Mexico City Earlier this month, as the taxi I was riding in pulled up to the Hilton hotel on Avenida Juárez, my heart sank. A wall of plywood planks, painted gray and standing end to end, lined the sidewalk in front of the building. It looked like a construction site. I pulled my suitcase through a narrow opening in the barricade, bracing for the racket of hammers. But there was none. The Hilton was merely in a defensive crouch. It was Oct. 2, the day of the 1968 Tlatelolco massacre when government forces fired on an antigovernment student rally 10 days before the start of the Mexico City Olympics, killing an unconfirmed number of protestors. Forty-five years later, striking teachers and their sympathizers—anarchists, Marxists, members of other unions—were promising an anniversary march. There was reason to worry. On Dec. 1 last year, when Institutional Revolutionary Party (PRI) President Enrique Peña Nieto was inaugurated, some of the same groups also turned out in the capital. They threw firebombs, broke windows and ransacked buildings, dragging furniture into the streets to set it on fire. The Hilton was a casualty that day and neither the city nor the feds did much to help. This time the hotel was ready. So were many other businesses along the avenue, which had boarded up windows and pulled down security gates in the middle of the day. Returning from lunch downtown, I walked past hundreds of helmeted riot police lining the sidewalks and blocking off some thoroughfares. Their young, expressionless faces looked straight ahead. Perhaps they were thinking of their colleague who had been beaten by a protest mob two days earlier and was lying in a coma. As darkness fell, stones and Molotov cocktails soared through the air. Hooded assailants swinging sticks and bats attacked police, who held up their shields in self-defense. Ambulances raced around the city picking up the wounded. It is a familiar scene since Mr. Peña Nieto announced his education reform earlier this year. The teachers unions object to new performance evaluations and the end of automatic tenure. The many full-time union activists will no longer be allowed to draw teacher salaries. To voice their objection, the teachers march. Some of their elements are extreme, and they are joined by outsiders who do their dirty work. Even when they dont trash property and send innocents to the hospital, the protestors disrupt commerce and deny free movement. As I reported here in May, they have even engaged in hostage-taking in the south of the country. Union thuggery is not news. But the government has not done much to prevent it. Criminal prosecutions for violence are rare. Paralyzing the capital or an important highway often results in negotiations with the government and compromises, reinforcing the behavior. This is worth noting as Mr. Peña Nieto works his plan of tax increases and higher deficit spending through Congress this week. The package includes new taxes on capital and dividends and progressively higher income-tax rates on earnings above $38,000 annually, with fewer deductions. In 2014, public-sector borrowing requirements as a percentage of gross domestic product are forecast to reach 4.1%, a level not seen in more than a decade. Mr. Peña Nieto is proud of the tri-party political agreement—dubbed the pact—that he won with the center-right and the hard-left in the early days of his government. It is designed to minimize gridlock. But for a president who has pledged to boost productivity, this is more like a suicide pact. To justify what is a reversal from earlier commitments to make economic freedom its policy anchor the Peña Nieto government is relying on clichés about equality. The promised revenue increase is slated to partially fund new welfare-state entitlements. But its hard to think of an example in history where populism advanced development. Mexico is unlikely to be the first. It already collects roughly 18% of its gross domestic product in taxes, almost as much as the U.S., which is far more developed and therefore can afford a higher tax burden. To deal with low tax-compliance, why not start with more transparency in government spending and regulation so Mexicans dont continually feel like they are being cheated by a corrupt state? New taxes like the ones Mr. Peña Nieto wants on soft drinks and junk food will only drive economic activity further underground. The informal economy, with all its inefficiencies, will expand. Mr. Peña Nieto already has done some heavy lifting on the reform front by introducing an amendment to allow private investment in energy. Perhaps he now believes he has to satisfy his left flank in order to hold together his pact. But this economic package will discourage risk-taking, and higher deficits will push up interest rates at a time when Mexico is struggling to grow. The hard-left dinosaurs prowling the streets of Mexico City want to be fed. But giving in to extortion is no way to run a country. Write to OGrady@wsj.
Posted on: Mon, 21 Oct 2013 22:14:58 +0000
Trending Topics
Recently Viewed Topics
© 2015