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Lloyd Mexico Economic Report - August 2000

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CONTENTS:

VICENTE FOX IS PRESIDENT-ELECT FOR 2000-2006
ZEDILLO PRAISES CITIZENS
THE UPCOMING TRANSFER OF POWER
LARGE TURN OUT OF VOTERS
THE COMPOSITION OF THE NEXT CONGRESS
A BRIEF HISTORY OF THE PAN
MARKETS REACT FAVORABLY
BIOGRAPHY OF THE PRESIDENT-ELECT
WHAT DIRECTION WILL FOX TAKE?
REACTION OF BUSINESS LEADERS
FROM ARIZONA TO GUERRERO
MALNUTRITION REDUCED, OBESITY HIGHER
CABLE INTERNET SERVICES
NEW POWER-TOOL PLANT

VICENTE FOX IS PRESIDENT-ELECT FOR 2000-2006

On December 1, Vicente Fox Quesada will begin his six-year term of office (sexe ñio) as the nation's President, succeeding Dr. Ernesto Zedillo. The Federal Electoral Institute (Instituto Federal Electoral, IFE) announced the following preliminary results for the presidential elections held July 2:

Party/Coalition Candidate Votes Cast % of Votes Alliance for Change Vicente Fox 15,988,740 42.52 (PAN/PVEM) PRI Francisco Labastida 13,576,385 36.10 Alliance for Mexico Cuauhtémoc Cárdenas 6,259,048 16.64 (PRD/PT) (No other candidate gained more than 1.5% of the votes)


Fox represented a coalition, Alliance for Change (Alianza por el Cambio), led by the conservative National Action Party (Partido Acción Nacional, PAN), of which he is a member, and the smaller Mexican Green Party (Partido Verde Ecologista Mexicana, PVEM). He campaigned mainly on the need for political change and for an end to corruption. His stunning victory ended the world-record run of 71 years continuous rule by a succession of PRI presidents and means that Mexico has celebrated entering the new millennium by showing the world how to achieve full democracy and major political change through peaceful means.

ZEDILLO PRAISES CITIZENS

In acknowledging the PAN victory, incumbent President Zedillo stated that, "We have been able to confirm that we now have a mature democracy, with solid and trustworthy institutions and, in particular, with a citizenry of great conscience and civic responsibility."

THE UPCOMING TRANSFER OF POWER

The Zedillo administration is cooperating fully with Fox's advisors to ensure a smooth transfer of power when Fox takes office on December 1. Indeed, it is highly probable that Fox's first cabinet will include some members of the current administration. Saying that he wants to find the "best man or woman available for every post", Fox has called on all Mexicans to suggest the ideal candidates for positions within his government. Finance Secretary Jose Angel Gurría has announced that the present administration's 23.7-billion-dollar "armor- plating" package of contingency loans, guaranteeing financial stability during the presidential transition, will remain available throughout 2001.

LARGE TURN OUT OF VOTERS

The turnout of voters, 64% of the 58 million on voting lists, was high. Minor problems aside, national and international observers all agreed that the election process was fair and transparent. Much of the credit for this goes to the independent IFE.

THE COMPOSITION OF THE NEXT CONGRESS

IFE's preliminary results show that in the 128-seat Senate, the Alliance for Change (PAN/PVEM) will have 53 seats, compared with 58 PRI seats and 17 seats for the Alliance for Mexico (PRD/PT). In the 500-seat Chamber of Deputies, the Alliance for Change is likely to occupy 224 seats, PRI 209 and the Alliance for Mexico 67 seats. The new Congress takes office on September 1.

Fox will become the first President in Mexican history whose party does not enjoy an absolute majority in either the Chamber of Deputies or the Senate, ushering in an era of coalition politics. For legislative changes, PAN will have to gain the support of at least some opposition politicians. Not surprisingly, PAN also did well in state and municipal elections held at the same time, although the governorship of Mexico City was retained, narrowly, by the PRD.

A BRIEF HISTORY OF THE PAN

The PAN was founded in 1939 as a counterbalance to the government of Lázaro Cárdenas, whose left-leaning government had nationalized Mexico's oil and pursued a huge land redistribution program. The PAN remained a weak, long-suffering opposition group until 1989, when it finally won the governorship of Baja California. Since then, it has gradually risen in prominence, particularly in the states of northern and central Mexico.

MARKETS REACT FAVORABLY

The financial markets reacted positively to the election results with the main index of the Mexican Stock Exchange (IPC) rising by over 6% on the next trading day and the peso strengthening against the dollar.

BIOGRAPHY OF THE PRESIDENT-ELECT

Coincidentally, Fox celebrated his 58th birthday on election day. The second of nine children, he was born in Mexico City but raised on his parents' cattle ranch near the city of León, in the central state of Guanajuato. His father, José Luis Fox, was the Mexican-born son of an Irish couple, hence his unusual Anglo-sounding surname. His mother, Mercedes Quesada, born in Spain, makes history by becoming the first foreigner ever to have had a child elected President of Mexico. Prior to 1993 both parents of any presidential candidate had to be Mexican by birth.

Putting aside an early ambition to be a bullfighter, Fox worked for Coca-Cola México Inc. from 1964 to 1979, becoming that company's youngest CEO, at the age of 32, in 1974. After retiring from Coca-Cola, Fox founded Grupo Fox, a conglomerate of farming, ranching and shoe-making businesses. First drawn into politics by Manuel Clouthier, the PAN's fiery presidential candidate in the 1988 elections, Fox was victorious in the congressional elections, representing León in the Chamber of Deputies. After failing to win the governorship of Guanajuato in 1991 in a hard- fought election contest marred by irregularities, Fox tried again in 1995; this time, he won the governorship by a landslide. As governor, he proved to be an astute leader and power broker.

Fox studied business management at the Jesuit Iberoamerican University in Mexico City and holds an Upper Management Diploma from Harvard University. Separated from his wife, he is devoutly Catholic, speaks fluent English and has written several books. In considerable contrast to most politicians, Fox's public speeches are marked by a brash, outspoken, down-to-earth style.

WHAT DIRECTION WILL FOX TAKE?

Based on both campaign promises and post-electoral interviews, this section outlines some of the likely policies and goals of the next government:

  1. Social Issues:
    One of Fox's oft-stated commitments is to reduce government corruption. As part of a major reform of the justice system, all federal police will come under the jurisdiction of a new Secretariat of Safety and Justice. Another campaign promise is to reduce the military presence in Chiapas and reopen peace talks with the Zapatistas. He has also said that the education budget will be almost doubled and that higher education will be made available to all who seek it. To help alleviate poverty, Fox has proposed the creation of "social banks" designed to ensure that everyone will have access to credit. In addition, Fox has stressed his vision for an "open" border with the U.S., one which workers could cross freely, within ten years. This would stimulate considerable bilateral development of the border region.

  2. Economic Policy:
    According to his chief economic advisor, Luis Ernesto Derbez, Fox will establish a fiscal deficit target of 0.5% of GDP for the 2001 budget, compared with the 1% deficit projected for this year. Derbez has praised the "tremendously receptive attitude" of President Ernesto Zedillo's government in joint discussions about next year's budget. Fox has said he wants sweeping tax reform in order to boost tax revenues, now at a paltry 11% of GDP, compared with about 17% in Chile and 21% in the U.S..

    However, proposals for major tax reform are unlikely to be presented to Congress before early next year. Fox is not expected to privatize state oil monopoly Petroleos Mexicanos (Pemex) or the Federal Electricity Commission (CFE). However, to achieve his stated goals of 7% annual GDP growth and the creation of 1.2 million new jobs a year, the nation's electricity capacity will have to be substantially increased. According to analysts, Fox's stated aim of doubling foreign investment to 20 billion dollars a year, a key plank of his economic policy, is ambitious but achievable.

  3. Environmental Issues:
    Despite heading a coalition including the Mexican Green Party, Fox made few environmental promises during his campaign, though he expressed his intention of making environmental resources, such as water and forests, matters of national security. In addition, he promised to establish a new commission to administer water resources in the severely-stressed Lake Chapala/Lerma River basin.

REACTION OF BUSINESS LEADERS

With one of their own elected President, business leaders reacted positively to Fox's victory, and expressed their confidence that the transition period between administrations will be uneventful. Anticipating that the business sector will be regularly consulted by the incoming administration, Claudio X. González, leader of the Business Coordination Council (Consejo Coordinador Empresarial), stressed the urgency of fiscal reforms. The private sector wants the incoming administration to encourage the small and medium-sized businesses that comprise 90% of all of the nation's enterprises and that generate much of the nation's employment.

Fox has promised to present a 25-year Long-Range Plan for Mexico (Plan Gran Visión de México) when he is sworn in as President in December. The plan will offer a clear direction for the country and will parallel a shorter-term National Development Plan (Plan Nacional de Desarrollo). Help in developing the 25-year plan will come from the National University (UNAM), in association with the Tecnológico de Monterrey and public universities throughout the country. Its principal aim will be to help the worst-off sectors of society. Fox said that it is essential that "we Mexicans know where we are going as a country, not just as a government, since every Mexican forms an equal part of the system."

FROM ARIZONA TO GUERRERO

The vehicle manufacturer General Motors (GM) is to relocate part of its testing facility, currently located in Mesa, Arizona, to Mezcala, in the state of Guerrero. The main reason is Mezcala's hotter climate. In order to cut the time required to turn new designs into production models, GM needs to test new vehicles in extreme temperatures in any month of the year, whereas the Arizona climate allows such testing only five months each year. The 60-million-dollar, 100-worker Guerrero plant will test a variety of components, including air conditioning units.

MALNUTRITION REDUCED, OBESITY HIGHER

The latest survey of women's and children's health and nutrition, based on a survey of 23,000 households throughout the nation, reveals that a marked decrease in malnutrition is being replaced, unfortunately, by a higher incidence of obesity. The 1999 National Nutrition Survey, published by the Health Secretariat and the Institute for Public Health, reveals that severe malnutrition (as defined by the World Health Organization) among children fell significantly over the past decade, from 6% in 1988 to 2.0% in 1999. However, the survey also showed that 52.5% of women in Mexico are now classified as obese or overweight, compared to 35% in 1988.

CABLE INTERNET SERVICES

The number of Internet users in Latin America, including Mexico, is growing more rapidly than in any other region of the world and Grupo Televisa, the world's largest Spanish-language media group, is clearly convinced that this trend is likely to continue. Televisa now has its own web portal (Esmas.com) and has begun offering high-speed Internet access by cable through its cable television company, Cablevisión. Cablevisión connects 420,000 cable TV subscribers via 9000 kilometers of cable, about one-third of which already meets the standards required for digital Internet access. Televisa has contracted Motorola Inc. as the technology provider for its cable Internet services and WorldGate Communications Inc. as its Internet access provider.

NEW POWER-TOOL PLANT

U.S.-based Black & Decker Corporation, the world's largest manufacturer of power-tools, has recently opened a new plant in Mexico for household tools. Located in the border city of Reynosa, the new plant is expected to provide 700 jobs by the end of next year. It will make between 4 and 5 million items a year, mainly for export to the U.S. and Canada. The plant will be used to make and assemble plastic components, motors, sanders and drills. Black & Decker already has three plants in Mexicali.

Mirrored with permission from Lloyd S.A. de C.V.
See their Page on Mexico Connect.

© 2000 Operadora de Fondos Lloyd, S.A.
© 2000 Allen W. Lloyd, S.A. de C.V.

Published or Updated on: July 20, 2006
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