Mexico's old ruling PRI hits bumps in rebranding

September 1, 2011 - 7:05 PM
Mexico PRI Leader Scandal

FILE - In this Aug. 24, 2006 file photo, Coahuila, Mexico, Gov. Humberto Moreira Valdes talks with another governor before the opening ceremony of the border governors conference in the Texas Capitol in Austin, Texas. Moreira, who heads the Institutional Revolutionary Party, or PRI, helped pull off a decisive gubernatorial victory in Mexico's most populous state in 2011 and was heading into the 2012 presidential campaign fielding the strongest candidate when federal officials reported a massive debt in the state that Moreira governed until January 2011. Moreira has called the claims a smear campaign against the PRI as it is poised to regain the presidency it lost in 2000 after 71 years of rule. (AP Photo/Harry Cabluck, File)

MEXICO CITY (AP) — The leader of Mexico's long-ruling political dynasty is facing some old-style scandals in his campaign to repair the party's image and regain the presidency in 2012.

Humberto Moreira, who heads the Institutional Revolutionary Party, or PRI, recently helped his party's candidate pull off a decisive gubernatorial victory in Mexico's most populous state. Now, just as the PRI under Moreira is fielding the strongest candidate in early polling for the 2012 presidential campaign, federal officials have reported a huge 34 billion peso ($2.8 billion) debt in the state of Coahuila, which Moreira governed until January.

A close former aide to Moreira also is under investigation for amassing unexplained wealth, buying property in the U.S. and becoming CEO of two firms and a shareholder in Mexican radio stations on a modest state salary.

Moreira has called the claims a smear campaign against the PRI as it is poised to regain the presidency it lost in 2000 after 71 years of rule.

Mexican Treasury Secretary Ernesto Cordero, who launched a probe into Coahuila's finances for possible irregularities, is seeking to be the presidential candidate for the rival National Action Party, or PAN.

"It's their campaign — evil — to harm the president of the party," Moreira said at a recent news conference in which he also compared the federal government to a Dracula sucking money from states.

After a violent revolution that ended in 1920, the PRI maintained stability in Mexico for decades, building its institutions and public health and retirement systems for average Mexicans. But it also became known for buying votes, stealing elections and enriching its public servants to stay in power. The PRI also presided over cyclical economic booms and busts, expansions followed by crises, and peso devaluations about every six years, when a new president was elected after being appointed the candidate by his predecessor.

PRI stalwart Carlos Hank Gonzalez, the former Mexico City mayor and former governor of the state of Mexico who started his career as a teacher and died a billionaire, was famous for coining the phrase "a politician who is poor is a poor politician."

Since Moreira's appointment as the head of the PRI in January, the 45-year-old politician has preached that his party is now more democratic and transparent, most notably in its open process of choosing candidates, who were simply appointed before by their predecessors.

But the Coahuila debt, four times what was reported three months ago, caused Standard & Poor's to cut Coahuila's credit rating from A+ to BBB- in the border state of Coahuila two weeks ago because of "the weak policy of transparency of Coahuila's public finances," the company said in a statement.

The downgrade came after Coahuila's legislature revealed the total debt was 33.9 billion pesos, or $2.8 billion, and not 8.4 billion pesos ($700 million) as the state had reported to the Treasury Department in December, just before Moreira stepped down to head his party.

When Moreira took office in 2005, the state reported a 323 million peso ($27 million) debt.

Coahuila, which shares a border with Texas, is Mexico's most seriously indebted state, but others such as the Gulf coast state of Veracruz and the northern border state of Nuevo Leon have also taken on excessive debts in a short time.

Standard & Poor's said Coahuila's debt was accumulated mostly because of public investment. Coahuila's lawmakers agreed they spent what was needed on infrastructure to create jobs and weather the 2008-2009 global recession that hit income from manufacturing and remittances sent from relatives living in the U.S.

Moreira has avoided explaining how the debt rose 100 times in his administration. The state's liabilities had never swelled so quickly, even in the 1994 peso crisis, which was one of the country's most devastating economic crises that helped lead to the eventual ouster of the PRI from the presidency in 2000.

Instead, Moreira said the debt issue was a strategy by the National Action Party, or PAN, to cling to power. The PRI was toppled by former President Vicente Fox of the PAN, who was followed by fellow party member President Felipe Calderon in 2006.

The debt issue "questions whether the PRI is the supposed squeaky-clean, modern image they have been pushing," said Shannon O'Neil, a Latin America expert of the U.S.-based think tank the Council on Foreign Relations. "It sounds like he doesn't have an acceptable answer to why these numbers seem to be mismatched. For all politicians, a good defense is a good offense."

Early polls show presumed PRI candidate Enrique Pena Nieto, current governor of Mexico state, in the lead to regain the presidency next summer, with many voters disenchanted with the PAN after 12 years in power.

Carlos Alberto Garza, who manages states for the Treasury Department, said information on how much states owe has been released because it is of public interest. Some have alleged it is because the states with the largest debts are governed by the PRI.

"We are not campaigning," Garza told the AP. "We are focusing on the technical part and only that. We are not being political, although it may seem that way."

The PAN has filed a complaint with the Mexican Attorney General's Office demanding an investigation into Moreira's former aide, Vicente Chaires, claiming he became rich on an administrative secretary salary while buying property in Texas and becoming a partner in radio stations. The PAN complaint accuses him of lending his name to assets on behalf of Moreira, though it provides no proof in the complaint.

"It seems a little odd the way these purchases took place, because the salary of a public official is not enough," reads the June complaint filed by Mexican Sens. Federico Doring and Ruben Camarillo.

The 82-page document obtained by the AP says Chaires was very close to Moreira when he was governor and even followed him to the PRI's headquarters in Mexico City to join the executive committee. Chaires could not be found on the party's website, and a telephone operator said he was not in the directory. Newspapers have reported that he was deleted from the site.

Texas property deeds show Chaires, president of an investment firm, bought a $720,000 house in San Antonio in 2007 and sold it two years later. According to the financial information company Dun & Bradstreet, Chaires was CEO of a real estate and construction firm and manager of a consulting business.

Mexico's Telecommunications Commission, responding to a public information request, said that for 10 months in late 2008 Chaires also was a shareholder in a media company that owned two radio stations and a TV channel.

The Attorney General's Office would not comment on the charges, citing an investigation.

Although presidential elections in the country are 10 months away, these allegations could hurt the PRI, O'Neil said.

"It's hard to tell what would come of this," she said.

(This version CORRECTS Corrects in 10th paragraph that debt report was three months ago instead of two, corrects 'state deficit' to 'state liabilities' in 15th paragraph.)