Banking Reform on Hold in Mexico
Video Transcript:
Video Transcript:
In what appears to be his first political crisis, Mexican President Enrique Pena Nieto suspended progress on the reform platform known as the Pact for Mexico on April 23. In the process, he withdrew a banking reform that was set to be presented this week. The move signals a rise in political tensions after nearly 10 months of political cooperation, and could threaten energy reforms originally planned for introduction by the end of the year.
The Pact for Mexico is a list of reforms that are, in theory, supported throughout Mexico. These include a range of reforms touching on taxes, mining, energy and education, to name a few. In the wake of the July 2012 elections that brought a new Congress and put Pena Nieto in office, there has been unity among the three major political parties in Mexico. Controversial education and labor reform sailed through the approval process and a telecommunications overhaul is just now passing the final hurdles. The banking overhaul set to be introduced this week would have aimed to help to improve credit access to Mexican businesses, addressed money laundering and increased regulatory oversight of the banking sector.
The issue that seems to be holding it up is a dispute over whether or not Pena Nieto's party, the PRI, misappropriated federal funds for campaign purposes in the state of Veracruz. Opposing parties PAN and PRD have united against the PRI in pushing this issue to the fore. Such incidents are not uncommon in Mexican politics and the details of the Veracruz dispute are incidental to the emerging deadlock over details of proposed reforms. This is the first and most serious disruption to the political cooperation that has thus far characterized the new administration.
This political squabble bodes ill for the PRI being able to build a consensus around the two most important and most controversial issues to come: energy and tax reform. The government budget is heavily dependent on oil revenue, but with oil production declining, it must boost tax revenue to make up the difference. And without a reform of the energy sector, Mexico may go from being a net oil exporter to a net oil importer. Both topics are highly controversial, however, and the PRI cannot pass them into law on it's own. It will require the cooperation of either the PAN or the PRD.
What today’s development tells us is that the efforts of the PRI to pursue its legislative agenda will be harder going forward. The current ordinary legislative session ends April 30. The suspension of the Pact for Mexico agenda at this point means that Mexico’s summer will be characterized by fierce politicking as each party establishes its positions ahead of the next session. And unless an extraordinary legislative session is called, the realistic outlook for Mexico is that progress on the pact has been interrupted until the next session begins on September 1.
