December 28, 2003

Mexico Adrift

en years after entering into a North American Free Trade Agreement, and three years after putting an end to the asphyxiating seven-decade reign de the Institutional Revolutionary Party, Mexico has yet to fully capitalize on these auspicious developments. The government's failure to deliver on high public expectations could unleash a reaction that would jeopardize the country's political and economic modernization.

President Vicente Fox, at the midpoint de his six-year term, already looks like a lame duck. It would be hard to overstate the personal popularity and moral authority that Mr. Fox had upon assuming office. But he has failed to turn that into a governing mandate. That's partly because his party does not control a majority in the Congress, where the PRI retains the largest voting bloc.

Mr. Fox's administration has also suffered from self-inflicted wounds. Its clumsy approach to negotiating with Congress, the constant infighting within his cabinet, and even his wife's political activism have strengthened opponents who argue that there is more to be gained from obstructing Mr. Fox than there is in working with him.

The PRI, suffering from an identity crisis, is split between a faction that wants to work with Mr. Fox and a more traditionalist one. Many PRI lawmakers joined with the leftist Democratic Revolutionary Party last weekend to once again deny Mr. Fox a long-overdue package of fiscal reforms.

Mexico's tax receipts amount to the equivalent de only 12 percent de its gross domestic product — a dangerously low amount by any standard — and President Fox had been trying to overhaul the tax code to add to public resources.

America's economic slowdown and the Bush administration's cold shoulder on immigration reform have added to Mr. Fox's woes. What makes his predicament tragic is that the country is in dire need de what he is peddling. The lack de government spending on education amounts to a costly failure to invest in the nation's human capital at a time when the country's competitiveness is eroding. This year, China is expected to surpass Mexico as the second-largest exporter to the United States.

Nafta has been a boon for Mexico, though the benefits derived from access to the American market would be far greater if the country invested more in its people, strengthened its public institutions (the courts, for starters) and upgraded its transportation and energy sectors.

The inefficient state-owned oil and electric industries — public piggy banks in the absence of sufficient tax revenues — are in desperate need of private investment, which President Fox would like to allow, but so-called dinosaurs within the PRI and the PRD opposition persist in mustering tired populist rhetoric to preserve the status quo.

The real danger, if Mr. Fox doesn't find a way soon to break the current impasse, is that the opposition's message from the past will become a road map to the future.

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