Breaking with the Past

Much has changed in Mexico since President Vicente Fox was elected in July 2000. His victory ended 71 years of continuous rule by the Institutional Revolutionary Party. For much of that period, corruption, statism and hostility toward the US were part of Mexico’s political fabric.

Now, corruption is no longer viewed as normal. Free market principles are the foundation of government economic policy. Ties between Mexico and the US have grown tighter. Fox has made the most of his friendship with President George Bush, whom he has convinced to review US immigration laws to favor illegal Mexican workers.

The country’s mood has shifted, but it is still unclear how much else has changed. Fox is still very popular, but his political honeymoon is drawing to an end. Much of Mexican society – its corporate executives included – says Fox is still settling into his new job. He is more than nine months into his six-year presidency, but doubts are growing about his ability to effectively address the country’s pressing economic and structural problems. Recession has not helped his political fortunes either. Fox’s relations with members of his own pro-business National Action Party (PAN) are strained. He has made little progress in winning over Congress, where no party has a majority. His bid to overhaul the country’s tax structure has gone down badly with Congress and there is fierce opposition to his plans to deregulate Mexico’s energy industry (see “Oil Rich, Cash Poor” page 9).

Analysts say Fox, a former state governor and ex-president of Coca-Cola in Mexico, is inexperienced in the ways of national politics. His political initiatives are making little progress. Soon after taking office, Fox released political prisoners in Chiapas state, withdrew army bases from there and proposed reforms placate Zapatista rebels. Congress watered down an Indian bill of rights and the rebels broke off talks with the government. The rebellion in Chiapas remains stalemated.

“If Fox is able to accomplish half as much as he promises, including a tax reform, he will already have made the environment much better,” says Othon Ruíz, chief executive officer of Banco Mercantil del Norte.

Mexican bankers say the country’s inefficient and plodding judicial system also cries out for reform. “Fox has recognized this very clearly as one of the main tasks he wants to accomplish,” says Manuel Medina Mora, chief executive officer of Banamex, the country’s largest bank, which was bought by Citigroup in May. Medina Mora says the existing court system creates uncertainties over property rights and so blocks the development of the financial system.

While Fox may be at odds with Congress, he is widely praised for lining up an outstanding cabinet. Francisco Gil Díaz his finance minister, Economy Minister Luis Ernesto Derbez and Jorge Castañeda, the foreign minister are its most impressive members. “President Fox has a business background and the ministers that he has surrounded himself with come mostly out of the private sector,” says Peter Cardinal, chief executive officer of Grupo Financiero Scotiabank Inverlat. “They have been very carefully selected not because of their political merits, but because of their perceived competency to do the job.”

Ricardo Salinas, CEO of Grupo Salinas, says, “The mandate that [Fox] received was for a change. He’s working on that but it’s hard to get results immediately. It requires many changes in the way Mexicans think and act. I think that he’s on the right track, but it’s going to take him a while so some people are getting a bit fidgety and been lots of unrealistic demands for immediate change, which can not happen.”