Mexico: President-Elect Peña Nieto Faces Party Unity Challenges

Tensions are rising in the Mexican legislature’s debate over labour market reform, and we believe the outcome will be a key indicator of whether President-elect Enrique Peña Nieto (who takes office in December 2012) will be able to implement his promised reform agenda.

As we had previously highlighted, one of Peña Nieto’s key challenges in pushing through his reform agenda will be ensuring the full backing of his Institutional Revolutionary Party (PRI), which we see as being divided between pro-business reformers and the ‘old guard’. The ‘reformer’ wing of his party will likely remain willing to back labour market reform, even with the recently introduced amendments to require unions to undergo audits and elect leaders through secret ballots.

However, the ‘old guard’ is less likely to remain supportive of the legislation given that it would curb the power of union leaders – one of the party’s traditional bases of support. Indeed, during the recent debate in the Senate, PRI legislators argued fiercely against the inclusion of the transparency amendments, noting that some of the modifications could violate unions’ autonomy.

As the amended bill comes before the lower house for discussion (which must be completed within the next 30 days), the question becomes ‘who rules the PRI?’ Is it the reformers or the ‘old guard’? The answer to that question will determine not only whether Mexico’s Chamber of Deputies passes labour market reform in the next month, but also if Peña Nieto will have the necessary support to push through his controversial reform agenda, which includes full-scale liberalisation of the energy sector.