Mexico: President Peña Nieto's Reform Agenda – A First Year Assessment
Since taking office in December 2012, Mexican President Enrique Peña Nieto has embarked on an ambitious reform drive, which has so far bolstered investor sentiment towards the country and has the potential to significantly improve the long-term trajectory of the economy.
Key to Peña Nieto's ability to push through major structural reforms has been a tripartite coalition known as the 'Pact For Mexico', which was formed by the country's three main political parties, the ruling Partido Revolucionario Institucional (PRI), the centre-right Partido Acción Nacional (PAN), and the left-leaning Partido Revolucionario Democrático (PRD), just after the president took office.
Peña Nieto requires two-thirds of the votes in both the lower house and the senate to pass reforms that require amendments to the constitution. Under the current party composition of congress, this means that the PRI needs the full backing of either the PRD or the PAN to enact such reforms. Peña Nieto's flagship proposed energy sector reform, which seeks to open up the state-owned energy sector to foreign investment, has been subject to fierce opposition by the PRD and by a large segment of the population. However, we expect energy sector reform to be approved by the end of 2013, as we believe it has enough votes from the PRI and the PAN to move forward. Although the impact of Peña Nieto's reforms will begin to feed through in 2014, when we forecast real GDP growth accelerating to 3.3% from 1.6% in 2013, upcoming secondary legislation will be crucial in shaping the long-term success of reforms.
In our latest Mexico politics crib sheet, published in Business Monitor Online on December 4, we discuss President Peña Nieto's progress in reforming the following areas: the energy sector, electoral system, banking and financial sector, public finances, education, and telecommunications.