Mexico's new president is pushing his reform agenda

  • Article by: THE ECONOMIST
  • Updated: April 8, 2013 - 5:17 PM

Enrique Peña Nieto has set a furious pace. But he will be judged on implementation as well as on legislation.

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President Enrique Peña Nieto delivered a speech at the convention of his Institutional Revolutionary Party in Mexico City. Peña has been fast out of the blocks in attacking some of Mexico’s toughest issues in a country often stymied by monopolies and corruption.

Photo: MARCO UGARTE • Associated Press ,

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When Enrique Peña Nieto won Mexico’s presidential election last year, the Institutional Revolutionary Party (PRI), which had run the country for 70 years, was restored to power after a 12-year gap. Many of those who liked the telegenic 46-year-old’s reformist rhetoric were worried that once the PRI was back in power, it would revert to its old, authoritarian ways.

So Peña deserves praise for his first four months in office. Having signed a pact with the two main opposition parties to overcome the gridlock that had prevented reforms, the new president has targeted the monopolies that hold Mexico back.

An education reform is aimed at seizing control of schools from the teachers union, whose longtime leader, Elba Esther Gordillo, was promptly arrested on charges of embezzlement, which she denies. Then came a potentially far-reaching measure to force more competition on the telecommunications firms that have made Carlos Slim the world’s richest man, and on Televisa, a mighty television network that his critics claim did Peña favors during the campaign.

Last week, the president signed a new law restricting injunctions, which have been abused by the rich and powerful to block regulatory or legislative measures.

Peña is not the only one who deserves credit. So does the opposition: It has recognized that Mexicans want change, and is behaving better than the PRI did when out of office.

A new optimism surrounds Mexico’s prospects. The peso has risen by 16 percent against the dollar since last June. If Peña is to keep his promise to raise his country’s rate of economic growth to 5 percent or 6 percent a year, however, the president will need to make some harder decisions still.

First, passing a law to make telecommunications more competitive is only a first step. It must be implemented effectively.

Second, a great deal rests on a proposed energy reform. Mexico has the potential to be an energy superpower, but oil production has slumped since 2004, and the country imports oil and natural gas from the United States. The blame for this falls on Pemex, the state monopoly.

Sadly, Peña has rejected the idea of part-privatizing Pemex, but he should at the least allow it both to offer risk-sharing contracts to private investors for deep-water exploration, shale gas and refining, and to invest more of its profits, rather than handing them over to the state in taxes.

Energy reform must go with fiscal changes, which would also finance a social-security reform designed to reduce the incentives for Mexicans to work in the informal economy, as one in two Mexicans now does.

Another big test for Peña is security. His predecessor, Felipe Calderon, declared a war on drug traffickers that saw 70,000 people die in six years, 30,000 “disappear” and extortion and kidnapping become commonplace. Peña needs to spend fewer resources on sending soldiers to fight drug barons and more on strengthening the police and the court system.

He seems to understand this. He has proposed a new paramilitary force, but has not been clear about its role or financing, and has yet to set out a plan to get the army off the streets, despite its mounting abuses.

The PRI likes to claim that its long experience of government means that it knows how to run the country. Peña does indeed seem more adept in the exercise of presidential power than his two immediate predecessors.

His sure touch could serve his country well. But if he uses it to resurrect his party’s former political monopoly, he will lose his glowing new reputation as a trust buster.

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