Mexico: This Squeeze Play Could Backfire

It's 15 months until Mexico's July, 2006, presidential election, and the race is already shaping up as one of the most vicious ever. At the center of a growing political controversy is Mexico City's 51-year-old populist mayor, Andrés Manuel López Obrador of the left-leaning Party of the Democratic Revolution (PDR). He's the front-runner, with a 13-point lead. But President Vicente Fox's National Action Party (PAN) and the Institutional Revolutionary Party (PRI) Fox defeated five years ago are mounting a legal challenge that could keep López Obrador out of the race.

The complicated legal saga dates back to a 2001 lawsuit over the city's construction of a hospital access road on disputed land in Mexico City. Although many Mexicans consider the disagreement minor, the PRI and the PAN are joining forces for a vote to strip López Obrador of the immunity from prosecution he enjoys as a public official. This vote on desafuero, as it's called, would allow the Fox administration to charge him with ignoring a court order to stop the road's construction. Under Mexican law, politicians cannot run for office if under indictment.

López Obrador calls the charges politically motivated and vows to run for President from jail if necessary. As BusinessWeek went to press on Apr. 6, the Mexican Congress, where the PRI and the PAN hold 75% of the seats, was preparing to vote on the mayor's immunity. His supporters planned mass protests in downtown Mexico City.

The rising tension is spurring concern about instability. For a quarter of a century, with the exception of the 2000 vote, the country's presidential elections have triggered crises. One poll shows some 80% of Mexicans oppose any move to strip the mayor of his immunity. If voters conclude the election is being rigged, there is no telling how they will react. In an Apr. 4 report, Merrill Lynch & Co. (MER ) warned investors to take a "conservative approach" to Mexican securities until López Obrador's legal situation is resolved. The Bolsa has fallen 11.3% since early March as the debate heated up. "The protests are worrying politicians, businesspeople, and even religious figures because they could destabilize the country," Mexican news agency Notimex recently editorialized.

Friend to the Downtrodden

López Obrador is easily Mexico's most popular politician. He has won over the capital's voters by handing out free school supplies and $65 monthly pensions to local senior citizens. And he built a new highway that has cut commuting time in the city. "He's the great hope for the downtrodden," says Luis Pichardo, 72, a retired carpenter who receives a local pension. "But his opponents will do anything to shove him out of the way."

The confrontation with the PRI and the PAN is giving López Obrador a publicity boost. He aims to play that card against his likely chief opponents, 52-year-old PRI President Roberto Madrazo, and Santiago Creel, 50, the expected PAN candidate and a Fox Cabinet member. The PRI boss appears to be backed by the business elite, who worry about López Obrador's populism, and by former President Carlos Salinas de Gortari. If López Obrador winds up in court, his lawyers might try to obtain an injunction to allow him to register as a candidate until his case is resolved. If he is blocked from running, Mexico can expect more tumult -- and the biggest casualty of all could be its nascent democracy.

By Geri Smith in Mexico City

Edited by Rose Brady

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