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Mexico's Fox Defeated Again in Bid to Reform Taxes - 2003-12-23

For the third year Mexican President Vicente Fox has suffered a defeat in his attempt to push a comprehensive tax reform proposal through Mexico's Congress. Mr. Fox remains determined to fight on for what he describes as essential reforms.

In a late-night session on Monday the lower house of the Mexican Congress passed a patchwork of new tax measures and set aside the major reform package President Fox had promoted. This effectively ends any possibility of achieving even part of the reform this year and bodes ill for Mr. Fox in the coming year as well.

In a speech delivered prior to the expected vote, Mr. Fox expressed outrage and anger.

He said he would follow the will of the congressional deputies but that, as president, he has the right and responsibility to continue fighting for reform. He said he will continue the struggle until his term ends in three years.

President Fox blamed opposition politicians for the defeat of his fiscal reform package, saying they had played political games and covered their actions by claiming to defend the interests of the people.

The president's remarks drew a quick response from the leader of the Institutional Revolutionary Party, known as PRI, which ruled Mexico uninterrupted until Mr. Fox won election in the year 2000. In a written statement, Roberto Madrazo accused Mr. Fox of throwing a tantrum because his proposal was rejected. Mr. Madrazo also denied having orchestrated the move against the proposal in Congress.

The congressional leader of the leftist Party of the Democratic Revolution, Pablo Gomez, accused the president of trying to provoke a fight.

He said Mr. Fox needs to understand that this is not a clash between ordinary citizens, but a clash of political powers. He said the president needs to engage in dialogue with lawmakers to seek reform.

The defeat of the reform package is seen by many economists and business leaders as a blow to Mexico's attempt to compete for jobs and foreign investment on the world stage. Mexico has already lost tens of thousands of manufacturing jobs to China and other low labor cost nations.

Some of the companies that have left Mexico have complained about the unwieldy tax system as well as the high cost of energy and security.

Mexico collects less than 12 percent of its Gross National Product in taxes. The government depends on oil revenue for about a third of its annual budget, but the state-owned industry badly needs investment in new technology in order to maintain production. Opposition parties have blocked attempts by President Fox to open the energy sector to private investment.