So Far, Fox Can't Rally His Own Troops

The PAN may help kill a crucial tax-reform program

Frustrated by legislative gridlock over his controversial tax reform proposal, Mexican President Vicente Fox recently tried a new lobbying method: inviting congresspeople from his National Action Party (PAN) to a private screening of the movie 13 Days, about President John F. Kennedy's handling of the Cuban missile crisis. The popcorn-munching politicians were treated to a not-so-subtle message: Presidents faced with big challenges in their first months in office must act boldly, often unilaterally.

If the encounter was designed to galvanize support among PAN legislators for sweeping tax reform, it didn't work. Just hours later, on Apr. 17, Congress shelved the project and now may not take it up again until September. That's a serious blow for Fox, who needs to boost tax collection to finance his pledges to expand education, health care, and employment. Postponing tax reform also could threaten other key initiatives, such as allowing private participation in the investment-starved electricity sector. "Fox's biggest enemy appears to be the PAN," says political scientist Denise Dresser of Mexico's Autonomous Technological Institute.

That comes as little surprise to many Mexicans. Fox is a straight-talking politician who likes to take his message directly to the people via television and radio--usually without consulting the typically cautious PAN leadership. That's how he won last year's election, and that's apparently how he intends to govern. Yet Fox could be making a big mistake by failing to cement his PAN loyalties early on in his six-year term.

Of course, the PAN shares some of the blame for the tension. PANistas are miffed that the President went outside the party to fill many Cabinet posts. They also grumble that Fox, who joined the PAN in 1988, is a relative newcomer whose political philosophy doesn't match the party's. A key example: While Fox boldly welcomed the Zapatista guerrillas on their recent visit to Mexico City, the PAN boycotted a congressional session with the masked rebels.

Still, Fox doesn't appear to realize that Mexico's democratic revolution has reached the Congress, which under more than seven decades of rule by the Institutional Revolutionary Party (PRI) served merely as a rubber stamp for Presidents. The PAN controls just 207 of the 500 seats in the lower house of Congress, and Fox assumes the party will vote with him as a bloc. "Fox doesn't seem to understand that while we support him in principle, we don't support him unconditionally," says PAN Congressman Fernando Martínez Cué.

What's more, Fox is not doing enough to reach out to opposition parties. PRI Congressman Jorge Chávez Presa complains that Fox reneged on a promise to send key Cabinet officials to Congress to discuss the tax initiative. "Neither the Finance Secretary nor any other top official has met with the Finance Committee," he says.

FIRESTORM. The irony is that most Mexicans believe tax reform is essential. The government collects only 11% of gross domestic product in taxes, one of the lowest rates in Latin America. Loopholes and exemptions granted over the years must be eliminated and new revenue found to reduce the government's dependence on oil revenues.

But Fox's proposal to raise $14 billion largely by charging a 15% value-added tax (VAT) on food and medicine has sparked a political firestorm. The PAN, traditionally backed by the middle class and small business, worries about alienating poor and working-class voters who cast their lot with the party for the first time last year in hopes that Fox would improve their lives. "Fox doesn't seem to be worried about the political cost to his party," complains Martínez.

If Congress delays a vote on the tax legislation until September, it would be a real setback for Fox's ambitious reform agenda. To prevent that, he will have to show the PAN and other parties in Congress that he is willing to strike a compromise on the most controversial items in the package, such as the VAT. In short, Fox will have to prove himself a far better lobbyist than he has so far. And that will take much more than private movie screenings.

By Geri Smith in Mexico City

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