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Mexico's election boosts confidence
Hotel & Motel Management / June 16, 1997

By Larry Luxner

WASHINGTON -- Far from scaring away potential hotel investors, Mexico's recent mid-term elections -- which delivered a stinging blow to the long-ruling Institutional Revolutionary Party (PRI) -- have impressed executives and investors alike with their fairness and notable lack of violence.

Jesus Silva-Herzog, Mexico's former secretary of tourism and now the country's ambassador to the United States, called the July 6 balloting a "wonderful, beautiful exercise" in democracy, despite his party's losses at the hands of the leftist Democratic Revolutionary Party (PRD) and the center-right National Action Party (PAN).

"More than 60% of the electorate went to the polls," Silva-Herzog told Hotel & Motel Management during an interview at the Mexican Embassy in Washington. "It was peaceful and transparent, without any serious incidents, and with the very active participation of the people. Mexico has made a very important step forward in its road to improve the democratic process. More than 50% of Mexico's population will now be governed by the opposition."

Voters handed the PAN two governships (the states of Queretaro and Nueva Leon), while the PRD -- which has a reputwon the Mexico City mayoral race and a majority in the lower house of Congress. Nevertheless, Herzog says he doesn't contemplate much change in Mexican economic policy.

"After the elections, the Mexican stock market hit an all-time high. We had four consecutive days of record levels, then two days of adjustment, and now we're back up," he said. "That means essentially that the people have increased their confidence in the Mexican political system. The mayor of Mexico City or the [new PAN governors] will not have any responsibility in the design or implementation of economic policy. They'll have their say and they'll try to insist, but I don't have any doubt that the basic economic policy will continue, and that Mexico after the elections has added some degree of confidence on the part of the investment community."

That view is echoed by Wendell B. Ward Jr., vice-president and managing director for international hotel development at Marriott International. Ward says Washington-based Marriott -- with 2,000 rooms among five hotels in Mexico City, Cancun, Puerto Vallarta and Tijuana -- has invested over $100 million in Mexico. That's more direct capital investment than any other foreign hotel chain in Mexico, and Marriott's largest investment in any one country outside the United States.

"Given our substantial commitment to Mexico, and our long-term involvement in the country, we're delighted to see that the election process was carried off without major disruption, and in such a democratic fashion," he said. "We would expect that to bode very well for political stability in Mexico."

Adds Ignacio Gomez, regional vice-president of Four Seasons Hotels & Resorts, which has a 240-room hotel in Mexico City and is now building a 450-acre hotel-timeshare complex in Nayarit state, along Mexico's Pacific coast: "It is almost immaterial who won. The important thing is that it worked so well. And that is a giant leap for democracy."

Last year, 21.7 million foreigners visited Mexico, placing it seventh among the world's top destinations. Tourism generated $7 billion for Mexico, representing 5% of total Gross National Product, and now ranks third -- after manufacturing and oil -- as a source of foreign exchange. Cheap airfares, renewed investor interest and a weak Mexican peso have all combined to push tourist and business arrivals to record highs, resulting in a hotel construction boom that can be seen from Tijuana to Cozumel.

"We all had a number of concerns on how clean those elections would be, and I think the outcome was extremely positive," said Philippe Cassis, general manager of the 752-room Maria Isabel Sheraton, Mexico City's largest hotel. "Obviously, the control that the PRI had is slowly being eroded by opposition parties, which is again reinforcing those major political reforms that President Zedillo implemented."

Cassis adds that "the fact that Mexico City's first elected mayor has gone to the PRD is not much of a concern, because although he'll be ruling over 20 million inhabitants, it doesn't have a direct impact on the country's general macroeconomic policy, so we feel that this process should reinforces investor confidence in general terms."

Alejandro Gonzalez Molina, director of the Acapulco Tourism Board, says he doesn't think the election results will scare away hotel investors from this world-famous resort, which depends on tourism for 99% of its income.

"Mexico has been ruled by the PRI for many years. Although I cannot say that everything has been bad, what the country needed was a change in the style of government. and a change in our priorities," he said in a phone interview. "I don't see much change in the short or medium term." He added that "investors are very wise" and that "I don't see any risk of investing in Mexico, as long as they understand the rules."

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