MEXICAN PRESIDENT Vicente Fox's administration is at an impasse.
A congressional defeat last month of his party's plan to raise taxes to bail out the cash-strapped government means there will almost certainly be no tax, energy, labor or political reform during the remainder of his term.
The economy's mediocre performance during the first half of his term and the modest estimates for the second half mean Mexico will not absorb its ballooning jobs deficit. In fact, Mr. Fox's only major achievement may lie in immigration reform - if President Bush's ambitious but fuzzy proposal legalizes millions of Mexicans in the United States.
Mexico's three discredited, archaic and deeply divided dominant political parties have pushed the country into gridlock, and the government has not found a way to break out of it. Hence the questions being asked throughout a disillusioned Mexico and an increasingly skeptical international community: What went wrong and, more important, what can still be done?
Undoubtedly, Mr. Fox's team has made many mistakes. But avoiding them would not necessarily have made much of a difference, given his situation as a president lacking a majority in Congress and absent any spirit of compromise from the opposition.
In fact, the main responsibility for Mr. Fox's failure lies with two dysfunctional features of Mexico's transition to democracy: its institutions and its political parties. Mr. Fox and his team, of which this writer was a member, decided from the outset to work for important economic and social reforms - civil rights for indigenous groups, new taxes, changes in the nationalized electricity industry - without first attempting to give Mexico a modern, democratic institutional framework.
But in the absence of such changes - allowing more than one term for legislators; providing for referenda on constitutional and international issues; establishing a semi-parliamentary government with an appointed prime minister, thus creating an effective majority coalition in Congress; and instituting a runoff mechanism for presidential elections - achieving the so-called structural reforms proved impossible.
Even the decision to avoid a clean break with the past in exchange for the former ruling Institutional Revolutionary Party's (PRI) support for reforms turned out to be futile. We ended up with the worst of both worlds: no reforms, no settling of scores with Mexico's recent history and the country virtually paralyzed.
Working with the institutions of the past was demonstrably a mistake; it was compounded by counting on the political parties of the past. Mexico's three large parties - the PRI, in office since 1929; the right-of-center National Action Party (PAN), founded in the 1930s; and the left-wing Democratic Revolution Party (PRD), created in 1989 - reflect the ideological alignments and political cleavages of another era.
They belong to a time when Mexico lacked democratic rule, before its economy was opened to the world and the North American Free Trade Agreement was established, and when the Cold War determined the international state of affairs. They reflect a political regime in which the PRI ran everything.
Today, the parties are deeply divided, unable to reform themselves and devoted exclusively to conserving their perks. This is the only explanation for free-marketeers such as former Presidents Carlos Salinas de Gortari and Ernesto Zedillo sharing PRI ranks with energy nationalists rabidly opposed to private investment in oil or electric power; for European-style social democrats and Castroite revolutionaries co-existing in the PRD; and for Catholic, anti-American right-wing ideologues cohabiting in PAN with modern Social-Christian reformers.
There is no consensus within them, let alone among them. What can be done?
First, Mr. Fox should make clear that the top priority for the rest of his term lies with institutional reforms. He should make it plain that without these reforms, Mexico cannot be effectively and democratically governed. If the political parties go along, Mr. Fox will have bequeathed his successor functional institutions. If they don't, they and the country will pay a price for their obstruction.
Second, Mr. Fox should ease monetary and fiscal policy and get Mexico's economy growing again. The lack of reforms, the new and heated rivalry with China for U.S. markets and investment, and the absence of the rule of law all signal that Mexico's economy will not recover just because the United States' recovers.
The country sorely needs investment in infrastructure, education, law enforcement and anti-poverty programs; Mexico can use its credit standing to responsibly finance a slightly larger budget deficit for these purposes.
Finally, Mexico should take advantage of its immense oil wealth and its exceptional geopolitical situation. Mexico is already moving to expand its oil exports, but Mr. Fox should make this goal an explicit priority.
Through these undertakings, Mr. Fox could simultaneously force the country's political parties to face up to their responsibilities, ignite a modest economic recovery more brisk than what would otherwise be the case and invest in Mexico's future.
These are modest goals, but they are feasible. They are less than what Mr. Fox and his team hoped for, but more than what was achieved during the first half of his administration.
Jorge Castaneda was foreign minister of Mexico from 2000 until 2003. This article first appeared in the Los Angeles Times.