Tuesday, September 18, 2007

Hold the phone, Calderón!!

There is good news and bad news from Mexico.

First the good news: President Calderón is working with opposition parties in the legislature and getting things done in a way that his predecessor Vicente Fox never could / would.

Now the bad news: President Calderón is working with opposition parties in the legislature and getting things done in a way that his predecessor Vicente Fox never could / would.

His current achievements? A convoluted tax increase and a gutting of the independent electoral board (IFE) that helped bring real democracy to the county over the last 7 years.

Lets use the NY Times as our perfect negative indicator for all things economic:

President Felipe Calderón won his first major legislative victory Friday when the Mexican Congress passed a comprehensive tax bill aimed at one of Mexico's biggest economic problems: its meager tax take and miserly public spending.

Ah, yes Mexico's problem is that the government is too small. Thank you Elisabeth Malkin. Holy Crap. Meager and Miserly, not to be judgmental or anything.

Mexico's problem is that it is a lower middle income country stuck in a rut. It needs sustained economic growth. Improving the country's educational system and infrastructure would definitely help, but there is nothing like this being discussed for these revenues, and not even the Times yet advocates tax increases as the path to higher economic growth.

The real problem with Mexican tax revenues is non-compliance. Evasion, off the books transactions, underreporting are legendary there. Adding a new "alternative minimum tax" on companies is not likely to improve this issue.

The IFE overhaul is just plain bad. In the old days, the incumbent party (always the PRI) counted the votes and regulated the election. Needless to say, this didn't always please the opposition. To me, Ernesto Zedillo is the real unsung hero of Mexican democracy. As he was the PRI president who was instrumental in creating an independent electoral commission. And, this commission showed exceptional fortitude in the face of incredible political pressure, when it certified Calderón as president.

The Times actually gets this one right: Getting rid of the institute’s board members before the end of their term in 2010 would make a mockery of the autonomy that was meant to protect the institute — and Mexico’s electoral system — from the vagaries of Mexico’s politics. It would also open the door for the loser of the next election to try the same gambit again.

Man, if this is success, give me gridlock!