Economy

The Blind Spot In Mexico's Sweeping Reforms

President Enrique Pena Nieto has pulled off the political feat of pushing through unprecedented reforms. But they are based on a promise that economic growth will inevitably follow.

Mexican President Enrique Pena Nieto in Ecatepec de Morelos on Sept. 4
Mexican President Enrique Pena Nieto in Ecatepec de Morelos on Sept. 4
Luis Rubio

-OpEd-

MEXICO CITY — Do the sweeping reforms being pushed through by Mexican President Enrique Peña Nieto contain a fundamental act of deception?

The reformist project touted during Peña's victorious campaign in 2012 was based on the supposition that the country was stagnating for lack of reform, and he broke no political taboo by saying so. An effective consensus had emerged between the parties during preceding decades on the need for reforms. Even as they disagreed on so much else, the three main parties agreed Mexico was not working as it was.

At the time, there was also ample acceptance among academics and politicians on an almost mathematical link between reforms and economic growth. Indeed, the leftist party best known for its populist antics and obstructionism, the Democratic Revolution Party (PRD), declared that parties must share the political cost of reforms. The collaborative will of the PRD and of the right-wing PAN (National Action Party) have further aided the current president's enormous capacity for political action to bring us to where we are today. With the legislative part of reforms complete, we may soon see if this ambitious plan actually translates into growth.

But already, the political tone has begun to change. The parties sounded conciliatory when they signed the Pact for Mexico in December 2012, whereas today people either bitterly recognize the president's political skills or harshly denounce his sellout of the country and its resources.

More measured appraisals of Peña reforms have instead focused on their content. Some praise the reforms' potential to attract investment, develop the country's natural resources and resolve some of its (almost) ancestral ills — in education, for example. Others focus more on the details and potential obstacles along the way, clashing motivations and numerous sources of uncertainty, particularly in all the provisional articles that were squeezed into the legislation.

On the ground

The most notable reactions have come from the government itself. First, it is justifiably satisfied with having attained a historic landmark. Some of the approved reforms are changing the country's development mechanisms in a manner inconceivable even a few months ago. The general tone from the government reflects the expectation that the economy will now begin to improve, and hopefully after that so too will the president's popularity and the electoral fortunes of his party, the PRI (Institutional Revolutionary Party).

Coming months will show how effectively the reforms are breaking down obstacles to development. It will be worth watching if and how telecommunications changes, and whether the relevant law (and regulator) ensures the transition toward a competitive market. What will the major players do? How will investors react? Only on-the-ground realities and the response of relevent actors will provide the best measure of the success — or incipient success — of any package of reforms.

The general public's reaction is more complex. The president's extremely low approval rating may reflect a traditional Mexican skepticism about grand visions of change: They will believe them when they see them. That's when the ratings might turn around.

But the more problematic scenario is that the supposed link between reforms and growth is wrong. There is no doubt that an improved economy would solve many problems, create job opportunities and better living standards. Yet it is not obvious that the reforms will resolve basic, structural problems.

The population became accustomed to the economy's pathetic performance a long time ago. The informal economy is a means of survival in a hostile environment. An improved economy would help, but it would not remove the reasons why people trade under the counter.

As for the hostile environment: Mexicans suffer multiple sources of disorder that the reformes neither address nor recognize as relevant. There is the lack of opportunities, influence peddling, corruption, extortion, insecurity, bureaucratic contempt for the common citizen.

In a word, our people live amid a giant heap of disorder. So as long as the sources of disorder remain, even if the economy grows the government will merely continue its age-old trick of passing its problems on to the next man.

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Geopolitics

Iran-Saudi Arabia Rivalry May Be Set To Ease, Or Get Much Worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before.

Military parade in Tehran, Iran, on Oct. 3

-Analysis-

LONDON — The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.


Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

The role of the nuclear pact

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

It's unlikely Ali Khamenei will tolerate the Saudi kingdom's rising power in the region.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Photo of Iranian Supreme Leader Ali Khamenei in 2020

Iranian Supreme Leader Ali Khamenei in 2020

commons.wikimedia.org

Riyadh's warming relations with Israel

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

For if nuclear talks break down, Iran's regime may become more aggressive.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

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