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This coming Friday Mexico enters into uncharted political territory. Seventy-one years of one-party rule by the Institutional Revolutionary Party (PRI) come to an end as president Vicente Fox, from the opposition National Action Party (PAN), is installed December 1st, the first democratic transfer of power from one party to another in Mexico’s history. But over these seven decades the PRI has been in power it was much more than a political party. The PRI chose every six years who would be president for the next six through a back-room choice made by the party leaders, which was then ratified in national elections won with the help of a well-oiled, government-run political machine, virtual denial of opposition access to the media and, whenever necessary, outright fraud at the polls. For a change, the new president has been chosen through a fair and clean democratic process, but he can be seen as a revolutionary who has toppled over a monarchy—and as any other revolutionary who becomes chief of state he will have to prove that his action was good for the nation.
A successful businessman turned into skillful politician, Fox arrives to the presidency without the backing of a congressional majority, a totally new experience in Mexican politics, and at a time when the brisk pace of 7.5 percent at which the economy has been growing in the first three quarters of this year is raising fears of overheating that would trigger an increase in inflation, now holding at 9 percent.
While Mexican workers have only recently begun to see real wage gains after years of steep losses—wages remain below 10 percent 1994 levels—those gains are now rising at their fastest rate in more than a decade, threatening the centerpiece of Mexico’s economic recovery: the central bank’s anti-inflation fight.
Increases of 20 to 25 percent have become common. At first sight labor’s demands appear to be justified: not only has the economy grown 7.5 percent in the first nine months of the year, but the government coffers are flush. thanks to high oil prices, and the booming U.S. economy has been a hungry market for Mexican exports.
But now it will be Fox’s uphill task to convince labor that it should trim its demands. Achieving this was no problem in the past. Under PRI governments, salaries were arranged by back-room collusion, under government auspices, between PRI-friendly union leaders and employers. And these agreements were imposed upon workers, not only because the PRI dominated state governments (it still controls about half of them), thousands of city halls and the unions’ leadership (it still controls both) but also because it counted upon a national network of loyal big, medium and small political bosses who extolled the government’s virtues and retailed its patronage.
This was the mechanism with which the PRI maintained alive during seven decades popular support even at the most distant corners of the country. But the PAN, Fox’s party lacks this resource. The new president will have to put to use all his personal political skills to convince workers that wage increases should be contained.
Given this picture the question arises whether it was a good idea for Fox to choose as finance minister a “fiscal terrorist”, because this is the nickname by which the new minister, Francisco Gil Diaz, is known in Mexico for his zeal in prosecuting tax evaders when he ran revenue policy at the Finance Ministry under former President Carlos Salinas de Gortari.
Gil Diaz’s financial credentials are impeccable. He is an economist with central banking experience and in the telecommunications business, and his appointment has been praised sky-high in world financial markets.
However, the experience in developing countries is that finance ministers who “are not afraid of having enemies when it’s a cause he believes in”—as was said of Gil Diaz by the head of a U.S. bank in Mexico—fail when the enemy they make is labor. Angry businessmen don’t take to streets and break windows and burn cars; workers do. Gil Diaz may be “the most respected macro-economist in the country,” as the same bank official said, but nobody has praised his political wisdom; if he does have it, it has been overshadowed by his confrontational style.
Moreover, there are doubts about the political viability of the policy already announced by Fox’s transition team led by former World Bank economist Luis Ernesto Derbez of intending “to induce a reduction in the rate of growth in internal demand, and in this way promote a more rapid reduction in inflation expectations.”
Already the change in the goal from an economic growth of 7 percent Fox campaigned on to a much lower 4 to 4.5 percent now announced is an indication that a slowdown of the economy is part of the new government’s plan. This is the medicine proposed by the International Monetary Fund, the World Bank, central bankers, the Clinton treasury and all the conventional economist. It proved to be the wrong medicine for Asia and the rest of the developing world, both economically and politically. It may turn out to be the wrong medicine for Mexico.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com