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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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