 POLITICS AND ECONOMY |
| POLITICS |
In stark contrast to the 1988 presidential election in Mexico, when Carlos Salinas of the Institutional Revolutionary Party (PRI) gained the presidency by beating Cuauhtémoc Cárdenas of the Party of the Democratic Revolution into second place amid accusations of grand scale fraud and a public outcry for a democratic electoral process, the 2000 election saw the first opposition party triumph since the PRI took office in 1929, with Vicente Fox of the conservative National Action Party (PAN) gaining the presidency in an election which was acclaimed by the whole world to have been a truly democratic process. Herein lies the key to the downfall of the PRI: Democracy.
One year after the widespread criticism of the '88 elections came the PRI's first important defeat when, on July 3 '89, the PAN candidate for Baja California, Ernesto Ruffo, became the first opposition candidate to win a governorship.
In answer to the critics of the electoral process in '88, during the year '89, a series of amendments were made to the General Constitution and new electoral legislation was introduced, which, in an attempt to make the electoral process more transparent, culminated in the formation of the Federal Electoral Institute (IFE), which was officially constituted and became operational on October 11, 1990. In 1991, it issued voter credentials which incorporated photographs, along with several other security measures, thus turning the Mexican elections into the most expensive in the world. Subsequently, in 1993, the IFE was empowered to decide upon the validity of an election, and to establish ceilings for electoral campaigning, further increasing the democratic outlook for future elections.
However, on March 23rd in the run up to the '94 presidential election, the assassination of a man who had become akin to a political messiah, Luis Donaldo Colosio (the PRI candidate), once more caused public outrage and a further outcry for greater democracy. Nevertheless, the '94 presidential election kept the PRI in power, once again beating its closest opposition with Ernesto Zedillo Ponce de León replacing Salinas at the helm, but this time the PAN candidate, Diego Fernandez de Ceballos, came second. Zedillo, who inherited a country in the midst of its worst post-revolution crisis, had a tough battle ahead of him. Although he had triumphed in the elections, he realized that he needed to give the PRI a more democratic image if it was to continue in power, as the Jan 1 '94 rebellion in the south-eastern state of Chiapas was attracting international criticism of human rights violations and support for the opposition parties was gathering momentum.
| ECONOMY |
Over a ten-year period, Mexico's traditional protectionism regarding international trade was left by the wayside. Carlos Salinas had broken the mold and taken the country along the path of globalization, firstly by signing a Free Trade Agreement (FTA) with Chile (1992), and subsequently signing the North American Free Trade Agreement (NAFTA) with the US and Canada (1994). In December '94, Ernesto Zedillo took up the reigns and adopted this policy of globalization and by mid '98 Mexico had signed FTA´s with Bolivia, Costa Rica, Colombia and Venezuela - the latter two forming what is known as the Group of Three along with Mexico ('95), next on the list was Nicaragua ('98).
During this period, Mexico faced internal problems in the form of a currency devaluation (Dec. '94) and incredibly costly bank rescue programs valued at an estimated US$55bn in February '98. | Added to these internal problems, in late '98 the emerging markets were submitted to an onslaught of external shocks including the Japanese recession, which triggered the Asian crisis, and as a consequence recession hit the Latin American continent. Then the collapse of Brazil's markets added to the negative external influence on the remainder of the continents' markets. However, due to Mexico's macro-economic policies and the floating exchange rate regime, the country survived the situation as the least affected economy of the whole continent, its main problems being the reduction in the flow of capital into the economy and the falling oil prices, which bottomed out below those of 1986, thereby leaving the country in a dire economic position.
When signs of recovery became apparent, the sheltering affect of Zedillo's macro-economic policies added to the country's FTA's, meant that foreign investors once more began to consider Mexico as an attractive option for investment. Another saving grace for Mexico's economy was the fact that the economy of it's northern neigbor, the US, was picking up speed and the NAFTA agreement placed Mexico in a unique position to take advantage of this fact.
In 1999, Zedillo's continued fiscal discipline, which has been the outstanding character of his presidential term, seemed to persuade foreign investors that Mexico was once again on the road to recovery, and a turnaround in the oil prices meant that the governments pockets' began to receive a welcome boost. Both internal and external demand increased, unemployment decreased to its lowest level since 1985 and domestic saving was on the up. Furthermore, the economy grew 3.6% (above the January forecast of 3.0%), and so, with the accumulated effect of all these factors, the government was able to reduce its ratio of net public debt to GDP from 27.9 percent at the end of ''98, to 25.3 percent at the close of '99. In August of '99, Mexico signed yet another FTA with Chile, and due in great part to the long list of FTA's signed during Zedillo's presidfential term, exports throughout this presidential term have risen over 200%, 80% of which are from non-petroleum exports.
At the beginning of this year, a further FTA was signed with the Northern Triangle - Guatemala, Honduras and El Salvador - and later in the year Israel joined the list of countries with which Mexico has special trade agreements. The last, and most important FTA to be negotiated by the Zedillo administration was with the European Community. All the signs are that Mexico has overcome its recent troubles which is shown by the figures, this year the inflation rate is forecast to close the year at 8.8% and the projection for 2001 is 7.4%, this years' export figures will post a growth rate of 18.2% and and are forecast to continue rising into the year 2001, industrial production is also increasing, this year it will close with a growth rate of 7.2%, a trend that is expected to continue throughout the year 2001. Possibly the most impressive figures are those of GDP growth, which has increased to 7.0% this year vs. the 3.6% of last year, and estimates establish that this will increase throughout next year, all be it at a slightly lower level.
Another interesting fact is that the Zedillo administration, in order to ensure a smooth presidential transition at the end of this year (in contrast to the habitual crises during the transition period), announced a Financial Strengthening Program in 1999, which consists of several sources of finance totalling US$16.9 bn. This money was secured from the IMF, the World Bank, the Inter-American Development Bank, and the U.S. Export-Import Bank.
So, the future looks bright for Mexico, the incoming President, Vicente Fox has promised an austere budget, along with a strong macro-economic policy and the opening up of the energy sectors of electricity and peripheral petrochemicals, which should attract further direct foreign investment and decrease the burden of further investment in these sectors by the government. Domestic and foreign consumption is predicted to increase next year and the high level of oil prices is expected to continue for the foreseeable future, thus representing a steady income for the government. The signing of a further FTA is to take place on Jan 1 2001, with the Northern Triangle - Guatemala, Honduras and El Salvador - and should thus further increase investor interest in Mexico, which has established itself as one of the most attractive countries in the world in investment terms with regard to the future of the globalization process. |
