Fox Loses Mexico Budget Battle

These are days Mexican presidents dread. Since opposition parties first took control of Congress in 1997, wrangling over the national budget has turned into an annual year-end brawl.

So far, Mexico’s emerging democracy has survived with cliffhanger compromises forged in all-night sessions between the president’s party and its adversaries.

Not this year. For the first time since the demise of one-party control, opposition forces have taken full charge of the budget process and passed a spending bill over the president’s objections, throwing the government into legal and financial uncertainty.

Angry and outmaneuvered, President Vicente Fox vowed on national television Thursday to challenge the budget with a veto or court action. He called it an “irresponsible” spending plan that would force tens of thousands of layoffs and undermine his government’s ability to carry out such essential duties as policing Mexico’s borders.

Since his election in 2000, which ended the Institutional Revolutionary Party’s 71-year grip on the presidency, Fox has seen much of his reformist agenda shot down by Congress, in which the former ruling party and the leftist Democratic Revolution Party together hold a majority. Fox has fought for opening the energy market, expanding the tax base and liberalizing the labor law. But lawmakers have been more obstructionist than between 1997 and 2000, when adversaries of the then-ruling Institutional Revolutionary Party, or PRI, held a majority of seats.

In voting Thursday to reallocate $7.8 billion of the government’s proposed $158 billion in spending, the lower Chamber of Deputies took the standoff with Fox to a new level of acrimony.

“This is a message to Fox that he is not in charge,” said Jonathan Heath, chief economist in Mexico for HSBC. “Mexico still has a system designed for one-party rule, but Congress is trying to unwind that system and test the limits of its power. We’re treading into unknown waters.”

Mexico’s stock market slumped slightly Friday under the weight of uncertainty. But investors noted with relief that the conflict was over how to spend, not how much; whatever the outcome, revenues and outlays would be nearly balanced next year.

The budget slashes outlays for the presidency, Foreign Ministry, armed forces, attorney general’s office, courts, and the pride of Fox’s administration, his anti-poverty programs.

Money saved from those cutbacks would benefit farmers and other traditional constituents of the PRI and the Democratic Revolution Party.

Fox’s office said the lawmakers had diverted millions of dollars for roads and other public works away from states governed by his center-right National Action Party, or PAN, to those run by opposition parties.

Members of the PAN walked out of the chamber after the spending bill passed by a party-line vote of 323 to 137.

The Finance Ministry said the cuts would oblige the federal government to fire about two of every five upper- and mid-level officials, about 30,000 people. The cuts, it added in a statement, “will have a big impact on national security, making our borders more vulnerable and would also have a negative impact on tourist flows because they would face unbearably long immigration controls.”

An official at the Foreign Ministry said it would be forced to curtail consular services to the nearly 10 million Mexicans who live in the U.S. -- services Fox has expanded and counts among his prime achievements.

Some of the deepest cuts would hit the Interior Ministry, which is led by Santiago Creel, the leading contender for the PAN’s 2006 presidential nomination.

“A lot of these things have to do with aspirations for the presidential race,” said PAN legislator Gustavo Madero.

Opposition leaders dismissed that argument, called the Finance Ministry’s forecasts an exaggeration, and said the reallocations were aimed at curbing frivolous spending and waste.

“The president is trying to sow fear as part of a political strategy,” said PRI spokeswoman Marcela Guerra.

Fox’s legal team is studying whether the president has authority to veto the budget, a point on which Mexican lawyers disagree. Alternatively, his aides said, the president might ask the Supreme Court to invalidate the budget on the grounds that Congress passed it after the Nov. 15 deadline. The court could order Congress to start over, but several political and legal analysts said Friday that no one knew what to expect.

In his speech, Fox sounded exasperated. He said the “authoritarian presidency” in Mexico was in danger of being “replaced with an inflexible Congress.”

Aides said Fox was trying to coax congressional leaders into negotiating a new budget before year’s end. But leaders of the PRI, which won three out of four governor’s races in Nov. 14 elections, sense a growing political advantage and have little incentive to compromise.

Fox’s party cannot by itself muster enough votes to prevent Congress from overriding a veto.