A Leader Foiled By an Old System.(Vicente Fox)

Castaneda was foreign minister of Mexico from 2000 to 2003.

Mexico and Vicente Fox are at an impasse. Halfway through Fox's term as president, Mexicans are disconcerted with his government, and so, increasingly, is the international community. The defeat last month in Congress of a package of government-sponsored legislative proposals means there will be no tax, energy, labor or political reforms any time soon. What's more, the economy is showing little sign of improvement. Unemployment has been rising, and per capita incomes have fallen over the last three years. The modest GDP growth estimates for this year and next--between 2 and 3 percent--suggest little change in a country that has become, in many ways, lethargic. Perhaps the only area in which Fox may achieve a major objective is in foreign affairs--if the Bush administration's ambitious but still fuzzy immigration-reform policy truly legalizes the millions of undocumented Mexicans in the United States.

Fox isn't really to blame for his failures. His PAN party lacks a majority in Congress and gets no cooperation from the political opposition. In fact, Mexico's transition to a genuine democracy, with a modern economy supporting it, has been held back by the country's old institutions and dysfunctional political parties. There are three--the long-dominant PRI, Fox's right-of-center PAN and the relatively young, left-wing PRD. All are deeply divided and discredited: in last July's midterm elections only three of every 10 Mexicans voted for these parties.

The Fox team, including this writer, decided from the outset to pursue important economic and social reforms--indigenous rights, energy and tax reform, to name three--without first attempting to modernize Mexico's institutional framework. That tactic didn't work. For example, aside from Costa Rica, Mexico is the world's only democracy that forbids legislators to run for a second term. In addition, Mexico does not have any provisions for calling nationwide referendums on constitutional and international issues, and there is no runoff mechanism for presidential elections. As a result, the reform agenda has stalled.

Mexico's political parties all reflect the ideological cleavages of another era. They belong to a time when Mexico lacked democratic rule, before its economy was opened to the world and NAFTA was established, and when the cold war defined foreign relations. For 71 years, until Fox's Inauguration in 2000, the PRI ran ...