Working out.

• Author: Grayson, George W.
• Position: Letter from Sinaloa

WITH LESS than four years left in his term, Mexico's President Vicente Fox looks increasingly like a lame duck. To his credit, he has brought honest people into government, cracked down on narco-trafficking, backed a freedom of information act, and quieted the Zapatista guerrillas in southern Chiapas state. Still, a medley of factors--poor relations with Congress, an inability to set priorities, a quixotic management style, intramural cabinet fights and spillover effects from a sluggish American economy--have contributed to the deadlock and drift that beset his administration.

But even as Fox slogs through a political quagmire, a basketball-playing labor leader, a law-and-order impresario and a Rocky-like SWAT team commander have shown that change can be accomplished at the state level. This unlikely trio has transformed the state of Sinaloa from a narcodealer's paradise to a magnet for entrepreneurs. As a result, this carrot-shaped province hugging the Gulf of California in northwest Mexico has attracted, as of November 2002, 227 new businesses, totaling more than $700 million in investment since 1999. While much of the country has remained bogged down in a protracted recession, sun-baked Sinaloa has led the nation in job creation during the first quarter of this year and attained the number-one ranking among 31 states for slashing red tape. Who are the men responsible for this turnabout? How have they achieved so much despite a disquietingly high murder rate and an abundance of corruption and narco-clans? Does Sinaloa's experience hold any lessons for the rest of Mexico or for th e developing world in general?

The Politico

CHANGES BEGAN in the state of Sinaloa soon after basketball aficionado Juan S. Millan Lizarraga swore the gubernatorial oath nearly four years ago. A former announcer who worked his way to the top of the Radio Workers' Union, the indefatigable Sinaloan became a leader in the Confederation of Mexican Workers (CTM), the nation's largest labor organization. Traditionally, all CTM members were automatically affiliated with the Institutional Revolutionary Party, known as the PRI, which dominated the country's politics for 71 years until opposition-candidate Fox captured the presidency in 2000. But Millan soon acquired a reputation as a maverick among the "dinosaurs" who ran the lethargic CTM. This image sprang from Millan's attempts to forge alliances with other labor centrals, while working with the private sector to link higher compensation to improved efficiency, productivity and quality. The pay-for-performance concept was as alien as square tortillas to union bosses who came to power within a statist, author itarian regime that favored union shops, featherbedding, payola for CTM honchos and workplace tranquility for coddled businesses.

Millan's independent streak nearly ended his political career in 1989. With the backing of Sinaloa's labor movement, he had just completed a six-year Senate term and was presiding over the local PRI elite. With negotiations over the North American Free Trade Agreement hanging fire, then-President Carlos Salinas decided to show skeptics in the U.S. Congress that Mexico had shed its corrupt, single-party dictatorship, and Salinas cavalierly selected Sinaloa as the venue to drive home this point. Specifically, he agreed to allow the pro-Catholic, middle-class National Action Party (PAN) to "win" the mayorship of the resort city of Mazatlan. Although himself no political puritan, Millan--convinced that the PRI had won fair and square--raised unshirted hell at this Machiavellian ploy. He even proposed having the ballots re-counted publicly at high noon in the city's central plaza. When Salinas fobbed off this suggestion, Millan promptly resigned his party post. Once Salinas left office, however, Millan returned to national prominence, serving as the PRI's secretary general before winning a party primary en route to the Sinaloa statehouse. Even though anathema to some of CTM's diehards, Millan enjoyed organized labor's backing for the state's top spot inasmuch as it was the only governorship available to a union notable.

His labor credentials aside, Millan knew that investment was the key to raising the quality of life in this seafood- and farming-dominated state whose personal...