Candidates Pledge to Put Mexico to Work

Three promises echo in every speech by candidates in Mexico’s presidential campaign: jobs, jobs and more jobs. From the practical to the miraculous, the proposals come from all sides.

On the left, Andres Manuel Lopez Obrador promises employment in massive public works -- a new trans-Mexico shipping route to rival the Panama Canal, high-speed rail and 2 million acres of furniture-grade forest.

On the right, Felipe Calderon pledges that a more orderly, well-behaved Mexico that pays its taxes will attract investment and ignite the free-market engine of job growth. And former ruling party candidate Roberto Madrazo snatches a number, 9 million new jobs, seemingly out of thin air.

Although illegal immigration is not a leading issue in Mexico’s July 2 election, its flip side -- the lack of well-paying jobs -- certainly is.

Leading Mexican candidates Calderon and Lopez Obrador have their own ideas for combating the irresistible draw of steady work and higher pay north of the border. They offer voters a choice of faith in big government or big business.

For many, however, both institutions have failed Mexico. And there is doubt whether any president can fix Mexico without fundamental changes in how the country operates both government and business.

“Mexico’s wounds are self-inflicted,” said Joel Kurtzman, a former editor of the Harvard Business Review now with the Milken Institute, a Los Angeles think tank. “They began the road to reform, but it’s been a very short road.”

Mexican President Vicente Fox promised millions of new jobs during his 2000 campaign. He broke the 71-year rule of the Institutional Revolutionary Party, known as the PRI, which controlled government, unions, media and industry.

Fox and his National Action Party have done what the PRI could not -- kept the peso stable and controlled inflation. The national economy will reach $700 billion this year. Thanks to high prices for government-owned oil, Mexico has a balanced budget.

But Fox, who by law cannot run for reelection, failed on his jobs promise, and Mexico lost an average of half a million citizens a year to a more robust job market -- the United States.

In the first contested presidential election since the collapse of PRI political dominance, the left and the right offer distinct versions of how to provide those jobs at home.

Lopez Obrador’s campaign theme -- for the good of all, the poor first -- promises to expand nationwide the monthly payments he gave to single mothers and the elderly as mayor of Mexico City, the capital.

And for nearly everyone else, Lopez Obrador has pledged a combination of government subsidies and lower energy costs that would boost income 20% for households earning less than $800 a month -- nearly a third of the country.

The populist idea is derided by critics as a throwback to Mexico’s debt-laden economic policies of the 1970s and 1980s. But attacking poverty to strengthen an economy is not far-fetched, according to World Bank economists. The World Bank found that poverty is slowing Mexico’s growth rate, which has been mostly flat under Fox.

Lopez Obrador argues that he can launch his attack on poverty and underemployment with money Mexico already has, says his chief economic advisor, Rogelio Ramirez de la O.

Specifically, he would divert a small fraction of oil revenue, plus some money he expects to gain by improving tax collection and trimming federal payrolls. That pot would be divided three ways, Ramirez de la O said: social programs, public works and reinvestment in Pemex, the national oil company.

Among Lopez Obrador’s proposed public works projects are a new international airport north of Mexico City and high-speed trains between the capital and border cities of Tijuana and Ciudad Juarez.

A more audacious plan includes a rail line and highway across Mexico’s narrowest point, to lure cargo from the Panama Canal. He also plans to replant forests with valued hardwoods such as mahogany over five southeastern states for harvest decades from now.

The projects would provide more than half a million jobs -- not coincidentally, Mexico’s annual jobs deficit -- and draw billions of dollars in private investment, Ramirez de la O said.

The Cambridge-educated economist also acknowledged significant hurdles. No one has figured out how to force more Mexicans to pay their taxes, for example. And cutting government expenses in a country dependent on public-service jobs begs for trouble.

Leading the army of Lopez Obrador skeptics is Calderon. The conservative candidate said his opponent threatened to bankrupt Mexico.

Better, he argued, to stimulate the economy by concentrating on reforms to make the country more competitive: Simplify the tax system so more Mexicans pay their share; reform labor laws to give employers more flexibility in hiring part-time workers; increase public safety; and secure billions of dollars in new investment for national energy companies and private firms.

Calderon’s hurdles are as formidable as those faced by Lopez Obrador, though for different reasons.

With manufacturing and assembly work moving to lower-wage countries such as China, Kurtzman said, Mexico needs to reduce risk to attract investment. The country needs to start by adopting bookkeeping and accounting standards that let investors know how a company is spending its money, something Fox failed to do.

Mexico also must force companies to have rules governing corporate managers that forbid, for example, informal loans among board members or executives. Bosses need more freedom to hire and fire. The property title system also must be strengthened.

“Those kinds of reforms sound simple and boring, but if investors have to worry about how their money is being spent, they’ll go somewhere else,” Kurtzman said. “Investors want to know who’s running a company and what they’re doing. Sure, there are similar problems in China and the Far East. But they have cheaper labor costs that make those risks worth taking.”

Inefficiency and corruption in Pemex, for example, make a barrel of Mexican oil twice as expensive to produce as one from Saudi Arabia. When oil prices fall below $34 a barrel, the country loses money.

Investors are also leery when public safety is threatened by competing narco-traffickers who kill each other and innocents by the hundreds each year, with few arrests and fewer convictions.

And maybe the most Herculean task for Calderon would be to persuade the Mexican Congress to approve reforms in labor, energy and taxes.

The same democratic reforms that broke the president’s once-unilateral power have divided Mexico’s Congress among three warring political parties.

Fox never got his reforms through Congress. Calderon has promised to push them again, but he would have to deal with a new set of lawmakers, two-thirds of whom might be from opposing parties.

Lopez Obrador would have to sell his projects to the same Congress. And with no reelection in Mexico, most politicians are more loyal to the party leaders, who can keep them employed, than to constituents.

Both candidates say Mexico must create more jobs, because the country cannot forever depend on employment north of the border.

The United States measures its immigration problem by how much money is spent on families in the country illegally, but Mexico’s costs are more personal.

“The tragedy for Mexico is that the U.S. is getting the people who are enterprising and future leaders,” Kurtzman said. “The reason there are so many Mexicans migrating is that they are not fools. They’re going where the opportunity is.”

Carlos Martinez in The Times’ Mexico City Bureau contributed to this report.