Mexico is not known as a country where major political and economic reforms happen quickly. It took 71 years for the once-authoritarian Institutional Revolutionary Party (PRI) to lose power, and the first two non-PRI presidents of the modern era, Vicente Fox and Felipe Calderón, found their energy, labor and tax initiatives either blocked or hopelessly watered down by Mexican lawmakers. "Political gridlock has virtually paralyzed Mexico's government for more than a decade," columnist Andres Oppenheimer lamented in October 2011. "Even where there is consensus, Congress contrives to disagree," The Economist grumbled in January 2012.
Thus, by Mexican standards, the reforms that President Enrique Peña Nieto, a member of the PRI, has achieved during his first year in office are extraordinary. On February 25, he signed a historic education reform aimed at improving teacher quality and increasing accountability. On June 10, he signed an equally historic telecom reform designed to boost competition and curb monopolistic practices. Both reforms were constitutional amendments that required "secondary laws" for implementation. Earlier this month, with union-led protests filling the streets of Mexico City, Congress passed an education reform package that will create a new evaluation system for teachers and prevent their jobs from being inherited or sold. The vote was 390 to 69 in the lower house and 102 to 22 in the upper house.
While the final legislation was not as ambitious as many education activists had wanted, it was still a landmark victory in the battle to improve Mexico's underperforming schools. "It's not everything we would have hoped for but it's an historic change," David Calderón, director general of the pro-reform group Mexicanos Primero, told the Associated Press. "Of course it's just a change in the rules that still has to be turned into reality." The teachers' union that opposed it most vociferously, the National Education Workers' Coordinating Committee (known by its Spanish acronym, CNTE), will surely continue to stage protests and make threats as the new law is implemented nationwide.
In the meantime, Peña Nieto is pushing ahead with the rest of his reform agenda. On September 8 he unveiled a fiscal reform plan that would expand social programs, expand the reach of value-added taxes, raise taxes on higher incomes, introduce a new tax on capital gains, get rid of various tax loopholes and limit deductions. (To appease the left, he decided not to propose slapping a VAT on food and medicine.) There is much to dislike in Peña Nieto's plan; the tax increases on income and investment would hurt Mexican economic growth, and the VAT expansion would squeeze middle-class families. Nevertheless, his fiscal reform would simplify Mexico's tax code, enlarge its tax base and reduce the government's dependence on oil revenue.
Speaking of oil revenue, Peña Nieto is also hoping to revamp the Mexican energy industry by allowing for private investment in Pemex, the state petroleum monopoly. Mexican oil reserves were first nationalized in 1938, and for the past 75 years Pemex has defied all serious reform efforts. It is more than just a company -- it is a powerful symbol of national pride, an economic asset that is often called Mexico's "crown jewel." Indeed, the date of the 1938 oil nationalization, March 18, is still a civic holiday in Mexico. And yet, given the urgency of reform and the limited nature of Peña Nieto's proposal, the odds seem high that his Pemex initiative will succeed.
