The Pri Is Running Against Itself

The ruling party is divided over its free-market reforms

When presidential candidate Robert Madrazo blasted Mexico's ruling Institutional Revolutionary Party at a speech to the party faithful recently, hundreds of PRI-affiliated unionists responded with standing ovations. Never mind that Madrazo is a long-time party member--and wants the party's nomination. He was targeting the PRI technocrats who Madrazo claims have favored the wealthy above the poor majority. "We've waited a long time for our macroeconomic results to translate into benefits for our people," Madrazo said. "Mexico must wait no longer."

With elections a year away, the race for Mexico's presidency is turning into a boisterous referendum on the free-market reforms that have transformed the country. The most intense debate is raging within the party that pushed through these changes. The PRI is badly split between traditional populists, who want the party to put more emphasis on industrial planning and social spending, and the technocrats, who have controlled policy since the mid-1980s. At issue is whether the PRI will keep Mexico on a fast track to globalization or whether the party's economic philosophy is in for substantial change. "It's a battle for the soul of the PRI," says political scientist Federico Estevez of the Autonomous Technological Institute of Mexico.

Keeping the PRI unified is key to its survival. For the first time in 70

years, the world's longest-ruling political party faces serious opposition, chiefly from the center-right National Action Party (PAN). The PRI's biggest worry now, though, is a split in its ranks. These challenges--from within and without--are the most significant the party has ever faced. If it works through a needed internal debate without fracturing, it stands a good chance of winning the presidential elections next July.

But if the battle for the PRI's direction turns bitter, the party could come apart. "The specter of political violence has become very real," says Delal Baer, an analyst at the Center for Strategic & International Studies in Washington. Mexicans have been there before. Amid fierce party disputes five years ago, presidential candidate Luis Donaldo Colosio was assassinated.

Party feuding, whether violent or not, could plunge Mexico and the global businesses that have invested there into a period of uncertainty. Any PRI candidate will face intense pressure to relax the fiscal discipline the technocrats have imposed. Whether another PRI president can pull that off without spooking investors is a multibillion-dollar question.

To give the frustrated factions a voice, and to persuade voters that the PRI is keeping pace with Mexico's move toward democracy, President Ernesto Zedillo has dropped the practice of choosing his own successor. The governing party will hold a primary--its first since coming to power in 1929--on Nov. 7. Four leading PRI-istas are contending. Forty-six-year-old Madrazo is the charismatic governor of Tabasco state. Former cabinet secretary Francisco Labastida, 56, is widely believed to be Zedillo's choice. Two longtime PRI operatives, former Puebla Governor Manuel Bartlett and Humberto Roque Villanueva, a former PRI president, are also vying but stand little chance.

IDEOLOGICAL CHASM. Madrazo has almost single-handedly set the tone for the party's populists. As he stumps around the country, he blames the PRI establishment for selling out the party to economists who care more about balanced budgets than social justice. Madrazo's strong public support has taken Labastida aback. "We need the state and the government to correct the problems of inequality and poverty that market economics cause," Labastida responds. But he adds that this doesn't mean Mexico should fundamentally change its course.

The PRI's ideological chasm dates to the early 1980s, when Latin America's debt crisis pushed technocrats to the fore. Mexico's presidents ever since have come out of the Finance Ministry, not the political fray. While the PRI rank and file didn't agree with the new direction, the technocrats were restructuring finances, wooing investors--and improving Mexico's image. It was enough to win the traditionalists' grudging support and maintain party unity.

But the December, 1994, peso devaluation and the recession that followed turned populist PRI-istas decisively against the party's Ivy League economists. "Important groups in the PRI are fed up with neoliberal economics and technocrats, whose policies have had high political costs," says political scientist Jose Antonio Crespo. Since 1995, opposition parties led by PAN and the left-of-center Party of the Democratic Revolution have won more than a half-dozen governorships and hundreds of city halls.

Many Mexicans still believe that joining NAFTA and launching extensive reforms were necessary to modernize an inefficient economy. But they worry that the pace of globalization has cost millions of jobs and worsened the income gap in a country where 40% already live in poverty. Mexicans of varied political stripes, including many PRI-istas, believe it's possible to spend more without blowing the budget. The PRI's technocrats kept deficit spending to 1.25% of GDP; by comparison, European nations allowed themselves 3% deficits as they prepared to create the euro.

While the PRI is navigating these waters carefully, just the fact that a primary is being held entails great risks. A smashing victory by Madrazo could topple the PRI establishment. And if the party's leaders defy popular opinion and continue to favor Labastida, or if there is even a hint of fraud in the November vote, the party's split could start right after the primary. That would open the way for an opposition victory next July.

There are already signs of nasty things to come. Madrazo is the object of an Internet smear campaign in which he is accused of corruption and homosexuality. PRI officials say they will cancel the candidacy of any political figure found to be responsible. At the same time, some party officials are flouting their own rules by openly favoring Labastida, who has the edge in campaign financing. Influential business man Eduardo Bours is seeking $30 million for Labastida's bid.

Disarray in the PRI could clear a path for PAN's Vicente Fox, the governor of Guanajuato state, who has been campaigning for the presidency for almost two years. The former president of Coca-Cola Co.'s Mexico operations has a tell-it-like-it-is style that appeals to many Mexicans. While a PAN victory would be disastrous for the PRI's traditional patronage, Fox's pro-business policies would reassure local and international investors. Fox supports NAFTA; Guanajuato is home to one of General Motors Corp.'s newest plants. Fox also has populist credentials: He contends that planning efficiently and eliminating corruption would enable Mexico to fight poverty and increase economic stability.

With so much power concentrated in the presidency, the political stakes over the next year will be high. If the PRI fractures, Mexico could find itself in terra incognita with an opposition president. One thing is certain: Technocrats will never again wield the power they have for the past two decades.

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