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Thursday, September 20

Mexico: ominous signals

In today's Pakistan Daily Times, Jorge G. Castañeda, former Foreign Minister of Mexico (2000-2003), currently a Global Distinguished Professor of Politics and Latin American Studies at New York University, spells out the bad news about Mexico's latest reforms. Take special note of Castañeda's observations about several Latin American central banks.
Mexico's paradox of reform

Sometimes no reform is better than the wrong type of reform. That seems to be the case in Mexico, which recently passed new tax and electoral laws — but not the ones the country needs.

While tax reform was high on President Felipe Calderón’s agenda during last year’s presidential campaign, electoral reform was not. Instead, it has been imposed upon him by a strange and extreme version of political horse-trading.

Opposition legislators wanted electoral reform, but no new taxes; the administration wanted more revenues, but no new election laws. Both sides got part of what they wanted, and Mexico got the short end of the stick.

An alternative minimum tax was established, along with a slight increase in gasoline taxes, but both were so watered down that they barely add up to anything. According to the government’s own figures, they equal just 1% of GDP — a pathetic increase in an economy with one of Latin America’s lowest tax takes.

Meanwhile, the three main parties — the National Action Party (PAN), the Institutional Revolutionary Party (PRI), and the Party of the Democratic Revolution (PRD) — united in order to keep newcomers out of the electoral arena. They evicted the Federal Electoral Institute (IFE) directors, who organised last year’s presidential vote; strengthened the ban on independent candidates; made it practically impossible to create new parties; and established a series of arbitrary, quasi-Stalinist restrictions on the content of campaign advertising, speeches, and exchanges among candidates. All of these changes were rammed through the Congress as constitutional amendments, exempting them from appeals to the courts.

The one positive feature of the reforms — a scheme aimed at ensuring equal radio and television airtime for parties during electoral campaigns — was tainted by serious legislative omissions. Given the absence of any regulation regarding fairness in news coverage of campaigns, the blatant corruption of many news organisations, and the absence of a current affairs programme on national, prime-time television, banning the purchase of airtime merely erects an insurmountable barrier to potential new political entrants.

Against this backdrop, the ejection of the IFE directors stands out all the more glaringly. While the IFE undoubtedly committed several serious public-relations mistakes during last year’s election, it remains one of Mexico’s most respected institutions, with credibility ratings that are regularly double or triple those of Congress and the three political parties. The IFE shepherded Mexico through several crises in 2006, when the PRD’s presidential candidate, Andrés Manuel López Obrador, refused to accept his razor-thin margin of defeat and took his battle to the streets.

Now, the same people who certified that last year’s votes were free and fair, and that Calderón had indeed won, are being fired for exactly that reason. Their removal, as everyone in Mexico acknowledges, is a sop to the PRI and the PRD in exchange for Calderón’s miserly tax reform. Bismarck was right when he said one should never look too closely at how laws and sausages are made.

Unfortunately, the attack on the IFE’s autonomy is not an isolated event in Latin America. Although independent central banks have been crucial in helping the region achieve macroeconomic stability over the past two decades, they, like electoral authorities, are being subjected to increasing pressure.

Venezuelan President Hugo Chávez has openly proposed abolishing the central bank’s independence, submitting a constitutional reform that would allow him to use the country’s international reserves as he sees fit. Likewise, electoral commissions there and in Bolivia, Ecuador, Nicaragua, and, according to some accounts, in Argentina are being packed with political loyalists.

Mexico now seems poised to join this dubious club. It shouldn’t, and if anyone should know that, it is Calderón. It is understandable that he wishes to distinguish himself from his predecessor, Vicente Fox, who was unable to get meaningful reforms through Congress. But it is not reasonable to do so by proposing a cure that is worse than the disease.

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