Mexico's Peña Nieto scores early political wins – but can he sustain support?

Progress toward big promises: That was President Enrique Peña Nieto’s message this week in his first State of the Union message.

Mr. Peña Nieto has had, in many ways, a strong start. A pact signed by the three top political parties just a day after he took office Dec. 1 has allowed him to pass much-needed reforms that he says will go on to make Mexico more competitive globally and stimulate a sluggish economy.

An education reform and another that would increase competition in the telecommunications industry, which is heavily dominated by a single company, have won legislative approval. And progress has been made on others, including one reform that would bolster access to credit by small businesses. But observers say some of the most contentious challenges lie ahead, especially energy and tax reform.

Yet the changes Peña Nieto has sponsored won't make visible differences in Mexico's economy or day-to-day life overnight, even if they succeed. While the president has garnered kudos internationally and among Mexico’s elite for proposing an economic transformation, as he moves forward in his six-year tenure he will need to assure the Mexican population that their patience will pay off.

“One of the arguments for the reforms is that they are going to have an impact on economic growth,” says Carlos Bravo Regidor, political science professor at Mexico's Center for Research and Teaching in Economics (CIDE). “That may be true theoretically, but it will take a long time.”

Mexico’s economy isn’t growing as expected, and the country’s notorious drug violence hasn’t faded. These issues consistently show up at the top of polls of Mexicans’ most pressing concerns. Peña Nieto’s approval rating after nine months in office stands at 56 percent, according to a survey by Consulta Mitofsky. That’s worse than his two predecessors at the same point in their tenures: Felipe Calderón earned 66 percent approval and Vicente Fox 62 percent.

Protests ­– some violent – against education, energy, and tax reforms broke out across the capital on Sunday. Teachers continue to march against laws that define the education reform and have called for a nationwide “day of insurrection” on Wednesday in at least 22 states and the capital. 

Reform-minded

Peña Nieto’s Institutional Revolutionary Party wants to reform the energy sector, opening both the national oil monopoly Petroleos Mexicanos and the state-controlled Federal Electricity Commission to outside investment. They can likely count on the support from the conservative opposition, the National Action Party. But the leftist Democratic Revolution Party has said it will oppose anything that smacks of privatization, putting in jeopardy the “Pact for Mexico” that smoothed the legislative path for the earlier reforms.

Peña Nieto also wants to boost the state’s ability to collect taxes. It’s a very tough sell in a lethargic economy. Mexico has one of the region’s lowest tax collection rates as a percentage of gross domestic product, below that of Argentina, Brazil, Uruguay, Costa Rica, Chile, and Ecuador, according to 2010 data from the Organization of Economic Cooperation and Development.  

The president has promised that his reforms will work wonders on the Mexican economy by modernizing the country’s legal frameworks and attracting foreign investment. The government “has decided to face multiple challenges at the same time,” he said during the speech Monday. “We’re doing it this way because the window of opportunity to address them is open and we must take advantage. This is the moment to move and transform Mexico.”

Mexico’s economy expanded at roughly 2 percent per year over the past 12 years, and Peña Nieto has vowed to accelerate growth during his six-year term. But Mexico’s Finance Ministry has already scaled back growth projections twice this year, from 3.5 percent to 3.1 percent in May, then to 1.8 percent in August.

“In the short term we need to see results,” says Edna Jaime, director of México Evalúa, a center for public policy analysis. “We can’t wait through three or four more years of mediocre growth.”

Mr. Bravo Regidor, from CIDE, notes that public confidence in Mexico's strategic direction reached a low point in the last years of the previous administration. But Peña Nieto’s administration has been successful in boosting hopes, and changing how the world viewed Mexico’s prospects – at least for a while, before economic growth numbers began to shrink – shifting the national conversation away from the violence that dominated media reports for years.

“They changed the perceptions,” he says. “The problem is that the government believed its own PR campaign.”

Ongoing violence 

Peña Nieto hasn't been able to entirely steer the conversation away from the country's pernicious drug-related violence because it hasn't gone away. He touted a positive trend in his speech, however: Homicides fell 13.7 percent between December 2012 and July 2013 compared to the same time the previous  year.

The decrease in murders is something that began during the previous government, according to Ms. Jaime, who has analyzed crime statistics in depth. But drug-related violence remains elevated in many regions of the country, while kidnapping and extortion are on the rise, she says.  

Wearing the traditional sash of the three-color Mexican flag beneath his suit jacket, Peña Nieto described the legacy he hopes to create. With what remains of the year – and with his political capital perhaps at its highest – there is a chance for 2013 to be remembered, he said, “as the year of great transformations, a year in which Mexico dared to take off.”