A COUPLE of decades ago, when businesspeople and investors first got excited about the growth prospects of large emerging markets, Mexico was at the top of their lists. Nowadays it is the BRIC countries—Brazil, Russia, India and China—that have all the swagger, while Mexico commands attention for a sad reason: the surge of drug-fuelled violence that assails some of its cities. Mexican envy at the hoop-la surrounding Brazil, its Latin American rival, has reached a pitch to which only a psychoanalyst could do full justice. Look more closely, however, and Mexico has hidden strengths. Its people are richer than those of any of the BRICs except Russia. They are better educated than Brazilians. The economy is more industrialised, better managed and more business-friendly than Brazil's. And although growth has not been spectacular over the past 15 years, it has been significant. For reasons of geography Mexico's fate is ineluctably intertwined with that of the United States. This now looks less of an advantage than it once did (and not just because it is Americans who arm and finance the Mexican drug gangs). In 2009 Mexico's was hit worse than any other big economy in the Americas by the recession in the United States. Renewed weakness north of the border this month has prompted economists to slash their forecasts for Mexico as well. But Mexico is not condemned to suffer contagion. A decade ago its exporters were losing ground to China. Now Chinese wages are rising sharply, and Mexico's market share north of the border is growing again. Despite the violence, foreign investment is pouring in, especially to the motor industry. And more of those cars and other products can be bought at home: whereas Brazil's credit market looks overheated, there is plenty of scope for loan growth in Mexico.

Above all, it is within Mexico's own power to do better. Its economy has long been held back by monopolies and cartels—of legal businesses, not drug traffickers (see article). Costliest of all is the state monopoly over oil. Even as Brazil's oil industry—state-dominated, but open to foreign investment—is surging, Mexico's is retreating. Then there is the telecoms business: thanks to a private near-monopoly, owned by Carlos Slim, the world's richest man, Mexicans pay between four and ten times as much to be connected than do people in developed countries. Restrictive practices drive up the price of much else, from medicines to air fares.

Ignore the vested interests, court the voters

The government of Felipe Calderón, president since 2006, has taken some timid steps to make the state energy monopolies less inefficient, and has applied the odd pinprick to Mr Slim. But bolder action—especially allowing in more foreign investment—would secure a big reward: opening up oil and reforming labour markets and competition law could raise the rate of growth by up to 2.5 percentage points, according to one estimate. So why hasn't it happened? The oil monopoly is a nationalist totem, but its only beneficiaries now are the oil workers' union and favoured suppliers. It dates to the days of the Institutional Revolutionary Party, which ruled Mexico for seven decades mainly on the basis of cosy deals with monopolists. These have proved hard to unpick, partly because no president has had a majority in Congress since 1997.

The price of political deadlock is rising. A failure to raise extra taxes hobbles efforts to bolster security. Lack of reform risks condemning Mexico to stagnate with America. As politicians start campaigning for next year's presidential election, they should ignore the business lobbyists. Reform would benefit voters; they can surely be persuaded to back it.