WorldCity Business Magazine

Connections: Mexico's next Chapter

by Mary Dempsey

*Mexico’s next chapter *

Participants at a recent breakfast briefing correctly predicted the outcome of Mexico’s presidential election. But are they right about its impact on business?

They should have been betting at the track.

Three experts on Mexico came together on the final day of Mexico’s presidential campaign to predict the electoral outcome. The trio concurred that the race would be neck-and-neck but Felipe Caldern likely would squeak through to a victory. The results, they added, could be challenged.

Four days after Albert Lapanta, Pablo Pinson and Mike Carricarte took out their crystal balls at a Connections: Breakfast for the Brain gathering sponsored by WorldCity, Mexican voters cast ballots in a cliffhanger that initially was too close to call. A recount gave the victory to the conservative candidate, Caldern, but his left-leaning rival, Andrs Manuel Lpez Obrador, went to court claiming there had been voter fraud.

Mexico’s electoral court has until Aug. 31 to determine if the voting was valid. A new president must be named by Sept. 6.

The Connections participants’ prescient comments came with another prediction that has yet to play out: Regardless of the outcome, Mexico’s democracy will not be threatened nor will its business community face an upheaval.

“Democracy is messy and this [election] is messy,” said WorldCity Publisher Ian McCluskey, the moderator of the panel. “But this time around there’s no real threat of economic collapse, of social upheaval.

“Or is there?” he asked the three panelists at the panel discussion.

“Democracy is very stable in Mexico. With the [incumbent Vicente] Fox administration, nobody rocked the boat and Mexico moved forward,” said Carricarte, the binational chairman of the U.S. Mexico Chamber of Commerce and the outgoing chairman of Amedex insurance company (see People, page 40).

He added that the next government regardless of who leads it will build from that strong framework.

The panelists directly rebutted news reports that the election of Lpez Obrador, known by his initials, AMLO, would result in a self-styled populist government similar to that of Venezuelan President Hugo Chvez.

“Mexico is not Venezuela,” said Pinson , DHL’s senior vice president of legal and regulatory affairs for Latin American and the Caribbean. “I see headlines that if AMLO comes into power, it’s the end of Mexico and everyone should pack up and go. That’s not the case. I don’t think it’s as cut and dry as that.”

He added: “The president will not have a majority in Congress so it will be very difficult for him to make dramatic changes.”

The panelists also said rising oil prices have given Chvez a windfall that has allowed him to “make a lot of mistakes” and still remain in power. That scenario is not likely in Mexico.

Carricarte also cited claims that “foreign investment is going to come to a stop for six month” if AMLO takes over the presidency. “Does this have anything to do with reality?” he asked. “No, but that’s the perception.”

The panelists also said while Mexico is unlikely to swing too far to the left, it also will not move any farther to the right at least not when it comes to the oil industry. In response to a question from Donna Hrinak, the director of corporate and government affairs in Latin America for Kraft Foods, the panelists agreed that privatization of Mexico’s state oil company, Petrleos Mexicanos, or Pemex, is not likely to happen even under a Caldern government.

“It’s so much a part of the Mexican psyche that it would be as if you gave Mexico a lobotomy if you were to privatize,” Lapanta said, although he acknowledged that Caldern is more likely than AMLO to encourage private investment in the energy sector.

The Mexican Constitution forbids private investment in Pemex, although there has been a push in recent years to allow some investment in petroleum-related services as a back-door push toward more openness. Pemex income directly feeds the government treasury, covering about a third of the national budget. Money made from currently high oil prices is going to the government, rather than being reinvested in any significant way into oil exploration or technology, and Pemex is carrying debt.

Energy industry analysts long have criticized Mexico’s policy regarding the oil giant.

“It’s a hot potato, but the last thing Mexico wants is to give it up. It will be very difficult to convince the people on private investment,” said Pinson.

Carricarte noted that he had expected a bigger pro-privatization push by the Fox government. “Will Pemex be privatized now?” he asked. “I don’t think we’ll see that for years.”

In making their predictions about the election’s outcome, Zapanta, the president of the U.S.-Mexico Chamber of Commerce, said Caldern would win “but it will be very, very tight. It may go on for a day or two.” Carricarte described it as a “close race” but also said it would be Caldern after the votes were tallied. DHL’s Pinson was more cautious, calling it “a toss-up” and warning that the incoming government regardless of its party affiliation could have trouble governing without a clear majority.

Zapanta, who was Ronald Reagan’s senior adviser on elections, correctly predicted that there would be a legal challenge in the event of a close vote. He said it would not play out in Mexico like the disputed 2000 election that put George W. Bush in office. “I think Al Gore walked away from a win. I never would have let him do that if I was in his party,” he added.

For the 41 million Mexican voters who went to the polls on July 2, the choice was between National Action Party (PAN) candidate Caldern, who stood for a continuation of the free-market policies of the Fox government, or the changes promised by AMLO and the Party of the Democratic Revolution.