Mexico News and Analysis: Sept 7-13, 2009

1. Calderon announces changes in administration
2. Calderon proposes budget

1. Calderon announces changes in administration
President Felipe Calderon announced changes in his administration this week, firing the Federal Attorney General, the Secretary of Agriculture and the head of Pemex. 

Perhaps the most unexpected was the replacement of Attorney General Eduardo Medina Mora, one of the architects of Calderon’s war on drugs and a close political ally.  Medina Mora is widely suspected of links to the Sinaloa cartel and has been battling the Secretary of Public Security, Genaro Garcia Luna, for control of the drug war strategy.  Medina Mora will be reassigned to an overseas position as an ambassador, removing him completely from access to sensitive information on anti-cartel strategies.  Calderon nominated Arturo Chavez Chavez, former Attorney General in the state of Chihuahua, who is famous for suggesting that women in Ciudad Juarez “use irritant spray and take courses in karate” and “stop wearing mini-skirts” to defend themselves from the rash of unsolved femicides that plagued his administration.  His nomination was roundly condemned by women’s organizations and human rights groups, and his approval by the Congress is anything but assured.

In Pemex, Calderon removed Jesus Reyes Heroles, one of two PRI members of his cabinet.  He nominated Juan Jose Suarez Coppel, who is closely linked to a scandal during the Fox administration involving illegal Pemex contracts with private companies controlled by family members of former first lady Marta Sahagun de Fox.  Suarez Coppel also faces an uphill fight for approval.  Calderon nominated him early in his administration for a position in Pemex, but political parties across the spectrum rejected his candidacy.

Francisco Mayorga was nominated as the new Secretary of Agriculture, replacing Alberto Cardenas, a controversial figure who was widely distrusted in rural areas.  Mayorga is noted for his strong support of NAFTA, and served in the same post during the Fox administration.  His policies are expected to differ little from those of Cardenas.


2. Calderon proposes budget
President Felipe Calderon proposed a budget this week that includes a 2% tax on food and medicine, which are currently exempt from taxation, and increases in electricity, gas and water.  The budget also includes a 2% increase in personal income tax, increased taxes on alcohol, cigarettes, and telephone service, and a 1% increase on cash bank deposits over $15,000 pesos.  Calderon packaged the initiative as a “battle against poverty,” though the centerpiece of his proposal would apply disproportionately to the poorest segments of the population who spend higher percentages of their income on basics like food, medicine and electricity.  In addition, rising energy costs would increase inflation in consumer goods across the board.  The increased taxes would total 1.4% of GNP and help to close a budget deficit estimated at nearly 3%.

Opposition parties, including the majority PRI, trashed the proposal and promised it would not pass.  Calderon’s National Action Party (PAN) controls only about a quarter of the votes in either house of Congress, and his proposal was generally understood to be dead on arrival.  Calderon tried to sell the proposal as a poverty reduction plan beneficial to poor families: “If we arrive at a point where poor families consume less water, without sacrificing their well-being, consume less electricity, we are going to help these families save money, but we are also going to save our own budget, because each kilowatt that is not consumed represents a subsidy that we don’t have to pay.”  Electrical rates in Mexico already average 25% higher than rates in the US, and poor families, many who are unemployed or work in the informal sector, are losing purchasing power every week as inflation takes an increasing bite out of family income.  Look for Calderon to quickly drop his anti-poverty arguments as they quickly met with widespread ridicule across the political spectrum.