In Mexico, History Is Repeating Itself

Parents of missing students lead a march through Mexico City on Oct. 23, 2014.

Photographer: Brett Gundlock

When Mexican President Enrique Peña Nieto visited President Obama on Jan. 6, hundreds of Mexican Americans demonstrated outside the White House. Hundreds more picketed at Mexican consulates across the U.S. It was an unusual display of solidarity with Mexicans south of the border, who have taken to the streets almost daily since September—when 43 college students were massacred by narco-gangsters—to denounce corruption and violence in their country.

Peña Nieto’s approval rating, which hovered above 60 percent two years ago, has plummeted into the 30s as marchers call for his resignation. That’s a dramatic fall considering how ardently U.S. and international boosters lionized him when he took office in December 2012. Then, it seemed like every financial gazette on the planet was declaring Peña Nieto’s Mexico “the Aztec Tiger.” New York Times columnist Thomas Friedman said it was poised to become a “more dominant economic power in the 21st century” than China.

All that turned out to be familiar hyperbole. Mexico, after all, is a place where history can’t help repeating itself. Peña Nieto’s approval numbers are the lowest for a Mexican president since 1995, when the peso was suffering one of the worst crashes in its history. And that’s fitting, because while another peso collapse may not be imminent, there’s a lot about Mexico in 2015 that feels eerily similar to Mexico in 1995.

To better understand what I’m talking about, let me take you back not just to 1995 but to 1991, when I was Newsweek’s Mexico City bureau chief, covering the political and business campaign to ratify the North American Free Trade Agreement. The pact would join developing Mexico in open-border commerce with the developed U.S. and Canada—provided the public in the U.S. and Canada could be sold on the idea.

As the three countries began negotiating Nafta, it became clear that a big hurdle would be the stories emanating from Mexico about poverty and inequality, political corruption and business monopolies, lawlessness and narco-violence. Thus began a concerted public-relations campaign by politicians and businessmen to burnish Mexico’s image. For starters, the bold free-market reforms of Mexico’s Harvard-educated president, Carlos Salinas de Gortari, were to be cast in the most adulatory light possible. U.S. media were also urged to lay off Salinas’s dictatorial Institutional Revolutionary Party, the PRI (which is also Peña Nieto’s party).

That summer some journalist colleagues and I met with a group of visiting U.S. corporate honchos in Ciudad Juárez, on the border. One of them, the pushiest, angrily huffed and jabbed his finger into my ribs, telling me that reporters had to get with the program.

Eventually, public concerns about Mexico were allayed, and Nafta won U.S. and Canadian passage two years later. But the moment it took effect in 1994, the illusion of the First World Mexico that Salinas and the U.S. had so finely crafted shattered. First came an armed uprising by destitute Maya Indians, then a spate of political assassinations, including the murders of Salinas’s designated successor and his ex-brother-in-law. (The president’s own brother went to prison for ordering the latter, but his conviction was later overturned.) Then came the discovery that Salinas’s dapper tecnócratas were hiding foul fiscal data, such as vanishing hard-currency reserves.

The result: Foreign investors fled in droves, the peso imploded, the economy collapsed, and the U.S. had to send its neighbor a $50 billion bailout. It was years before either country could enjoy the fruits of Nafta, especially a stronger consumer market in Mexico.

Twenty years later, there’s a keen sense of déjà vu. For one thing, the scandals rocking the country—including the acquisition of a $7 million mansion by Peña Nieto’s wife from a construction firm that won lucrative public contracts when he was a state governor—have erupted in the wake of a campaign to glorify Peña Nieto. (The first lady, TV soap opera star Angélica Rivera, says there is nothing illegal about her dealings over the house.)

When Peña Nieto came to power, Mexico had been through a decade of unprecedented drug-war carnage and dismal economic growth. Its political and business classes wanted desperately to expunge the cartels and decapitated bodies from the front pages. There was, in fact, better news to report: Gross domestic product was improving; manufacturing exports were tops in Latin America. The World Bank noted how much easier it was to do business in Mexico than in Brazil—a country whose ascent as the region’s new economic power had been harder to swallow in Mexico City than cheap mescal. Peña Nieto was pursuing a laudable reform agenda, including a landmark measure to usher private and foreign investment into production projects at Mexico’s anemic state-run oil monopoly, Petróleos Mexicanos (Pemex). He also pledged to make the PRI—back in power after a 12-year hiatus—less larcenous and more democratic.

Everyone from investors to think tanks to diplomats began to hype these signs of hope. Even organizations like the World Bank in 2012 suggested Mexico was now majority middle-class—despite the government reporting that 59 percent of the population was still lower-class or in poverty.

Although Mexico’s mafia mayhem didn’t recede (narco-related murders—90,000 since 2007—keep mounting), it became a taboo subject. Just before Peña Nieto took office, I interviewed him for Time. “Mexico needs a more integrated approach to combating narco-violence,” he said. But that seemed about the extent of his enthusiasm for that effort. Los Pinos, the Mexican presidential palace, often chastised journalists for what one Peña Nieto aide told me was our “obsession” with the drug war.

That lulled everyone, including the U.S., into believing Mexico’s hardest but most critical mission—establishing rule of law via police and judicial reform—could be back-burnered. The complacency deepened last year after the capture of a top drug lord, Joaquín “El Chapo” Guzmán, which was great news but hardly indicative of a new law enforcement culture. What mattered most to U.S. politicians and businessmen, even to many Mexicans, was Peña Nieto’s energy reform—just as the only thing that mattered 20 years earlier was Salinas’s Nafta crusade.

Until Sept. 26. That’s when a group of leftist student protesters from a teachers college in Mexico’s southern Guerrero state came to the town of Iguala. The mayor and his wife, who have family ties to a local drug gang, allegedly got irritated and ordered police to attack the students and hand them over to the narcos—who federal officials say have confessed to murdering 43 of them and burning their corpses. The mayor and his wife deny the allegations.

Suddenly, deprioritizing the rule of law didn’t look so shrewd. Suddenly, Mexicans were reminded that even in the Aztec Tiger, gangland and government are all too often monstrous Siamese twins. In late November, as protests swelled into an antigovernment movement, Peña Nieto announced a major anticrime overhaul, conceding, “Mexico cannot go on like this. After Iguala, Mexico must change.”

It would be nice if change started with the PRI. But since that speech, more scandal has hit the administration—including a Wall Street Journal probe into an alleged sweetheart real estate deal involving Luis Videgaray, the finance minister and reform architect. Videgaray denies any wrongdoing.

Where does all this turmoil leave U.S. and other foreign investors, the same folks who canonized Peña Nieto two years ago? Feeling wary at best, by most reports, and warier still as falling oil prices make investment with Pemex less appealing. And, by the way, the peso since September has fallen more than 10 percent.

Peña Nieto, who doesn’t leave office until December 2018, can still break Mexico’s cycle of hope, hype, and heartbreak. But he needs to get real about the rot. And so does the U.S.

 

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