Economic growth, security top Pena Nieto's to-do list

MEXICO CITY -- Can Mexico's new president Enrique Pena Nieto capitalize on favorable trends in the country?
Written by Lauren Villagran, Correspondent (Mexico City)

MEXICO CITY – This country has a new president who, in less than a week on the job, has made enough promises to keep the government busy through the end of his six-year term.

Enrique Pena Nieto returned the Institutional Revolutionary Party (PRI) to power after a 12-year hiatus on Dec. 1. In his inauguration speech, he described a 13-point plan to move the country forward, and two days later, he led the signing of a "pact for Mexico" in which all major political parties agreed on 95 points of action.

There's no question the new administration has a lot of work to do.

Pena Nieto inherits a brutal drug war from his predecessor, Felipe Calderon. The violence has cost an estimated 60,000 lives and left the social fabric of some hard-hit regions in shambles. Drug-related homicides in the border cities of Tijuana and Ciudad Juarez have dropped from the highs of a year ago but are still elevated.

When it comes to the economy, Mexico is on pace to grow faster than Brazil this year and next – 4 percent here versus sub-2 percent growth in the South American giant – but job creation in the formal market hasn't kept up with demand. Wages remain low. Inequality has increased.

Mexicans are ready for a change. According to Mexico City-based public opinion research firm Gabinete de Comunicacion Estrategica (GCE), 51 percent of respondents to a recent survey said the country was "stagnating" and another 21 percent said the country was "regressing."

In the same survey, Mexicans ranked their "most urgent" priorities for the incoming administration. Improve security topped the list; the same number of respondents – 36 percent – said the new president must lift the economy, jobs and salaries before anything. Improving education also ranked high.

All that and more is on the new president's to-do list. Pena Nieto needs to win the hearts and minds of the 62 percent of voters who didn't vote for him on election day, when he garnered 38 percent of the vote in a field of four candidates.

Here is a breakdown of what the president proposes and what's at stake in key areas:

Security. While many Mexicans support the government's decision to combat drug-trafficking organizations head-on, a majority believes the strategy has failed. Nearly two-thirds of respondents to the GCE survey said they believed drug traffickers were winning the war – not the government. (That eye-popping statistics on drug-related violence have done little to deter foreign direct investment seems to suggest that multinationals, at least, don't see things the same way.)

Pena Nieto has said he'll make lowering homicides, kidnapping and extortion the priority – shifting the focus to the safety of Mexican communities rather than knocking out cartel kingpins. As part of the 13-point plan, he outlined a holistic approach that would involve not just the military and police forces but agencies including health, social development and education in a crime prevention strategy.

Economy. On the macroeconomic front, Pena Nieto has signaled he'll stay the course set by previous governments: keeping inflation in check and national debt low. Mexico's net debt as a percentage of gross domestic product stands at 38.9 percent versus 83.8 percent in the U.S., according to the International Monetary Fund.

It's likely that Pena Nieto will "aggressively promote the image that Mexico has been engendering in recent months as a good place to invest," said Tamon Takahashi, director of research in government and economy at think tank CIDAC.

Pena Nieto also plans to propose a law governing the ability of states and municipalities to run up public debt – this after a PRI governor of Coahuila left the state with some $2.18 billion in bills to pay.

"It speaks of the concern that the administration has to maintain fiscal discipline," Takahashi said.

Education. Mexico ranks last among 30 OECD nations in education.

About half of Mexican 15-year-olds enrolled in school performed at or below the lowest level of proficiency established by a key OECD educational assessment. It doesn't help that Mexican students spend an average of 4.5 hours in school per day – compared with six hours in the U.S. and eight hours in Korea – or that teachers are often exempt from periodic evaluations or testing themselves.

Pena Nieto has, with some limits, promised to push to require that teachers be hired and compensated based on merit instead of a current system in which "plazas," or posts, are "owned" by unionized teachers and can be bequeathed or passed around.

The new president now has a chance to prove to Mexican society that his PRI party has evolved – as he so often promised during the campaign. The PRI ruled Mexico uninterrupted between 1929 and 2000 in a semi-authoritarian government that kept a tight grip on the country. Twelve years of government by the National Action Party failed to inspire, while the drug war has overshadowed most of the good news of recent years.

"Some awful years are giving way to what, if managed properly, could be a prosperous period for Latin America’s second-largest economy," Tom Wainwright says in the Economist's recent special report on Mexico. "Big, irreversible trends, from a falling birth rate at home to rising wages in China, are starting to move in Mexico’s favor."

A new bar is set.

Photo by Nacho Espejo

This post was originally published on Smartplanet.com

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