Delivering his first state-of-the-union address (informe) Monday, President Enrique Peña Nieto urged Congress and the nation to back his series of structural reforms that he says will keep Mexico’s “grand transformation” on track.
Speaking from his Los Pinos residence after protesting teachers had blocked his path to Congress, Peña Nieto said the remaining 120 days of 2013 would be crucial in maintaining the momentum of reforms that in the coming days will seek to transform both the tax system and energy sector.
Peña Nieto made his speech against the backdrop of angry, striking teachers who for several weeks had occupied key parts of capital and tried to disrupt the opening of the new session of a heavily policed Congress.
The youthful president seemed unfazed by the fierce opposition to the education legislation that requires teachers to take and pass mandatory testing in order to keep their jobs and be eligible for promotion (see story above right).
“Our dilemma is whether to continue to stagnate or to allow the state to recover the leadership and transform and improve the quality of education,” he said.
In tradition with past presidents, Peña Nieto used the occasion of the annual informe to laud his administration’s achievements, not least in combatting crime. But while a significant reduction in the homicide rate (13 percent in the first six months of the year, he claimed) and some stunning arrests of drug capos are commendable, there was little in the informe to suggest he is any closer to quelling the drug-fuelled violence that so blighted his predecessor’s six-year term of office.
While 16 pages long, the informe skipped over some crucial economic areas, critics noted, preferring only to accentuate positive stats. Among these are an 8.1-percent increase in the number of visitors to Mexico this year and direct foreign investment totaling some 23 billion dollars.
But despite some favorable macro-economic indicators, including a reasonably robust peso, Peña Nieto made no reference to this year’s predicted drop in GDP growth of 1.8 percent from an earlier forecast of 3.1 percent. And he scarcely touched on the fact that only 300,000 new jobs were created in the first six months of this year, the lowest number since 2009. Rather dismissively, he blamed “external factors” for these poor results.
The opposition was not in the mood to give the president any leeway on his debut informe. “He paints a different reality than the one the country is living,” said Cecilia Romero, secretary general of the National Action Party (PAN).
Economic issues, however, took second place on a day that was dominated by the teachers’ protests and the specter of further reforms that Peña Nieto believes will make Mexico more competitive and spur job creation.
Despite his resolution not to change course, the ferocity of the teachers – who are mainly from the country’s most depressed states and represent only a fraction of Mexico’s 1.4-million strong teachers union membership – will give Peña Nieto plenty to reflect on. A major concern will be that much bigger and more widespread demonstrations may occur once Congress starts debating his proposed energy and financial reforms.
By trying to open up Pemex to greater domestic and foreign investment – a move Peña Nieto estimates will create between 500,000 and one million new jobs – he will run the risk of bringing opponents out on to the streets in large numbers. Although woefully inefficient and unable to take advantage of the nation’s oil reserves without massive new investment, Pemex is still considered by many Mexicans as an untouchable sacred cow – one of the nation’s great patriotic symbols.
The oil sector debate, which could start as early as next week, is likely to center on whether the proposed reforms would endanger Pemex’s sovereignty. To many in power the issue is a no-brainer: foreign and domestic investors eye Mexico’s petroleum riches greedily, while politicians here look south to Brazil and see how their oil giant, Petrobras, has thrived since one-third of its stock was sold off in 2010.
At one stage Peña Nieto’s planned tax and financial sector reforms looked set to eliminate the IVA (sales tax) exemption on food and medicines, a move that would have provoked a maelstrom of discontent, since most analysts reckon this will create more hardship for those worse off in society than those with better economic resources. That option now appears to be off the table, with a watered-down package aimed at increasing tax revenue from other areas most likely to be submitted to Congress this week.
But after pushing through education, telecommunications and economic competition reforms in his first six-month “honeymoon” period in office, Peña Nieto will no longer encounter the same kind of bipartisan support that he needs in a split Congress.
The president won plaudits at home and abroad for securing cross-party support to pass the first stage of his reform initiative. That was down to the Pact for Mexico, signed by the congressional leaders of the three main political parties, that sought to break the mold of previous legislatures characterized by an aversion to bipartisanship. But times have changed since those amicable days immediately after Peña Nieto’s victory: one of those leaders, Jesus Zambrano of the leftist Party of the Democratic Revolution (PRD), decided to skip the president’s speech on Monday in protest at his policies.
Reacting to Peña Nieto’s state-of-the-nation address this week, some analysts warned that he might be biting off more than he can chew with his ambitious reform program. If he fails with even one of the proposals, they say, the next five years could become extremely uncomfortable, unless economic conditions improve dramatically.
These kinds of nagging worries, apparently, won’t deter him, as Peña Nieto said this week that he wants 2013 to be remembered as “the year Mexico dared to take off.”