Andres Oppenheimer

Everything that could possibly go wrong seems to be going wrong for Mexico, Latin America's worst performing economy this year. But a new government idea could put this country back on the road to prosperity for decades to come -- if government officials really are serious about it.

Right now, things look pretty bad in this country: The economy is projected to fall by nearly 7 percent this year because of a dramatic decline in exports to the United States, world oil prices are down, a swine flu outbreak has crippled the tourism industry and an unprecedented wave of drug-related violence that left more than 6,000 dead last year is scaring away domestic and foreign investors.

But Mexico's biggest problem is that President Felipe Calderón's government has its hands tied and can do very little to solve these problems. Because of an outdated political system, Mexico has a weak president who can't pass meaningful reforms through Congress.

Calderón, who won the 2006 elections with only 35 percent of the vote, only 0.6 percent more than the runner-up, faces a solid opposition majority in Congress. In legislative elections earlier this year, his National Action Party won only 29 percent of the seats in Congress.

BLOCKADE

As a result, Calderón's efforts to reactivate the economy by raising taxes -- Mexico is, alongside Guatemala, the Latin American country with the lowest tax collection rates -- and opening sectors of the Pemex oil monopoly to the private sector are, among other economic initiatives, systematically blocked by opposition parties.

That's nothing new in Mexico, where Calderón's own party played a similar blocking game when it was in the opposition. Mexico has three major political parties and two of them have traditionally obstructed whatever the president wants to do.

But Mexico's Government Secretary Fernando Gomez Montt made a series of proposals at a recent congressional hearing that could break the country's traditional deadlock.

Arguing that Mexico must end its political paralysis, Gomez Montt said the government will submit to Congress a political reform package next month that will include congressional ratification of Cabinet members, a possible reduction in the size of the 500-member Congress, and -- perhaps -- the introduction of a presidential runoff election to ensure that Mexico's future presidents can rule more effectively. Gomez Montt called on Congress to "analyze" whether runoff elections would be a "suitable" idea.

Will the opposition parties go for runoff elections? A senior government official told me privately that it could happen. The center-left Institutional Revolutionary Party (PRI), which controls 41 percent of congressional seats and is the biggest opposition party, initially said it's against the idea, but could be swayed to support it, the official said.

"They feel that they have a chance of winning the 2012 presidential elections, and that they would be facing the same problem if they win," the official said. "They may end up accepting the idea of a runoff election."

COUNTER-PROPOSAL

Miguel Angel Romero, a top advisor to PRI Senate leader Manlio Fabio Beltrones, told me that the PRI will submit a political reform counter-proposal to Congress, but that it will not include a second-round election. Runoff elections are too costly and most often force the leading candidates to form "artificial coalitions" that don't guarantee political stability, he said.

Instead, the PRI political reform bill will include proposals such as congressional ratification of Cabinet members -- much like in the United States -- to create a "new political equilibrium" that can result in a more effective relationship between the president and Congress, he said.

REFORM NEEDED

My opinion: Mexico's biggest problem is political, not economic. The only way to embark on economic reforms that can make the country more competitive and emerge from its crisis will be through a constitutional reform that changes the country's political architecture.

That can only be done either by a political reform that introduces a runoff election, or by creating the job of a prime minister ratified by Congress. I'm afraid that if the government doesn't press harder for these changes, or the opposition continues stalling them, Mexico will be condemned to its current mediocrity at best, or to a steady downward spiral at worse.