News Column

Reforms Won't Come Easy for Mexico's New Leader

July 3, 2012

Dudley Althaus

Mexican President-elect Enrique Pena Nieto vowed Monday to quickly push for promised economic and social policies that include energy reforms favorable to U.S. and Texas investors.

But many analysts say Pena's far-from-dominant victory in Sunday's election might mean continued gridlock between Mexico's weakened presidency and a politically fragmented Congress. Such paralysis has scuttled the hopes of Mexico's presidents for the past 15 years.

"We were finally getting to the point that people thought we would get real reform," said Amy Myers Jaffe, director of the Energy Forum at the Baker Institute in Houston. "If this election is a setback for that, it's very disappointing."

Pena, 45, won Sunday's election with just 38 percent of some 49 million votes cast, according to the preliminary official tally, far below predictions of pollsters and pundits.

Leftist Andres Manuel Lopez Obrador, who had been written off by many, took about 32 percent of the vote. Josefina Vazquez Mota, the candidate of President Felipe Calderon's conservative National Action Party, claimed another quarter of the ballots. The political allies of both Lopez Obrador and Calderon will hold sway, if not a cohesive majority, in the new congress installed September 1.

"This is the great challenge we have ahead," Pena said Monday, while announcing he was putting experts to work on his reform proposals immediately. "I aspire to carry out a democratic presidency that governs for all Mexicans."

Political observers note that it will take a lot of concessions to get them going.

"Pena Nieto's results in the presidential race means that he lacks the strong mandate he was looking for," said Duncan Wood, an international energy and political analyst in Mexico City. "So we are going to see intense negotiations beginning on this."

Big challenge

Issues like energy reform -- which could benefit Texas energy companies -- is strongly opposed by Lopez Obrador's followers and even many in Pena's own party and could prove especially difficult. Profoundly reforming the petroleum industry, allowing risk investment in exploration and production, will mean changing the constitution. And that requires two-thirds approval by both houses of congress and in 21 of Mexico's 32 states.

"Radical energy reform looks very difficult now," said Wood. "So we are going to see intense negotiations beginning on this."

Pena's Institutional Revolutionary Party, or PRI, and its allies will hold just 232 of the 500 seats in the lower Chamber of Deputies, said Jeffrey Weldon, an expert on Mexico's Congress at ITAM, a Mexico City university. They will fall three seats short of a majority in the 128-member Senate.

"This is not a mandate," Weldon said of Pena and his allies. "They'll have to work with other parties."

Pena has insisted he'll continue but improve upon Calderon's military-led campaign against the country's violent narcotics trafficking gangs, which has claimed more than 50,000 lives in the past six years and brutalized large stretches of the Texas-Mexico border region.

"A stable and secure Mexico is in the best interest of the United States," Texas Congressman Michael McCaul said of Pena's victory. "I am hopeful that he will not return to the PRI party of the past which was corrupt and had a history of turning a blind eye to the drug cartel."

Weak political hand

President Barack Obama called Pena on Monday to offer congratulations and offer cooperation on "advancing common goals including promoting democracy, economic prosperity and security in the region and around the globe," according to the U.S. Embassy.

Pena and his advisors, as well as many experts, argue that allowing both Mexican and foreign private investment in Mexico's energy sector is crucial for the countries economic prospects.

They envision opening shale gas, petroleum distribution and electricity generation to private investors. Some of that might be doable even if Pena holds a weak political hand.

But the nationalization of energy by Pena's party 74 years ago is a political and cultural milestone of many Mexicans, one enshrined in the constitution. Any sort of privatization has its share of opposition.

"Pena's economic agenda looks pretty good," said Rodrigo Aguilera, senior Latin America analyst with the Economist Intelligence Unit in London.

"But it doesn't look like the PRI is going to get the number he needs without working with other parties."



Source: (c)2012 the Houston Chronicle


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