CANDIDATES PLAY TO AUDIENCES ON THE CAMPAIGN TRAIL

UNCLAS SECTION 01 OF 02 MEXICO 000806

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: CANDIDATES PLAY TO AUDIENCES ON THE CAMPAIGN TRAIL

REF:

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SUMMARY
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1. (SBU) On the campaign trail the week of February 6, the
three main presidential candidates, Andres Manuel Lopez
Obrador (AMLO),Felipe Calderon, and Roberto Madrazo,
concerned about losing potential votes in a close race have
avoided detailed explanations of their economic proposals
and focused mainly on populist and non-controversial themes.
Madrazo caved in to government workers by withdrawing
support from a needed pension reform bill, AMLO pledged non-
partisan government, and Calderon promoted tourism
development. All three are touting their energy proposals
with Calderon backing private investment through joint-
ventures with Pemex, Madrazo backing some limited private
investment, and AMLO promising cheaper energy, while
opposing private investment. Bankers overwhelmingly
supported Calderon in a straw poll at a February 7 meeting.
End summary.

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MADRAZO'S FIRST DEFEAT ON A STRUCTURAL REFORM
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2. (SBU) As the major presidential candiates continued to
tour the country campaigning the week of February 6, they
avoided taking any potentially unpopular positions on major
issues. More than five months prior to the election,
Institutional Revolutionary Party (PRI) candidate Roberto
Madrazo has already caved in on a key reform - of government
employee pensions. Speaking to members of the National
Government Workers Union and facing numerous banners
rejecting reforms to the overly generous and financially
troubled government employee pension system (ISSSTE),
Madrazo promised to withhold support for the pending
reforms.

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AMLO PROMISES TO BE A RESPONSIBLE LEADER
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3. (SBU) In a meeting with academics and business
representatives, Party of the Democratic Revolution (PRD)
candidate AMLO promised to strengthen government, but to do
so without a return to authoritarian measures and with
respect for individual freedoms. As he has been doing
throughout his campaign, he specifically aimed to soothe
business leaders' concerns by stressing his intent to govern
"responsibly." He promised not to use institutions for
partisan purposes, neither to help friends nor to destroy
"enemies." To help avoid the legislative impasse that has
prevailed during the current administration, AMLO promised
that he would not instruct PRD legislators in Congress how
to vote. AMLO believes opposition legislators will support
his initiatives on their merits and because of his own
negotiating skills. AMLO is also confident that he will
reach an agreement with the unions, long-time PRI
supporters, to solve the public pension problem, but he has
publicly opposed previous social security reforms and the
private retirement accounts created as a result.

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CALDERON PROMISES TOURISM DEVELOPMENT IN CANCUN
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4. (SBU) During a trip to Cancun, Felipe Calderon presented
his proposal to make tourism development a priority, saying
he considers the sector a main driver of the economy. He
proposed reducing bureaucratic hurdles to facilitate
investment in the sector, creating just one office to manage
the regulation of investments in tourism. Calderon proposed
to diversify Mexico's tourist destinations by developing 100
municipalities with great tourism potential, but which have
yet to be exploited for this purpose. As with his other
proposals, Calderon stressed his desire for investments to
be private-sector driven, noting, however, that Mexican
investors should not be "disadavantaged." In Cancun he also
voiced opposition to the possible closure of the Sheraton
hotel in Mexico City on minor violations of city ordinances.

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MEXICO 00000806 002 OF 002


BANKERS PRESENT TEN PRIORITIES TO CANDIDATES
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5. (SBU) On February 7, bankers from Spanish-owned BBVA-
Bancomer, the largest bank in Mexico, provided the
candidates a list of ten priorities for the future
president: consolidate macroeconomic stability, improve tax
collection, offer a feasible pension scheme, increase the
effectiveness of public expenditures, guarantee reliable
energy supplies, improve human capital, promote flexible
labor markets, strengthen respect for the law, strengthen
competition, and facilitate market access. After the event,
bankers voted on their preferred candidate with Calderon
leading the poll with 459 votes, followed by Madrazo with
95, and AMLO, who didn't attend, with only 4. AMLO might
have decided not to attend the event because of perceived
hostility against him. He has proposed new investigations
into the 1990s financial sector bailout (FOBAPROA) and the
creation of regional development banks that would compete
with private banks.

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ENERGY STRATEGIES
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6. (SBU) With broad agreement that the energy sector is key
to Mexico's economic future, the candidates' energy
proposals have been a staple of their campaigns. Many
analysts, such as former Undersecretary of Energy and
current advisor to the Mexican Competitiveness Institute,
Juan Antonio Barges, believe that the candidates' energy
proposals are still too vague. According to Barges, their
proposals not only lack detail, but are largely dependent on
other factors, such as the need for constitutional reform to
allow for private investment.


7. (SBU) Calderon has been the most explicit about the
opening of the energy sector to private investment,
promising to decrease energy costs through joint-venture
schemes. AMLO has promised to reduce domestic gas and
gasoline rates, construct three refineries, and reduce
gasoline imports by 25%, while leaving the mechanisms
unclear. Madrazo has been prompt to say that he would too
reduce energy prices but that he is against the
privatization of the state oil monopoly, Pemex, or the state
electric utility, the CFE. He would only support the
participation of private capital in co-generation projects
and always under the state's close supervision. He has
promised to channel oil revenue surpluses to investment in
the sector. Neither Calderon nor Madrazo are willing to
wade deeper into the energy issue for fear of alienating
voters opposed to constitutional reform of the sector.

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COMMENT
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8. (SBU) Given the closeness of the race, the candidates
seem to be playing it safe, focusing on non-controversial
promises of improving education, creating employment, and
helping the poor. This lack of boldness is understandable
during the campaign, but it will not serve Mexico's economic
future after the elections. Mexico needs leadership to
minimize the power of corrupt and entrenched interest groups
whose goal is to maintain the status quo. Madrazo's promise
to the government workers' union to withhold support for
needed pension reform is a bad omen. AMLO's promise to rule
responsibly addresses a concern many voters have about him.
But it also seems to contradict actions by PRD officials in
Mexico City who are using their power to try to close the
Sheraton hotel based on seemingly minor infractions, after
the hotel expelled a Cuban delegation that was holding
negotiations on energy issues with American businessmen.
Calderon, meanwhile, is preaching to the choir by largely
addressing audiences already disposed to supporting him.
End Comment.
GARZA