Mexico's Pena Nieto takes power, begins new era for old ruling party

Sat Dec 1, 2012 12:59am EST

Related Topics

* Pena Nieto aims to boost growth with energy, tax reforms

* Doubts linger about his party

* PRI inherits an economy that has improved lately

By Dave Graham

MEXICO CITY, Dec 1 (Reuters) - Enrique Pena Nieto takes over as Mexican president on Saturday, offering a shot at redemption for the party that shaped modern Mexico if he can bring about an end to years of violence and economic underperformance.

Returning the centrist Institutional Revolutionary Party, or PRI, to power after a 12-year hiatus, the 46-year-old Pena Nieto aims to use a recent improvement in the economy's fortunes to spark faster growth.

Telegenic and married to a popular actress, he also promises to restore calm after more than 60,000 people were killed in violence between drug gangs and security forces during the six-year term of his conservative predecessor, Felipe Calderon.

"Unfortunately, this has been something which has made or formed the image of Mexico in the world," Pena Nieto said during a trip to Europe in October. "That's why there's no doubt dealing with lawlessness more effectively is a priority."

He says he is committed to the fight against organized crime, which dominated Calderon's presidency, but has also stressed his main goal is to reduce the violence.

Pena Nieto, a former governor of the state of Mexico, will be sworn in as president at a ceremony on Saturday. He won the July 1 election with about 38 percent of the vote, more than 6 points ahead of second-place Andres Manuel Lopez Obrador.

The new president's right-hand man, Luis Videgaray, and close political ally Miguel Angel Osorio Chong will be the two key figures in his Cabinet, running the finance and interior ministries respectively.

Having helped shepherd a labor reform through Congress since his election victory, Pena Nieto now wants to pass legislation to strengthen Mexico's tax base and allow more private investment in lumbering state oil giant Pemex.

If he is successful, the reforms could help spur stronger growth and create jobs, blunting the allure of organized crime.

Like many of Mexico's best-known institutions, Pemex was a creation of the PRI, which ruled for 71 uninterrupted years until it was voted out in 2000. By then, the party had become a byword for corruption, cronyism and vote-rigging.

'ESTABLISHMENT GUY'

Annual economic growth averaged less than 2 percent under the National Action Party, or PAN, over the past 12 years. That record and growing worries over the drug war violence opened the door for a PRI comeback under Pena Nieto.

Still, inflation has been kept in check, debt levels are low and growth picked up toward the end of Calderon's term, with the economy outperforming Brazil's in the past two years.

"Maintaining that stability is going to be one of the biggest challenges of the next government," said Phillip Hendrix, 44, a Mexican businessman.

Pena Nieto's inner circle features several ambitious young economists and financial experts eager to prove the PRI can do a better job of managing Latin America's second-biggest economy.

For much of the PRI's reign, Mexico enjoyed stronger growth than the PAN mustered, but memories of default on the country's debts in 1982 and a financial crash in 1994 and 1995 still linger.

"It's very hard to believe in the PRI. They bankrupted Mexico," said construction worker Jose Luis Mendoza.

Supporting a family of four on 1,300 pesos ($100) a week, Mendoza, 29, said he was worse off now than when Calderon took office, and doubted his lot would improve under Pena Nieto. "The cost of everything has gone up - but my wage hasn't," he said.

Pena Nieto has pledged to put more money in Mexicans' pockets and shake up competition in a country where large swaths of the economy are concentrated in the hands of a few, like telecoms billionaire Carlos Slim, the world's richest man.

But Pena Nieto has been vague so far about how he plans to create a more level playing field, and pollster Jorge Buendia said it would be foolish to expect radical change.

"Pena Nieto's not a reformist guy. He never has been," Buendia said. "He's an establishment guy and I don't think he's going to rock the establishment that much."

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