Mexican corruption got the country into present mess

Siesta time is over for Mexico.

By Carlos Luken

After submitting the government’s 2010 fiscal plan to congress, Mexican president Felipe Calderon and his finance minister Agustin Carstens are presently suffering the heaviest barrage of criticism from every quarter of Mexican society since he took office in December 2006

In an uncommon display of frankness, the fiscal plan recognizes Mexico’s harsh economic reality; facing international economic crisis, rapidly decreasing revenues and progressively increasing social expenditures, the country’s financial situation gradually turned from black to red without having any administration’s willingness to pay the political price for making timely and required adjustments.

Mexico lived trough eight decades of a reality it could not afford; eighty years of subsidies for water, power, gas, foodstuffs, preferential interest loans, etc., etc. were coupled with unrealistic monetary policies that did little more than sustain the peso’s exchange rate while subsidizing exports; politically its financially supported social programs were used to cover government’s corporative structural costs by benefiting privileged labor unions and business concerns.

While corruption and tax evasion was rampant, Mexico always managed to tap into its seemingly inexhaustible resources from oil exports and use its black color to cover all the financial red ink; this practice was over-exploited to the point where almost 65% of all the oil revenues were taxed in order to cover expenses. In fact the country was drowning in a pool of oil.

This was “The Mexican dream” and many benefited from it.

Still luck would come to the Mexican Economy’s aid as it stumbled into two timely windfalls; the inexpensive peso helped stimulate a vast tourist boom that produced revenues that were second only to oil and, as the Economy slowly worsened, it created unemployment and sparked a massive migration trend into the U.S. (Ironically in search of “The American dream”); in short time revenues from migrant remittances increased to a point where they surpassed tourism

After spending most of its revenue and neglecting infrastructure, modernization and refinery investments, Pemex Mexico’s oil giant ill-equipped to exploit deep water crude and take advantage of price booms, was pumped dry. Congressional opposition stubbornly continued to block any promise for co-investment with private and foreign interests, and consequently liquidity depleted as fast as oil well capacity.

Making matters worse, the U.S. economic debacle reversed the upward growth trends in tourism and migrant remittance revenues and Mexico’s financial breach deepened.

The administration reacted with a fiscal package that in essence raised taxes and cut federal spending. Calderon closed ministries and in a bold stroke, seized and merged the Federal Central Power Company (Luz y Fuerza del Centro) with the Federal Electricity Company charging ineffectiveness, an audacious move considering their confrontational unions These unpopular moves were immediately rejected by opposing politicians, many well to-do capitalists, labor unions and the general population for being “ill-timed” and “hard line”.

Yet the current plan is only another limited attempt to rectify a long-standing problem. As with many past administrations Calderon’s is providing aspirin to cure cancer. Regardless of party affiliation or political ideology, every sitting president and legislator has perennially made fiscal decisions with politics in mind; most have been supported by businessmen ( with profits in mind), but not by the general public who only occasionally benefit from some political decisions but more often suffer their financial consequences.

The whiplash being voiced to this halfhearted plan is so disproportionate that it seems more comical than tragic. Many beneficiaries of Mexico’s failed policies are now articulating what I call “Detached Outrage”; apparently they were oblivious to the consequences of the schemes they were following. In short, many beneficiaries are irritated yet nobody is responsible.

However, instead of looking at the past and pointing fingers, Mexico must look to the future. First it must realize that the precarious present situation is the result of decades of living a comfortable but bogus lifestyle; implementing quick-fix or radical changes is risky, the underprivileged will not endure more hardships; Calderon and congress have the opportunity to devise a comprehensive long-term plan that transcends political term limits and may correct the situation. But Mexico must patiently wait for the solutions

To do so, political and business leaders and people in general must first become citizens. Instead of criticizing everything while waiting to insert themselves into the corrupt system, they must correct it by involving themselves in their government and search for solutions. If this not done Mexico may soon find that Siesta time is over and awaken from its slumber only to find that the “Mexican dream” turned into a nightmare.

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Carlos Luken, Is an independent columnist. He is also the author of the book “300 weeks- Mexico ’s turbulent transition to democracy” (available from Exlibris publishing Co. orders@xlibris.com, and Amazon www.amazon.com . Mr. Luken can be reached at his blog via e-mail at http://carlosluken.com