Economy Is Fox’s No. 1 Job

Every economic or political jolt that Mexico suffers reverberates across the northern border, rattling California with particular force. So, one year after President Vicente Fox took office, it’s encouraging to hear Mexican optimists predict good things based on the cheerful fact that for the first time in modern history the transfer of power did not bring about an economic or political crisis. At the same time, we must not ignore the pessimists who say that Fox’s political inexperience has led to missed opportunities and who see his clumsy handling of the economy as a portent of gloom.

It’s not surprising that reviews are mixed so soon after a truly democratic leader stepped to the helm of a nation that had floundered through 70 years of authoritarian rule. The criticisms are particularly forgivable given that the reverberation metaphor cuts both ways, and the U.S. was already in a recession when terrorists attacked. With the market for exports to the U.S. weakened and American tourists reluctant to take their wallets south, reviving Mexico’s economy has been an even harder task than anyone predicted. The economy must become Fox’s focus for the next five years.

With a population that hovers near 100 million, Mexico desperately needs the resources to educate its young people, to keep its health system functioning, to ensure energy production, to maintain its infrastructure and improve public safety.

First, to find new sources of revenue, Fox needs to engage his multiparty Congress in serious negotiation to define the terms of a radical fiscal reform bill that has been waiting in the wings. Then the executive and legislative branches must decide on the best way to close loopholes in the current tax laws. Together they can negotiate the merits and the limits of a new value-added tax proposal presented by Fox. At the same time the president must demand that his government enforce tax laws and help improve tax collection, which stands at a meager 11% of gross domestic product. Cracking down on businesses that thrive in the informal economy also would bring in more revenue.

On another economic front, Fox must persuade his country’s Congress to open the energy sector to private investment. Unless businesspeople and bankers come up with the money for new generating plants, the country will soon face serious energy shortages.

Fox has worked hard to boost his nation’s image abroad. He has made a crackdown on domestic human rights abuses the centerpiece of a new foreign policy and has won Mexico a seat on the United Nations Security Council.

But none of that will mean much if Mexico’s economy crumbles. And progress there will require the cooperation of the national Congress. That, in fact, is the key lesson Fox should take from his first year: that one person can never achieve what Mexico needs, even if that person is Vicente Fox.