| | |  News Around the Republic of Mexico | July 2009 
Economy to Hurt Mexico's Calderon in Mid-Term Vote
 Catherine Bremer - Reuters
go to original
July 03, 2009
Mexico City - Mexican President Felipe Calderon's party faces a defeat in congressional elections on Sunday that may complicate his reform agenda as voters punish him for an economic slump.
The setback should not hurt Calderon's high-stakes drug war and is unlikely to completely quash his chances of passing new tax and oil laws in the second half of his term.
But it could leave his government weakened and unable to move fast enough on reforms to boost Mexico's tumbling oil production, increase tax revenues and help the country claw out of its worst recession since the mid-1990s.
All 500 seats in the lower house of Congress are on the table in Sunday's mid-term election. Voters also will elect six state governors and hundreds of mayors.
Polls show Calderon's conservative National Action Party, or PAN, will lose the lower house elections by some 5 percentage points to the Institutional Revolutionary Party, or PRI, which has flourished in opposition since the PAN ousted it from the presidency in 2000 after seven decades in power.
The PRI would likely take first place in the lower house, doubling its number of seats to more than 210, leapfrogging the struggling left-wing opposition, and leaving the PAN in second place with 175 seats or less.
Calderon has lacked a majority in Congress since taking office in 2006 but now more than ever needs backing from opposition deputies to approve reforms.
Mexican oil output has dropped to its lowest in 16 years, eroding a pillar of public finance, and the economy is set to shrink 6 percent or more this year due to the downturn in the United States, Mexico's top trading partner.
Mexico's tax take is one of the lowest in Latin America and foreign investors want to see a fiscal overhaul.
DEBT RATING ON THE LINE
Agencies that rate sovereign debt have threatened to downgrade Mexico, which would raise its borrowing costs, if the vote does not produce a Congress able to reform the economy.
"The key wildcard is if the change in Congress ... cuts the odds of important reforms being passed, likely triggering a sovereign credit rating downgrade," Royal Bank of Canada analyst Nick Chamie wrote in a research note.
He said ratings agencies would unlikely wait longer than October to decide what reform prospects look like.
The PRI opposes tax hikes but its leaders say it could be open to revamping income tax laws to boost state coffers.
"We have proposals for solutions to the devastating economic crisis which ... is going to be a dramatic reality for Mexican families," PRI head Beatriz Paredes said this week.
Calderon is a popular leader but his party was bruised last year by a string of municipal elections where the PRI won six times as many ballots as the PAN.
Aware voters are bitter about the recession, the PAN has focused its mid-term campaign on Calderon's army-led war on the country's violent drug gangs, the crux of his presidency and a key concern for Washington.
"Don't leave Mexico in the hands of crime," warns one PAN campaign ad that shows a line of men in PAN T-shirts straining on a rope as they win a tug-of-war against criminals.
Mexicans are fed up with organized crime, kidnappings and some 12,300 drug gang murders since Calderon came to power. Widespread support for the drug war will likely save the PAN from a more crushing defeat.
But the economic slump remains the bigger worry for both Mexicans and foreign investors. A recovery will hinge more on the United States than a shift in Congress.
"The only real issue is the economy," said pollster Dan Lund, head of Mexico City-based research firm MUND Americas. "Mexico is hurting and the impact at the popular level will become pretty loud by the summer and year-end.
"Mexico's not a hot ticket for investment at this point. Economically, it all depends on the United States."
The PRI, stung by its defeat in 2000, blocked most reform attempts by former President Vicente Fox. But it has worked with Calderon on oil, pension and tax laws, helping shed its image as an authoritarian party that clings to state control of the economy.
Some speculate that a stronger-than-expected win by the PRI on Sunday might encourage it to back further-reaching reforms, to get Mexico's economic house in order for a possible win in the 2012 presidential election.
But most see Calderon struggling through the next three years with a Congress that only gives him lukewarm backing.
"We don't see things dramatically different to how they are now," said Standard & Poor's analyst Lisa Schineller.
(Additional reporting by Luis Rojas Mena; Editing by Bill Trott) |
|
| |
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us