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Mexico’s Moment

The PRI is about to regain power. Should we be worried?

8:05 AM, Jun 28, 2012 • By JAIME DAREMBLUM
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Assuming the polls are correct, Mexico’s notorious Institutional Revolutionary Party (PRI) will cruise to victory in Sunday’s presidential election and also win at least one chamber of the national legislature. Will this mean a return to the bad old days of authoritarian politics and corrupt deals with drug cartels, as many PRI critics fear? Or will it affirm the strength of Mexico’s young democracy and create a golden opportunity for economic reform?

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Nobody can say for sure, but the second outcome seems more likely.

The youthful PRI presidential candidate, Enrique Peña Nieto, who turns 46 on July 20, is the former governor of Mexico’s most populous state (the one surrounding Mexico City). He is not a member of the party’s old guard, and there is little evidence that he harbors a penchant for autocratic rule. Moreover, he will be dealing with an independent supreme court, an independent central bank, and two robust opposition parties (the center-right PAN and the center-left PRD) that control a host of state and local offices, including the powerful mayorship of Mexico City, not to mention a large number of seats in the federal congress. We should also remember that media coverage of Mexican politicians is far more aggressive today than it was during the PRI’s “perfect dictatorship” years.

As for the once and future ruling party itself, the PRI has changed a great deal since losing the presidency in 2000. “While many of the old-time PRI remain in important advisory roles,” former U.S. ambassador to Mexico James R. Jones said recently, “this PRI headed by Peña Nieto is truly different and seem ready to tackle many of the remaining issues that have prevented Mexico from attaining first-world status.” To be sure, patronage-loving PRI “dinosaurs” are hardly eager to liberalize the economy, crack down on political corruption, or improve transparency. But Peña Nieto has endorsed some relatively bold economic reforms, especially when it comes to energy policy and the state-run oil company Pemex, which is perhaps the most prominent symbol of Mexico’s (public and private) monopolies. “I suspect that we are on the eve of the most promising opportunity the country has seen in more than a decade,” Morgan Stanley economist Gray Newman has written.

Despite years of terrible drug violence, Mexico is doing better economically than many outsiders realize. Indeed, Dallas Fed president Richard Fisher notes that the country “is outperforming the U.S. in many economic areas.” For example, Mexican industrial production eclipsed its pre-recession peak early last year, whereas American industrial production is still 3.3 percent below the pre-recession high it reached in December 2007. Meanwhile, Mexico’s budget deficit in 2011 was only 2.5 percent of GDP, whereas America’s deficit was 8.6 percent of GDP. Mexico also had a faster-growing economy than the United States.

More impressively, it had a faster-growing economy than Brazil, which has been hailed as Latin America’s rising superpower for much of the past decade. The South American giant is facing a sharp economic slowdown, along with a seemingly endless parade of high-profile corruption scandals. “Mexico now looks a better bet than Brazil for rapid economic growth,” declares the Economist.

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