ANALYSTS GIVE CANDIDATES' PROPOSALS LOW MARKS

UNCLAS SECTION 01 OF 02 MEXICO 001626 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/MEX, WHA/EPSC STATE PASS USAID FOR LAC:MARK CARRATO TREASURY FOR IA MEXICO DESK: JASPER HOEK COMMERCE FOR ITA/MAC/NAFTA: ANDREW RUDMAN E.O. 12958: N/A TAGS: ECON EFIN EINV PGOV PINR MX SUBJECT: ANALYSTS GIVE CANDIDATES' PROPOSALS LOW MARKS Ref: Mexico 1124 -------------- SUMMARY -------------- ¶1. (SBU) A group of forty prominent political and economic experts brought together by a new Mexican think-tank analyzed the three main presidential candidates' proposals in a report called "Evaluate and Decide." The analysts found candidates' proposals incomplete, with all failing to identify financing sources or produce execution plans. The report also ranked the three candidates based on the design, feasibility, and implementation of their proposals. Leading the overall ranking was Institutional Revolutionary Party (PRI) Roberto Madrazo, followed closely by National Action Party (PAN) candidate Felipe Calderon. Front-runner Andres Manuel Lopez Obrador (AMLO) from the Party of the Democratic Revolution (PRD) came in last. All three were on the low end of the scoring scale. End summary. -------------- ANALYSTS EVALUATE CANDIDATES' PLATFORMS -------------- ¶2. (SBU) The recently created Espinosa Yglesias Studies Center recently brought together 40 experts from Mexican universities and research centers to evaluate and compare the three main candidates' platforms. This represents the third such effort from civil society to provide an unbiased assessment of candidates' proposals. The other two efforts were Televisa's "Dialogues for Mexico" (reftel) and Historian Enrique Krauze's website "Lupa Ciudadana." The purpose of this exercise was to "rank" the candidates based on their proposals, in order to help Mexicans evaluate their choices. The project divided the proposals into five main issues: rule of law, political, social, international and economic. The experts were divided into five groups and evaluated each of the issues based on the following criteria: design, feasibility and implementation. Each of the candidates were graded on a 0 (worst) to 5 (best) scale. ¶3. (SBU) Unsurprisingly, the findings revealed the proposals lacking in detail and substance. Final grades ranged from zero to two. Overall, Madrazo rated highest with 1.5, followed by Calderon with 1.4, and AMLO with 0.9. In the economic proposals, Calderon led the ranking with 2.5, followed by Madrazo with 2.2, and AMLO with 1.3. Analysts studied and compared the candidates' economic proposals on monetary and fiscal policies, employment and infrastructure. -------------- MONETARY POLICY -------------- ¶4. (SBU) Madrazo promised continuity of the current monetary policy as it has been successful in bringing economic stability. Calderon's intentions are ambiguous, stating that the Bank of Mexico's priority should be controlling inflation, but that it should also consider the exchange rate and the impact of the monetary policy on economic growth. AMLO has explicitly proposed modifying the Bank of Mexico's objective to include economic and employment growth. He proposed designating experts in a special commission to reform monetary and financial laws. Analysts were concerned about AMLO's proposal to modify the central bank's mandate, commenting that this was risky and that any changes could hurt one of the pillars of Mexican economic stability. (Both AMLO and his economic advisor Ramirez de la O have repeatedly promised continued macroeconomic stability.) -------------- AGREEMENT ON THE NEED FOR FISCAL REFORM -------------- ¶5. (SBU) All three candidates agreed to restructure the tax system to make it simpler, reduce tax evasion, and increase the taxpayer base. Madrazo acknowledged the government's dependence on oil revenues, but failed to present a specific proposal to increase tax collection. Calderon proposes a flat income tax rate, which has been successfully applied in some Eastern European countries. Despite Calderon's promises to give tax exemptions to low-income families, analysts believe the proposal is not politically feasible in MEXICO 00001626 002 OF 002 Mexico where the income distribution is very unequal. Calderon will have problems trying to pass it through a divided Congress. Surprisingly, the analysts thought AMLO's proposal to be the most feasible one, but the most naive as well. He intends to raise tax collection and eliminate evasion by simplifying the process and managing taxes more efficiently. AMLO would not tax food and medicine, but has said that richer people will pay more taxes. -------------- A MORE FLEXIBLE JOB MARKET -------------- ¶6. (SBU) To create more jobs, Calderon has proposed more flexible hours for workers, but has not explicitly mentioned any labor reform. Madrazo said he would push for labor reform, which was also deemed politically difficult by the analysts. Former presidents Carlos Salinas and Ernesto Zedillo failed to pass labor reforms despite the PRI's then congressional majority. AMLO has promised to increase minimum wages above the inflation, raising concerns about a potential inflationary spiral. -------------- -------------- INFRASTRUCTURE PROJECTS WITH PUBLIC-PRIVATE CAPITAL -------------- -------------- ¶7. (SBU) On infrastructure, the three candidates agreed on the need for more investments in highways, railways, airports, and ports to increase the country's competitiveness. Madrazo didn't elaborate further on how he would obtain financing. Calderon has mentioned tapping private investment, capital markets, and institutional investors (private pension funds),loans from international organizations, federal, state, and municpal funding, and the use of oil revenue surpluses. Lopez Obrador emphasizes the promotion of public and private co-investment programs similar to what he did in Mexico City. -------------- COMMENT -------------- ¶8. (SBU) It is unfortunate, although not surprising, that analysts still consider the candidates' proposals to be lacking in detail. The candidates' very low scores are somewhat more surprising, but not necessarily fair given the nature of political campaigns, which tend to favor general promises over substantive details. With little time left in the campaign to expand on their proposals, we are likely to see candidates focusing even more on their confrontational and repetitive speeches, attentive only to their popularity levels, which will be supported by massive expenditures on advertising. GARZA