By Loren Moss
Last week’s presidential elections in Mexico saw the PRI (Institutional Revolutionary Party) return to the executive branch in government with the election of its candidate, former Governor Enrique Peña Nieto. This returns the PRI to power after a 12-year absence, before which it held power for 71 years, dating back to the founding of the modern Mexican republic.
Peña Nieto defeated the PAN’s (National Action Party) candidate, congresswoman Josefina Vasquez Mota, and the PRD’s (Democratic Revolutionary Party) candidate, former Mexico City mayor and previous presidential candidate Andrés Manuel López Obrador. Votes were largely split among regions, with the more industrialized North going for Peña Nieto (except for the important border state of Nuevo León, which went for Vázquez Mota) and the less developed South largely choosing López Obrador, a native of the Southern Mexican state of Tabasco.
Many of those who opposed Peña Nieto viewed the PRI as the party of entrenched interests, be they business, labor or otherwise, and feared more than anything a return to the endemic corruption that symbolized the PRI’s hold on power. Even still, part of Peña Nieto’s campaign platform was a pledge to take on Mexico’s entrenched labor syndicates, family dynasties, and tycoons while opening up Mexico’s government-controlled petroleum industry to competition and modernization.
As is often the case in Mexico, Peña Nieto was born and raised in a political family which counts six former governors in its genealogy. Still, rising rapidly through the party power structure, he generally enjoys credit for instituting tax reform in the state of Mexico, wiping out debt and presiding over several popular public works projects.
Mexico faces severe challenges: Endemic narcotics fueled violence that affects every level of society and creates a real security risk for the international businessperson –not to mention to the workforce, a corporatist government that caters heavily vested interests and resists reform, a business structure that is anti-competitive except for those politically connected enough (and willing) to buy influence, and antiquated labor laws that make hiring and growth a risky proposition. If Peña Nieto follows through with his promised reforms, it should allow Mexico to follow the route of countries like Colombia and Costa Rica in competing for BPO opportunities on the global scale.
BPO Outcomes chatted with Eduardo Barenque, planner with the Public Security Administration of the Mexican state of Nuevo Leon, for his insights on business prospects in light of this month’s presidential election.
BPO Outcomes: Incoming President Peña Nieto has promised to wrestle against the traditional strong men, dynasties, unions, syndicates and power families that have ruled Mexico for so long – if not directly, then through informal yet pervasive and insurmountable networks and graft systems. Do you believe it is possible that he can succeed at this, even with a congress so heavily influenced by the PRD?
Barenque: I believe so. In the past, most significant legislation has been achieved by alliances between the PRI and the PAN and these two parties together still hold a majority of seats in congress.
BPO Outcomes: Mexico has many laws and rules that leave the country behind when it comes to competition with other countries for BPO dollars. For example, if an employer has to terminate an employee after only one week, the employer has to pay a penalty severance equal to three months pay! What is the prognosis for improving the environment for international business? We are not necessarily speaking of mega-enterprises that have access to government at the highest levels, but let’s consider the companies with less than $1 billion USD in revenues?
Barenque: I believe that on this point the question is more complicated. The labor laws in Mexico are very clear for a developing economy. The type of practice you mentioned is common in developing countries around the world. Still, the fact that we now live in a country with such a high level of unemployment constitutes a challenge for the new government.
BPO Outcomes: How will NAFTA be affected by the Peña Nieto presidency?
Barenque: NAFTA is a treaty that any president who comes to power should know to approve. Our proximity and close trade ties with the USA should make us more competitive for business as a country in the global economy. Let me point to the advantages Mexico has compared to South American countries that don’t have access to new technologies or efficient methods due to their more closed economies and regional trade ties.
To the extent Mexico does not benefit from NAFTA, it is the fault of nothing more than the preparation on our own end. Now that we are positioned strategically, conditions such as the overheating of the Chinese economy have caused companies to consider more closely the options of investing in Mexico. Remember, we are neighbors with the world’s number one economy.
BPOOutcomes: How should one analyze locating or expanding BPO operations in Mexico in light of the proposed changes that are coming with the Peña Nieto administration?
Barenque: I believe it depends a lot on the type of business. For example, there are cases of businesses such as call centers that have been very successful in México. One also takes into account the labor laws as you mentioned but of course each business should adopt the solution that makes the most sense to them. Mexico is one of many options that may turn out to be the most convenient. Still, I am optimistic that the new administration will be beneficial to business and supportive of international trade pacts. The PRI party coming into power has always been characterized as exploring opportunities for new trade and markets.
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