Mexico’s Neoliberal Transition

The markets were pleased when Vicente Fox won Mexico’s presidential election in July: not because he had done what many still thought impossible—defeat the authoritarian machinery of the longest ruling party in the world—but because there had been no unrest, nothing to shake investor confidence. As James Nash, senior economist for Latin America at the New York Federal Reserve, explained at a conference in Washington, it mattered little which of the two top contenders won, right-wing businessman Fox or Francisco Labastida of the reigning Institutional Revolutionary Party (PRI), because both pledged to continue the neoliberal, free-trade policies embraced by PRI governments since the 1980s. The only concern was that the vote could be close and spark allegations of fraud, protests in the streets, the kind of thing that makes capital skittish.

So, when Fox won by a relatively comfortable margin and the PRI conceded, stocks rallied in Mexico City and New York, and the Mexican peso rose against the dollar. Dutch brokerage giant ANB AMRO, echoing firms from one financial center to the next, encouraged clients to “buy on the news” and raised Mexico to an overweight from an underweight position in its model Latin American stock portfolio. Wendy’s International announced plans to expand its roster of eight fast-food franchises to more than a hundred outlets, joining a phalanx of foreign concerns poised to ramp up their stake in Mexico.

Mexican big business was no less sanguine. Fox’s National Action Party (PAN) had supported the North American Free Trade Agreement (NAFTA) from the beginning, voting for the constitutional amendments the PRI needed to implement the agreement even as it continued to denounce the PRI’s imperious rule. No surprise, then, that telecommunications tycoon Carlos Slim, a long-time PRI supporter who became the richest man in Latin America (according to Forbes) as a beneficiary of the party’s privatization program, stated after the election that Fox “has the best intentions of moving Mexico forward.”

The Clinton administration applauded Fox’s victory as “a triumph for democracy,” as if all along it had been part of the school that believed there could be no democracy in Mexico until the PRI was ousted. Given the primacy of commercialism in U.S. foreign policy since the end of the cold war, the White House surely would have endorsed a continuation of the PRI’s seven-decade tenure if Labastida had won.

U.S. presidential candidates Gore and Bush, as interchangeable as Fox and Labastida when it comes to markets and trade, were caught flat-footed by the PRI’s defeat. Fox aides said that prior to the vote, both had snubbed overtures from his campaign and that the tempestuous Fox was livid. They said Bush had refused to meet with Fox’s daughter Ana Cristina, who will act as first lady for the divorced Fox, but had sat down with Labastida’s wife in Los Angeles. Gore, me...