Monday, July 6, 2009

The Political Economy of the Next Fiscal Reform -After the election-

Results of the election show that the Revolutionary Party (PRI) will be the first minority in Mexican lower chamber with more than 210 seats. A strong position with respect to its present 106 seats. The official National Action Party (PAN), will have 133 seats a big lost from the former 206. In the last three years, history has recorded that whenever the PAN wanted to go ahead with any major reform, it had to agree with the PRI first.

Now all negotiations will be harder for the official party. Taken PRI's ambitions to return ruling Mexico in 2012 as given, a fiscal reform that raise the tax base or the marginal tax rate of existing tributes looks ever more difficult.

Taking a glimpse in to the future, and assuming the PRI is willing to raise tax revenue, the optimal strategy for the Democratic Revolution Party (PRD) will be -with emphasis- to condemn those taxes and then trying to re-gain the second place in voters' preferences. The PRD did very bad too in the recent election, it will have only 67 seats nearly half of its current number 126.

All the latter would leave the PAN in a historical weak position and as an all time looser. The PAN would present to the 2012 elections as a party with the poorest performance in both economic and public safety terms. Taken the last election as an advanced indicator of the 2012's, the PAN should focus in not loosing its place as the second major party.

One of the few ways a fiscal reform would take place, must involve the PRI's akcnowledgement of the fact that without enough revenues, Congress alocates fewer resources. At the same time, the fiscal reform should include all parties, so that none of them could make campaign against it.

Sadly, evidence of reforms including all parties in the current period shows that they have turned out to be weak when compared with its motivations. The latter is the case of the last fiscal, energy and voting system reforms.

Only reforms agreed by a small number of parties are near to satisfy the needs reality demands, such as the pension reform of the State workers of 2007.

Mexico's President will face tougher obstacles now, with its safety policy struggling to convince Mexicans it is the right way, an economý faltering and expected to grow slowly, added to low expected public revenues, the PAN has to take serious action and deal with the PRI, otherwise, the country of 2012 will be ever more distant from that promissed in 2006. Voters acknowledge that.

1 comment:

Jesus Eduardo Barragan Zamudio said...

IT IS CERTAINLY DIFFERENT THE STRATEGY OF A PARTY WHEN THIS ONE GOES FROM THE FIRST MINORITY TO THE SECOND PLACE IN THE CONGRESS, AS WE KNOW NOW (PAN HAS TO PLAY THIS ROLE), NOTHING TO LOSE PRD IN THESE 3 COMING UP YEARS, ONLY VOTANTS. AS WE KNOW PRD WILL PUSH BACK ANY REFORM ATEMPT TO TAX THE MEDICINE AND FOOD, SIMPLE REASON IS FANCY AND POPULAR TO PROMOTE THAT, AND ELECTORALLY PROFITABLE. HOWEVER PRI AS THE FIRST MINORITY HAS THE RESPONSABILITY TO STABLISH STRONG BASES FOR 2012 IF IS WILLING TO MAKE AN STRUCTURAL CHANGE IN PUBLIC ECONOMY IN ORDER TO IMPACT IN THE VARIABLES OF THE PRIVATE SECTOR FOR COMPETITIVNESS AND GROW.

MIDDLE ELECTIONS MARK ONLY A NEW HOPE FOR THE PEOPLE WHOSE ECONOMICS EXPECTATIVES ARE FAR AWAY OF FROM MACRO VARIABLE AS GDP, INFLATION OR FEDERAL RESERVS, THEY FOCUS THEIR INTEREST IN MICRO VARIABLES, THIS WILL BE A GOOD CHALLENGE FOR MODERN PRI AND PRD RESTRUCTURE NOT FORGETTING PAN IS STILL AT PINOS AN WILL PROBABLY AWARED HAS TO COOPERATE WITH THIS TWO BIG PARNERS.

JUST WE HAVE TO REMEMBER MEXICAN DEMOCRACY HAS SHOWN THIS IS A 2.5 PARTY DEMOCRACY, 1-PRI,2-PAN AND 0.5 PRD.

THANKS!

JEBZ