How Mexico’s New President Can Make or Break Its Future

The policies pursued by Mexico's new president will determine whether Mexico becomes an economic force or drifts into more violence.

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Mexico's newly sworn-in President Enrique Pena Nieto delivers his inaugural speech at the National Palace in Mexico City, Saturday, Dec. 1, 2012. Protesters opposed to the new president clashed with tear gas-wielding police early Saturday morning outside the National Congress, where Pena Nieto took the oath of office.

Ted Galen Carpenter, a senior fellow at the Cato Institute, is the author of nine books and more than 500 articles and policy studies on international affairs. His latest book is The Fire Next Door: Mexico's Drug Violence and the Danger to America (2012).

As Enrique Peña Nieto takes the helm as Mexico's new president, there is a wide range of opinions about the probable future of the country. At one extreme are fears that Mexico could become a failed state wracked by pervasive violence at the hands of drug cartels. At the opposite pole is speculation that Mexico could join the ranks of rising economic powers such as Brazil, Russia, India, and China—the so-called BRICs.

The past six years under President Felipe Calderón have been extremely turbulent. Not only did the country's economy suffer from the global Great Recession, but drug-related violence soared. Some 60,000 people perished in the carnage during Calderón's six-year term.

[Read the U.S. News Debate: Should the United States Build a Fence on Its Southern Border?]

His decision to use the army to wage war on the country's powerful drug cartels clearly backfired. Even though the violence has apparently reached a plateau over the past year, it has done so at levels roughly twice what they were when Calderón took office. And even where the warfare has subsided, such as in Ciudad Juárez, once the epicenter of drug violence, it is largely because one cartel has achieved local dominance. The authority of the Mexican state remains precarious in Juárez, other major cities along the border with the United States, and swaths of rural territory throughout northern Mexico.

That is the legacy that Peña Nieto inherits. As the first Institutional Revolutionary Party president in 12 years, he also is saddled with that party's reputation as a reservoir of corruption during the long decades that it ruled the country as a virtual one-party state. During his campaign, Peña Nieto portrayed himself as a young, dynamic leader and an advocate of clean, efficient government—as the head of a "new and improved" Institutional Revolutionary Party.

Whether that image has real substance may determine whether Mexico embarks on a bright future or remains locked in the dysfunctional pattern of the past. Even though the specter of greater turmoil has not gone away, Mexico does have significant strengths—including a $1.2 trillion annual gross domestic product—that could lead to a decline in violence and more vigorous growth of the legal economy. 

[See a collection of political cartoons on the economy.]

Peña Nieto has offered some encouraging hints of needed policy change regarding both the drug war and the overall economy. Although he does not endorse former president Vicente Fox's wise suggestion that Mexico abandon the war on drugs and encourage the United States and other consumer countries to embrace a policy of legalization to defund the cartels, the new president will likely try to steer a "middle course" on the issue. What that means in practical terms is trying to contain the power of the cartels while striking pragmatic deals with traffickers to mute their violent rivalries. Indeed, there are indications that some of the organizations may already be putting out feelers for a truce, which the new government would certainly welcome.

Peña Nieto has also deviated, at least rhetorically, from the Institutional Revolutionary Party's stifling economic statism, even proposing to allow enhanced private investment, perhaps even foreign investment, in Mexico's lumbering government-run petroleum monopoly, Pemex.  That would have been considered heresy just a few years ago. 

[Read the U.S. News Debate: Is It Time to Scale Back the 'War on Drugs'?]

Only time will tell, though, whether these statements are something more than empty rhetoric. One hopes they are. A more flexible and liberal economic policy would foster more vigorous economic growth in Mexico. That would ameliorate several problems. It would ease immigration tensions, because if there were more adequate economic opportunities at home, especially for younger Mexicans, there would be a less desperate push to enter the United States by any means possible to find jobs there. A stronger legal economy also would weaken the competitive position of the drug cartels in offering well-paying jobs.

Washington has an important role to play in all of this. At a minimum, the Obama administration needs to avoid pressuring Peña Nieto's government to pursue the flawed policies of its predecessors on the drug issue. Ideally, Washington would end its own futile prohibition policy regarding drugs and thereby effectively defund the cartels. Just legalizing marijuana—indisputably the least harmful of currently illegal drugs—would reduce revenues available to the traffickers by 30 to 35 percent

[Read the U.S. News Debate: Should Marijuana Use Be Legalized?]

U.S. officials also need to work in a more cooperative and creative manner with Mexico City on resolving the problem of illegal immigration. Finally, American government and business leaders need to heed Mitt Romney's correct observation during his third debate with President Obama that Latin America offers far greater economic opportunities than is generally recognized. That is especially true of Mexico.

Peña Nieto's presidency may be the most crucial one that Mexico has experienced in many decades. The policies he pursues—and whether Washington supports or impedes needed changes—will go a long way toward determining whether Mexico becomes the latest BRIC or drifts toward greater violence and economic stagnation.

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