What a Divided Legislature Means for Mexico

6 MINS READAug 5, 2016 | 09:00 GMT
What a Divided Legislature Means for Mexico
Even if Andres Manuel Lopez Obrador, the leader of Mexico's leftist National Regeneration Movement party, were to win the country's 2018 presidential election, he would have little leeway to implement radical policy change.

In Mexico, preparations are already underway for the next presidential election, now less than two years away. Over the next year and a half, Mexico's political parties will select candidates to represent them in the 2018 election, which stands to shake up the country's economic and political status quo more so than previous races. With three or four major political parties vying for office, the contest may be the most competitive presidential race in Mexico's recent history. The current president, Enrique Pena Nieto, is not eligible for re-election, and after decades of waning popularity, the approval ratings of the ruling Institutional Revolutionary Party (PRI) are relatively low.

Now, the explicitly populist National Regeneration Movement (Morena) party, led by two-time leftist presidential candidate Andres Manuel Lopez Obrador, increasingly appears capable of making a credible bid for the presidency, a worrisome prospect for foreign business interests in Mexico. Nonetheless, Mexico's split legislature and reliance on foreign investment would limit his ability, should he win, to change the country's political and economic course.

To understand how Mexico's political system came to be so fragmented, one must first understand how the PRI gained (and lost) its near-total dominance of Mexican politics. The PRI evolved from the National Revolutionary Party (PNR), a group of political figures who rose to prominence after the Mexican Revolution ended in 1920. The PNR, and later the PRI, ruled as an umbrella party, joining diverse political constituencies in Mexican society to bring as many key political players and institutions to its side as possible.

Though the PRI's political stance was nominally left of center (it was once a member of the Socialist International), in practice it was highly populist and pragmatic. To deflect threats emerging from Mexico's historically underserved rural constituencies, the PRI implemented wide-ranging land reform in 1934. When faced with a labor dispute between the nation's largest energy union and foreign oil companies in 1938, President Lazaro Cardenas expropriated the firms' assets in Mexico. These moves — combined with extreme levels of political patronage — cemented the PRI's popularity among voters to the point that opposition parties, such as the National Action Party (PAN), could hardly compete. Between 1934 and 1994, the PRI won every presidential election.

The roots of the PRI's decline trace back to the economic crisis that engulfed Mexico in the early 1980s. After World War II, Mexico was among the developing countries that rapidly took on debt to fund domestic economic development. The country's high ratio of debt to gross domestic product and net outflow of capital proved unsustainable, and in 1982, Mexico defaulted on foreign debt it could no longer service. Four years later, a rapid decline in global oil prices further impaired Mexico's economy, giving rise to an economic crisis that drove up inflation. (The consumer price index in Mexico City increased nearly tenfold from 1986 to 1991.) Mexico's voters suffered in the midst of the turmoil. The country devalued the peso by 15 percent in 1995 to cope with pressure on its foreign reserves, and the financial crisis that followed reduced its value by half, further increasing consumer prices and compounding the PRI's electoral troubles. By the 2000 election, dissatisfied voters elected PAN presidential candidate Vicente Fox, breaking the PRI's 66-year hold on the Mexican presidency.

Having lost the presidency, the PRI became just another player in a multiparty system. It won only 22 percent of the popular vote in the 2006 election, placing third behind the coalition led by the left-leaning Party of the Democratic Revolution (PRD). Though the PRI regained power in 2012, the party has not fully recovered from its 2000 and 2006 losses. It remains a minority party, having won just over a third of the popular vote in 2012. Depending on the public's perception of the PRI's most recent six years in office, a candidate from the PAN or even PRD/Morena could well be inaugurated in 2018.

A Crowded Field

Today, four notable parties — the PRI, PAN, PRD and Morena — dominate Mexico's political landscape. The emergence of Morena, a recently formed leftist party, sets the 2018 race apart from previous elections. Mexico's electoral system has only one round of voting, meaning that candidates need only a plurality of the vote to win. Although the current electoral cycle is still at an early stage, several polls show Morena leader Lopez Obrador with an advantage. Running as the PRD-led coalition's candidate, Lopez Obrador narrowly lost the 2006 vote to Felipe Calderon, and Pena Nieto beat him by seven points in 2012. Recent polls by Parametria, Grupo Reforma and Mitofsky and Associates suggest that Lopez Obrador remains relatively popular with voters. About 14 percent of the voters polled supported Morena, compared with around 21 percent for the PAN and 16 percent for the PRI. PRD, on the other hand, holds about 5 percent of the vote, while roughly 30 percent of the electorate remains undecided.

PRD's weakness has led it to seek alliances with the PAN and Morena. Since PRD is divided, any alliance will be contingent on whether enough of the party's factions decide that a merger is in their best interest. Regardless, Mexico's political landscape is divided enough that Morena could make significant headway in the campaign leading up to the presidential vote, with or without PRD by its side.

Challenges to Change

Whatever the outcome of the 2018 election, the risk of political or economic instability in Mexico will not necessarily rise. Lopez Obrador is easily the most leftist major candidate running for the presidency, but even his campaign platform would not necessarily translate into a broader attempt to shift Mexico to the left. Moreover, even if Lopez Obrador were to assume office, Mexico's divided legislature would stymie any significant political initiatives he might have in mind. To substantially alter the reforms enacted during the PRI's 2012 to 2018 tenure, a new government would have to command a majority in the legislature, on its own or through an alliance. Gathering members for a political alliance to roll back reforms through the legislature would be virtually impossible because the national leaders, PAN and PRI, would likely be loath to lend their support.

Beyond the legislative hurdles, concerns about investor confidence and its effects on Mexico's finances would likely curb Lopez Obrador's attempts to deviate from the current administration's policies. Mexico's economic growth relies heavily on foreign capital, and any effort to make the country less business-friendly would likely drive foreign investors — and their money — out, undermining its economic stability. Such a move would make governing Mexico far more difficult and could cost the ruling party during the next election. Even if Lopez Obrador attained office, the dangers of following through with his highly populist policies would probably deter his administration from pursuing its more radical proposals. At the same time, however, the president's influence over Cabinet ministries and government entities could slow progress on existing initiatives. For instance, as president, Lopez Obrador could suspend cost-cutting reforms at state energy firm Petroleos Mexicanos.

Though the next election may bring more political uncertainty for Mexico, the next president will get only so far in undoing his predecessor's legislation. If the 2018 vote puts Lopez Obrador in office, investors will doubtless become worried about the future of Mexico's business climate. But the country's split legislature will limit the impact that even Lopez Obrador could have on Mexico's political and economic stability. 

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