Elections in Mexico - potential outcomes and implications for business
(By: Emma Campos-Redman, Americas Analyst at London-based business risk consultancy Control Risks Emma.Campos-Redman@control-risks.com).

Five individuals have officially registered for Mexico’s presidential election, which will take place on July 2nd. However, the race is effectively a contest between the three candidates representing the country’s main parties and their allies: former Mexico City mayor Andrés Manuel López Obrador of the leftist Party of the Democratic Revolution (PRD), former energy minister Felipe Calderón of the ruling centre-right National Action Party (PAN), and Roberto Madrazo of the former ruling Institutional Revolutionary Party (PRI).

Ultimately, the presidential race is likely to become a head-to-head contest between long-time frontrunner López Obrador and Calderón. While support for Madrazo has consistently lagged behind his two rivals, it is still too early to dismiss the PRI as a viable contender. Both the PRD and the PAN lack the PRI’s formidable party machinery and national presence. Despite its evident internal fractures, the PRI will continue to play a key role in Mexican politics in the run-up to July and beyond, regardless of who secures the presidency.

Campaign platforms

Although campaigning officially began on 19 January, the policy platforms of the leading candidates’ remain vague. López Obrador, whose PRD heads the leftist ‘Por El Bien De Todos’ coalition that also includes the Workers’ Party (PT) and the smaller Convergence Party (Convergencia), has based his campaign platform on a series of 50 commitments issued since July 2005 – essentially a wish-list that fails to specify how he would fulfill his pledges. Measures to alleviate poverty form the central theme of his campaign. Despite attempts to ease business concerns over economic policy, López Obrador has emphasised that there will be no structural reforms should he become president. However, he has offered no clear alternative strategy to finance the reduction of energy prices, the increase in hydrocarbons production or the new jobs that he has promised. His proposals are weakest with regards to crime and insecurity, considered one of the country’s most pressing problems, and an area where he performed unsatisfactorily as mayor of the capital Mexico City.

Calderón offers a government programme based on five elements: effective rule of law; productive, job-creating economic policies; social policies based on equal opportunities; public accountability; and environmental responsibility. The most distinctive aspects of the PAN’s campaign are those that address the promises that the current administration President Vicente Fox has failed to keep, such as implementing structural reforms concerning energy, labour and taxation, and improving public security. While Calderón’s economic platform is opposed to López Obrador’s, there are few substantial differences between their other policies. Fighting corruption is another of Calderón’s strong cards, bolstered by his image as an honest politician.

Madrazo’s campaign shows the most pronounced lack of ideology or ideas. Campaigning by the PRI and the Green Party (PVEM), the so-called ‘Alliance for Mexico’, has consisted of bashing the current PAN government. Madrazo’s discourse is that current President Vicente Fox’s management of the economy has failed to benefit the average Mexican worker. His promises resemble López Obrador’s wish-list: job creation, energy price reductions, infrastructure projects and a tough stance on crime. Similarly, there are few substantial ideas regarding how these objectives would be met.

The PRI factor

Despite López Obrador’s charisma and Calderón’s squeaky clean image, the key factor that will determine the result of the presidential elections will be the PRI, or more specifically the anti-PRI vote. Similarly, the PRI will be pivotal in determining the incoming president’s prospects of passing his legislative programme. Ideological differences between the PAN and PRD would prevent them from supporting each other’s proposals in a legislature that is likely to be evenly divided among the three parties. This means that the PRI would become the kingmaker under a PRD or a PAN government. However, it remains highly uncertain how the PRI will act should it fail to recover the presidency for a second consecutive term. The party could become more fractious or it could remain a resilient block; in addition, it could opt to join a coalition either for or against the new government.

A turn to the left – a PRD government

A possible victory of López Obrador, with his tendency towards centralisation and state intervention, remains a source of concern, more because of his unpredictable style rather than as a consequence of his leftist stance. A López Obrador administration would almost certainly maintain an orthodox economic policy to sustain the country’s macroeconomic stability and positive business environment. However, foreign investors in the country should expect slightly more restrictive operating conditions, particularly if the PRI returns to its populist, nationalist origins and opts to join the PRD in a centre-left coalition in Congress.

With regards to the country’s severe corruption problem, there is little to indicate that a López Obrador government would indeed be effective in ending bribery and other less-than-transparent practices that plague the public sector. While López Obrador himself has not been directly implicated in any corruption scandals, the PRD government in Mexico City demonstrated that it is not immune to the problem, with major embezzlement cases involving close collaborators of López Obrador. Allowing the army to perform further law enforcement and policing duties, and calling for harsher penalties for criminals will essentially be futile without a reduction in corruption among public servants, which fuels impunity and encourages reoffenders. The judicial and law enforcement agencies across the country require a major overhaul, but López Obrador’s proposals have so far not included such an initiative.

More of the same? A second PAN

Given current electoral preferences, a second PAN administration headed by Calderón would only be likely to secure a small margin of victory. Calderón appears to offer a positive economic programme, but, with an opposition-dominated Congress and little experience in government, it remains unclear whether Calderón would be able to govern effectively and successfully implement his proposals.

Calderón has already stated that, should he win the presidency, he would aim to establish a governing coalition. However, this could leave the PAN dependent upon the PRI’s votes to get legislation passed. Thus, a Calderón government could face the same legislative gridlock as the current administration. Moreover, if the PAN fails to obtain one-third of congressional seats, there is a risk that a centre-left coalition composed of the PRD and PRI could effectively govern from Congress because they would have the necessary votes to overrule the presidential veto.

Calderón enjoys the greater degree of credibility with regards to his position against corruption, as he is widely perceived to be the most honest of the three main candidates. However, like Fox, he faces the sternest challenges to address the myriad of vested interests that stand in the way of the necessary reforms in the judiciary.

Moving back – PRI ‘coup’

In the less likely scenario of a Madrazo victory, his government would produce the least drastic changes. A Madrazo administration would maintain the status quo with policies similar to those of the most recent PRI governments, particularly that of President Carlos Salinas (1988-94). In the longer term, Madrazo would need cross-party support in Congress, probably from the PAN. Such a coalition would not threaten business conditions in the country, but it would not be conducive to securing the major reforms that are essential to increase competitiveness and productivity.

Furthermore, a Madrazo victory would mark a significant setback for the country’s process of democratic consolidation. Madrazo has shown a propensity to attempt to influence elections and disregard established rules and procedures, as evidenced most recently during his chairmanship of the PRI. A Madrazo victory would inevitably spark allegations of fraud, particularly from the PRD. López Obrador has said on several occasions that he would call for civil disobedience should the election be ‘stolen’ from him. López Obrador has subsequently moderated his stance, but there remains a risk of limited civil unrest which would undermine Madrazo’s legitimacy and authority.
Conclusion

The elections will not result in the country’s economic or political regression. Stability and policy continuity are expected. However, this alone will not be sufficient to make the country a more attractive market or deliver faster economic growth and higher standards of living. Progress will only be possible if the new government succeeds where Fox has failed – in avoiding legislative stalemate and securing meaningful structural reforms.