Presidential U-turns, fumbles, fudges and gaffes from Mexico

Echoing former US President George HW Bush in his 1988 “read my lips, no new taxes” election vow, President Enrique Peña Nieto pledged in September’s state of the nation speech neither new taxes nor higher tax rates for the rest of his government. That is a big promise when your term lasts until 2018. Mexicans may be wondering now whether they should believe it.

Why? Because the government has shown an alarming ability in recent months to shoot itself in the foot — and to backtrack on, or fudge, its announcements.


Take the fall in oil prices in a country that funds a third of its government budget from oil. At first, the government said it was protected by its much lauded hedging policy, which allows it to lock in a price for the year ahead, in this case $76.4 per barrel. Though well below peak prices, this turned out to be very comfortable given the plunge in prices and the price of Mexico’s crude export blend. Crisis averted, came the message.

Things were looking better and better: by mid-January, the government had tapped bond markets for the money to service half of its foreign debt needs for the entire year, and at historically low rates to boot. Inflation was unusually low. An improving US economy — the destination for nearly four-fifths of exports — held out the promise of less sluggish growth after two disappointing years.

But by the end of the month, the mood had changed as the oil price crunch sank in: austerity is the new government game plan, with budget cuts of more than $8bn ordered for this year, half to come from Pemex, the state oil company. While business leaders hailed it as responsible forward planning, public reaction to the announcement was still “Ouch”. Next year, many fear, the clampdown will be tighter still.

And it looks as though policy U-turns, stumbles and gaffes are proliferating.

This month, the president finally acknowledged what has been obvious to many Mexicans since news broke in November that his family’s luxury mansion had been built, paid for and was still owned by a favoured government contractor. That businessman was in turn part of a Chinese-led consortium that won, and was then abruptly stripped of, a high-speed train tender days before the house news broke. “I am aware that this . . . looks like something improper happened,” Mr Peña Nieto allowed. “Which, in reality, did not,” he swiftly added.

It is not just the presidential mansion that looked improper. Luis Videgaray, finance minister, bought a property from the same contractor, and Mr Peña Nieto was found, several years ago, to have bought another residence from a different one. Nothing necessarily wrong with that — except that the terms of the deals remain opaque, and the idea that leading political figures have fostered close ties to the purveyors of public works contracts makes many people queasy.

That it should have taken the president three months to realise all this might be bad enough. But his promise of a full investigation, to be led by a newly appointed federal auditor who immediately said he had jurisdiction only to probe government contracts and not houses, left the government with more egg on its face.

One step forward, two steps back? Mexico’s government has hit the skids since the disappearance and apparent murder of 43 students in the town of Iguala in September. This thrust the issue of security back into the spotlight after the government had deliberately steered the agenda towards reform and away from the previous administration’s bloody “war on drugs”. The renowned Argentine forensic team working on the investigation has accused officials of jumping to conclusions about what happened, and all but says the official version appeared to make the facts fit televised testimonies from the arrested alleged perpetrators — something Mexico denies.

Mr Peña Nieto and senior officials seem genuinely puzzled that the government’s messages appear mixed, at best, when its strategy — economic growth through ambitious reform — generated genuine excitement from international investors. The president’s hobby is chess: time for a new game plan, perhaps?




Jude Webber




Fonte: FT