Thu, Dec 07, 2006 page9

• Calderon's cauldron is a tough mix

  The new Mexican president faces the challenge of breaking monopolies and reforming the party system

  • By Jorge Castaoeda
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  Under dramatically inauspicious circumstances, Mexico finally got itself a new president last Friday. Felipe Calderon took the oath of office, braving the wrath of his left-wing opposition, out-smarting the Partido de la Revolucion Democratica (PRD) and its leader, Andris Manuel Lupez Obrador, but nonetheless paying a high price. TV news shows and front-page headlines across the world ran the story under the headline: "New Mexican President inaugurated in chaos and fisticuffs."

  Mexico's institutions withstood -- just barely -- the onslaught of a virtually insurrectional left-wing opposition, bent in vain on stopping Calderon's inauguration, and of a resentful Partido Revolucionario Institucional (PRI), increasingly dedicated to allowing Calderon to take office, and then fail miserably. Calderon impressively overcame apparently insurmountable obstacles on the way to the presidency, yet the struggle to govern and transform Mexico has just begun.

  Most Mexican commentators believe that it should be relatively easy for Calderon to improve on the largely self-inflicted failure of outgoing President Vicente Fox's term. Mexico needs to grow at roughly twice the rate that it did under Fox (a meager 2 percent per year). If Calderon can strengthen law and order, and use his considerable political skills to reach agreement with the PRI on structural economic reforms, he will succeed.

  

  But this view is simplistic. Fox's term, along with the four last years of former President Ernesto Zedillo's mandate, was hardly a failure. Not since the 1960s had Mexico undergone ten consecutive years of economic stability, low inflation, low interest rates, a stable currency, and constant, though mediocre growth. For the first time ever, mortgages, automobile loans, and consumer credit became available to the lower middle class: this year more homes were built and sold, and more cars were bought, than ever before.

  Likewise, while Fox can be criticized for not clamping down on protesters and a disruptive, extremist opposition, he never resorted to the bloody repression for which most of his predecessors came to be known. Moreover, he dragged Mexico out of its archaic foreign policy cocoon, and placed immigration and human rights at the heart of Mexico's new international agenda.

  Nor is Calderon finding it easy to negotiate with the PRI, failing to build a coalition government, which he has repeatedly proclaimed as the solution to the gridlock that has cursed Mexico since 1997. Whatever the advantages of a Cabinet comprising solely members of his Partido Accion Nacional (PAN), this is not what Calderon sought. Similarly, no deal with the opposition was possible regarding the inauguration ceremony -- thus the chaotic, depressing scenes of congressmen fighting it out in their chamber, while Calderon was ushered in through the back door for a rushed ceremony.

  Mexico's economic problems might be similarly more intractable than many commentators seem to believe. Mexico experienced a "cold-turkey" economic opening under former President Carlos Salinas from 1988 to 1994; a belated but successful political opening under former President Zedillo from 1994 to 2000; and, at long last, a true rotation in power thanks to Fox. But the foundations of the old PRI-corporativist system created in the 1930s remain untouched, and represent the main and most formidable obstacles to Mexico's growth and success.

  The first pillar of this system is the public and private economic monopolies that dominate the country. The state-owned oil and electric power companies -- Pemex and the Federal Electricity Commission -- face no competition. The private virtual monopolies in telecommunications, Telmex; television,Televisa; cement, Cemex; bread and tortilla manufacturing, Bimbo and Maseca; and banking, Banamex/Citigroup and Bancomer/Banco de Bilbao may face competition abroad, but not at home. These monopolies are stronger than ever, and prices, supply, service, and quality all suffer.

  The second pillar is formed by the unions that have controlled the Mexican labor movement since the 1930s. They enjoy "closed shop" hiring and firing prerogatives, leadership elections by acclamation, mandatory dues without transparency, and immense political power. The teachers' union is the largest in Latin America, the oil workers' union is the richest in Latin America, and the social security employees union has thwarted any attempt at pension or health reform for years.

  The third pillar of the system is political monopoly. For 70 years, the PRI had a complete lock on Mexican politics; now three parties do, and no one else can enter the political arena or gain access to the enormous public subsidies -- more than US$500 million last year -- handed out to these parties without their consent. The main parties write their own anti-trust legislation, vote on their own subsidies, and choose their own elected officials. The absence of consecutive re-election at any level reinforces the party machines' power. They pick candidates, whom voters merely ratify at the polls.

  So Mexico's challenges boil down to liberating the labor movement, breaking up the private monopolies and opening the public monopolies to competition, and lowering entry barriers that restrict access to the political arena. These may not be sufficient conditions for success, but they are certainly necessary ones.

  Calderon must strengthen his presidency from the outset. Taking on the powers that be is perhaps the only way to achieve this, however risky it might appear. Elected with only 35 percent of the vote, lacking a majority in Congress, and taking office on the eve of an economic slowdown in the US, things would be difficult anyway. Given that roughly a third of the electorate does not think he won fairly, and in view of the precariousness of the rule of law in the country, Calderon's position is even less enviable. Caution and patience might not be his best advisers.

  Jorge Castaoeda was Mexico's foreign minister from 2000 to 2003 and is professor of politics and Latin American Studies at New York University.

  Copyright: Project Syndicate
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