Ten months after taking over the presidency of Mexico, Enrique Peña Nieto has found himself at a critical moment. His ambitious project to reform practically all Mexican institutions is meeting opposition from the right and the left, at a time when his popularity is beginning to wane.
The right opposes his proposal to increase taxes on businesses and individuals with high incomes, while the left disagrees with his education reforms, which call for reorganizing the National Union of Education (SNTE, the biggest trade union in all of Latin America, with 1.5 million members).
Peña Nieto is preparing to remove cushy jobs and other privileges from teachers. During September, the teachers orchestrated huge protests in Mexico City, taking over a main avenue in the capital twice, creating long traffic jams that paralyzed a large area of the city for hours.
The left also opposes his proposition to open the state’s monopoly on Petróleos Mexicanos, the petroleum company better known as Pemex, to the private sector — a move that will require a constitutional amendment.
And still the Mexican president needs to get other promised reforms underway, like breaking the monopolies of the telephone and TV companies — both have already passed — and modernizing the judicial administration and the electoral systems.
Peña Nieto’s problems are not just from the left and the right. His popularity is also decreasing, with 55% approval from Mexican voters, according to the most recent opinion polls. This figure is lower than the 58% he enjoyed three months ago and lower still than it was during the first years in office for his three predecessors — Felipe Calderon, Vicente Fox and Ernesto Zedillo.
Peña Nieto has shown himself to have a steady hand throughout his exhaustive reform efforts, for which he has formed a fragile and surprising agreement between the two major Mexican political parties — PAN and PRD — as well as his own party, the Institutional Revolutionary Party (PRI).
This agreement, known as the Pact for Mexico, is what makes Peña Nieto’s reforms legislatively possible. And, in theory, it's what will give him the two-thirds majority that he needs in the Senate to pass the constitutional reform allowing him to open Pemex to public investment.
Reform of the energy sector isn’t just good news for Mexico. It’s also urgent. With it, companies such as Exxon and Chevron could pay for the right to exploit deposits in the deep waters — something Pemex can’t, because it doesn’t have the technology, or the funding, to do so.
But the Mexican oil giant will be given first right of refusal for all exploitation of gas and oil deposits in the country, and the private companies will only be able to sink their teeth in once Pemex has decided not to do it itself.
The reform also will include a substantial reduction in Pemex’s taxes. The market, luckily, seems to believe that the Mexican Congress will pass the Pemex reform. Pemex bonds maturing in 2035 rose in value by 9.9% in September. It is by far the highest performance from all 120 Mexican companies that issue bonds, and it increased four times on the Bloomberg Emerging Market index.
It is hoped that Congress will see the Pemex reform through by mid-October, together with the constitutional reform it requires. The voting comes at a crucial moment for the Mexican president. The economy, which has had good momentum during the last few years, slowed just as Peña Nieto moved into the presidential palace. This reform of the energy sector would certainly help him fulfill his promise of giving Mexico a sustained growth rate of 5% per year.
América Economía hopes that this reform passes and, once again, we applaud the ambition, strength and audacity of the Mexican president. In less than a year, Peña Nieto has proved himself to be a revolutionary institution. If he gets what he has proposed, this man could become the first Mexican president who honors the name of his party.