Mexico Is Changing, but How It Handles the Future Is Pivotal

The Los Angeles-based Pacific Council on International Policy today will release “Mexico Transforming,” a report prepared by a 56-person council study group. The following is adapted from the report’s executive summary.

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The Mexicos in the minds of many Americans do not exist. Those who think of Mexico as unremittingly poor, rural, traditional and authoritarian have not kept up with the vast changes reshaping the country. Yet those who conceive of Mexico as already transformed into a modern, open, prosperous, stable and democratic nation overlook the immense problems the country is still very far from having resolved.

Mexico today is seeking to become less authoritarian, less presidential, less centralized and more open to the world. The transformations are uneven across different sectors and regions, and paradoxes abound. The presidency still can dominate the political system when it chooses, and Mexico City still is the paramount force in the country. Mexico is less authoritarian, but the army is being employed in more and more places to combat drugs and sustain order when local authorities cannot. Nationalist fervor, especially in parts of the south, impels politicians to reject more open economics.

Mexico today is many Mexicos. It is a country of deep divisions, particularly that between north and south, of which the conflict in Chiapas is a symbol. Some states in Mexico’s rapidly democratizing north today enjoy per-capita incomes similar to those of South Korea or Taiwan, but most southern states are at the level of Guatemala or Honduras. Indeed, the gap between Mexico’s north and south is about as great as that between the United States and Mexico as a whole.

Few countries have undertaken more significant changes than Mexico in the past 20 years--market-oriented economic reforms and a gradual but accelerating process of political opening. But despite these welcome transformations, Mexico’s troubles will compound if the country does not more successfully confront its deep social problems, including lawlessness and insecurity, grinding poverty, gross inequities, pervasive corruption and the lack of accountability. On some of these dimensions, Mexico’s recent performance has deteriorated.

Mexico’s economy was protected and inward-looking, built around a strong state role in production and distribution, but it is becoming more open and internationally oriented, with a more streamlined state. The “peso crisis” of 1994-95 was a devastating blow that revealed the underlying weaknesses of the country’s prior political and economic strategy. Now, as the North American Free Trade Agreement, or NAFTA, nears its seventh year, direct foreign investment is booming, and integration has stimulated powerful forces of change in trade, investment, the environment, labor practices, finance and corporate governance. Since 1993, Mexican exports have more than doubled, and manufactured goods make up close to 90% of the country’s sales abroad. Yet structural reform is uneven, and integration has reinforced the existence of a two-tiered business class: 50 top companies, most of them maquiladoras and multinational enterprises, account for one-half of Mexican exports. The bailout of the banking system is projected to cost $100 billion in public resources. Mexico continues to run a chronic current account deficit. Perhaps surprisingly in a country long deeply ambivalent about its neighbor to the north, a debate has begun over whether to “dollarize”; that is, tie the peso irrevocably to the dollar.

Reshaping Governance

Mexico’s political system was deeply authoritarian and highly centralized but is being reshaped as power and governance devolve. The turbulent presidential elections of 1988 sparked the rise of independent civic organizations, which began to erode the monopoly of the governing party, the Revolutionary Institutional Party, or PRI. In the past the Mexican media often was on the public payroll. Now, the media’s financial independence has inaugurated a new era of critical journalism.

Change has come most quickly in the realm of federal elections. The Federal Electoral Institute, once part of a PRI-controlled bureaucracy, is now independent, and the parties compete on a level playing field. The PRI retains control of the upper house, but the two major opposition parties currently command a majority in the lower house. Mexico now has clean elections but not yet clean politics. Questionable money still flows into campaigns, and some state and local elections still touch off violent disputes.

The political system was built around an all-powerful president, but the current incumbent, Ernesto Zedillo, has inaugurated a less interventionist style. The change could be reversed in part by his successors. Now, however, traditional PRI bosses in states such as Tabasco, Yucatan and Puebla have taken the refashioned presidency as weakness and strengthened their personal fiefdoms. Today, the PRI is more divided and less disciplined.

Despite the PRI’s travails, it remains the front-runner for the presidential elections this year. It is the only party with a truly national presence. It will win unless it splits or the main opposition parties--the National Action Party (PAN) on the center-right and the Democratic Revolution Party (PRD) on the left--can overcome ideological differences and personal egos to unite the opposition vote behind a single candidate.

Mexico’s transitions have cast a glaring light on judicial patterns inherited from the colonial past that seemed to serve tolerably well during Mexico’s authoritarian, inward-looking one-party rule but are grossly deficient now. Direction from the center has less legitimacy, crime is exploding and corruption is much more exposed, and foreign and domestic investors require equitable, fair and transparent processes. A wave of criminality is sweeping through the major cities. In poll after poll of Mexicans, public insecurity is ranked as one the most important concerns.

As much as 70% of the South American cocaine bound for the U.S. market enters through Mexico. As Mexico seeks to contain drug trafficking, the military has become the supreme--and in some cases virtually the only--authority in parts of Oaxaca, Sinaloa, Jalisco, and Guerrero. Mexico’s armed forces, unlike those in most other Latin American countries, have remained out of politics since post-revolutionary times. Now, however, in combating drugs and crime, they are being thrust into the limelight, straining traditions of unity and loyalty.

Managing the U.S. Links

Internationally, Mexico has jealously preserved its sovereignty and independence from the United States, but powerful sectors of Mexican society now embrace North American and global integration. The plain lesson of the financial problems of 1994-95 and 1997-98 is that Mexico is linked to the fate of the U.S. economy far more than to the global economy. Mexico is unique among emerging market countries, for as it opens to the world, it is also becoming more affected by and dependent on what happens in the United States. For each country, the other is now virtually a domestic issue. For both, interdependence, however asymmetric--Mexico’s GNP is but a 20th of the United States--is a fact, if not always a fully welcome one. That fact presents challenges to both countries: how to make the most of economic integration and how to cope with social issues on both sides of the border.

Taken together, the changes in Mexico represent profound transformation. But if Mexico’s past patterns have been shattered, the shape of the new Mexico is not yet determined. The central questions are whether and how Mexico will reshape its laws, institutions and practices to meet the challenges of an open international economy, of the technological revolution and of democratic politics.