Pena Nieto Poised to Return Mexico’s Once-Lofty PRI to Power

Mexican presidential front-runner Enrique Pena Nieto built his campaign on the promise that his once-dominant party has evolved and can rise above a history of corruption and cronyism. In four days, voters probably will give him the chance to prove it.

Polls show Pena Nieto leading his nearest rival by more than 10 percentage points ahead of the July 1 vote as he seeks to propel the Institutional Revolutionary Party, or PRI, to victory for the first time since 1994. The PRI ruled alone for 71 years until 2000, and Pena Nieto has faced attacks from rivals and protests warning that he’ll erode civil liberties and revive corruption that thrived under the previous regime.

While some of the PRI’s older leaders may try to turn back time, the opening of Mexico’s economy over the past two decades has given rise to younger leaders like the 45-year-old Pena Nieto, making a return to authoritarian rule unlikely, said James Jones, a former U.S. ambassador to Mexico.

“It’s almost impossible for the PRI or anyone to turn back the clock,” Jones, who served in Mexico City when the North American Free Trade Agreement took effect in 1994, said in a phone interview from London. “The institutions of democracy have become so entrenched that I don’t see them changing.”

Election Pledges

Pena Nieto has led polls since the race began, fueled by pledges to boost salaries held back by economic growth that averaged 1.8 percent a year since President Felipe Calderon took office in 2006. That’s half the rate of Brazil’s 4.1 percent average over that period, though Mexico has caught up in the past two years. The former governor of Mexico state has also promised to turn the tide in a drug war blamed for more than 47,000 deaths under Calderon.

Pena Nieto had 39.5 percent support in the final poll by Mexico City-based GEA-ISA taken June 25-27. Andres Manuel Lopez Obrador, 58, who charged fraud after losing to Calderon by less than a percentage point in 2006, had 24.1 percent support and Josefina Vazquez Mota, 51, of Calderon’s National Action Party, or PAN, had 18.9 percent backing. The poll of 1,144 registered voters had a three percentage-point margin of error.

Stronger Peso

Investors are taking the election in stride. Mexico’s peso has rallied 3.3 percent in the past six months, the best performance of 16 major currencies tracked by Bloomberg. That compares to a slump of 6.3 percent in the half year prior to the previous presidential election in 2006, when Lopez Obrador led many polls with a promise to put the poor first.

Bank of America Merrill Lynch said in a report this week that the “mere perception that the country is moving forward under strong leadership” by Pena Nieto could boost confidence among the 112 million Mexicans and help advance a pro-business overhaul that proved elusive under Calderon, like easing Petroleos Mexicanos’ oil monopoly.

While Europe’s debt crisis spurred a 13 percent drop in the MSCI Emerging Markets Index of developing nation stocks over the past three months, Mexico’s IPC index has gained 1.4 percent. Analysts surveyed by Bloomberg forecast Mexico’s gross domestic product will expand 3.7 percent in 2012, outpacing growth in Brazil for a second straight year.

Mexican peso bonds have returned 11 percent in dollar terms this year, compared with a gain of 2.1 percent for local- currency emerging-market debt, according to Bank of America.

If elected, Pena Nieto has pledged to raise salaries and support legislation making it easier to hire and fire workers, which would lure more companies into the formal economy. He also said he plans to allow private investment in the oil industry.

Drug War

Pena Nieto has said he will change the emphasis of the drug war, reducing violence by focusing on the worst crimes such as murder and kidnapping and eventually return the army to the barracks. In a Bloomberg interview in November, he rejected as “nonsense” and “propaganda” accusations by his rivals that he’ll negotiate with criminal gangs.

“I’m part of a generation that has grown up in a democracy, and I aspire to be a president who governs respecting liberties,” Pena Nieto said in a speech in Mexico City on June 24.

Growing ties with the rest of the world over the past two decades, most notably through Nafta, have made any drift from current policy unlikely and expose Mexico to greater outside scrutiny, said Jones, whose Manatt Jones Global Strategies consultancy helps companies expand in Latin America.

Student Protests

Any attempt to repress freedoms would also face resistance from a wary populace after 90,000 students gathered in the Zocalo, the capital’s main square, to protest against the PRI’s return earlier this month.

Mexico has changed in other ways as well. While the PRI may regain the presidency, its grip on power will be checked by an opposition that controls 12 of Mexico’s 32 states, including Mexico City. Like Calderon, the next president may also face a divided Congress.

Institutions like the central bank, media and antitrust watchdog face less government interference than they did in the days when PRI presidents would handpick their successor, says former Foreign Minister Jorge Castaneda.

“To fear an authoritarian restoration would be to deny everything that we have all achieved over the last 12 years,” Castaneda, who served as foreign minister under the PAN government of President Vicente Fox, wrote in an op-ed article published June 22 on the Los Angeles Times website.

Congress

To push his agenda Pena Nieto will need the support of Calderon’s party, which makes the race for second place key. While the latest Mitofsky poll shows the PRI-Green Party coalition garnering at least 274 of the 500 seats in the lower house, that’s short of the two-thirds majority needed to amend the constitution, a move required to end Pemex’s monopoly.

A stronger finish by Lopez Obrador, who opposes more private investment in the oil industry, could cost the PAN seats in Congress. Many of Pena Nieto’s proposals “are not too different” to ones proposed by Fox and Calderon, JPMorgan Chase & Co. said in June 22 report.

1968 Massacre

Vazquez Mota has tried to lift her candidacy by reminding voters of the PRI’s past, citing in a June 10 debate the 1968 massacre in Mexico City’s Tlatelolco Square when the military killed hundreds of students protesting anti-democratic practices days before the city hosted the Olympic Games. Pena Nieto was 2 years old at the time.

Pena Nieto is “a young man with old ways,” she told a cheering crowd of more than 40,000 at a rally in Mexico City’s bull ring on June 23. “This candidate represents corruption, authoritarianism and surrender before organized crime.”

The PRI has continued to be dogged by accusations of corruption. U.S. federal prosecutors last month filed civil charges against Tomas Yarrington, a former governor in the border state of Tamaulipas who allegedly used millions of dollars in bribes from cartels to invest in Texas real estate. While Yarrington denies the accusations, the PRI suspended him and Pena Nieto has said justice must take its course.

Far from foreshadowing challenges for Mexicans’ liberties, Pena Nieto’s election in a free and fair election would show that Mexico’s democracy is working because voters are rejecting PAN policies that escalated drug violence and failed to boost growth, said Rosalba Laguna, a social work professor at the National Autonomous University of Mexico.

“The PAN had their chance as an alternative,” Laguna said in an interview at a PRI rally at Mexico City’s Azteca stadium. “The PRI has people who know how to govern.”

To contact the reporter on this story: Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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