Mexico: the challenges of reform

On Monday 2 September, Mexican President Enrique Peña Nieto delivered his first annual report, traditionally given as a public address in Congress. This year however was different, because a teacher’s union had blocked access to the Congress (and the main international airport, many streets, the stock market and other institutions), so the speech was given from the safety of the President’s official residence.

His ambitious agenda includes an education reform that will result in tests for schoolteachers to see if they’re fit for the job. Many teachers are up in arms, believing that the old system where teaching posts were personal property to be bought, sold, and inherited is wrong and needs to be abolished. But they’re nervous that exams will be used against them.

It may seem strange that Mexican law enforcement would permit a union to block access to the Congress or the airport, but this paradox sums up the challenges that Mexico currently faces. The police and military have a reputation for harsh crackdowns on social movements. So this approach is a safety valve while Congress works out how many of their demands to take into account.

Peña Nieto – the new face of the post-Revolutionary ‘official’ party of Mexico – is young, energetic, serious, but also a bit stiff and formal. In office for nine months, his raft of reforms will only work if they are put into place with transparent, impartial, and capable regulators. In Mexico that’s a very big ask. And the fate of the reforms is unclear, as each measure comes with its own die-hard opponents. One of the most divisive is the plan to open the Mexican state-owned oil sector to private investors, including those from other countries. Pemex believes it needs partners to be able to invest in costly new projects like deep water exploration. Opponents believe it would sell out the precious national resource to gringos and violate the Constitution.

Meanwhile the president has turned a blind eye to drug trafficking, preferring to focus on crime more generally. In a throwback to the old days of nationalism and sovereignty-above-everything, he has reduced the close cooperation between American and Mexican agents that was encouraged by his predecessor, Felipe Calderon. Critics claim he simply wants to manage Mexico’s image more effectively and has no intention of trying to solve the problem of narcotrafficking. Americans are puzzled. We’re doing great things together to fight cartels, they say. Mexicans see it differently. You’re administering lie detector tests on our agents, flying drones deep into our territory, and your National Security Agency is reading our president’s emails.

The cartels will never be beaten as long as the American appetite for drugs remains voracious, and everyone knows it. There is no greater entrepreneurial or innovative spirit than a Mexican cartel boss. Cartels have moved drugs across the border by traditional means – backpacks, jets, trains, cars, trucks – and by less traditional means – catapult, tunnel, submarine. The previous president tried to defeat the “narcocracy” of northern Mexico and ended up with more than 50,000 dead on his hands – that’s about the same as the number of Americans who died in Vietnam. The old peace between politicians and pushers has given way to more confrontation, but the two sides still have much to do with each other. To pave the way for their shipments of narcotics, Mexican cartels are estimated to spend upwards of one billion dollars (not pesos) per year on bribes to local, state, and federal politicians, bureaucrats, judges, police, military and others.

Corruption is endemic. Corrupt politicians and police are sometimes caught by hidden cameras and tape recorders, but the task ahead is immense. On a recent visit, the head of the union for Norway’s Statoil (like Pemex, state-owned) explained that he earns a bit more than rig workers, around £60,000 a year. He lives modestly in Oslo. Pemex’s union leader Carlos Romero Deschamps, meanwhile, on an official salary of about £15,000 per year enjoys luxury cars, homes in Miami, and many other mysteriously-acquired benefits.

Gluttonous union chiefs routinely siphon off members’ contributions. The head of the biggest union in Latin America, the SNTE, is in prison on corruption charges, accused of diverting two hundred million dollars of union resources for herself, family and friends. She makes Deschamps seem like a choir boy. Union books, unsurprisingly, are not open to scrutiny by anyone – not their members, not government officials, not auditors.

But their members remain silent because they are the lucky ones. Enough trickles down to keep them happy. An astonishing 60% of Mexico’s workforce is in the informal economy – cleaning windscreens on street corners, selling pirate CDs on the Metro, tending gardens. They pay no taxes and therefore do not contribute to public finances, nor are they covered by many social programmes.

This is the downside to the low official unemployment figures, which are around 5%. Other parts of the economy look good at the aggregate level: public finances and inflation are in order, and growth is near 3%, not spectacular but solid.

But a lot remains to be done to ignite an economy which combines high-tech aerospace and car companies along with low-wage assembly plants. Competition, infrastructure, energy, and education all need modernizing before Mexico can hope to fulfil its potential. To make things work properly they don’t need more or better democracy. They need better institutions, regulators, transparency, and justice. They need to overcome the “rule of scofflaw.”

Mexico could be so much more. It is one of the richest countries on the planet in terms of biodiversity and natural resources. In the social fabric beats the warmest heart I have ever lived amongst; people of generosity and old-fashioned formality. They deserve better. 

Mark Aspinwall is Professor of Politics at the University of Edinburgh. He is currently working in Mexico City on research leave. This piece was originally published in a slightly longer form at http://www.psa.ac.uk/insight-plus/blog/will-president-pe%C3%B1a-nieto%E2%80%99s-reforms-change-anything-mexico. We gratefully acknowledge their permission to repost.


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Can US Aid Buy Leverage in Egypt?

By WJ Dorman, Honorary Fellow of Edinburgh PIR

In the aftermath of the Morsi government overthrow in July, critics have accused the Obama administration of timidity and indecision. Citing broad public support in Egypt for the military takeover, the administration refused to declare it a ‘coup’ and made only token response to the massacre of the ex-government’s Muslim Brotherhood supporters in August. Critics argue that Washington should halt the $1.3 billion in annual military assistance as a warning against a return to the authoritarianism of the Mubarak era. More sceptical analysts, by contrast, doubt that such admonitions are practical or likely to be effective.

The history of US-Egypt relations is probably on the side of the sceptics. Attempts by the Eisenhower, Kennedy and Johnson administrations to use aid to secure more pro-American policies from the Nasser government in a ‘carrot and stick’ fashion were unsuccessful, leading to its cut-off by the mid-1960s. As William Burns, now the Obama administration’s deputy secretary of state, argues in his Economic Aid and American Policy Towards Egypt, 1955-1981: foreign assistance works best as a reinforcement to “shared political objectives” (p. 208). It does not substitute for their absence.

In the US National Archives, I came across a declassified 1974 letter from the American diplomat Hermann Eilts to the State Department’s Egypt desk, discussing the impending resumption of aid in the context of Sadat’s rapprochement with Washington. Eilts and his superiors agreed that their predecessors mishandled the relationship, and he argued for a modest programme of roughly $80 million per annum “as a means of maintaining a political climate in which we can more effectively pursue our policy goals.” He was sceptical that external assistance could do much for Egypt’s “economic situation” and doubted the US would get much gratitude for whatever it provided.

Unfortunately Washington did not follow his advice for a narrowly focused and pragmatic aid effort. In the interest of shoring up the Sadat government and its all-important peace agreement with Israel, the US embarked upon a much larger programme which at its height provided well over $2 billion per year in military and economic assistance. Its Agency for International Development struggled to spend the approximately $815 million allocated annually for development projects, but such largesse gave Washington little leverage in demanding economic reform (despite considerable Egyptian efforts to create the impression thereof) or even in highly visible foreign policy crises such as the 1985 Achille Lauro incident.

So what is US aid actually good for? It works best behind the scenes, reinforcing the political logic of the Egypt-Israel peace agreement and their close security cooperation. Egypt remains one of Washington’s important regional allies and was a key proxy in the US counter-terrorism campaigns of the 1990s and 2000s. But beyond security and diplomatic cooperation, US influence is limited. With respect to the domestic balance of power, it is probably non-existent.

If the aid relationship enabled Washington to argue for restraint during the original 2011 Tahrir protests, the Egyptian military also had its own reasons for forbearance: the degree of popular mobilization, realization that President Mubarak had lost his grip on power and desire to see off his son and heir apparent Gamal. By contrast, in July/August 2013 there appears to have been broad public support for the military takeover.

Perhaps most importantly, the ‘deep state’ and ancien regime forces which returned to centre stage in July have a new emerging strong man: General Abdel Fattah al-Sissi. In such circumstances, it is unsurprising that the Obama administration has chosen the path of least resistance.