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Mexico's steaming political environment reached full boil with the victory of Vicente Fox in the July 2, 2000 presidential election. His clear 6.4% win over Francisco Labastida, candidate for the Institutional Revolutionary Party (PRI), shattered 71 years of PRI monopoly at the executive level. Fox's conservative National Action Party (PAN) had previously won several state elections, setting the stage for this historic change at the federal level. Expectations for a continued and sweeping democratic transition are running high. But the reforms may not be as exhaustive as voters or even business would hope.

Latin America

One could easily question the logic of forecasting as a single bloc the enormous diversity of Latin America. Its largest economy (Brazil - US$605 Bn) dwarfs its smaller club members (e.g. Nicaragua - US$700 million). However, most financial institutions, governments, and corporations continue to track the region’s performance as a whole - one of the reasons, perhaps, why its economies in the past tended to move in concert, especially when bad news loomed. That said, 1999 was a disastrous year for South American economies (-1.5% GDP) and quite positive for Mexico and Central America (+3.5%) thanks to the latter’s increasing ties to the US and a year without political risk. In 1999, Mexico proved that it could avoid regional contagion (from Brazil’s 60% devaluation and lesser falls in Colombia, Ecuador, Peru and Chile). Even Ecuador’s suspension of debt payments and President Chavez’s symbolic political victory sent barely a ripple through the region. It appears that creditors and investors are finally learning to differentiate economies in a region that enjoys almost no economic integration.

Argentina

President de La Rua has taken advantage of his honeymoon period and confronted two difficult issues head on: shrinking the fiscal deficit and reforming the nation’s archaic labor laws. Federal auditors discovered that the outgoing Menem administration had under-reported the 1999 fiscal deficit, now believed to have reached 2.5% of GDP. De la Rua worked quickly upon entering office to negotiate caps on transfer payments to provinces and convinced provincial governors, most of which belong to the opposition Peronist party, to cut their own budgets. Most analysts agree that the federal deficit will be kept to $4.5 Bn USD or 1.5% of GDP. This will help Argentina to negotiate better terms on expiring external debt.

"The day is ours, the bloody dog is dead." Is this a battle cry from Shakespeare's King Richard III or Peru's congressional leaders after receiving Fujimori's resignation by fax? Last month, the lines between theatre and reality in Peruvian politics became blurred and as this article is published, we are still not much wiser. A few things are certain. Fujimori is gone for good. Until the country elects a new President in April 2001 (in transparent fashion), general investor uncertainty will remain.