Mexico's Disputed Election

Luis Rubio and Jeffrey Davidow

From Foreign Affairs, September/October 2006

Summary:  The July 2 Mexican election was about more than picking a president. It represented a choice between continuing the liberalization of recent years or returning to the past. Neither alternative, however, offers a solution to the country's problems. To address those, the next president must not only deepen reforms but also extend their benefits to the many Mexicans who have been left out of the process.

Luis Rubio is President of CIDAC (the Center of Research for Development), in Mexico City, and a co-author of "Mexico Under Fox". Jeffrey Davidow is President of the Insitute of the Americas and the author of "The U.S. and Mexico: The Bear and the Porcupine." He was U.S. ambassador to Mexico from 1998 to 2002.

To deal with the disaffected and the dispossessed, Mexico's economy needs to deliver more benefits to more of its citizens, and its government must become more effective, open, and honest. This will require deep reform of government institutions, bureaucratic procedures, the tax and educational systems, many laws, and even the constitution. Mexico's political and economic leadership has not seriously taken on this challenge, preferring the comfortable status quo. And although both López Obrador and Calderón talked incessantly of change during the campaign, they provided little evidence that they clearly understand the depth of the problem.

The path that Mexico started down 20 years ago is not the wrong road: it has simply not been well enough traveled. The country's principal goal should be to put the economy into a high-growth orbit and to make the leap from the pack of struggling second-tier economies into the developed world.

Mexico's economy has sustained its hard-won stability for the past dozen years -- no mean feat after 25 years of inflation, crises, and devaluations. But it has not grown fast enough to absorb the supply of labor or to tend to the serious social tasks that the country has been postponing for decades. Fox promised to deliver seven percent annual GDP growth and to create over a million new jobs a year. He managed only three percent annual growth and an average of only 100,000 new jobs a year. True, he was hobbled by the effects of a lackluster U.S. economy for much of his term, but this government's failure to meet its goals was mostly due to its inability to bring about important structural changes that could unleash the Mexican economy and provide opportunity to many of the people who would come to vote for López Obrador in 2006.

These failures were all symptoms of a more fundamental problem: the inability of Mexico's institutions to work effectively. For seven decades of PRI rule, the institutions of government were secondary actors. The party conferred on the president an extraordinary ability to influence all events through its wide web of extragovernmental control. With the defeat of the PRI in 2000, the "new" presidency became much weaker, for Fox had only his constitutional powers to manipulate. This change, along with both a PRI attitude that saw Fox's failure as its ticket back to power and Fox's own political inexperience, led to a six-year period of governmental paralysis that added strength to López Obrador's campaign.

The ineffectiveness and the political manipulation of the institutions of government have led to widespread distrust on the part of much of the population. López Obrador was able to generate mass support for his rejection of the election results because so many of his compatriots are preternaturally inclined to believe the worst about their government, including, in this instance, the national electoral commission, which is in fact effective, efficient, and honest.

For Mexico to break the vicious cycle of public distrust, resentment, and insufficient development, there must be a reform that matches the new reality of political power with the institutions that are supposed to wield it. In a sense, Mexico's institutions need to be refounded. An ambitious reform would transform the relationship between the Congress and the executive, the structure of Congress itself, and the party system. Those political institutions served the PRI era well, but they make little sense today. For instance, 200 of the 500 members of Mexico's lower house represent no constituencies but are political operatives chosen by the party hierarchies. The hallowed Mexican tradition of no reelection of public officials (at least not to the same office) means that many officials pay little attention to their constituents, causing further disaffection. A revision of the relationship between the states and the national government and of the operation of the giant state-owned oil and electricity monopolies are also in order. Even a modest reform, one that would create mechanisms such as a "guillotine law," which establishes a peremptory period for a legislature to act on an executive bill lest it be automatically approved, would help rebalance the relationship between the legislature and the presidency.

Some of the most glaring dysfunctions of the Mexican system are well known and frequently discussed. But little has been done to change them, because the status quo benefits important vested interests. Evasion and loopholes in the tax system mean that the government collects too little of Mexico's national product to allow for adequate growth-stimulating redistribution through social programs, infrastructure development, and education. The need for serious fiscal reform is paramount, and will be even more so as pensions become ever more costly for an aging population. In addition, the labor market remains inflexible. Excessive protection for workers translates into fewer jobs: industries are unwilling to hire new workers because they cannot release them when an economic downturn takes place. Labor reform is an important key to economic growth. Mexico also shares shame of place with North Korea as the only two countries that still prohibit private risk investment in oil and gas exploration. This restriction limits the potential for energy growth at a time when Mexico (the United States' second-largest source of foreign oil) sees its oil production declining and gas imports from the United States increasing. Legal and constitutional changes are imperative if Mexico is going to be able to exploit its vast energy resources.

Attaining higher levels of economic growth will require a combination of foreign and domestic investment and a more competent government. In some sectors, such as energy, attracting more investment will be dependent on significant legal or constitutional changes. But in all cases, increased investment will demand a much more effective government, less cumbersome regulations, a fair and transparent judicial system, more consumer-conscious public utilities, improved infrastructure, and a concerted effort to promote competition by limiting the power of private and government monopolies and of public-sector unions, all of which profit from keeping things the way they are.

The enormous social gaps that the country faces and that López Obrador effectively spoke to in his campaign must be addressed with greater vigor. The overarching perception is that many people (perhaps a majority) have been left out of the development process. Many of these are not the poorest of the poor but rather those who face unsurpassable obstacles in their daily lives while watching wealthier Mexicans do well and boast loudly. The administrations of Ernesto Zedillo (1994­2000) and Fox developed professional, high-quality programs to address poverty. These programs (which have even been copied in other countries) actually made a considerable dent in Mexico's level of abject poverty, but the percentage of those considered to be poor still hovers around 50 percent.

These programs use the educational system to help children of today's poor stay in school, thereby disrupting the cycle of poverty. But the educational system as a whole is in profound need of investment and reform -- the latter much fought against by powerful teachers unions. Public education in Mexico has not yet risen to the challenge of converting itself into a vital source of opportunity for the era of the information economy and of Mexico's introduction into the global market. Changing the system will take much more than new textbooks. A modern educational system geared toward the development of true equality of opportunity would alter Mexico's social structure radically. Equally important, a modern system to finance education and to fund higher studies for poorer people would create opportunities that today are absent. All of this will require not only the resolve on the part of the new president and the new Congress to carry out changes but the political skills necessary to transform the underlying structures as well.