In Mexico, disappointment with Pena Nieto fuels a desire for change

Leader in Mexico’s presidential race, MORENA candidate Andres Manuel Lopez Obrador
Andres Manuel Lopez Obrador leads in the polls, running as the candidate of radical change willing to take on corruption. But he will likely be limited in his policy choices (source: dpa)

Mexico’s July 1 election is likely to be a major turning point in the country’s recent history. Polls show a significant lead for the leftist candidate, Andres Manuel Lopez Obrador, who is making his third run for the presidency and promises to clean up corruption and reduce inequality. If he wins, it would be the first leftist government in Mexico’s history and could take the country in new, unexplored directions – at least rhetorically.

Meanwhile, the candidate of the ruling Institutional Revolutionary Party (PRI), Jose Antonio Meade, is unable to gain traction, running a distant third in the polls. In between, Ricardo Anaya, a young candidate from the center-right National Action Party (PAN), which governed Mexico from 2000 to 2012, has also positioned himself as a candidate of dramatic change, appealing to middle-class voters as a less radical version of Mr. Lopez Obrador.

Mexicans’ apparent turn away from the party in power and toward options that promise thorough change suggests that there is disenchantment with the much-touted reforms from early in President Enrique Pena Nieto’s term. However, efforts to allow private investment in Mexico’s protected energy industry, make telecommunications more competitive and improve education have achieved some significant successes, even if progress has been slower than promised.

Mexicans overwhelmingly express frustration at the direction their country is headed

At the same time, violence from organized crime has spiked again. This is partly because the government has paid limited attention to the problem, but also because illicit drug consumption patterns have changed in the United States. The administration has been engulfed in multiple corruption scandals that have undermined public confidence. Mexicans overwhelmingly express frustration at the direction their country is headed and a strong desire to tackle corruption and rule-of-law issues, which have been the Pena Nieto administration’s Achilles’ heel.

As often happens, this election may prove as much of a referendum on the outgoing administration and the state of the country as a choice about the future. If trends hold, voters seem likely to opt for some version of major change, or at least for one of the candidates that promises to implement it.

Mexico’s reforms

The first 18 months of the Pena Nieto administration, from late 2012 to mid-2014, were a period of almost dizzying legislative activity. Prodded by the executive, the Mexican Congress approved a major amendment to the country’s constitution to allow for private investment in energy, including oil exploration; passed a law creating greater accountability in schools, which had long been run at the whim of a corrupt national union; and injected greater competition into the telecommunications sector (cellular phones, broadband and television), including robust market regulation.

All these reforms have met with some success. Despite low oil prices, private companies have eagerly invested in Mexico and have helped make the first two oil discoveries in decades. Gas imports from the U.S. have also increased, allowing the country’s power grid to switch from oil- to gas-fired power plants, driving down industrial electricity prices. Renewable energy is expanding quickly, accounting for almost a fifth of all electricity now produced (not including hydroelectric power). There is now a robust retail gasoline market with private distributors alongside the national oil and gas company, Pemex, which has also improved customer service.

Ricardo Anaya of Mexico’s National Acton Party
PAN candidate Ricardo Anaya has positioned himself as a less-radical version of Mr. Lopez Obrador, and appeals to Mexico’s middle-class voters (source: dpa)

In the long run, all these changes augur well for Mexico’s future, but it will take years before their effects are fully felt. In particular, oil exploration will yield new production five or six years from now, while gas imports will only start to reach the center of the country – and then likely help lower residential electricity prices – once new pipelines come on line later this year and in 2019. The reform was well done, but it was an investment in Mexico’s long-term health, not its short-term development.

Of course, what Mexicans most remember about energy these days is not the reform, but the series of corruption scandals involving Pemex management and the Brazilian contractor Odebrecht, which is alleged to have given about $10 million in bribes to Pemex officials in return for lucrative construction deals. The gains of the energy reform may be real, but they are undermined by the government’s deep corruption problems.

The education reform created new standards for teachers and allowed for the removal of those who failed to meet minimum standards or did not show up to teach, including friends and allies of union officials who often received salaries without teaching. Yet the reform has been slow to take hold, and the government has negotiated its implementation with the union in many states to avoid strikes and disruptions during the school year. It will probably improve Mexico’s education system in the long term. Today, though, Mexicans still see promises unfulfilled.

Arguably, the initiative that had the most short-term success was the telecommunications reform. It brought prices down by creating greater competition in the cell phone market, provided more choice in television stations and expanded broadband and internet access. The reform has succeeded in part because regulators have been able to play a few major monopolies against each other as they try to enter each other’s markets, but also because innovation has created space for new competitors.

Trump, crime and corruption

If the government had only this to deal with, they might be able to declare a measured success. The economy has grown slowly, but the stage has been set for Mexico’s future. However, many Mexicans would say the gains have been more than offset by the government’s own missteps, as well as the unexpected election of U.S. President Donald Trump, who has focused attention on Mexico.

The Pena Nieto administration deserves credit for proactively facing the threat to Mexico posed by President Trump’s policies. In the face of a U.S. government that wanted to withdraw from the North American Free Trade Agreement (NAFTA), build a wall on the border and deport millions of Mexicans back to their home country, the Mexican government has moved adroitly to build a better relationship with the Trump administration than anyone could have imagined, negotiated deftly on NAFTA and refused to budge on paying for a border wall.

For many Mexicans, the government looks too willing to accommodate President Trump’s whims

Nevertheless, President Trump’s early declarations have created uncertainty in Mexican financial markets and driven the peso lower against the dollar. Sometimes the Pena Nieto administration has failed to balance its smart negotiating skills with its counterparts in the Trump administration with equally visible outreach to countervailing political forces in the U.S. For many Mexicans, the government looks too willing to accommodate President Trump’s whims.

However, the greatest damage to the Pena Nieto administration has been self-inflicted. This includes inattention to a growing public security crisis, which saw homicide rates in 2017 return to figures not seen since 2010-11, and a series of corruption scandals. To be fair, the growing violence in Mexico is partly the result of shifting demand in the U.S., especially the rise in the consumption of Mexican-produced heroin and the smuggling of synthetic opioids from China through Mexican ports. These shifts, which were accompanied by falling demand for Mexican marijuana and Colombian cocaine (smuggled through Mexico), reshuffled the balance of forces among organized crime groups, benefiting some, harming others and setting off a scramble to control the heroin and opioid trade.

The government has been wrong-footed by these developments and has done little to address them. Its strategy for public safety, including cooperation with U.S. law enforcement agencies on organized crime, has been on autopilot, and senior government officials rarely even speak about the spiraling homicide rate. It is true that the rising murder rate has not been accompanied by a similar increase in other kinds of crime, such as kidnapping and extortion, that often affect average citizens more directly. But growing violence has cast a pall over economic gains and made some parts of Mexico particularly dangerous.

President Enrique Pena Nieto and PRI presidential candidate Jose Antonio Meade
PRI candidate Jose Antonio Meade (R) is polling a distant third, largely due to disenchantment with the administration of President Enrique Pena Nieto (L) (source: dpa)

The government’s inept response to the killing of 43 young people in Iguala, Guerrero in 2014 by an organized crime group, with the complicity of local authorities and possibly the knowledge of some federal agencies, has become the symbol of this public security failure. The government not only took several days to react to the brutal murders but managed to muddy the investigation so badly that it undermined any credibility it might have gained from establishing the facts. Many Mexicans suspect that the government had reasons for not getting to the bottom of the crime, feeding the impression that it has done little to stem rising violence or break the ties that still exist between criminal groups and public authorities.

At the same time, President Pena Nieto and his wife found themselves in trouble after media reports revealed that they owned a home worth $7 million, built by a company that often won government contracts, without clear evidence of how it was paid for. Whether or not this was a case of influence peddling, it certainly seemed that way to most Mexicans. Much like the Odebrecht scandal, it highlighted the degree to which public officials appear to benefit financially from their positions of influence. Several other scandals involving the administration, ruling party and opposition party leaders have followed, creating the impression that corruption has run wild under this government.

This perception of corruption, together with the rising violence, has done the most to create frustration among Mexicans about the direction of their country and will likely help shape their decisions at the polls in July.

The future

Recent polls give Mr. Lopez Obrador a consistent lead in the run-up to the presidential elections. A former Mexico City mayor and two-time presidential candidate for the left-of-center Democratic Revolutionary Party (PRD), he broke away and formed his own party, the National Regeneration Movement (MORENA), to make his third bid. He has long opposed both the PRI and PAN administrations that have taken turns governing Mexico in recent years and has positioned himself as the beneficiary of today’s citizen discontent by making the fight against corruption and reducing inequality his main issues. While some Mexicans fear that he might turn back some of the current government’s reforms, others see him as the politician best positioned to change Mexico’s course and bring fresh thinking to government.

Ricardo Anaya, the 39-year old candidate of the PAN, has built an alliance with the left-of-center PRD and a smaller party, Citizens’ Movement. He has also managed to position himself as an opponent of the current government, which has helped him place second in most polls, several points behind Mr. Lopez Obrador. Mr. Anaya served only one term in the Mexican Congress, so his policymaking record is thin, but he is also seen as tough on corruption while supporting many of Mr. Pena Nieto’s economic reforms. His candidacy is especially appealing to many in Mexico’s middle class, who are angry at the current administration’s perceived corruption but worry that Mr. Lopez Obrador might abandon economic policies that have helped it prosper over the past two years.

A victory by any of the major candidates will probably bring incremental rather than wholesale change

Quite far back in most polls, in third place, is Jose Antonio Meade of the governing PRI. A well-respected technocrat, he has tried to be the PRI’s standard-bearer while distancing himself from the government by calling himself a “citizen candidate” (he did not join the PRI until last year). This dual role does not seem to have gone over well at a time when most voters want change.

A final wild card is Margarita Zavala, an independent candidate who is married to former President Felipe Calderon of the PAN. She is polling in single digits and is largely seen as pulling support away from Mr. Anaya, her former party colleague.

Some analysts have speculated that a victory by Mr. Lopez Obrador could put Mexico in a different direction in terms of economic and social policy, while Mr. Anaya and Mr. Meade would largely stay the course. While this is possible, the policy choices are often quite constrained – as in most large economies – and a victory by any of the three major candidates will probably bring incremental rather than wholesale change.

However, Mexicans seem ready to vote for one of the two versions of change on offer, largely because they are so disappointed in the present administration. Even if it does not produce a huge change in policy or rapid economic growth, they want to see more respect for the rule of law – by politicians, too – than has been evident in recent years.

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