A first for Fox: by averting a strike at Pemex, Fox is savoring his first political victory. (Politics).

President Vicente Fox and his administration recently underwent one of their most difficult political moments. The wage-increase demands by Petroleos Mexicanos (Pemex) Union workers and the threat of strike set them on a collision course with the government. And contrary to what may have happened under PRI governments, on this occasion the Pemex strike threat was very real.

The distinct possibility that the nation's most important industry would be paralyzed was not strictly a labor issue. Neither the union nor the government held entirely fixed positions in terms of increases to wages and benefits. The core of the conflict actually took place in the political and judicial arenas.

THE JUDICIAL SIDE

As is well known, judicial investigations are underway into the diversion of Pemex funds toward the PRI's presidential campaign in 2000. As a result of these investigations, the Attorney General's Office (PGR) recently requested Congress to strip Pemex Union leaders Deputy Carlos Romero Deschamps and Senator Ricardo Aldana of immunity to prosecution. Both are being investigated for the diversion of US$1.2 billion, but the union sought to protect its leaders by threatening to strike.

THE POLITICAL SIDE

The traditional hard-line wing of the Institutional Revolutionary Party (PRI) supported the union's leadership and accused the government of political persecution against the PRI. With this, the Fox government and indeed, the entire country, were approaching a critical breaking point.

In the face-off with the union, one of the strongest bastions of Priismo, something more than Fox's anti-corruption strategy was at stake-the government's entire commitment to promoting change regardless of the PRI's resistance, as well as the importance of their support to the government's reform process.

For the PRI, the conflict was also seen as a decisive moment for its relationship with the executive branch. For some members of the party, the occasion represented a perfect opportunity to force Fox's administration into moderating its actions, as well as strengthening the PRI's own position before the public. More specifically, for PRI President Roberto Madrazo, the conflict was the opportunity for the party to establish itself as a mediator with the government.

The conflict soon became a dare: Union leaders used the threat of strike, while the government stood by the law, and the PRI positioned itself as a mediator between the two. However, union leaders did not sway, and hardened their position further through press statements and street protests. The union's actions began to be seriously questioned by the media and the public-at-large, who increasingly supported the president. In order to avoid further complications for the party, Roberto Madrazo managed to convince the PRI's National Executive Committee to take a stand in favor of the rule of law and against criminal impunity. The PRI caved in before the political costs became greater, certainly with its eyes set on the 2003 mid-term elections. President Vicente Fox had managed his first political victory.

PERSPECTIVES

* President Fox has strengthened his leadership, and his administration has recovered a great part of the credibility it lost over the past two years.

* The judicial process at Pemex continues. Besides union leaders, it is likely other PRI members will be investigated by the PRI. It is unlikely that union life will ever be the same in Mexico.

* Hard-line groups within the PRI are now likely to insist on investigations into the funds of President Fox's own campaign fund-raisers, the "Amigos de Fox," to detect irregularities.

In this scenario, and in light of the upcoming mid-term elections, the outlook for reform consensus building between the government and the three main political parties is grim, particularly for electricity. The year 2003 is likely to be a decisive one.

Joel Estudillo Rendon is a member of the board of the Mexican Institute for Political Studies.