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On Point

Mexico's Complex Free Trade Initiative


by Austin Bay
August 18, 2009

Credit Mexico's president, Felipe Calderon, with vision and guts.

In the midst of the Cartel War's vicious bloodletting, Calderon continues to pursue his "systemic revolution" on multiple fronts, and he's doing so with an enviable cool and steadiness.

Despite his National Action Party's (PAN) political losses in the July Chamber of Deputies election, Calderon's postelection statesmanship indicates he intends to pursue his liberalizing, reformist agenda during his remaining three years in office.

The Institutional Revolutionary Party (PRI), which for decades dominated Mexico, gained clout in the elections. The PRI's track record of debilitating corruption is notorious. Calderon argues PAN suffered in the July vote because the global economic downturn hit Mexico hard. He genuinely believes the Mexican people know that "bribery as business as usual"

fostered Mexico's sclerotic economic mess. Corruption saps economic productivity and destroys political confidence.

The confident Calderon sees the Cartel War as part of a larger struggle for the terms of modernity in Mexico. A modern, competitive 21st-century Mexico will not emerge until the kleptocrats are jailed and their fiefdoms are either eliminated or drastically reformed.

Calderon's "Limpiemos Mexico" campaign to "clean up Mexico"

isn't hollow rhetoric. His government has energized its departments of social development, public education and health. Restoring confidence means responding to problems. Corruption in the security forces and judiciary creates "dirty space" for crime, from drug trafficking to embezzlement by government officials, so judicial and police reforms are key to Calderon's systemic process. Mexicans have heard that promise before, but the Calderon government can tout examples of detailed reform planning and implementation.

The government recently refused to rehire 700 customs inspectors. New customs personnel have been specially trained to combat narcotics smugglers and identify smuggling techniques. They also have been through militarylike security checks to ensure they do not have criminal records.

An evolving free trade deal with Brazil is Calderon's latest international political endeavor -- and one with multiple dimensions, with domestic economic reform and development a central facet.

Calderon's announcement of a possible Brazil-Mexico open market pact follows on the heels of President Barack Obama's trip to Mexico last week for a North American Free Trade Agreement summit. Prior to the summit, the Obama administration quietly admitted that NAFTA would not be renegotiated. This is the latest in Obama's retreats from wrongheaded but headline-generating campaign promises. Given the distraught Canadian and Mexican reactions to his campaign demand for renegotiation, particularly in the midst of a recession, it is a wise retreat.

A Brazil-Mexico free trade regimen would bring together two Latin American economic giants. The actual agreement must address a number of politically fascinating details, such as Mexico's trade relations with South America's Mercosur trade pact members. Mercosur consists of Brazil, Uruguay, Argentina and Paraguay, with Chile, Venezuela, Ecuador, Peru, Colombia and Bolivia as associate members. Calderon has just completed a trip through South America that included extensive discussions in Uruguay and Colombia, and this dimension was certainly on the agenda.

The mirror issue is Brazil's relationship with NAFTA. Calderon and Brazil's president, Luiz Inacio Lula da Silva, know they have placed themselves at the political forefront of what could become, over time, a broad, hemispheric free trade agreement.

The Brazil deal promotes domestic economic goals. It would expand Mexican markets, which ultimately would mean more jobs and less reliance on the U.S. market. Between 70 and 80 percent of Mexican exports now go to the U.S.

Free trade also plays a nuanced role in domestic reform. Mexico has its own anti-NAFTA activists. The Zapatista National Liberation Army launched its rebellion Jan. 1, 1994, the day NAFTA went into effect.

Mexico's left-wing party, the Democratic Revolution Party, has a vociferous anti-NAFTA faction. Still, a number of Mexican economists and some social activists -- particularly those who believe endemic corruption undermines their reform agendas -- see economic integration with Canada and the U.S. as a way to force the political and business leaders to begin to meet Canadian and U.S. legal standards. The advocates argue NAFTA has helped nudge forward systemic social, economic, political and legal reform, and they point to the PRI's defeat in the presidential elections of 2000 and 2006 as signposts.

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