By Gabriel Stargardter
SAN SIMON ZAHUATLAN, Mexico (Reuters) - Sofia Irene can remember when a Mexican president came to visit her mountaintop village pledging to replace dirt floors with cement, pave roads and broaden electricity coverage.
Seven years on, most homes in San Simon Zahuatlan have solid foundations and electric lights and two concrete roads run through the remote settlement in Oaxaca state in southwestern Mexico.
But soon after the day President Vicente Fox entered the village with a bustling entourage in 2005, Mexico had its back to the wall again in its long fight against poverty.
More than 12 million Mexicans have joined the ranks of the poor since Fox left office six years ago, making poverty a top issue in the July 1 presidential vote.
The election winner, Enrique Pena Nieto, has said he will bring jobs, education and clean water to wide swaths of the country where poverty is a stubborn reminder of successive governments' failure to unlock Mexico's full economic potential.
He has made firm commitments: the day his campaign began, he pledged to lift 15 million people out of poverty.
However, few of his words reached Irene's ears in San Simon Zahuatlan, Mexico's second poorest municipality.
Cooking beans over an open fire in a smoky, corrugated iron shack with a dirt floor, Irene had already forgotten about the election and who the winner was until her husband reminded her.
"We're screwed," Irene said repeatedly, using one of the few Spanish phrases the 38-year-old ethnic Mixtec knows well.
To end malnutrition and improve water supply in places like San Simon Zahuatlan, Pena Nieto aims to ratchet up annual growth in Latin America's second biggest economy to around 6 percent - or triple the average rate of the past decade.
Though the economy has improved toward the end of his six-year term, outgoing President Felipe Calderon has presided over a sharp rise in poverty.
Today, nearly 60 million Mexicans or more than half the population are considered poor, roughly the same percentage as in the 1980s. That belies the unequivocal economic progress of the upper end of Mexican society, which has helped make Carlos Slim the richest man in the world.
Within the 34-nation Organisation for Economic Cooperation and Development, only in Chile is income inequality higher than in Mexico, OECD data show.
Growing at nearly double the rate of Mexico over the last decade, Brazil's economy has shown what can be achieved.
The South American giant has cut the number of poor by nearly 21 million since 2003 and pulled ahead of Mexico to become Latin America's foremost economic powerhouse.
Nearly 90 percent of people in the ramshackle settlement of San Simon Zahuatlan live on less than the 684 pesos ($52) a month which CONEVAL, the government's social development agency, uses as its benchmark for extreme poverty.
Potable water has to be trucked up the mountain, and none had been delivered in more than a month when Reuters visited.
Most inhabitants are subsistence farmers growing corn and beans on tiny plots and spend the rest of the year working elsewhere in Mexico. Those who stay at home weave straw hats and sew soccer balls, earning as little as 15 pesos ($1.13) a day.
Of the municipality's roughly 1,000 students only around 50 finished primary school and 25 secondary school last year, said mayor Marciano Camarillo. The literacy rate is below 50 percent and many of the indigenous Mixtec speak little or no Spanish.
Nearly 40 percent of pregnant women are teenagers and 20 percent of babies are born malnourished, said village doctor Jesus Carino.
Such statistics are a stain on Mexico's reputation, Pena Nieto said in Oaxaca during the election campaign.
"We cannot remain a poor country when we are already well into the 21st century," he told a rally in Oaxaca City.
The 46-year-old president-elect with boyish good looks, who takes office in December, has pledged to combat poverty and banish hunger by raising agricultural output, providing universal pensions for the old and scholarships for the young.
But Pena Nieto's victory margin was smaller than expected and his Institutional Revolutionary Party (PRI) will not have a majority in Congress, making it tougher to push through the package of fiscal, labor market and energy reforms he hopes will spur faster growth.
Residents in San Simon Zahuatlan are skeptical Pena Nieto will be able to make much of a difference in their lives.
"We had six years with Fox and nothing, and now with this current government we're just as badly off, worse even," said Federico Balthazar, the village's 30-year-old treasurer.
Until the 1980s, Mexico had made big inroads against poverty.
Taking power in 1929, the PRI pursued left-leaning policies in its early days, redistributing land, creating a minimum wage and improving healthcare and access to education.
Poverty fell steadily from more than 85 percent in 1950 to settle at just over 50 percent in the 1980s, according to a study published by the Inter-American Development Bank.
After a spike in the mid-1990s, when a major economic crisis hit Mexico, further advances were made under Fox, whose conservative National Action Party (PAN) ousted the PRI in 2000.
When Fox left office in 2006, poverty was at 43 percent, thanks to a welfare scheme that promoted education and gave women control over family spending. Seven million people had exited poverty during his presidency.
Calderon continued his predecessor's increase in welfare outlays, though they remain the lowest in the OECD, partly due to a weak Mexican tax take Pena Nieto has pledged to improve.
But his government was soon struggling with the 2008-2009 global financial crisis, and the job market has yet to recover to its pre-crisis levels. By 2010 the average wage was worth less in real terms than it was in 1994, according to Inter-American Development Bank figures.
Rapid population growth and the rising cost of social services turned the screw on Calderon's promise to raise living standards and between 2006 and 2010, around 12.2 million Mexicans slipped into poverty, according to CONEVAL data.
Pena Nieto has identified sub-standard education and poor infrastructure as key impediments to progress.
If he succeeds, the returns could be impressive.
Lifting the country's 21 million extreme poor out of poverty could boost GDP by as much as 9 percent, said Raul Feliz, an economist at Mexico's CIDE think tank.
ROADS GO ONLY SO FAR
The people of San Simon Zahuatlan have learned not to get their hopes up.
When Fox visited in 2005, he came with an ambulance.
Local councillor Jorge Mendez, 52, said he and many others thought the vehicle was a much-needed gift to the village.
They were wrong. Brought along in case anything happened to the president, it disappeared just as quickly as he did.
Fox's visit did, however, bear some fruit.
Electricity coverage has become widespread. Amid the stray dogs and cockerels, most houses now have concrete floors, while two streets in the center have been paved, as Fox promised.
The age of the Internet has also arrived - although the technical college due to house the seven computers connecting San Simon Zahuatlan to the Web has not been built yet.
It is not just a question of money, said Bernardo Rosales of the Technological Mixtec University in nearby Huajuapan, who works with indigenous groups in the region.
"The act of paving a street, of building sewers means nothing," Rosales said. "We can't talk about real, worthwhile development until people are able to create sources of employment from within their own communities."
(Editing by Dave Graham and Mohammad Zargham)
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