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Mexico's Fox Spars with Business Leaders Over Economic Policies - 2003-06-05

Mexican President Vicente Fox is trying to deflect criticism from what most people believe should be his natural allies - business leaders. The disagreement between the Fox government and some influential industrialists comes just weeks before an important election.

While President Fox was in Europe this week trying to drum up trade agreements and more investment for Mexico, some prominent business leaders back home were grumbling about the slow-growth economy. They say the pro-business Mr. Fox should be doing more to stimulate private sector activity in what they describe as a stagnant economy.

Spokesmen for Mr. Fox's National Action Party and his government are defending the administration, noting that there are already signs of improvement and blaming the current sluggishness on the worldwide slowdown of the past few years. They also argue that more economic growth could come from an opening in the state-controlled energy sector and other reform proposals that are stuck in Congress. President Fox and his supporters are hoping for a stronger hand in this after the July 6 mid-term elections, in which new members of Congress will be chosen.

Interior Minister Santiago Creel says the critics should listen to international financial institutions that have given Mexico high ratings.

He says it is sad that people outside the country seem to have a better vision of Mexico than those within the country. He says Mexico has never had ratings from international agencies as high as it now enjoys for its investment opportunities.

The spat with business leaders began a few weeks ago when some Mexican executives criticized the government's handling of the economy. But it took on more steam on Tuesday of this week when Dionisio Garza, president of the Mexican conglomerate Grupo Alfa attacked the Fox government at a business meeting in the northern city of Monterrey. He said the slowdown in Mexico could not be blamed entirely on external factors and that there is much the government could do to reduce regulations and costly paperwork. He said these measures would not require congressional approval.

The New York-based Merrill Lynch financial company has reduced its growth expectations for Mexico this year to 1.9 percent from its previous standing of 2.3 percent. But Merrill Lynch analysts say they are maintaining their expectation of four percent growth for next year because Mexico's growth should follow that of the U.S. economy, which the company sees in a recovery mode.

Merrill Lynch also expects the Mexican peso to weaken slightly in the weeks ahead as a result of what the company refers to as "political noise" surrounding the July 6 election. The peso currently trades at around 10.5 to the dollar and Merrill Lynch sees it slipping to just over 11 to the dollar this year.