Mexico president, in crisis, is now losing once stalwart support of big business groups

MEXICO CITY – The full-page ad in Mexico’s national newspapers was unusual, if not unprecedented: 20 powerful business groups and think tanks publicly scolding the government for not doing its job.

They demanded “conditions necessary to do their work … in total security, in all of the country.” The ad, published last month, urged government officials to “honour your oath to observe and enforce the constitution.”

The public criticism by Mexico’s business community underlines the eroding support for President Enrique Pena Nieto’s administration as he enters the third year of a six-year term. Business leaders are angry over reforms that have increased the tax burden without sparking economic growth, scandals over apparent favouritism and acts of lawlessness that are hurting commerce.

Last weekend, Coca-Cola halted its operations in the capital of Guerrero state due to attacks and abductions of its workers. In Guerrero and elsewhere, businesses complain they are losing merchandise to highway hijackings. Anti-government protesters have commandeered toll-booths, sacked government offices, blocked shipments and shut down airports. Drug cartels rule large swaths of land, extorting business owners, buying off authorities and disrupting important industries such as agriculture and tourism.

The public rebuke “reflects for the most part the fatigue, the exhaustion from many searches for solutions on a regional level, many promises on the regional and federal level that they would fix things. And, they haven’t fixed things,” said Luis Foncerrada, director general of the Center for Economic Studies for the Private Sector, the think-tank for one of Mexico’s most powerful business chambers, the Coordinated Business Council.

Foncerrada said the impact of crime and impunity on businesses has become “absolutely intolerable.” Business leaders also are hammering at rule of law and codes of ethics in response to recent cases of public corruption and conflict of interest.

Complaints have reached those closest to Pena Nieto, including his wife and finance minister. Both were found to have bought luxury properties, including the first lady’s white-walled “Casa Blanca” mansion, from a government contractor that was part of a group awarded a lucrative high-speed train project. Both defended the purchases as legal.

Pena Nieto also took heat for the government’s handling of the September disappearance of 43 college students, allegedly at the hands of police in Guerrero state who handed them over to be killed by a drug cartel. The case highlighted ties between local authorities and organized criminals as well as the administration’s inability to defuse public anger over the crime.

“What you are hearing in conversations among business people, and no longer in the whispered tones … is that the president needs to seek input from a wider circle of people, grab hold of an ethical compass and get serious about rule-of-law initiatives and security,” said Antonio Garza, former U.S. ambassador to Mexico and now counsel in the Mexico City office of White & Case, a U.S. law firm that represents banks and businesses.

Pena Nieto’s office responded to The Associated Press’ request for comment by saying the government maintains an “open relationship” with the business community and has taken several anti-corruption and security measures, including requiring public servants to declare potential conflicts of interest and creating a new, independent attorney general’s office. It also noted the government has launched operations to stop the blockading of highways and airports “with total respect for the right to protest.”

Since the early 1980s and the presidency of Miguel de la Madrid, Mexico’s business sector has more or less worked closely with the government in power, which has been Pena Nieto’s Institutional Revolutionary Party, or PRI, for all but 12 of the last 86 years. The late head of the nation’s giant Televisa network, Emilio Azcarraga, once said, “I am a soldier of the PRI,” in part because the government tolerated his near-monopoly of broadcast television.

The criticism from the business community for the most part has been muted. Business leaders know that confronting the ruling party carries great risk since government agencies wield a lot power, and government contracts, permits and concessions are so discretionary, so lucrative and such a big part of the economy.

The business sector helped restore the PRI to power by backing Pena Nieto in 2012, following two presidents from the National Action Party. They cheered the commerce-friendly reforms he pushed through: opening the state-controlled energy sector to private investment; breaking up communications monopolies; and weakening the power of the national teachers union.

But the discontent started with Pena Nieto’s fiscal reform, because he failed to generalize taxes, extending them to food, medicine and other goods as they had hoped, and instead raised income taxes, a move businesses say is counter to investment. In addition, “there’s no transparency in the way the money is spent,” said Dwight Dyer, senior analyst for Control Risks, a global risk and strategic consulting firm.

To top it off, Mexico’s economic growth was a sluggish 2.1 per cent in 2014, and just 1.1 per cent in 2013. The economy could suffer more in 2015 if global prices remain low for oil, which provides about a third of the Mexican government’s budget. The value of Mexican crude has plummeted since topping $100 a barrel last year and is now trading under $50.

Last month, the government was forced to cut its 2015 budget, cancelling the high-speed train project that Pena Nieto had promised would link the capital to the industrial city of Queretaro.

The bidding process for the train already had frustrated the private sector because it seemed designed to benefit one bidder, said Rep. Ricardo Anaya of the National Action Party.

Anaya is pushing his party’s proposal to create a national anti-corruption system that would give real teeth to prosecution and sanctions, and would be independent of the president who now appoints the anti-corruption czar.

“There’s enormous uncertainty,” Anaya said. “The private sector shares the feeling that corruption has hit Mexico to the core, and without an anti-corruption system, they’re not going to see any investment.”

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