Formally, Mexico is structured as a federal constitutional republic, consisting of 31 States plus a Federal District, not dissimilar from the US. It has several distinguishing characteristics, however: 1) it combines constitutional separation of powers with a civil law system, 2) consecutive re-election for the same public office is prohibited (although running for an alternative office is both permitted and common), 3) having been dominated by a single-party, PRI (Institutional Revolutionary Party) for 71 years until Vincente Fox of PAN (National Action Party) won the Presidency in 2000, transition to genuine democracy is still incipient.
The President is Head of State and Head of Government, elected by plurality for a non-renewable six year term. Under PRI, the President was all-powerful and other branches of government, and regional governments, largely inconsequential. The President appoints a cabinet of 20, the Interior Minister being the most important.
Felipe Calderon (PAN) succeeded Fox in 2006, being declared victor by less than 1% over Andres Manuel Lopez Obrador (PRD, Democratic Revolutionary Party), commonly referred to as AMLO, by the Federal Electoral Tribunal. In the wake of this closely fought election, and widespread accusations of vote-rigging and unethical campaign contributions, Mexico City was brought to a standstill for weeks, with AMLO accepting the title of ‘Legitimate President’ from his supporters on the street.
Mexico has a bicameral legislature; a 128 member Senate, elected for non-renewable six year terms contemporaneously with the President, and a 500 member Chamber of Deputies, elected for three year non-renewable terms concurrently with the Presidential and at ‘mid-term’. Politics will be dominated by the presidential and legislative elections in July 2012, one week after Mexico hosts the G-20 summit.
Both houses are elected using hybrid systems. Each State, and the Federal District, elects three Senators, two for the party in first place and one for the party in second. The remaining 32 Senators are elected by a Party-based, proportional representation list system. 300 members of the Chamber of Deputies are elected by plurality in single member districts with the remaining 200 elected on the list system. Paradoxically, while legislators elected by the list system tend to be more representative of the electorate on policy issues than those elected directly, they tend to be more disciplined in voting their party line.
Constitutional change in Mexico requires a two-thirds majority of members present and voting in each house of the national legislature in addition to half of all state legislatures. While PRI regularly controlled upwards of 75% of the legislature until 1988, its support waned and no party has had even a simple legislative majority since 1997.
Legislators enjoyed little effective power under PRI domination, although this slowly began to change after President Zedillo’s political and constitutional reforms of 1994. The lower house has the sole authority to approve the budget, although the Supreme Court has ruled that the President holds a veto.
Coalitions and negotiations are thus necessary for the President to pass legislation, the budget and, certainly, to amend the constitution. Despite having some of the best paid legislators in the world, the houses have far less than the average number of sitting days. Being barred from re-election, and not benefitting from significant staff support, there is little incentive or capacity for legislators to build up significant technical expertise. As a result of these factors, recent years have been marked by political deadlock on the policy and reform agenda. This environment is likely to persist until at least the elections in July.
Like the legislature, the judiciary has gradually become more assertive vis-à-vis the Presidency since 1994 with the introduction of judicial review. De facto separation of powers has thus come to reflect more closely its de jure design, serving to strengthen the rule of law and democracy in Mexico. Regional governments have also grown in stature, with opposition parties having electoral success at sub-national level long before unseating PRI from the Presidency in 2000. The bureaucracy is weak in Mexico, not having fully emerged from the era of single-party government. Pervasive corruption afflicts the police force, notably in respect of the drug cartels who are also flexing their financial muscles to secure political influence.
With five months remaining before the national elections, Calderon’s is a lame-duck regime as political gridlock stifles reform. His popularity has taken a hit as the security situation deteriorated significantly after he implemented a military-led strategy to combat drug cartels in 2006. 50,000 people have been killed during this period, with civilians and government officials increasingly becoming targets or caught in the crossfire.
Having enjoyed significant success in the 2011 gubernatorial elections, conventional wisdom would suggest that PRI will sweep back into power, their telegenic, young candidate, Enrique Peña Nieto, taking the Presidency. Potentially, PRI could also secure a legislative majority, giving Mexico unified government for the first time since 1997. The upside of such an outcome would be the possibility for significant reform on the policy agenda. Many fear, however, that Peña is a front for the conservative, authoritarian ‘Altacomulco Group’ faction of PRI with designs on a restoration of the ancien régime.
Despite recent poll slippages on foot of verbal gaffes, Peña Nieto still commands 37-43% support in opinion polls, and has enjoyed substantial support from the widely watched Televisa TV network. His opponents, AMLO and Josefina Vazquez Mota (PAN) each garner 17-24% support, with Mota recently formal selection as candidate pushing towards the top of this range.
Although AMLO enjoys significant affection among poorer voters, his high negative ratings, due to his actions after losing the 2006 election, constrain his ability gain momentum, while twelve years of perceived PAN failure may hamper Mota, the first female candidate for the Mexican Presidency from one of the three largest parties. Although there is some history of PAN-PRD regional electoral cooperation to thwart PRI, such an alliance appears unlikely at a national level given the breakdown of same before the 2011 elections, and the presence of AMLO on the ballot, in particular.
One recent development of note was the decision by PANAL (New Alliance Party), a relatively new party formed by the influential Education Workers’ Union, the largest trade union in Latin America, to withdraw its traditional support for PRI. It may not be decisive, but securing its support could help generate traction for the campaign of one of the other Presidential candidates.
Chief among Peña Nieto’s policy proposals are 1) returning the military to barracks, instead doubling the police force to combat the drug cartels and 2) enticing private sector investment into the oil industry, including the potential privatization of PEMEX, the national oil company, along the model used by Brazil’s Petrobras. The former will be difficult to achieve in the short-to-medium term without tacit cooperation of the drug cartels, such deals not being alien to PRI’s modus operandi. In turn, cartels are suspected of financing PRI candidates’ campaigns. The US stance could threaten such an approach given that they so distrust the Mexican police that they will only share intelligence on the cartels directly with the military. Privatization of PEMEX would require a constitutional amendment, and thus the post-election negotiation of legislative support with PAN.
A baseline scenario for Mexican politics in 2012 would be gridlock until the a new President assumes office in December, the return of PRI to the Presidency (falling just short of a legislative majority), little substantive change to internal security policy under a nascent Peña Nieto regime, PEMEX to remain state-owned (with modest proposals to attract further foreign investment to the sector).
Chairing the G-20 adds to Mexico’s global prestige, and affords modest agenda setting power, but it does little to alter the domestic political environment or investment climate. Security issues relating to the drug cartels have been to the fore but, while any significant escalation could damage perceptions, these problems are largely confined to certain areas, and investment & tourism have not yet suffered as a result.
The principal threats to the Mexican economy are fiscal retrenchment and relapse in the US recovery trajectory, or a sustained reverse of the recent increase in risk appetite favorable to emerging markets.