Mexico's Pena Nieto feels the heat with finish in sight

MEXICO CITY (Reuters) - Two months before Mexico's presidential election, Enrique Pena Nieto was strolling to victory. But with just a month to go, he may suddenly have a race on his hands.

Long dormant opposition to Pena Nieto and his Institutional Revolutionary Party (PRI) has welled up over the past three weeks to throw the result of the July 1 election into some doubt, raising the risk of yet another government with no majority in Congress.

Fired by youth activism on the Internet, a protest movement tapping into allegations of corruption and authoritarianism that dogged the PRI in the past has arisen to dent Pena Nieto's once-commanding lead.

"This is a danger to him because it could cause a kind of snowball effect, bringing together several things at the same time," said Federico Berrueto, director general of Mexican polling firm GCE.

The dominant force in 20th century Mexican politics, the PRI's 71-year rule ended in a 2000 election, heralding what critics hoped would be a new dawn for Mexican democracy.

But the conservative National Action Party (PAN), which succeeded the PRI, has struggled against a tide of drug-related violence and sluggish economic growth, opening the door to a return of Mexico's former rulers.

Aided by favorable coverage from Mexico's main broadcaster Televisa, the telegenic Pena Nieto emerged as strong favorite for the presidency, promising voters that the PRI had left behind the abuses of power that blighted its record.

Pena Nieto has held a big poll lead for over two years and he looked to be unstoppable when the campaign formally began two months ago, showing support that at times topped 50 percent.

But the shine began to come off his slick operation when a large group of noisy students surprised Pena Nieto at an event in Mexico City's Ibero-American University event on May 11, booing and mocking him all the way out of the building.

GIANT AWAKENS

Captured on video, the Ibero incident kicked off a frenzy of anti-PRI activism in online social media, and protest marches against Pena Nieto were organized for the following weekend.

Thousands took the streets of the Mexican capital to join the demonstrations, and other marches followed. Since then, Pena Nieto's poll ratings have suffered.

The protests are having resonance, said GCE's Berrueto. A telephone survey of 600 eligible voters across Mexico by GCE showed that more than 60 percent of respondents thought the marches, which also take aim at Mexico's dominant broadcasters, were positive with only 23 percent of the opposite view.

The Ibero showdown also spawned a youth movement called "Yosoy132" ("I am 132") explicitly opposed to Pena Nieto.

Describing itself as a continuation of the example set by the 131 students the group said had confronted the PRI candidate, it has generated plenty of buzz in Mexican media.

Fernando Rueda, a 25-year-old law student involved with Yosoy132, said far from having forgotten the PRI's past, many young voters remember its failings well, such as the sudden devaluation of the peso currency in late 1994 that sent the economy into a deep recession.

"We were a very gray generation, which was reflected in the lack of interest in politics we had been seeing. But it's fair to say the Ibero was the match which set everything ablaze, and the giant is awakening," Rueda said.

Created by the heirs of the Mexican Revolution, the PRI rose to fame in the 1930s with socialist policies like redistribution of land to peasants and it later moved towards the center.

Over the years, the party's image suffered due to a series of events such as the government's bloody suppression of student protests in Mexico City's Tlatelolco district in 1968 and the money laundering and murder allegations that enveloped the brother of former President Carlos Salinas in the 1990s.

MAJORITY IN DOUBT

Chasing Pena Nieto hardest is 2006 presidential runner-up and leftist contender Andres Manuel Lopez Obrador. His bid has drawn new momentum from attacks on the PRI that seek to depict the party as a tool of entrenched interests like Televisa.

After long languishing in third place, Lopez Obrador has moved into second, past Josefina Vazquez Mota of President Felipe Calderon's PAN. Calderon cannot seek a second term.

Lopez Obrador, who has likened the return of the PRI to a national disaster, was just four points behind Pena Nieto in a newspaper poll published on Thursday.

Other recent opinion surveys have also shown the gap closing, but still give Pena Nieto a much more comfortable lead.

So far ahead in the surveys was Pena Nieto in late April, his support levels would have all but guaranteed the PRI the first majority in Congress for 15 years, whetting the appetite of investors for pro-market business reforms in Mexico.

But after Thursday's poll showed Pena Nieto with effective backing of just 38 percent of voters, local bond holders took fright, and stocks and the peso slumped, aggravating fears already emanating from Europe's sovereign debt crisis.

Roy Campos of pollster Consulta Mitofsky said his firm's latest voter survey showed that nearly half of the PRI's cushion for control of Congress was erased in the space of a week.

"So its chance of winning a majority is at risk," he said.

As the longstanding favorite for the presidency, Pena Nieto and his soap opera star wife have been the focus of media scrutiny, though his productive relationship with Televisa has helped to take the edge off stories that could damage his bid.

That cover was blown during Pena Nieto's Ibero appearance when protesters jeered the contender over his record as governor of the State of Mexico between 2005 and 2011.

Reviving memories of brutal attacks carried out by police during Pena Nieto's attempt to quell unrest in the town San Salvador Atenco in 2006, students chanted "out" and labeled him a murderer. He made a hurried exit with his entourage.

Pena Nieto, who has largely eschewed attacks on his opponents during the campaign, sought to defuse the protests by saying he welcomed the breadth of opinion they illustrated.

However, since his poll ratings began to dip, he has become more combative, and his team attacked Lopez Obrador when a report this week said a group businessmen had met in Mexico City on May 24 to raise illegal campaign funds for the leftist.

Lopez Obrador's camp issued a statement from one of the attendees insisting that nothing untoward had taken place, but the PRI has lodged a complaint with electoral authorities.

Pena Nieto this week also told executives that the PAN had made notorious drug lord Joaquin "Shorty" Guzman one of the world's richest men by letting him break out of jail in 2001.

But the PRI has problems of its own with drug gangs.

The case of Tomas Yarrington, a former PRI governor of the northern state of Tamaulipas who is under investigation on suspicion of taking money from drug cartels, has been an unwelcome distraction from Pena Nieto's message of a new start.

The party has suspended Yarrington, but a steady drip of revelations about the ex-governor continues to plague the PRI.

A final televised debate looms for Pena Nieto on June 10, and Javier Oliva, a political scientist at the National Autonomous University of Mexico, said the PRI candidate would have to take more risks during the race to the finish line.

"And he's going to have to be more specific about what his policies are too," said Oliva.

(Additional reporting by Mica Rosenberg; Editing by Jackie Frank; Editing by Kieran Murray)

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