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27 December 2013, Gateway House

Mexico: Country of the year

The reforms initiated by President Enrique Pena Nieto may have started a new era of economic and social transformation in Mexico. The reforms, and the manner in which four major political parties of the country committed consensual support to vital policies, can be an inspiration for democracies across the world

Former Distinguished Fellow, India-Latin America

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“If an award could be given in 2013 for ‘Country of the Year’, Mexico might deserve it, the Christian Science Monitor said on 15 December. “No other country has done more this past year to put reforms in place to transform a nation – and with startling democratic consensus.”

It is a rare compliment from the American media, which usually portrays Mexico in a negative light, often headlining issues such as drug trafficking, illegal immigration and violence.

Mexico has instituted more fundamental reforms in the last 12 months than any other democratic country.  The reforms were initiated by Enrique Pena Nieto, the young and dynamic president of Mexico since December 2012. They were undertaken as part of the ‘Pact for Mexico’ signed by the four major political parties of the country   committing consensual support to vital policies and reforms of national importance.

Nieto started negotiations with the other parties as soon as he was elected in July 2012; he signed the pact on the second day after his inauguration. The pact has brought together the ruling centre-left Institutional Revolutionary Party (PRI) and the three principal opposition parties – the leftist Party of the Democratic Revolution, the conservative National Action Party (PAN),  which was ousted from power in 2012 after two terms, and the Green Party, which joined the pact in January 2013. The parties came together for the pact in the wake of a growing realisation that the polarisation of politics had alarmingly weakened Mexico, especially in the last decade.

The 95-point agenda of the pact ranges from a taxation overhaul to barring junk food in schools. The pact has already helped in passing six major reforms in a year – a reform of the educational system; legal reform; a telecommunications law that limits the quasi-monopolistic powers of the biggest companies, including that of Carlos Slim, reportedly the world’s richest man; a reform increasing the tax for more social spending; electoral reform; and energy sector reform.

The energy reform bill passed by the Congress on 12 December is dramatic, because it was considered to be the most difficult to move through. The petroleum sector had remained heavily protected in Mexico since nationalisation in 1938 because of a fear of domination by big U.S. firms. The inefficient monopoly of Mexican Petroleum resulted in a fall in crude output by a quarter. The new law allows foreign and private investment and technology, which will rejuvenate the energy sector. The production of oil is expected to increase by a million barrels by 2020. Energy costs for consumers and industries will decrease.

The energy reforms in Mexico are good for India. In recent years, India has been regularly importing Mexican crude oil – in 2012, India imported $ 2.83 billion worth of crude oil from Mexico. India is Mexico’s third-largest market for oil after the U.S. and Spain. As Mexico increases its production capacity, India can count on Mexico as a regular long-term source of supply. The reforms have also opened opportunities for Indian companies to invest in the Mexican oil sector, as they have done in Venezuela, Brazil and Colombia.

The process of passing the reforms was not smooth. Opponents paralysed Mexico city for several weeks with protests during the last year. But the government stood its ground and carried the reforms through. Still, the reforms will continue to face challenges, such as in their implementation through secondary legislations.

Mexico also faces serious problems of drug trafficking, crime and violence, besides high levels of poverty and inequality, as well as slow growth. But the reforms have given Mexicans a new confidence in the political system and made them more optimistic about the future.

The reforms signal a new era of economic and social transformation in Mexico. The manner in which the ruling and opposition parties have worked together on the pact can be an example for other democracies of Latin America and the world.  As The Economist commented, “Mexico appears to have found the medicine for political gridlock.” The Wall Street Journal said, ” At a time when politicians in Washington struggle to agree on anything, their Mexican counterparts sit down almost daily to talk about thorny issues”.  The Mexico pact contrasts especially with the U.S. government shutdown in October 2013 and the policy paralysis in WashingtonD.C. due to the irreconcilable political polarisation.

Perhaps the next prime minister of India could initiate a similar ‘Pact for India’ by reaching out to the opposition parties and forging a consensus on some issues of vital national interest.

Ambassador Viswanathan is Distinguished Fellow, Latin America Studies, Gateway House. He is the former Indian Ambassador to Argentina, Uruguay, Paraguay and Venezuela, and Consul General in Sao Paulo.

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