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What to Expect From Mexico's New Legislature

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Mexico's LXII legislature begins its session on September 1st amid moderate optimism that the country's tradition of congressional deadlock could finally begin to unravel. At first glance, there are plenty of reasons to support the view that this time it will be different; that obstructionist tendencies and conflicting interests will give way to compromise or even (dare it be said) consensus. The PRI-PVEM alliance, after all, controls 241 seats, to which could be added the ten seats of Nueva Allianza if a rapprochement with its powerful leader, union boss Elba Esther Gordillo, can be achieved. This is enough to give the PRI a simple majority. But better yet, getting the PAN on its side could net it the crucial two-thirds needed to push ahead with constitutional change. Not since the PRI's last stint in power ended in 2000 has anyone had it so easy.

Hold your reform horses...

For Mexico's reform agenda to truly prosper, it must have three elements of success. The first (and patently obvious) is that the party which is leading the charge must garner the necessary political capital to get it through a typically combative congress. This will be the easiest bit for the PRI given the composition of the new legislature and the fact that the PAN appears willing to act as a cooperative and constructive opposition.

The second, however, is that the reforms must actually be shaped in a way that will be conducive to boosting Mexico's economic growth potential, and benefit those who need them the most. Unfortunately, this would almost necessarily cause them to step on the toes of Mexico's myriad of vested interests (which include the political parties themselves). It's practically a given that every proposed reform will inevitably ruffle someone's feathers. Few would object to simplifying the tax system but big dominant businesses certainly don't want their tax loopholes closed, nor do they see the need for more domestic competition which could erode their sky-high profitability. Unions don't want labor laws to be more flexible, and will go to great lengths in order to avoid opening their murky finances to greater transparency. State governments will prefer to get free money from the federal coffers rather than being responsible for their own revenue, all the while avoiding any limits to how deep in debt they can get.

Mexico's political and economic vassals are too well entrenched to go without a fight, and the clearest measure of success for the new PRI government will be how far it can go without having to water down the reforms to appease everyone. This includes itself, of course, as the party has a notorious record when it comes to political "self-sacrifice." Case in point: Felipe Calderon's much vaunted political reform which was ultimately mutilated of certain key original features including a reduction of legislative seats (Mexico has more than the U.S., a country four times its size, three times its population and with an economy over ten times larger), re-election of legislators and mayors, and a second round during elections. What's good for Mexico will not always be what's good for the PRI, and only with this mindset can a genuine reform agenda take shape.

It's a democracy, after all

The third and final element is that the reform agenda must be adjusted to fit public sentiment, which remains deeply cynical of government and to no small measure, of democracy itself. Here's where the PRI must tread carefully, lest it watch its window of opportunity for transforming the nation vanish as quick as Vicente Fox's back in 2000. It is certainly true that national opinion has evolved in recent years. Many, for example, are supportive of private investment in the energy sector which just one presidential election ago was still a taboo subject. However, given simmering social frustration since the election, it could take just one mangled reform to give Mexico's discontents a new cause to rally around. Labor reform could be a touchy subject, for example, as millions of Mexicans working precarious jobs (often without social benefits) in the private sector are unlikely to sympathize with measures to make the labor market more flexible.

Unfortunately, ordinary Mexicans seldom have a seat at the bargaining table and up to a third of legislators (the plurinominales, elected under proportional representation) are not accountable to them anyway. Even when reforms have an upside, poor communication skills from party leaders and policymakers often fail to sway people into supporting them, even when, despite drawbacks, they could well have an overall positive balance.

A crucial first test

In response to the allegations of fraud during the July 1st election, the PRI's first announced reform come September will focus on combating corruption. Details are still sketchy but will it shape up to be a genuine, well-designed improvement of the country's rule of law? Or will it simply be another reform devoid of substance (by design or by pressure), useful only as hollow "proof" that a box in the agenda was ticked? The outcome of this could very much tell us what to expect down the line.

Rodrigo Aguilera is an editor at the Economist Intelligence Unit (EIU).