Pena Nieto Assumes Mexico’s Presidency Vowing Security, Growth

Mexican President Enrique Pena Nieto took office pledging to reduce crime, erase the budget deficit and spur competition in communications industries, where the world’s richest man has a near monopoly in phone service.

Wearing the green, red and white presidential sash, the 46- year-old president said in his inaugural address Dec. 1 that he’ll create a national crime prevention program after more than 57,000 people were killed in drug warfare since 2006 under his predecessor, Felipe Calderon. He called for austerity in government spending while saying infrastructure investments should be accelerated.

“It’s time for us to break the myths and paradigms and everything else that has limited our development,” Pena Nieto said at the National Palace before dignitaries including U.S. Vice President Joe Biden and Peruvian President Ollanta Humala. “It’s now up to us to take advantage of this platform to boost growth and achieve the most important economic objective -- improve the economy for Mexican families.”

Pena Nieto takes over a $1.2 trillion economy analysts forecast will grow 3.8 percent this year, more than Brazil yet less than other Latin American countries including Colombia and Peru. He said his government will bring “21st century” development to Mexico, promising a wider social safety net, more passenger railroads and less debt from state governments that he said put public finances in danger.

Insufficient Growth

“The nation hasn’t grown sufficiently,” Pena Nieto said. “Mexico hasn’t achieved the advances that the people demand and deserve.”

As part of his economic agenda, Pena Nieto vowed to seek bids for two new broadcast television networks in a nation dominated by Grupo Televisa SAB (TLEVICPO) and TV Azteca SAB. He also said there should be more competition in the telephone industry, even as billionaire Carlos Slim, the world’s richest person who controls 80 percent of Mexico’s landlines and 70 percent of its mobile-phone lines through America Movil SAB, attended the speech.

Pena Nieto said access to high-speed Internet should be a constitutional right. He also urged steps toward universal social security, including pensions for all citizens over 65 and life insurance for women who head families, calling for both programs to start next year. At the same time his government will propose eliminating the budget deficit for 2013. Mexico’s Congress passed a budget for this year that forecast a deficit of 0.4 percent of gross domestic product.

Policy Costs

“I was a bit stunned to see so many ideas floated,” said Carlos Ramirez, an analyst with the Eurasia Group, in a phone interview from Washington. “But they’re going to cost a good amount of money. Who knows where they’re going to get it.”

Markets rallied following Pena Nieto’s July 1 election. Yields on Mexican peso debt due in 2024 tumbled 41 basis points, or 0.41 percentage point, to a record 5.10 percent on July 20, before ending last week at 5.52 percent. The yield will fall to near 5 percent next year as Pena Nieto gets lawmakers to back reform proposals that include tax and energy overhauls, according to Benito Berber, a Latin America strategist at Nomura Holdings Inc. in New York.

The peso has rallied against the dollar, surging 7.6 percent this year, the most among 16 major currencies tracked by Bloomberg. Mexico’s stock market has also climbed since Pena Nieto’s election victory, with the IPC Index (MEXBOL) rising to a record on Oct. 18.

The president didn’t give details on his campaign plans to open up the energy industry, dominated by state-owned Petroleos Mexicanos, to more private investment. Crude production at the company has fallen for seven straight years and Pena Nieto has said in the past that he favors accelerated development of shale gas reserves and deep-water oil deposits.

‘Trapped Growth’

“We need to find a way to unleash that trapped growth potential in the economy, and that’s why those reforms are so critical,” said Alberto Ramos, an economist at Goldman Sachs Group Inc., before the speech. Investors are looking to see that the ruling party “will be willing and able to reach across the aisle to achieve meaningful reforms,” he said.

In the hours before the Dec. 1 swearing-in, several hundred protesters fought with police at barricades around Congress, with rioters hurling bottle rockets and officers spraying tear gas to disperse them as eight people were injured. A group of marchers rammed a truck into a police barricade and separate protests along Mexico City’s main business boulevard, the Paseo de la Reforma, left dozens of storefronts shattered.

Opposition Charges

Pena Nieto’s Institutional Revolutionary Party, or PRI, ruled Mexico for 71 years until 2000. Opponents, including supporters of election runner-up Andres Manuel Lopez Obrador, have warned that Pena Nieto’s administration may return to the corruption and cronyism that marked the PRI’s prior rule.

The incoming leader also said he’ll send constitutional amendments to Congress to consolidate state and federal penal codes and to improve education by basing teachers’ promotions on their performance and creating national standards for school evaluations.

“Enrique Pena Nieto wants to drive the economy with great responsibility,” Luis Videgaray, who became finance minister Dec. 1, told reporters on inauguration day. “Families’ economies, and not only the larger macroeconomic numbers, should improve.”

Education Shortfall

Mexico’s education system ranks last out of 34 countries for enrolled high school-age students, behind regional rivals Chile, Argentina and Brazil, according to a 2011 study by the Paris-based Organization for Economic Cooperation and Development. The study included non-OECD members.

Some of Pena Nieto’s stated goals are similar to ones pushed by Calderon’s National Action Party, or PAN, over the past six years, many of which were blocked by Pena Nieto’s party. Gustavo Madero, the PAN’s president, reiterated on Nov. 24 that his party will work with the PRI to achieve the overhauls that it worked for under Calderon.

“In a country’s life, six years is a short time,” Pena Nieto said. “But 2,191 days are sufficient to put down roots concerning what, starting now, should be our goals -- making Mexico a prosperous nation and one of opportunities and well- being for all.”

To contact the reporters on this story: Eric Martin in Mexico City at emartin21@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

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

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