0

Mexico’s New President

CAMBRIDGE: With Vincente Fox assuming Mexico’s Presidency on December 1, Mexico celebrates much more than a simple leadership transition. For the first time in its history, Mexico is on the verge of four simultaneous accomplishments: real democracy, economic prosperity, social cohesion, and good relations with the United States. Mexico’s mood is palpable: high expectations that the country will escape its past demons - instability, corruption, and massive social divisions - to become a dynamic society built upon strong, distinctive cultures, social inclusion, and a growing role in the world.

Few Mexicans could be sure that the previously ruling party, the PRI, would relinquish power after 71 years of continuous rule. Yet when Fox defeated the PRI candidate this summer, Mexicans were treated to a peaceful transition of power based on an honest count at the ballot box. Much credit for this goes to outgoing President Ernesto Zedillo, last in line of a dozen PRI presidents. Zedillo championed democratic reforms during his term, enabling the elections and political transition to proceed smoothly.

Zedillo bequeaths an economy in remarkably strong shape, thanks mostly to the North American Free Trade Agreement (NAFTA), the free-trade arrangements that link the economies of Canada, Mexico, and the US. NAFTA came into force on January 1, 1994. Ironically, Mexico fell into a temporary financial crisis later that same year, the result not of the trade agreement, but of a sudden reversal in capital flows to Mexico - the kind of crisis that hit East Asia three years later. NAFTA became the main mechanism for Mexico to overcome the crisis, as its economy dramatically multiplied exports to the US, achieving an export-led economic recovery.

The US/Mexican economic relationship may be the world’s most important example of how rich and poor economies can be harmonized for mutual benefit. Under NAFTA, US firms are flocking across the 2,000-mile Mexican border in order to set up operations in Mexico to benefit from lower wage levels, and hence lower production costs. In recent years, Mexico has been able to attract more than $10 billion per year of foreign direct investment into Mexico, mainly from US multinational firms.