RPT-UPDATE 2-Fitch cuts Italy's debt rating; cites weak growth, political risk
* Cites high debt, bank woes, backloading fiscal consolidation
By Dave Graham and Anahi Rama
MEXICO CITY, July 2 The smooth, boyish features, crisp white shirts and slick black hair parted perfectly from the left finally broke the spell that had frozen Mexico's old rulers out of office.
Only a hint of gray at the temples betrays signs of age in Enrique Pena Nieto, the man who brought the Institutional Revolutionary Party (PRI) back in from the cold.
The winner of Sunday's presidential election, Pena Nieto is the triumphant new face of the PRI, which governed Mexico for 71 consecutive years until it was defeated in 2000, succumbing to a buildup of popular resentment and disdain.
Descending afterwards into infighting and intrigue, the PRI looked to be on its last legs when its came in a distant third in the last presidential election in 2006.
Not long before, the ambitious and handsome Pena Nieto was still trapped in provincial obscurity, seeking a way onto the national stage. When he found it, he breathed new life into his party, stirring hopes of a comeback.
Weak economic growth and scenes of sickening brutality in a drug war that has killed over 55,000 people since 2007 eroded support for the conservative National Action Party (PAN), and allowed the centrist PRI back into contention.
Critics seriously doubt whether Pena Nieto can change the essence of a party widely identified with thieving, vote-rigging and links to organized crime, even among some of its supporters.
He has certainly been talking the talk, though.
"In the Mexico we want, there is no room for corruption, for cover-ups and least of all for impunity," he told a recent meeting of party leaders. "It's time to break with the past."
Blessed with an easygoing charm and good memory for faces, the fan of British singer Adele and Irish rockers U2 made a name for himself as governor of Mexico's most populous state, avidly courting the media and cutting deals with political adversaries.
A stickler for order, Pena Nieto is held up by supporters as a man who can be relied on in a country steeped in cynicism.
To detractors, he is a political puff pastry manufactured by Mexico's dominant broadcaster, Televisa, and an intellectual lightweight who can't keep his trousers on.
In January he admitted cheating on his first wife, fathering two children with different women while married to her.
But even then, Pena Nieto had a huge lead in polls and few doubted he would replace President Felipe Calderon, especially with the full weight of the PRI political machinery behind him.
Critics say the 45-year-old may owe too many favors to too many people to take a stand against corruption in the PRI, which has been unchecked at state level since the party lost the presidency.
FRIENDS IN HIGH PLACES
Pena Nieto's career took off after his relative Arturo Montiel became governor of the State of Mexico in 1999. Once described as a "bag carrier" for Montiel, by 2003 Pena Nieto was a deputy in the local Congress. Two years later, the telegenic lawyer succeeded Montiel as governor.
However, the notion that Pena Nieto was anyone's "puppy" is nonsense, said Domitilo Posadas of the leftist Party of the Democratic Revolution (PRD) who sat in opposition to the PRI in the state's legislature. The governor, he said, treated the opposition with respect and always kept his word.
"If he wins, the Pena Nieto I'd like to see as president is the one we saw in the State of Mexico: open to dialogue, tolerant and taking on board proposals that didn't come from him," he said in a recent interview.
Negotiating with left and right, Pena Nieto shepherded through a raft of legislation that cut the state's debt by about a quarter, ramped up investment and allowed the state on the capital's northern flank to outperform the Mexican economy.
Pena Nieto will likely have to show those deal-making skills as president if preliminary projections that showed the PRI will lack a majority in Congress are confirmed.
During his governorship, Pena Nieto also earned the respect of some notable political rivals at a national level.
Fernando Gomez Mont, a former PAN interior minister, said Pena Nieto played a "very helpful" role in getting the PRI to support Calderon's swearing in as president in 2006 when he was facing a serious challenge to his legitimacy.
The crisis blew up when Calderon's main election rival, leftist Andres Manuel Lopez Obrador, refused to accept defeat and staged weeks of protests, insisting he was the rightful president.
"I think (Calderon) likes him very much because Pena always was very loyal to him in his political dealings," said Gomez Mont. Were it not for his grounding in the PRI, Pena Nieto's conservative instincts would have easily allowed him to forge a career in the PAN, said Gomez Mont, who quit office in 2010.
"He's a man with a sense of governance and I believe he's a rather sound leader. He's the most consistent politician I've seen in the last few years in Mexico," he added.
ALL THE PRESIDENT'S MEN
Pena Nieto has pledged to restore order by beefing up law enforcement, and to raise economic growth to 6 percent a year.
His growth agenda hinges chiefly on three economic reforms: liberalizing Mexico's antiquated labor laws, extending the tax base to improve government revenues and allowing more private investment into struggling state oil giant Pemex.
The party has been close to backing the first two in the past, but ultimately blocked them to deny rivals a victory.
Opening up Pemex, which the PRI created in 1938, will be more of a departure, and officials say in private the plans could hit resistance among the PRI's rank and file.
But close advisers to Pena Nieto like Ildefonso Guajardo, an economics expert in Congress, said the party would line up behind the president, who takes office on Dec. 1.
"The PRI without the president and the PRI with the president are two different things," he said. "It gives the party a lot of discipline, especially when it comes to moving forward with the things that Mexico needs."
Pena Nieto's grasp of the finer points of policy was often uncertain in the campaign, and much of the deal-making with legislators may be left to trusted aides.
Foremost among these is Luis Videgaray, his former finance minister in the State of Mexico and a technocrat who has had plenty of experience as a PRI negotiator in federal Congress.
Schooled in Mexico's private ITAM university and the Massachusetts Institute of Technology, Videgaray is respected across party lines and also ran Pena Nieto's election campaign.
Without Videgaray, Pena Nieto's economic record in the State of Mexico would likely have been less impressive, experts say.
Fueled by big infrastructure projects, average annual growth in the State of Mexico outpaced the national rate between 2005 and 2010, while poverty levels actually fell during the financial crisis, bucking the wider trend, official data show.
Beyond pledging his allegiance to the amorphous ideology of the PRI, Pena Nieto has dropped few hints about who inspired his vision of government. One man he has named is Adolfo Lopez Mateos, the last president to hail from the State of Mexico.
A charismatic, left-leaning populist who redistributed land to peasants, Lopez Mateos kept Mexico neutral in the Cuban Missile Crisis while maintaining good relations with Washington, and secured the 1968 Olympic Games for Mexico City.
Plowing large sums into public works, Lopez Mateos stood down in 1964. He was the final president to serve before the PRI's image began to suffer badly with the bloody suppression of student protests four years later.
"I think Lopez Mateos is the most important ex-president for Pena Nieto," said Jose Luis Barros, a senior aide to the last PRI president, Ernesto Zedillo.
Like Pena Nieto, Lopez Mateos was known as a ladies' man.
MUGGING FOR PHOTOS
Shaking outstretched hands as he sidled down a barricade of cheering supporters in the eastern city of Campeche in May, Pena Nieto was violently thrown out of his stride when a woman leapt out and grabbed him for a kiss. Within in an instant, he was beaming broadly, returning her hug and mugging for photos with the crowd like a Hollywood veteran.
These scenes were repeated up and down the country on campaign with Pena Nieto, whose ready smile and weakness for the opposite sex won him fans and enemies alike during his run.
A former student at the Roman Catholic Panamerican University, a seat of learning backed by the conservative Church group Opus Dei, Pena Nieto has frequently extolled the virtues of close-knit families in his wooing of Mexican voters.
The news of Pena Nieto's infidelity to his first wife, who later died after an epileptic seizure, raised doubts about his moral fiber and might have cost him dear in a U.S. election.
Support from his second wife, a popular soap opera actress, helped lay that scandal to rest. More nagging have been accusations that Pena Nieto failed to do enough to tackle high murder rates of women in the State of Mexico.
And most persistent of all are the allegations that he is too close to the PRI's old ruling elite, who critics say too often saw public service as a means of private enrichment.
Nowhere are those troublesome ties more evident than in Atlacomulco, birthplace of Pena Nieto and his mentor, Montiel.
A nondescript town with a drab square and a market named after Lopez Mateos, Atlacomulco has acquired almost mythical status in the annals of the PRI domination of Mexico.
Since the ascent of local boy Isidro Fabela to the state governorship in 1942, the town has given its name to a nebulous group in the party imputed with great power and influence.
The "Grupo Atlacomulco" also became synonymous with impunity under leaders like Carlos Hank Gonzalez, a wealthy former governor of the state and mayor of Mexico City investigated on suspicion of drug trafficking in the 1990s.
By the time Pena Nieto began to rise through the ranks, Montiel was widely seen to be at the heart of the group.
The subsequent investigation of Montiel for suspected embezzlement only confirmed to Pena Nieto's critics what they had said all along: that he was mixed up with the wrong people.
"This group has wanted to have their own president for as long as it's existed and he is their bishop," said Mariela Perez de Tejada, a PAN congresswoman when Pena Nieto was governor.
Even loyal Pena Nieto supporters in Atlacomulco are quick to criticize Montiel over the allegations of corruption.
"He's not well liked around here. If Enrique Pena Nieto makes the same mistakes, it'll be all over for the PRI," said Javier Mendoza, 51, a campaign helper from Pena Nieto's 2003 bid for state congress.
The probe into Montiel petered out under Pena Nieto's governorship and the PRI kept faith with the old governor.
When party leaders attended the swearing in of Pena Nieto's successor last September in the state capital Toluca, there was polite and generous applause for many, including the new governor, when the names of visiting grandees were read out.
But nothing inside the huge theater could match the roar that went up for Montiel and his protege, Pena Nieto.
* Cites high debt, bank woes, backloading fiscal consolidation
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