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Mexico's New President and the Real Estate Market

July 4, 2012

'I will be a modern, responsible president, open to criticism, ready to listen, and taking into account the views of everyone,' Enrique Pena Nieto said in a speech on July 1, 2012. (Photo: Yuri Cortez/AFP/Getty Images)

Puerto Vallarta, Mexico - As owners or potential owners of real estate in Mexico, one wonders about Mexican politics in general and the new Mexican President specifically. "Who is the new President of Mexico?" and "How will this affect me?" are questions I’m getting frequently. I’ll do my best to give you my "Blue Collar" take on them.

The new President of Mexico is Enrique Peña Nieto. He represents the PRI party that held the Presidency for 70 years up until Vicente Fox, 12 years ago. With each Presidency lasting 6 years and re-election not an option here in Mexico, the PAN party in the form of Fox and then Calderón had the last 12 years to reign.

Fox and Calderón each vowed to end corruption, go after the drug cartels and in general clean up the national government. They have been viewed many ways, but PAN finished 3rd in the voting this year as many saw the war on the cartels as failed and there were plenty of scandals with corruption from the "anti-corruption" party.

I think it is safe to say that while nobody likes the drug trade or corruption, Calderón was viewed as weak and unable to achieve his lofty goals. The war on drugs seems like he went in with good intentions but only managed to stir up trouble, not rid the country of the nest of profiteers. To me the war seemed half-baked and as anyone knows about removing a bee’s nest, you don’t want to partially finish the job.

PAN ran a woman candidate this time but the "different" slogan she had seemed empty as she was from the incumbent party and nobody was sure what was going to be different. Nice to see a woman recognized as a major candidate anyway as this speaks volumes about changing culture here in Mexico. Her gender seemed to be neither a plus or minus as her message simply didn’t capture enough followers.

So, the door was quite open for replacing Calderón with either of the two other alternatives, Peña Nieto and a left-wing independent named Obrador. You might think of him in a loose way as the Ross Perot of this election. He ran once before with a pretty hard-line social message but softened the rhetoric this election moving much more toward center. Again it was a close election (Obrador is calling for a recount again) but at 6% behind, his chances are slim ("...and Slim just left town.")

There was a distinct difference in message between the old party Nieto and the change Obrador promised. For that reason, emotions are high even now as the Obrador crowd is in near disbelief that Peña Nieto could win, returning the "PRI party of the rich" to power. It definitely reminds me of (though there are distinct differences) of when George W. Bush was narrowly elected over Al Gore with each side not able to believe the other side could garner so much popularity. It was equally passionate and divided here for this election.

I won’t pretend to know everything about the election as this was really the first one that I really followed. I’m simply not experienced enough to address the nuances, but frankly no one "knows for sure" what will happen anyway. My crystal ball may be as good as anyone else’s even with my limited experience here. I am, after all, an expert in Puerto Vallarta real estate and that is the topic of concern anyway.

I believe the Peña Nieto election is likely to be good for the real estate market here. Much of what has held it down is due to a ramped-up war on drugs and the bad press about the violence. Peña Nieto has vowed to fight the cartels but very likely rightly so has condemned the military war on the cartels as ineffective.

Presuming all of us are anti-drug cartel one wonders what the next course will be, but I think Nieto is right; the military simply was not the way to go in this war. Fatigue from the violence and the affect it has on the economy is likely what got Peña Nieto elected as continuing to beat your head against the wall was simply too costly.

My prediction is that some legalization is pending and taking the money out of the cartels hands may be more effective than shooting at them. An improving economy will hopefully supply better jobs and make the cartel lifestyle less attractive. I expect the border violence will diminish some at first and a lot eventually. This should help with Mexico’s image.

Secondly, Mexico is poised for economic recovery. As the tourist industry returns as mentioned above, their other real money-maker is oil. Nothing like commodities in this market, ask any Canadian! Peña Nieto has vowed to soften the stance on a state-run oil industry and allow private investment to kick-start their oil industry.

While the virtues of privatization are arguable, Mexico simply had to do something as the current oil fields are running dry and the money was largely gone. This isn’t popular with the Obrador crowd, but allowing private companies to invest in oil here is likely a necessary evil. It will very likely at least be good in the short term as it will supply a much-needed boost to the job market and economy.

So the new president is a return to the old party. Many don’t like it. Nobody knows how this will work out. However, I think even with his shortcomings Peña Nieto will be good for the real estate market in the short term. His presidency will last until 2018 in any case.
¡Viva Mexico!

John Swanson is a real estate expert at Tropicasa Realty and long-term resident. He is a single dad and has raised his son Donovan in Puerto Vallarta. His hobbies include guitar and mandolin playing and he performs locally in the Texas Embassy Blues Band. You can contact him at: John(at)tropicasa.com.

To learn more about Tropicasa Realty Click HERE, or visit tropicasa.com.