By Mica Rosenberg
MEXICO CITY (Reuters) - Mexico's conservative National Action Party made history when it swept to power in 2000, ending 71 years of one-party rule. But it now faces an identity crisis after a punishing presidential election defeat.
Josefina Vazquez Mota, the PAN's candidate, came in a distant third with just 25.4 percent of the vote on July 1, and the party will have far fewer seats in Congress.
The Institutional Revolutionary Party, or PRI, which ruled for most of the 20th century and was ousted 12 years ago, was the beneficiary the PAN's collapse and bounced back to power.
President-elect Enrique Pena Nieto campaigned on a platform of ambitious labor, energy and fiscal reforms that look much like proposals that the PAN has failed to push through.
PAN lawmakers have said they will not block reforms that benefit Mexico's long-term growth, even if the proposals come from a PRI president.
But they face a clear dilemma: How does the party maintain its integrity as an alternative to the PRI while lining up behind Pena Nieto, who is likely to reap the political rewards if the reforms are successful at re-invigorating the economy?
Having struggled through two terms in office without a majority in Congress, dealt with the financial crisis and become embroiled in a brutal war with drug gangs, some party leaders acknowledge the years in power have taken their toll.
"We need a self-analysis, an internal catharsis to put us back on track," Eugenio Elorduy, a former governor of Baja California state, told Reuters.
Already the PAN is voicing support for measures which could set it at cross purposes with the PRI, potentially slowing down Pena Nieto's reform agenda.
It could call for curbs on the power of public sector unions that have long supported the PRI, closer monitoring of public finances in state governments -- two-thirds of which are under PRI control -- and a second round of voting in presidential elections, analysts and party politicians say.
"The fundamental question facing the PAN is whether they pursue an agenda no matter who gets credit for it or whether they pursue party building. It is difficult to do both," said Eric Farnsworth of the Washington-based Council of the Americas.
The PAN is projected to be the No. 3 force behind the PRI and a bloc of leftist parties in the 500-member lower house of Congress and No. 2 in the 128-seat Senate.
Still, it will be key to any deal-making and hopes to use that leverage to ensure Pena Nieto sticks to his campaign promises and does not bend to interest groups within the PRI.
"We know what we want in terms of energy reform, we know what we want in terms of tax reforms and education reforms. We presented those initiatives in Congress and they were blocked by the PRI over and over again," said Vazquez Mota's campaign manager Roberto Gil Zuarth, who is set to enter the Senate.
The PAN will have to decide what concessions it can demand from the PRI government to keep itself in the spotlight.
"There will of course be dialogue, but we will have our own agenda. One of the immediate items on that agenda is establishing electoral reforms to end campaign financing that is outside the boundaries of the law," Gil Zuarth said.
Leftist runner-up Andres Manuel Lopez Obrador has accused the PRI of widespread vote buying in the election and is refusing to accept the results.
Backed by a group of leftist parties, Lopez Obrador wants to join forces with the PAN to claim in an electoral court that Pena Nieto and the PRI handed out gifts in exchange for support and was unfairly propped up by Mexico's biggest media companies.
The PAN has said it will not seek to have the results of the election annulled but could still work with the PRD in Congress to pursue reforms of the political system and financing rules.
Voters are skeptical there will be much camaraderie in the new legislature, which convenes on September 1, after more than a decade of stalemate.
"Just like the PRI blocked Calderon's proposals, the PAN will likely block the PRI, for revenge," said high school teacher Sergio Francisco Javier.
'JUDAS OF GUANAJUATO'
Founded on socially conservative, free-market values, the PAN was the main opposition force for most of the PRI's rule between 1929 and 2000.
In the early days of its history in the 1940s, the PAN garnered much of its support from staunch Roman Catholics, who were opposed to the PRI's anti-clerical politics.
Over the decades, the PAN fought to break the PRI's grip on almost every aspect of Mexican political life. With charismatic businessman Vicente Fox as its candidate, it finally won the presidential election in 2000.
Felipe Calderon succeeded Fox in 2006 but both men failed to get their more ambitious reform proposals through Congress and were unable to meet their promises of robust economic growth.
Elorduy, the former state governor, and some other PAN loyalists say the party's principles were diluted by power and that a small group around Calderon has tried to impose its views on the rest.
The split was laid bare in the party's primaries in February when many believed the president backed his former Finance Minister Ernesto Cordero over Vazquez Mota for the nomination.
Octavio Aguilar, a member of Vazquez Mota's campaign team, has complained that Calderon and key members of his government did little or nothing to help Vazquez Mota after she won the party's nomination.
"Josefina was betrayed," he told news website Reporte Indigo
Another party betrayal came from Fox himself.
A month before the election, the mustachioed and outspoken former president who has largely retired to his ranch in the central state of Guanajuato, said Mexicans should rally around the winner, implying Pena Nieto was far in the lead.
Earlier in the campaign, he said it would take a "miracle" for Vazquez Mota to win.
"Fox for us was such a significant figure, he marked a generation," said PAN senator Adriana Gonzalez, 37, who is going to the lower house of Congress. "To know that he went over to the other side is heartbreaking."
PAN leaders have been mulling whether to kick Fox out of the party for his comments.
"Judas of Guanajuato, that's what the PAN is calling him now," Juan Ignacio Zavala, the brother of first lady Margarita Zavala, said in El Financiero newspaper. "He pulled the rug out from under the party's base."
(Additional reporting by Michael O'Boyle; Editing by Kieran Murray and Cynthia Osterman)