| MEXICO CITY
MEXICO CITY May 1 The fanfare accompanying
Mexican President Enrique Pena Nieto's first months in office is
increasingly being drowned out by discord in Congress that could
undo his plans to raise more tax revenue and open up state oil
giant Pemex to outside investment.
A pact that Pena Nieto painstakingly built with opposition
leaders to strengthen his hand in Congress risks falling apart
over accusations his ruling Institutional Revolutionary Party,
or PRI, has been using dirty tricks to buy votes in the first
major round of state elections since July's presidential vote.
Taking office in December after fighting off claims that his
own campaign team bought votes, Pena Nieto has won much praise
for his efforts to re-energize Mexico's economy.
A telecommunications bill passed by Congress on Tuesday aims
to bring more competition to industries dominated by phone
tycoon Carlos Slim and the No. 1 broadcaster, Televisa.
Pena Nieto's government has also pushed through a law aimed
at improving the education system and arrested teachers' union
boss Elba Esther Gordillo on corruption charges. A former PRI
stalwart, Gordillo was seen as a persistent obstacle to change.
Lacking an outright majority in Congress, Pena Nieto mapped
out an informal legislative program with the opposition under
the "Pact for Mexico," an agreement that has served as a
workshop for the parties' proposals to modernize the economy.
If his reforms succeed, Pena Nieto insists Mexico's growth
can reach 6 percent per annum. Investors have been encouraged by
the pact's achievements, piling into Mexican stocks and bonds
and recently pushing the peso currency to a 19-month high.
But last week, months of political goodwill evaporated amid
angry recriminations when opposition leaders accused the
government of trying to use public money to help the PRI in
local elections in the Gulf state of Veracruz this July.
When videos were leaked showing PRI officials advocating the
use of Social Development Ministry funds to corral votes in
Veracruz, the conservative National Action Party, or PAN, and
the leftist Party of the Democratic Revolution (PRD) were livid.
"The one that's been irresponsible, that hasn't kept its
word, that has put the Pact for Mexico at risk and shown it's
still the same old party it always was, is the PRI," said the
PAN's lower house leader, Luis Alberto Villarreal.
For Pena Nieto, the row is an unwelcome backdrop for the
visit of U.S. President Barack Obama to Mexico on Thursday, when
the leaders will discuss security issues and how to step up
cooperation between their closely intertwined economies.
Ruling for 71 uninterrupted years, the PRI had become a
byword for corruption by the time it was finally voted out of
power in 2000. When Pena Nieto recaptured the presidency for the
party last year, he swore things would be different this time.
But as the parties jockey for position before the local
elections in Veracruz and 13 other states on July 7,
finger-pointing about PRI corruption is again widespread.
Until the PRI has punished those behind the Veracruz scandal
and ensured the elections are protected against abuses, all
discussions within the pact over energy and fiscal reform are
off, PRD chairman Jesus Zambrano told Reuters.
Though he was confident the pact could overcome the current
furor, Zambrano foresaw trouble ahead if it did not. "It would
make building consensus enormously difficult," he said.
Defusing tensions between the PRI and its rivals is a big
enough challenge for Pena Nieto. But he must do so at a time
when there are major splits inside the opposition parties - in
particular the PAN - his natural allies on economic reform.
Without support from at least the PAN, Pena Nieto's ruling
coalition of PRI and the Green Party is unlikely to muster the
two-thirds majority in Congress needed to enact a constitutional
change he wants to make Pemex more attractive to investors.
The PRD is opposed to changing the constitution to open up
the oil industry and is highly skeptical about imposing a
value-added tax on food and medicine, a measure the PRI is
considering to improve Mexico's weak tax revenues.
Meanwhile, both the PAN and the PRD are pressuring Pena
Nieto's Social Development Minister Rosario Robles to step down
over the Veracruz revelations. To date, they have not made her
departure a condition of their support for the pact.
The parties were incensed when Pena Nieto last month backed
Robles publicly, withdrawing their support for a banking bill
negotiated under the pact, and putting that reform on ice.
"It's up to all the political players to carry on working
for the reforms our country needs," Pena Nieto said at the time.
The opposition says, however, that the PRI has yet to atone
for Veracruz. Robles quickly dismissed seven officials over the
affair and has denied any wrongdoing, but the PAN and the PRD
have said 57 people were involved and want more heads to roll.
The government has repeatedly stressed that the pact is
intact, but opposition lawmakers chafing under the fetters of
the agreement have jumped at the chance to attack the president.
Senator Luis Fernando Salazar of the PAN said Pena Nieto's
response to the Veracruz affair showed that he saw the pact "as
nothing more than an instrument for keeping the opposition
Even among the ranks of the ruling coalition, doubts have
grown about how much longer the government can defend the pact.
"It was very close to breaking," said PRI congressman Brasil
Acosta, noting the media attention the pact has generated had
turned it into a very public forum for lawmakers to air
grievances, making it harder and harder to defuse spats.
Another lawmaker in the ruling coalition, who declined to be
named, said the pact would last till the end of 2013 "at best."
Pena Nieto used the accord to push through the education and
telecommunications reforms with overwhelming support from the
PRI, PAN and PRD. But that spirit of cooperation has given way
to warnings that the pact risks neutering the opposition.
There is no suggestion Pena Nieto was personally involved in
the PRI's election planning for Veracruz, but preserving the
pact is exacting a mounting price in Congress, which must still
agree on laws to implement the telecoms and education bills.
Mindful of the risks, Pena Nieto front-loaded his major
reforms, pledging to sign off the reorganization of Pemex and
his plan to broaden the tax base by the end of the first year.
Ulises Beltran, head of polling firm BGC, said in the end
Pena Nieto's hopes of passing far-reaching energy and tax
reforms were almost certain to depend on the PAN.
How helpful the PAN is may hinge on who wins the only state
governorship up for grabs in July: Baja California. In 1989, it
was the first state the PAN ever captured and it still holds it.
Losing Baja California would be a crushing blow to the PAN,
which is still licking its wounds after giving up the presidency
to Pena Nieto and finishing a distant third in last year's vote.
Anxious to avoid defeat, the PAN is running on a joint
gubernatorial ticket with the PRD in Baja California and has
already said the PRI will try to buy the election.
The only problem, said pollster Beltran, is that after 24
years under the PAN, the state is ready for a change.
"And if (the PAN) ends up losing in Baja California, they're
going to claim there was fraud without a doubt," he said.