Enrique Peña Nieto Marks A Year As Mexico's President Amid Reform, Protests, Hurricanes, And A Deal With China

 @PReyMallen
on December 03 2013 9:13 AM
Enrique Pena Nieto
Mexican President Enrique Peña Nieto during the presentation of the energy reform on August 12, 2013. Twitter/@sipse_tvcun

Mexico’s President Enrique Peña Nieto has had the year of his life. Since he was sworn in on Dec. 1, 2012, becoming the first president from the formerly all-powerful Partido Revolucionario Institucional (Institutional Revolutionary Party, or PRI) in more than a decade, Mexico has gone through an economic, social and financial whirlwind.

Here are four of the key events that shaped Peña Nieto’s first year.

The Soda Tax Controversy

In Mexico, 2013 will be remembered as "the year of the reform." Peña Nieto’s administration, in agreement with the two main opposition parties, Partido Acción Nacional (National Action Party, or PAN) and Partido de la Revolución Democrática (Party of the Democratic Revolution, or PRD), drafted a slew of political, social and economic reforms meant to spur growth and help reshape society.

One of the most controversial was a tax reform which included raising taxes on sodas and junk food. The measure was meant to fight obesity, after Mexico took the top spot in the world from the U.S. as the country with the highest rate of overweight people, 32.8 percent. The reform, which was passed by Congress in October, stipulates that all junk food be hit with an 8 percent VAT, while sodas will be charged an extra peso (8 cents of a dollar).

The decision was opposed by soda bottlers, retailers and even health providers, who said there is no actual correlation between soda consumption and obesity. Even New York City Mayor Michael Bloomberg, who famously introduced a ban on sodas larger than 16 ounces, was brought into the controversy when opponents of the tax made him the face of what they were fighting.

Nevertheless, the reform was approved by Senate in November, and will come in full effect in the new year.

The Privatization of Pemex

The other big items in the reform package focused on energy, specifically the state-owned oil monopoly Petróleos Mexicanos (Pemex), which had been facing a drop in productivity in recent years. The cash-strapped and inefficient Pemex, currently the world’s seventh-largest oil producer, was unable to exploit untapped shale gas deposits and deepwater oil reserves in Mexico.

Therefore, Peña Nieto announced a plan in June to open the company to foreign investment and partnerships, a move that was not well received by the opposition and many Mexicans. Opponents saw in this a first step toward privatizing the company and its assets, which is forbidden by the Mexican Constitution, whose Article 27 stipulates that oil and other natural resources belong to the state.

But it goes deeper than that. Pemex has been a symbol of Mexican pride and independence ever since the oil industry was nationalized in 1938, and many opposed any potential changes within the company. The protests were led by leftist groups and in particular by PRD founder Cuauhtémoc Cárdenas, former presidential candidate and son of President Lázaro Cárdenas, the man who created Pemex by expropriating foreign oil assets 75 years ago.

The reform is still being discussed. The government will continue the process in 2014.

Ingrid and Manuel

Mexico usually has its share of the hurricane season, with storms roaming close to both Caribbean and Pacific shores, but 2013 was one of the most destructive years in recent history. Hurricane Ingrid and Tropical Storm Manuel hit the country almost at the same time in August, leaving behind flooding, heavy damage, more than 120 deaths, and a million people affected.

It was the first natural catastrophe for Peña Nieto’s administration, and the government provided 39 billion pesos ($3 billion) in relief, as well as measures like exempting small businesses from several affected states from paying any taxes for the remainder of the year.

The scale of the damage also showcased the flawed development plan of previous governments, which had permitted developers to construct properties on unstable land, like along riverbeds and in canyons.

China’s Xi Jinping Signs Economic Partnership

Mexico’s main trade and economic partner has been, traditionally, the U.S. The northern neighbor accounts for 78 percent of the country's trade, according to data from Trading Economics. Furthermore, Mexico’s economy is deeply affected by the situation in the U.S., as any crisis in America will resonate south of the border.

However, 2013 saw Mexico looking over the Pacific horizon in search of a new partnership: China. The Asian giant has been slowly growing in presence in Latin America, and, as the second largest economy in the region after Brazil, Mexico is a coveted prize.

Peña Nieto made his interest in China clear. When he visited Beijing in April, he expressed interest in increasing trade with China and reducing Mexico’s vast trade deficit with China (in 2012 it imported from China 10 times as much as it exported to it, by value: $57 billion imports versus $5.7 billion exports.)

Two months later, China’s President Xi Jinping visited Mexico on his first trip to Latin America as the country’s leader, where he toasted with Peña Nieto to the dawn of a commercial partnership. The initial deal, dubbed the Tequila Agreement, set the basis for the export to China of Mexican pork and tequila, as well as the promotion of tourism and student exchanges between the two countries. 

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