due to the fiercely disputed election and post-election contention, a presidency that began with a special plan to get him into the Congress to take his oath of office. And it’s a presidency that faces great challenges.

Calderon has made his three priorities fighting crime, fighting poverty and creating jobs.  So how is he doing so far?

Calderon certainly hit the ground running. He has sent security forces to various areas of Mexico. He has outlined an ambitious proposal to improve the economy and provide healthcare.  And he has had to face the problems of price increases for tortillas and other products.

A Reforma newspaper poll was administered from February 16 to 18, 2007, in which 1,515 Mexican adults were queried on the Calderon administration’s performance thus far.  Of all those questioned, 58 percent expressed approval of Calderon’s performance as president, while 23 percent disapproved, and 19 percent had no opinion.

Assuming that those polled were a microcosm of Mexicans, we could say that the Mexican public still approves of Calderon’s performance, or at least it is still willing to give him the benefit of the doubt.

Nevertheless, Calderon faces enormous challenges and Mexicans may not be as approving as times goes by if they don’t feel he is making progress.

Regarding Calderon’s three principal goals, fighting crime, fighting poverty, and creating jobs, there are so many factors involved that the new president has his work cut out for him.

Calderon is indeed attacking the drug cartels, but they have a lot of fight left in them and they are still intact and doing a brisk business.  Besides detentions and big security operations against the cartels, corrupt officials who get their palms greased with narco-money should be dealt with, and this is not easy.  Money laundering is a big part of the narco-business and can’t be ignored. And, as with any business, there’s that supply and demand — the demand for drugs is still strong, and where there are buyers there are sellers.  The United States is still the biggest consumer of illegal narcotics, but there’s a drug abuse problem in Mexico as well.

Reducing crime in general would also involve improving the Mexican judicial system and reducing corruption.

The Mexican economy is stable, but lacks the dynamism needed to produce more jobs. It’s estimated that about a million Mexicans enter the work force annually. Of this million, about a third enter the formal economy, a third enter the informal economy, and about a third go to the United States.

Calderon has emphasized the need for more investment in Mexico.  The good news is that in 2006, despite all of Mexico’s problems (a contested election, strife in Oaxaca, cartel violence, etc.), direct foreign investment kept coming in. This is in contrast to Bolivia and Venezuela, which are losing foreign investment.

In 2006, investment in Mexico hit a 5-year high, with US$18.9 billion more dollars being invested, the highest new investment figure since 2001.  That was 6.4 percent higher than in 2005.

The Hershey Company announced in February 2007 that it plans to build a factory near the northern city of Monterrey, which is good news for the economy and chocolate lovers as well.

All this investment is great, but the Mexican economy needs reforms to make it more dynamic.  Mexico’s labor law could stand improvement, and monopolies could be broken up.  Such reforms could be difficult to achieve however, with so many vested interests involved.

Much depends on how Calderon works with the Mexican Congress.  Failure to work well with Congress was a major reason why Vicente Fox, Calderon’s predecessor, was unable to accomplish more.  If Calderon can assemble a working congressional coalition of the PAN (National Action Party) and PRI (Institutional Revolutionary Party) he would have a majority in Congress.  The PRI’s position is actually quite advantageous, located as it is between the PAN and the PRD (Party of the Democratic Revolution) the former ruling party can play a kingmaker role, sometimes siding with the PAN and sometimes with the PRD, to its own advantage.

That’s politics, but hopefully after all is said and done the new Mexican president and enough members of Congress will be able hammer out substantive reforms that will raise the economic level of the neediest Mexicans. In reality, creating jobs is the best way to fight poverty.

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Allan Wall, a MexiData.info columnist, recently returned from a tour of duty in Iraq.  He currently resides in Mexico, where he has lived since 1991. He can be reached via e-mail at allan39@prodigy.net.mx.