A Talk With North America's Other New President

Vicente Fox looks forward to "economic convergence"

On the campaign trail, Vicente Fox vowed that if elected Mexico's President, he would not spend his days holed up at the office. He has been true to his word. Since his inauguration on Dec. 1, he has been busy crisscrossing Mexico, meeting with both supporters and adversaries to build support for his controversial policies. BusinessWeek's Latin America Editor Cristina Lindblad and Mexico City Bureau Chief Geri Smith managed to buttonhole Mexico's peripatetic President in Mexico City on Jan. 20. During the interview, Fox reviewed some of his achievements in his first 51 days in office.

What does the inauguration of President George W. Bush mean for Mexico-U.S. relations?

The fact that he was governor of a border state is very significant. There's chemistry, and that's going to help the relationship a lot. In the meeting that I am going to have soon with President Bush, I am going to propose economic convergence, and we're going to talk about a joint energy policy for the NAFTA region. And certainly we're going to talk about the tough issues: immigration and drug trafficking.

What measures are you taking to ensure the U.S. economic slowdown won't hurt Mexico too badly?

I believe it is only going to affect our exports but not foreign investment. Mexico today is the most opportune place to invest anywhere in the world. It's the only country that has free-trade agreements with the U.S., Canada, and the European Union. I'm traveling not only to Davos but also to Frankfurt and Milan to meet with hundreds of European businessmen and CEOs. They're very enthusiastic about coming and investing in Mexico so they can send their products to the U.S. and Europe. And the Americans are investing here to export to Europe.

But aren't you worried about a sudden drop in U.S. growth?

Not at all. We had estimated U.S. economic growth at 3% and our own at 4.5%. Now, if the U.S. economy grows 2%, we believe we'll fall to 4%.

So you won't have to tighten public spending more? That would make it hard for you to meet some of your campaign promises.

Only to reduce the deficit. Congress agreed to a deficit of 0.65% of gross domestic product, but we're still shooting for 0.5% because our goal is to have a surplus in 2003. We were told that oil prices were going to drop, but they've stabilized. If things continue this way, we'll be able to add another $1 billion to the oil-windfall contingency fund.

There's already strong opposition to your proposal to extend the 15% value-added tax to food and medicine. Will you be able to get your fiscal reform plan through Congress?

We have to make a very sound proposal, acceptable to the other parties. We also have to negotiate and make concessions. And we'll take special care not to affect the country's poor families. The benefits of fiscal reform will go straight to education, potable water, electrification, sewage services, health. Also to science and technology. We want to develop our own research and technology, even if it's on a modest scale.

Subcommander Marcos, the leader of the Zapatista rebels, is marching to Mexico City. Will you meet with him face-to-face, even if he refuses to take off his ski mask?

I don't think the mask is the important thing. We've done a number of things to show our good will: We've pulled the army out of four positions [in Chiapas state], we've freed 18 political prisoners. Now it's up to the other side to show willingness to engage in a dialogue.

You've named a respected businessman to head the state-run oil monopoly, Petroleos Mexicanos. What changes would you like to see at the company?

I don't see any change such as privatization in the next six years. But it is going to be managed as if it were a private company. We'll introduce a board of directors of businesspeople and academics. We're going to change its tax regime so it can compete on equal footing with other oil companies. We're going to see a very different Pemex.

You've pushed for the creation of a North American Common Market, complete with free movement of labor. With the U.S. economy slowing, will American officials be less receptive to your ideas?

What we're proposing are long-term objectives, for the next 10, 15, 20 years. Immigration continues to grow, drug-trafficking does not stop. So we need to come up with new ideas. My conversation with Senator [Phil] Gramm [who visited Mexico in mid-January with four other Senators to discuss expansion of the guest-worker program] was very, very hopeful. We're already seeing that in the medium and long term, immigration is not bad for the U.S. It has given a real stimulus to the American economy. That's the only way it has grown 5% a year with inflation of just 2%.

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