by Dan Miller.

Part I of this report focused on Mexico’s political problems related to the Drug War. This second part examines problems in Mexico’s economy, as well as recent efforts to address these political and economic problems:

Problem Two: the Economy

Mexico’s economy was also corrupted by seventy years of one party rule. With the help of political influence, a small number of big companies and rich business people (e.g., Carlos Slim, owner of Mexico’s telecommunications industry and by some measures the richest person in the world) came to dominate the economy and soak up most of the investment capital. Meanwhile medium and small businesses that depend on local customers have a hard time competing since a majority of Mexicans earn less than $5 per day.

NAFTA expanded Mexico’s commercial opportunities with the U.S. and Canada and encouraged the growth of manufacturing. But U.S. agricultural exports to Mexico have put two million small farmers out of business (Guess where they went looking for work?) and Mexico’s heavy reliance on trade with the U.S. (which takes 85% of their exports) means that a slow recovery in the U.S. creates difficulties in their economy. Mexico’s economy is growing slowly (just like the U.S. economy) but poverty is still widespread and a slump in the U.S. could send them right back into an economic slump.

Mexico’s economy is also hobbled by a tradition of government interference. Many protectionist trade policies that grew up in the period of intense nationalism (“Mexico for the Mexicans!”) that followed the 1910 Revolution have been dismantled due to NAFTA. But PEMEX, the huge company that monopolizes the production, sale, and export of the nation’s vast oil resources, is still government owned. And labor laws still give undue influence to government-sponsored unions. They make it difficult for employers to lay off workers in bad times which increases the cost of doing business. And the huge and powerful teachers union has been a road block to much needed improvement in the educational system.

How is Mexico addressing these problems?

Since the 2000 elections, Mexico has had a truly democratic political system, but that has brought some new problems. Mexico’s President now has to consult with an independent Congress. And the Congress is deeply divided among three large and several small parties. So a majority of the representatives are always from different parties than the President’s party.

Which brings us to 2014. The winner of the last presidential contest was Enrique Peña Nieto, candidate of the old ruling party. He won with the aid of vague campaign promises, a telegenic personality, and a beauty queen wife. He has surprised many observers (including me) by the seriousness with when he has approached the nation’s problems. In his first week as President, his party signed “The Pact for Mexico” with the other two major parties to push through a number of significant economic and political reforms. Even more surprising, the Pact appears to be working. In December, Congress approved a law that ended PEMEX’s monopoly by allowing foreigners to invest in Mexico’s petroleum industry. In addition government regulators declared that Carlos Slim’s telephone company would have to face competition as well. Even more astonishing, Peña Nieto pushed through educational reforms that were opposed by his party’s strongest ally—the teachers union—and arrested the leader of the union on well-founded charges of corruption. It remains to be seen whether these reforms will truly make a positive difference in the lives of ordinary Mexicans but they do look like steps in the right direction.

Unfortunately, addressing the drug-related violence is proving to be a more difficult problem. The President has said that he wants to make protecting citizens from violence a higher priority than engaging in combat with the criminal gangs. In practice what that has meant has been condoning the formation of vigilante bands who are taking on the drug cartels in their localities. It’s an understandable reaction given the corruption of local law enforcement in remoter parts of Mexico such as rural Michoacán where a bizarre cult-like gang called the Knights Templar have been wreaking havoc, but allowing unofficial bands to act as judge, jury, and on occasion executioner, opens the door to unanticipated consequences. Some of the vigilante groups have already been revealed as minions of rival gangs and some have developed criminal activities of their own such as demanding protection money from the communities and businesses they protect.

Conclusion

Mexico, despite all its troubles, is a great country full of wonderful people. They are going through a very rough patch in their national experience. I wish them well because in my experience, the vast majority of them are hardworking, honest, and hospitable people who deserve a better fate than history has dealt to them.

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Professor Daniel Miller has been a member of the Calvin History Department since 1983. He regularly teaches a survey of Latin American history and has taken students there on several January Interim trips. His research interests include the history of Protestantism in Latin America and U.S.-Mexican relations.