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07/13/2000

Mexico

"Americans will do anything for Latin America except read about
it."
--James Reston

I was embarrassed to learn, in doing some research recently, that
1 million Mexicans died during the Mexican Revolution of 1910-
20 (out of a total population of about 15 million). I had
absolutely no clue. We know so little about either one of our
neighbors, north and south. What we need to know about the
recent election of Vicente Fox is that this was a monumental
event in the history of Mexico, and possibly, the United States.

Former assistant secretary of state Elliott Abrams said of the fall
of the Institutional Revolutionary Party, the PRI, after 71 years of
entrenched rule, that it was "the Latin equivalent to the end of the
Soviet empire - or even more." In the 20th century, only the
Communist Party of the Soviet Union maintained a monopoly on
power for a comparable period.

Former president Jimmy Carter, in Mexico for the election as a
monitor, called it an "historic turning point of the most profound
significance."

A political scientist in Mexico said, "The fundamental pillars of
Mexico''s political system have changed."

But before we jump ahead, we need to acknowledge the
tremendous leadership of current president, Ernesto Zedillo. It
was Zedillo who proved to be an honest and effective legislator
after over six decades of incredible corruption.

Zedillo followed through on the work of his predecessor, the now
dismissed Carlos Salinas, after Salinas negotiated NAFTA.

NAFTA was implemented in 1994 and has been a huge benefit for
both the U.S. and Mexico (and Canada hasn''t done too poorly,
either). Mexican trade with the U.S. has doubled since NAFTA,
to the extent where Mexico is now the 2nd largest export market
for the U.S. after Canada (and ahead of Japan). General Motors
has become Mexico''s largest private employer.

Before Zedillo, the ruling PRI had been like a term-limited
absolute monarchy where each president would handpick his
successor as he wrapped up his 6-year term. It was Zedillo who
put an end to that, first, by following through on a legitimate
primary system and second, by instituting an independent election
commission.

So who is now in charge? Vicente Fox, 58, a rancher,
businessman, former Coca-Cola executive. Fox attended high
school in Wisconsin for a year and holds a degree from Harvard.
Today he manages a 1200 acre farm where he raises cattle and
ostriches. Fox has adopted 4 children.

In 1991 Fox was bitten by the political bug and ran for governor
in one of Mexico''s 31 states under the banner of the National
Action Party (PAN). He lost in an election rife with fraud but in
1995 he won in a landslide, thus setting himself up for a
presidential bid.

Supporters say Vicente is a tremendous salesman (a trait picked
up during his stint at Coke) and this talent will immediately come
in handy. His inauguration isn''t until December 1st and he could
face many problems beforehand.

While Zedillo has pledged his full support during the transition
phase, you have to understand that after 71 years, many of the
PRI kingpins are not about to give up power willingly. It is
expected that a free-for-all will ensue before December. Drug
traffickers will be pushing as much as they can across the border,
corrupt politicians will be looking to grab as much cash as
possible. Violence, no stranger to Mexico and its politicians,
could be prevalent.

One of the peculiarities of Mexican politics is that when Fox takes
over on December 1st, he has one month to push through a
budget. That means that the actual budget must be ready
beforehand. And Fox, who won only 43% of the vote, will not
have a natural majority in Congress. This is where Zedillo can
once again play a heroic role in convincing the opposition
legislators to go along, as long as they see that there is something
in it for them.

One of the budget issues involves Mexico''s tremendous reliance
on income from its vast petroleum industry...to the tune of one-
third of all tax revenues. Petroleos Mexicanos (PEMEX)
employs some 130,000 workers. Fox needs to be able to make
changes without upsetting the delicate balance between labor and
the government in Mexico City. At least the current price
structure helps in this regard. Fox promised during the campaign
to increase the wages of PEMEX employees.

Investors thus far have been extremely enthusiastic about the
change in government. The day after the election the Mexican
bourse rose 6%. Fox is seen as someone who can bring about
important change in the sense of modernizing the economy and
the system. But the government needs to develop resources that
defy the whims of financial markets. For example, right after
Zedillo took power in 1994, he devalued the peso, setting into
motion Mexico''s worst recession in 60 years. The key is to find a
way to give millions of would-be, small-time entrepreneurs access
to credit, technology and the markets.

But Fox never offered a comprehensive program during the
campaign. Many of his programs were little different from that of
his main opponent, the PRI''s Labastida. He pledged not to
reduce social programs while, at the same time, talked of
eliminating budget shortfalls by 2004. It was more a campaign of
"promises, promises."

Fox''s PAN also has had no real success governing in the states,
where it currently holds 7 of the 31 governorships. For example,
the battle to combat drugs and the impact of the narcotraffickers
has been a losing effort, whether the governor is with PAN or the
PRI.

And when Fox assumes office, 21 of the 31 states will still be run
by PRI chief executives. Zedillo has urged these governors to
cooperate with Fox. Many of them will have their own ideas of
the level of cooperation to be provided.

For its part, the PRI will need to undergo a tremendous overhaul.
The first step will be to attempt to reduce the influence of the old-
guard, the "dinosaurs" as they are known.

Can Fox win the biggest battle, however? The one against
systemic corruption? He won the election because he captured
the college educated voter by a 53-27 margin. This mostly
younger, middle class generation is crying out for change.

But in his efforts to weed out corruption, one expert said,
"The PRI remains in power for five more months, long enough to
destroy records of corrupt dealings and deny Mr. Fox a smooth
transition."

And Fox needs to totally revamp the police force, one which is
notorious for protecting drug dealers as well as preying on
ordinary citizens while facing little threat of investigation or
punishment.

Finally, he has rebel conflicts to deal with, like the one in the
southern state of Chiapas.

Yes, Vicente Fox has his hands full. The people who helped
bring him to office are tired of empty promises. They don''t want
a Boris Yeltsin-type figure. The Mexican people are impatient.

In discussing how he will select cabinet members, Fox said he
would pick those who "love their country, are honest, honest,
honest, and are professionally prepared." If he sticks to this
pledge, he will have set the example his people desperately need.

Latin America has been bereft of good news recently. The ABC
countries, Argentina, Brazil, and Chile, are the only nations who
can point to an occasional success. Mexico has a chance to be
another one. And the U.S. would be the big beneficiary if this
comes to pass.

Sources:

Elliott Abrams / The Weekly Standard
Linda Robinson and Andrea Mandel-Campbell / U.S. News
Geri Smith / Business Week
Michael Barone / U.S. News
Ginger Thompson / New York Times
Robert Unger / Washington Post
Sam Dillon / New York Times
Molly Moore and John Anderson / Washington Post

Brian Trumbore


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-07/13/2000-      
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Hot Spots

07/13/2000

Mexico

"Americans will do anything for Latin America except read about
it."
--James Reston

I was embarrassed to learn, in doing some research recently, that
1 million Mexicans died during the Mexican Revolution of 1910-
20 (out of a total population of about 15 million). I had
absolutely no clue. We know so little about either one of our
neighbors, north and south. What we need to know about the
recent election of Vicente Fox is that this was a monumental
event in the history of Mexico, and possibly, the United States.

Former assistant secretary of state Elliott Abrams said of the fall
of the Institutional Revolutionary Party, the PRI, after 71 years of
entrenched rule, that it was "the Latin equivalent to the end of the
Soviet empire - or even more." In the 20th century, only the
Communist Party of the Soviet Union maintained a monopoly on
power for a comparable period.

Former president Jimmy Carter, in Mexico for the election as a
monitor, called it an "historic turning point of the most profound
significance."

A political scientist in Mexico said, "The fundamental pillars of
Mexico''s political system have changed."

But before we jump ahead, we need to acknowledge the
tremendous leadership of current president, Ernesto Zedillo. It
was Zedillo who proved to be an honest and effective legislator
after over six decades of incredible corruption.

Zedillo followed through on the work of his predecessor, the now
dismissed Carlos Salinas, after Salinas negotiated NAFTA.

NAFTA was implemented in 1994 and has been a huge benefit for
both the U.S. and Mexico (and Canada hasn''t done too poorly,
either). Mexican trade with the U.S. has doubled since NAFTA,
to the extent where Mexico is now the 2nd largest export market
for the U.S. after Canada (and ahead of Japan). General Motors
has become Mexico''s largest private employer.

Before Zedillo, the ruling PRI had been like a term-limited
absolute monarchy where each president would handpick his
successor as he wrapped up his 6-year term. It was Zedillo who
put an end to that, first, by following through on a legitimate
primary system and second, by instituting an independent election
commission.

So who is now in charge? Vicente Fox, 58, a rancher,
businessman, former Coca-Cola executive. Fox attended high
school in Wisconsin for a year and holds a degree from Harvard.
Today he manages a 1200 acre farm where he raises cattle and
ostriches. Fox has adopted 4 children.

In 1991 Fox was bitten by the political bug and ran for governor
in one of Mexico''s 31 states under the banner of the National
Action Party (PAN). He lost in an election rife with fraud but in
1995 he won in a landslide, thus setting himself up for a
presidential bid.

Supporters say Vicente is a tremendous salesman (a trait picked
up during his stint at Coke) and this talent will immediately come
in handy. His inauguration isn''t until December 1st and he could
face many problems beforehand.

While Zedillo has pledged his full support during the transition
phase, you have to understand that after 71 years, many of the
PRI kingpins are not about to give up power willingly. It is
expected that a free-for-all will ensue before December. Drug
traffickers will be pushing as much as they can across the border,
corrupt politicians will be looking to grab as much cash as
possible. Violence, no stranger to Mexico and its politicians,
could be prevalent.

One of the peculiarities of Mexican politics is that when Fox takes
over on December 1st, he has one month to push through a
budget. That means that the actual budget must be ready
beforehand. And Fox, who won only 43% of the vote, will not
have a natural majority in Congress. This is where Zedillo can
once again play a heroic role in convincing the opposition
legislators to go along, as long as they see that there is something
in it for them.

One of the budget issues involves Mexico''s tremendous reliance
on income from its vast petroleum industry...to the tune of one-
third of all tax revenues. Petroleos Mexicanos (PEMEX)
employs some 130,000 workers. Fox needs to be able to make
changes without upsetting the delicate balance between labor and
the government in Mexico City. At least the current price
structure helps in this regard. Fox promised during the campaign
to increase the wages of PEMEX employees.

Investors thus far have been extremely enthusiastic about the
change in government. The day after the election the Mexican
bourse rose 6%. Fox is seen as someone who can bring about
important change in the sense of modernizing the economy and
the system. But the government needs to develop resources that
defy the whims of financial markets. For example, right after
Zedillo took power in 1994, he devalued the peso, setting into
motion Mexico''s worst recession in 60 years. The key is to find a
way to give millions of would-be, small-time entrepreneurs access
to credit, technology and the markets.

But Fox never offered a comprehensive program during the
campaign. Many of his programs were little different from that of
his main opponent, the PRI''s Labastida. He pledged not to
reduce social programs while, at the same time, talked of
eliminating budget shortfalls by 2004. It was more a campaign of
"promises, promises."

Fox''s PAN also has had no real success governing in the states,
where it currently holds 7 of the 31 governorships. For example,
the battle to combat drugs and the impact of the narcotraffickers
has been a losing effort, whether the governor is with PAN or the
PRI.

And when Fox assumes office, 21 of the 31 states will still be run
by PRI chief executives. Zedillo has urged these governors to
cooperate with Fox. Many of them will have their own ideas of
the level of cooperation to be provided.

For its part, the PRI will need to undergo a tremendous overhaul.
The first step will be to attempt to reduce the influence of the old-
guard, the "dinosaurs" as they are known.

Can Fox win the biggest battle, however? The one against
systemic corruption? He won the election because he captured
the college educated voter by a 53-27 margin. This mostly
younger, middle class generation is crying out for change.

But in his efforts to weed out corruption, one expert said,
"The PRI remains in power for five more months, long enough to
destroy records of corrupt dealings and deny Mr. Fox a smooth
transition."

And Fox needs to totally revamp the police force, one which is
notorious for protecting drug dealers as well as preying on
ordinary citizens while facing little threat of investigation or
punishment.

Finally, he has rebel conflicts to deal with, like the one in the
southern state of Chiapas.

Yes, Vicente Fox has his hands full. The people who helped
bring him to office are tired of empty promises. They don''t want
a Boris Yeltsin-type figure. The Mexican people are impatient.

In discussing how he will select cabinet members, Fox said he
would pick those who "love their country, are honest, honest,
honest, and are professionally prepared." If he sticks to this
pledge, he will have set the example his people desperately need.

Latin America has been bereft of good news recently. The ABC
countries, Argentina, Brazil, and Chile, are the only nations who
can point to an occasional success. Mexico has a chance to be
another one. And the U.S. would be the big beneficiary if this
comes to pass.

Sources:

Elliott Abrams / The Weekly Standard
Linda Robinson and Andrea Mandel-Campbell / U.S. News
Geri Smith / Business Week
Michael Barone / U.S. News
Ginger Thompson / New York Times
Robert Unger / Washington Post
Sam Dillon / New York Times
Molly Moore and John Anderson / Washington Post

Brian Trumbore