In his 2009 book, “The Next 100 Years,” George Friedman, the founder of Stratfor, wrote that by the end of the century Mexico will be the main power challenging the U.S. With $500 billion in trade with the U.S. (up from $75 billion two decades ago), with Mexicans spending twice as much on U.S. products as the Chinese, with over 33 million U.S. residents of Mexican origin, with the most frequently crossed international border in the world, it would be irresponsible to wait until the end of the century to pay attention to Mexico.
A couple of decades ago, Luís Pazos, the most popular free-market economist in Mexico, asked a question which sounded like a joke, but it was a sad reality. Pazos remarked, “Have you heard about the Mexican miracle? It is striking oil and going bankrupt.” PEMEX, the Mexican oil giant, shares the burden of most state companies. They are so inefficient that they usually generate losses which are then passed to the tax payer. In the rare case that they generate a profit, the proceeds end up mostly in the hands of the managers or their private crony contractors. Unlike the owners of shares of Exxon or Chevron, citizens never see a dividend. Sometimes, as it happens in Venezuela, citizens get gasoline at below market prices, but that only furthers market distortions.
After more than half a century of propaganda promoting the benefits of a statist energy policy, it would take a miracle for a radical change in Mexico. It requires intelligence and the support of civil society to achieve gradual strategic changes. Indeed, Mexico has been changing. Since Pazos’ question, the Mexican civil society experienced the impact of NAFTA, the first electoral defeat of the Partido Revolucionario Institucional (PRI), which had ruled for over seven decades, and some modest reforms by the governments of President Vicente Fox and Felipe Calderón. Piecemeal reforms like the ones approved this week in the Mexican Senate might seem boring, but they have a chance to change the dynamics of the energy sector and lead to further changes.
The future of these reforms will depend in great part on the work of Mexican think tanks and other intellectuals. During the decades of “perfect democratic dictatorship,” under PRI rule, most policy analysis was handled by government or business groups. A handful of fragile market-oriented institutes depended on a few staunch champions of the free society. Each of these older think tanks has planted seeds that are bearing fruit today.
One of these think tanks is CISLE (Centro de Investigaciones sobre la Libre Empresa), founded by Luís Pazos. Pazos devoted most of his life to educating Mexicans about the importance of the free market. He wrote 39 books promoting liberal economics most of them in a popular language. When he entered politics in 1998 he told me, “I think it will be a good platform to continue educating about free markets.” After winning a seat in Congress he became head of the Budget Committee. He then became president of the National Bank of Public Works (Banobras) and finished his government service as director of the Financial Services Consumer Protection Agency (Condusef). Pazos is back at CISLE where he continues to promote a free market message.
During most of its history CISLE, has been little more than a one or two person operation. But some of those who passed through the think tank and collaborated with Pazos have become outstanding analysts and promoters of the free society. Roberto Salinas (Mexico Business Forum) and Mary O’Grady, of the Wall Street Journal, are two prime examples.
Another effort was started in the early 1980s by Rolando Espinosa. A former dean of the business school of the Instituto Tecnólogico de Monterrey, he visited several think tanks to plan his work. Espinosa met with Antony Fisher, the “Johnny Appleseed” of think tanks, and zeroed in on the model of the Institute of Economic Affairs (U.K.) and the Fraser Institute in Canada. He founded the Centro de Estúdios en Economía y Eduación (CEEE) with the help of one of the most respected and impeccable Mexican businessmen, Alejandro Garza Lagüera. One of CEEE’s first products was a Spanish edition of a book by the Fraser Institute which was soon followed by a 1987 book by Oscar Vera Ferrer debunking CONASUPO, the Mexican government agency involved in agriculture. It took more than a decade, and the indictment of Raúl Salinas de Gortari (brother of the president) for corruption, to create enough pressure to abolish CONASUPO and liberalize the agricultural sector.
CEEE grew at a solid pace and started an office in Mexico City. When former President Carlos Salinas de Gortari appointed University of Chicago-trained economists to his team, and appeared to lead the country into a new market-oriented era, most donors thought the battle had been won and stopped contributing to CEEE. Soon after CEEE closed its offices in Mexico City and retrenched back to Monterrey, Nuevo León, where with a very modest budget it has been focusing on promoting scholarly work through its Academy of Humanistic Studies. Apart from CEEE’s influence on leaders of the PAN (the opposition party), perhaps the most important work and legacy has been the quiet work and dialogue with the Catholic hierarchy and lay leaders.
Sergio Sarmiento also deserves credit. He is a talented writer, a thoughtful and respectful intellectual with his own TV program, and a promoter of free enterprise for decades. His columns are widely read across the country. Sarmiento directs the Caminos de Libertad (Roads to Liberty) essay contest. The goal of the project is to reward, publish and promote the work of the best young Spanish speaking scholars. Just a few weeks ago, at a ceremony with former Czech president Vaclav Klaus, Axel Kaiser, a young Chilean, received the major award. Kaiser will become a force to be reckoned with beyond the Americas.
The Ludwig von Mises Cultural Institute (ICUMI), is another early Mexican effort. Like the others, it relied on one leader: Carolina Romero de Bolivar. It developed good educational programs and brought to Mexico some of the work of the Manhattan Institute, which played such an important role in the recovery of New York City. Some of ICUMI collaborators rose to prominence. The most famous is Josefina Vázquez Mota, former Minister of Social Development, former Secretary of Education, and recent presidential candidate for the PAN. Through one of the programs, Mrs. Bolivar discovered a young energetic teenager, Armando Regil. The work of this young leader during the last five years as founder and president of IPEA made Mrs. Bolivar feel that her mission has been accomplished. In a future column I will describe in more detail Regil’s efforts and those of other think tanks. Just a snippet: over a month ago, George Friedman attended a youth program organized by Regil. It attracted 1,700 participants from 32 Mexican cities. Friedman repeated his forecast: Mexico will be the main challenger to the U.S. at the end of the century.
Many tennis players see challengers as partners, they train together, they compete, and both become better. I wish the same for Mexico and its relation with the U.S., but its positive strength will depend greatly on the work in ideas. A re-energized CIDAC (Centro de Investigación para el Desarrollo A.C.) Mexico’s leading market-oriented think tank today, and the newer think tank efforts such as Mexico Evalúa, IMCO, and IPEA, are helping tap something that it is more valuable than oil: it is the human capital of ideas; ideas that liberate the entrepreneurial spirit and can help a re-energized Mexico that, rather than being a challenge to the U.S., will be its growing partner.
