Who's In Charge?

President Vicente Fox takes on Mexico's Congress.

COMFORTABLY ENSCONCED IN HIS ROOM AT THE Fiesta Americana Hotel in downtown Mexico City, Vicente Fox was beginning to savor the power of the presidency. He felt at ease. It was still only the fourth of September--he would not be sworn in as president for another three months. But the president-elect was already meeting with different political groups in the suite that had been his campaign headquarters and where he felt at home.

"Mr. President, a bigger budget is needed for social spending. Health, education and housing need more funds," said Marti Batres, lower chamber coordinator of left-of-center Partido de la Revolucion Democratica (PRD).

Fox cut him off.

"Yes, yes, I know. That's why we need fiscal reform. It's up to you;' the president-elect said.

Batres pressed on: "No, it depends on whether it's true reform and not just charging the value-added tax on food and medicine--that's just going to hurt the poor. You just don't want to take away any benefits:'

"Think about it, it's up to you," said Fox. "We have to talk later:' And the topic of conversation changed.

That short interchange foreshadowed the tumultuous relationship that is emerging between the first opposition president in Mexican history and the country's plural Congress, where neither Fox's Partido de Accion Nacional (PAN) nor the opposition holds a majority.

During the decades in which the Partido Revolucionario Institucional (PRI) held power, Mexico's Congress rubberstamped presidential initiatives. Fox, however, must negotiate with congressional factions to win the two-thirds majority he needs to pass his measures, including a US$12 billion fiscal reform package, privatization of the energy sector and constitutional changes.

Fox, so far, has sought to govern by consensus. He picked his Cabinet to accommodate the broadest political spectrum. He has distanced himself from the hard-line conservative elements of his own party, the PAN. Whether these efforts will win needed support from the lawmakers of the PRI and PRD--not to mention those of the PAN--is unclear.

"It will be a complex relationship for two reasons: Fox's difficult relations with the PAN coordinators in Congress--Felipe Calderon in the Chamber of Deputies and Diego Fernandez de Cevallos in the Senate--and PAN's lack of majority in Congress," says Alfonso Zarate, an independent political analyst. "It will not be easy for Fox to get his proposals approved. Almost none will go through exactly as sent by the president:'

The opposition parties are already girding for a power struggle. "This Congress is ideal for establishing a balance of power because no one has a majority. But Fox's attitude is entirely negative," says Batres. "The president doesn't like to be told 'no:" Hi kids. As soon as he assumed the presidency, Fox began to break protocol--to the chagrin of his opponents. Even as he recited the oath of office he altered the constitutional text. Only minutes later, he again strayed from tradition to greet his children in the front row. Standing at the podium, his inaugural speech started: "Hi, Ana Cristina. Hi, Paulina, Vicente and Rodrigo ..." before pronouncing the traditional "Honorable Congreso de la Union..."

Fellow party members and supporters may have found the family greetings folksy, but legislators did not. "It might seem trivial, but it's not. He violated the Constitution," says Senator Dulce Maria Sauri, president of the PRI. "It's worrisome because it shows a lack of respect for the legislators. The carelessness with the law is [also] worrisome:"

Rather than innovative or spontaneous, the opposition sees the president's conduct as defiant. "He wanted to send the message that he's above it all. Fox doesn't want to have to reach an agreement with Congress. He is going to try to govern without the Congress, through decrees and measures that mock the Chamber of Deputies and the Senate," says Batres.

In recent months, the opposition parties in Congress, with the support of the PAN, approved two bill on rural development and legalization of contraband automobiles. For these measures to become laws, the president must order their publication in the official gazette. Through at least mid-March, Fox had not done that, effectively vetoing the bills--a political precedent in Mexico.

Tax reform collects rancor. The Fox government's independence could jeopardize important initiatives pertaining to private investment in the energy sector, labor and fiscal reforms. At the recent meeting of the World Economic Forum in Cancun, Finance Minister Francisco Gil Diaz admitted that fiscal reform might not be approved in upcoming months. Rather, the changes could take place in 2002.

The reform package calls for a cut in the maximum personal income tax rate to 32% from 35% as well as elimination of the corporate dividends tax and broad administrative changes. At the same time, the new government wants the 15% value-added tax extended to food and medicine--a move that it hopes will help raise fiscal revenues to 16% from 11% of gross domestic product (GDP). The additional income will be earmarked for social spending and to gradually reduce the government's reliance on Petroleos Mexicanos (Pemex). Currently about two-thirds of the oil company's income goes to the government, accounting for almost a third of public revenue.

The opposition parties don't like the proposals. "The PRI legislators will not support the proposal to tax food and medicine," says Senator Sauri.

That leaves a less-than-desirable panorama for Fox--and his party knows it. PAN deputies have put together a backup reform proposal just in case the opposition flat out rejects the government's initiative.

While Congressional approval looks difficult, the initiative to open the energy sector reflects Fox's limited ability to avoid dealing with the legislature. At the start of the 1990s, the government used legal loopholes to circumvent the Constitution, which gives the government exclusive rights to administer hydrocarbons and electricity resources. Yet investment has not flowed in as needed, so power generation and natural gas development remain insufficient.

Modifications in the legal framework would open access to private investment. But a change in the Constitution requires approval from two-thirds of Congress. For the moment, it is unlikely that state-run Pemex or power company Comision Federal de Electricidad (CFE) will be sold.

At least that's how analysts view Fox's recent appointments of powerful businessmen to the Pemex board. The who's Who list of new Pemex board members includes Carlos Slim, chairman of Grupo Carso; Alfonso Romo, chairman of Grupo Pulsar; and Lorenzo Zambrano, CEO of Cemex. Raul Munoz Leos, exdirector of DuPont in Mexico, has been appointed general director of Pemex, and Ernesto Martens, former general director of industrial conglomerate Grupo Vitro, was named energy minister. Fox wants Pemex to operate as efficiently as a private company.

The appointments have upset PRI and PRD legislators, who sent Fox a letter of protest. Businessmen have complained about public pressure. "If they want, we'll go, but first they are going to have to withdraw the invitation," says Grupo Pulsar's Romo.

Stacking the Pemex board with businessmen to reform the state-run oil company from within, Fox might pragmatically avoid a congressional showdown he is unlikely to win. Sooner or later, however, he will have to face the lawmakers if he is to carry out his projects.

Curiously, some say the decline of the former ruling party, the PRI, might turn things around for Fox. It's unclear if its 271 deputies and senators will maintain ranks and vote as their party directs them.

Carta Magna changes. Fox will get his measures through Congress if he can split the PRI voting bloc. "It would have to be a very effective job to convince, one by one, the needed priistas (about 30 legislators) to win approval for the electricity and fiscal reforms. Very much like U.S. politics, it is difficult but not impossible," says political analyst Zarate. "Fox could pull an ace from his sleeve at the last moment."

Fox has already tried some sleight of band. On Feb. 5, he proposed a top-to-bottom revision of the Constitution that has been in force since 1917. He did not advocate drafting a new Constitution-- that would have required the election of an alternative Congress to write the document. But he has proposed substantial changes, and many of those modifications echo old demands of the left. For example, he has called for presidential impeachment provisions not unlike those of the United States, congressional approval of ministers of state, clauses allowing plebiscites and referendums and a measure giving Mexicans abroad the right to vote.

In political circles, Fox's action was interpreted as having two goals: to satisfy his commitments to supporters on the left and to reinforce public support for his government. "He doesn't run any risk because he knows neither PRI nor PAN legislators will support his proposal:' says Batres.

The PRI reaction seems to support this view. Ney Gonzalez vice coordinator of PRI deputies, calls the Constitution proposal "one more episode of the demagoguery that the president likes so much."

Still, Fox boasts support from certain sectors. Intellectuals and analysts say the call for constitutional reforms was right on the money. "Fox made the most important and solid speech of his government on that day. He called for a discussion about the nation's future, something that has never been done before in Mexico," political analyst Zarate says. However, Zarate cautions that Fox will have to act to avoid the speech sounding like a publicity stunt.

Where marketing ends and politics begins is always a fine line but, undeniably, the honeymoon is over. Fox now enters the toughest days of his relationship with Congress. If the president wants to maintain high approval ratings, he must produce results. And that will force an understanding with legislators. How Fox and the Congress will develop that working relationship is unclear. But nearly everyone agrees: it will be the cornerstone of Mexico's new democracy.

Marti Batres Guadarrama

COORDINATOR OF PRD DEPUTIES

One of the youngest legislators of the PRD, Batres cut his teeth on the student and urban protest movements. He knows how and when to break the mold and leads one of the most progressive factions of the party. In a short time, he has won a place in the political landscape. Now he must turn the country's third political party into the powerful swing player that the PRI and PAN need to get majority support in Congress.

Felipe Calderon Hinojosa

LEADER OF PAN DEPUTIES

PAN's former national leader is one of the party's toughest veterans. A longtime internal rival of Fox, he has astutely guarded his differences with the president and, as PAN leader in the Chamber of Deputies, he has maintained a critical distance from Fox. He is one of the key opponents of the president's bill recognizing the autonomy of indigenous communities--one of the principal demands of the Zapatista National Liberation Army.

Beatriz Paredes Rangel

LEADER OF PRI DEPUTIES

A centrist member of the PRI, the former Tlaxcala governor has yet to show colors in the current Congress, where she leads the single largest bloc of deputies of any party. Internal party confusion and the battle for national leadership of the PRI have kept party members occupied, but Paredes is expected to reveal hardball-negotiating talents. She's likely to crack the party whip to keep deputies from jumping the aisle to vote with the PAN and President Fox.

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