Will Mexico get the populist "full package"?
Today Andrés Manuel López Obrador (“AMLO”) is officially assuming his office as President of Mexico, after winning the election in July (the transition in Mexico clearly takes a lot of time). He won with a stunning majority: over 50% of the popular vote, 31 out of 32 country’s states. Such a majority will allow him to do pretty much whatever he wants, including changing the Constitution, during his six-year term.
“AMLO” has been often compared to Donald Trump for his campaign style, and it was even reported that in the White House, he is confidentially referred to as “Juan Trump”. Indeed, “the relationship between Mr Trump and Mr López Obrador has got off to a surprisingly positive start”, writes the Economist in an article that also points out that AMLO is Mexico’s most “left-wing leader in decades”. To his inauguration, AMLO has invited the President of Venezuela, Nicolas Maduro: an invitation with clear political undertones, more than just evidence of good neighbourliness.
I visited Mexico last week and I can’t claim to know much about the country’s politics. But the new president’s first proposals have an unmistakable flavour. Two of the parties that support the new President, the Labour Party and AMLO’s own National Regeneration Movement, have put forward some ideas that may set the tone of the new administration.
The Labour Party proposed to to repeal the law that allows private pension funds to be managed by private banks and re-nationalize them. Mexicans have had individual accounts since 1997. Such an idea suggests not so much a vision of “social justice”, but a need to have resources to prop up some sort of “industrial policy.” Sergio Sarmiento, one of Mexico’s most distinguished liberals, agrees that a reform is needed to raise pensions, but that the needed resources would not certainly come out of a nationalisation that gives government the right to invest workers’ savings at will.
The incoming director of the Fundo de Cultura Economica, a government publishing house, is Paco Ignacio Taibo II, a hard left activist; he recently came out saying the new government should nationalise the mining industry.
AMLO’s own party is flirting with the idea of abolishing bank charges by law (how generous!).
All of this came at the same time the incoming government has announced it will scrap Mexico City’s $13.3 billion airport already under construction. The project was financed at 60% by public authorities, but AMLO’s dismissal is not seen as a harbinger of a more considerate approach to public finance: because of the already completed construction and existing contracts, it will cost the country $5 billion.
The move was interpreted by markets as evidence that AMLO (who during his electoral campaign posed as a moderate, claiming no nationalisation was in sight) has no sympathy whatsoever for the private sector: the peso fell by more than 3 percent and the stock market fell by more than 4 percent.
As Manuel Suarez-Mier reports, the President’s “pronouncements have scared the markets and resulted in higher interest rates on public debt, depreciation of the peso, the crashing of stock exchanges, and downgrading of national credit by rating agencies. The cost of his actions has already been immense. Every week there has been unexpected and alarming news, but since the markets react to too many variables, including those from abroad, we can only say that the tally from his many mistakes has been severe. The losses on Mexico City’s stock exchange alone until this week amount to $100 billion.”
To all this, we should add that the Labour Party has also proposed to nationalise the international reserves of the Central Bank. Interestingly enough, the Central Bank is openly critical of AMLOnomics and “stressed the possibility of following November’s interest-rate move with further increases, citing a deteriorating inflation outlook and market uncertainty over the economic policies of President-elect Andrés Manuel López Obrador”.
The opposition of the Central Bank is perhaps the only good thing in a rather bleak scenario. In 1990, novelist Mario Vargas Llosa famously described Mexico as “the perfect dictatorship”. In the 20th century Mexico did not experience the carousel of caudillos other Latin American countries had, but the ruling Partido Revolucionario Institucional had an uninterrupted stretch in power for 71 years, from 1929 to 2000. Vargas Llosa pointed out that happened through a system of systemic corruption, in which the opposition was basically ceremonial, intellectuals were kept abroad in various ways, and corporatism was the rule when it comes to the economy.
AMLO’s roots are in the history of PRI and he may been trying to rebuild that system. A genuine opposition is key lest that happens, but given AMLO’s parliamentary majority, this appears to be a very long shot.
That AMLO’s goal is to re-establish the “perfect dictatorship” may be suggested not only by the proposals that his supporting parties are floating around but also by the method he is using so far. To terminate the new airport construction, AMLO has called a referendum to which a mere 1% of the voters participated: yet that was deemed enough to say that people have spoken and celebrate the blessings of direct democracy.
This is perfectly attuned to the new President’s ideology. He represents himself as a man of the people, and even more so: a man who has been trusted by the people with a mission of social and political renewal. His rhetoric is a mixture of nationalism (which in Mexico builds on the country’s pre-Spanish history), pauperism and Messianic echoes.
Roberto Salinas Leon has an impressive column that describes precisely this character of the new presidency:
The re-birth of a nation, the transformation of popular sovereignty for the benefit of all, a transcendental change from an unjust and corrupt-ridden past to a new society governed by a moral leader destined to impart equality, justice, and goodness. A savior, and a saint. It is unsurprising, therefore, that one of AMLO’s chief priorities involves the construction and approval of what he calls a “moral constitution”—an ethical set of national rules that will focus on both material progress as well as the “well-being of citizens’ souls.”
Note that Salinas acknowledges that AMLO was chosen by many hoping for “a wholesale repudiation of a vicious circle of cronyism and corruption.” People, basically, wanted to prove something different, exasperated as they were by insecurity and corruption. And yet such a wide majority for a man who wants to “regenerate” a nation spells danger. The road to hell is paved with good intentions, and the mix of a Messianic rhetoric with a super-majority may help you run through it very fast.
Dec 1 2018 at 10:01pm
I assume he would need the support of his party members in parliament for this. Surely the president himself cannot change the constitution?
Juan Manuel Pérez Porrúa Pérez
Dec 2 2018 at 1:30am
I hope that AMLO turns out to be “populism light”. You mentioned criticism by the Banco de México, but we must bear in mind that two appointments to its Board of Governors are coming up due to the retirement of one Board member and the resignation of another. The prospective replacements, it seems to me, are not enthusiastic about even the single mandate of the Bank of Mexico.
Also, a policy has been enacted that civil servants can’t earn more money than him, the President. This might seem harmless but the catch is that he decided to cut his own salary in such a way that civil servants at the Bank will see a fall in their salaries. This has so far had the effect of encouraging many long-serving employees to take retirement and has also encouraged others to look for other jobs. I don’t know what the effect will be in the long term of this policy for the Bank.
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