When Felipe Calderon leaves Mexico’s presidency in December, he will leave behind a mixed legacy, as our special report shows.
That might not seem impressive at first glance, but there’s a case to be made that it actually could represent a certain degree of accomplishment and success for Calderon.
After all, he faced an unprecedented “perfect storm” of negative factors, such as the impact of the 2008-09 global crisis that started in the United States and the H1N1 flu epidemic in 2009. The economic crisis weakened Mexico’s exports to the United States (its top market, accounting for 80 percent of exports) while also hurting tourism. That key sector of the economy was again hit by the flu epidemic, causing massive cancellations of previously booked trips to Mexico by U.S. and European operators alike. Calderon decided, bravely and correctly, to quickly react to the flu epidemic, suspending school classes, closing many public spaces and keeping the public informed of every detail (despite advisors who asked him to restrict that information).
The result of that double whammy of the U.S. and global meltdown and the H1N1 flu epidemic was a whopping 6.2 percent decline in Mexico’s GDP in 2009 (with a record 10 percent drop in the first quarter).
“Without a doubt, Calderon’s legacy was severely damaged by the scale of the great recession of 2008,” renowned economist Jonathan Heath says in a column.
Helping Calderon handle the crisis was his finance minister, Agustin Carstens – a brilliant appointment who has served Mexico well. (Many observers believe Carstens, a former IMF official who became Central Bank Go-vernor in December 2009, should have been elected to the top job at the IMF last year.)
In the middle of the economic and flu crises, Calderon continued to wage war against the drug cartels, which quickly yielded some success in terms of arrests but also led to a desperate turf war that has resulted in more than 47,000 deaths since 2006. Although the vast majority of those deaths – about 90 percent, by some estimates – belonged to drug cartels and the majority of the remaining 10 percent were law enforcement officers or soldiers, the drug war has negatively affected tourism and, in many cases, local businesses.
“I have never tried to mislead the Mexican people,” Calderon said during his acceptance speech at the 2009 Bravo Business Awards from Latin Trade. “I told them on the first day in office that this would be a long struggle, that it would take time and resources, and that it would cost many human lives, but that it was worth it.”
Yet Calderon’s drug war gets support from many business leaders. “In terms of public safety, it is essential to continue the struggle that the government has brought against organized crime to prevent it from challenging the state,” Mexichem Chairman Juan Pablo del Valle writes.
And security experts, such as Sergio Diaz from FTI Consulting, who say organized crime and common crime are on the rise in Mexico, also praise Calderon: “One may or may not be in agreement with (the) president and his strategy against organized crime, but no one doubts his bravery and determination to confront the problem,” Diaz argues.
Although Calderon impressed with major reforms on taxes and pensions during his first year, his ambitious plans on energy and telecoms reforms were either watered down or outright stalled. Part of the problem was Calderon’s loss of a majo-rity in Congress in 2009.
“Mexico’s executive branch has done what it can to improve the country’s business environment,” argues Latin Trade columnist John Price .
Instead, he blames the Mexican Congress for failure to pass the necessary reforms: “Ever since (then-President Ernesto) Zedillo’s PRI lost majority control of Congress following the mid-term elections of 1997, Mexico’s presidents have been stymied by a level of congressional infighting that makes Washington politics seem collegial by comparison.”
Several of the reforms that have been passed have helped Mexico improve its ranking in the latest Global Competitiveness Index from the World Economic Forum (from 66th place in 2010-11 to 58th in 2011-12), but the fact is that progress has been erratic during the Calderon presidency. In fact, in the Global Competitiveness Index released in October 2006 – two months before Calderon started his six-year mandate – it also ranked in 58th place.
Meanwhile, Mexico has dropped from second place in 2006 to fifth place in 2011 on the Latin Business Index from Latin Business Chronicle, which measures more than two dozen factors affecting macroeconomic, corporate and political environments. Countries such as Panama and Peru have implemented more reforms than Mexico in that period and thus have passed the former No. 2 business country. (Chile remains the top nation on the index).
But while Calderon clearly leaves behind a mixed legacy, no one can accuse him of complacency. At the same time, he deserves praise for continuing investor-friendly policies instead of implementing the kind of protectionist policies that have become so popular among policymakers in certain Latin American countries, including Brazil. And that, in the end, is not a bad note on which to end his six-year term.
About the Author: Joachim Bamrud is the executive editor of the Latin Trade Group and a former editor-in-chief of Latin Business Chronicle and Latin Trade magazine.