An Año Horrible for Mexico’s President

Peña Nieto faces teachers’ wrath and a cooling economy.

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Nieto

Photographer: Cole Burston/Bloomberg

For Mexican President Enrique Peña Nieto, 2016 was supposed to be a good year. The government had promised that in the second half of his six-year term, which started in 2012, the reforms pushed through Congress during his momentous first few months in office would bear fruit. They’d bolster growth as well as the standing of his Institutional Revolutionary Party (PRI).

Instead, the Mexican leader finds himself battling problems, including low oil prices and public dissatisfaction with the government’s response to corruption. The measure Peña Nieto said was most important—a plan to improve public education by making teachers more accountable for their performance—has sparked protests in the nation’s impoverished south.

The recent troubles began in the state of Oaxaca, long a bastion of resistance to changes in public education. Protesters blocked highways last month, and on June 19, a clash between police and members of the country’s second-largest teachers union left at least eight civilians dead and more than 100 injured. The union says the police fired on protesters, while the police say they were shot at first by militants who’d infiltrated the demonstration. The president’s press office declined to comment on recent events.

Protesters in Oaxaca on June 19.
Protesters in Oaxaca on June 19.
Photographer: Luis Alberto Cruz Hernandez/AP Photo

Protests have since spread to the neighboring states of Chiapas and Guerrero, cutting off access to roads. In Oaxaca’s colonial-era capital city, normally full of tourists, hotel occupancy rates have dropped to 5 percent. Wary of risking more violence by forcefully removing the blockades, the government has airlifted food and medicine to the state.

This standoff couldn’t come at a worse time for Peña Nieto. Low oil prices have hobbled his efforts to boost the oil and gas industry by courting private investment. They’ve also driven the peso to record lows and forced the government to cut spending. In addition, the government must now provide financial assistance to state-controlled producer Petróleos Mexicanos. Consumer spending, a vital prop for the economy, shows signs of faltering. Analysts see growth slowing to 2.3 percent from last year’s 2.5 percent as exports stagnate, a Citigroup poll of analysts shows. The central bank may raise rates beyond the 1 percentage point it’s already hiked them this year to head off inflation. The prime rate is 4.25 percent.

In June elections, the PRI lost the governor’s office in four traditional stronghold states. Peña Nieto’s approval rating has fallen to 29 percent, according to a late-June poll by pollster Buendía & Laredo and newspaper El Universal, the lowest of his presidency. “A problem of this kind makes any government look weak,” Alejandro Schtulmann, who heads political risk group Empra, says of the teachers’ protests. “Peña Nieto’s political capital isn’t gone completely, but it’s really damaged.”

The president still has more than two years left in his term. His weakness increases the risk that the National Action Party, or PAN, the biggest opposition group, will succeed in rolling back some of 2013’s tax increases and require the government to cut spending further, says Marco Oviedo, chief Mexico economist at Barclays. PAN was the biggest winner of June’s gubernatorial races.

Voters also favored the Morena party of populist Andrés Manuel López Obrador, the runner-up in the last two presidential elections and a potential candidate for the 2018 election. López Obrador has backed the teachers union, leading a march down Mexico City’s Paseo de la Reforma boulevard and demanding the resignation of the interior minister, a potential PRI presidential candidate whom López Obrador blames for the deaths in Oaxaca.

The unrest in Oaxaca has diverted attention from the progress the government has made in other areas, such as the effort to improve transparency in the courts and the pledge secured from Canadian Prime Minister Justin Trudeau to drop the tourist visa requirement for Mexican visitors. Instead, when Peña Nieto traveled to Toronto to meet Trudeau a week after the Oaxaca slayings, he was greeted by demonstrators shouting “murderer!”

The bottom line: President Peña Nieto started out as a bold reformer, but developments inside and outside Mexico have weakened his hand.

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