A Year of Retreat

As the López Obrador administration ends its first year in office, Mexicans can look back to a period of unrestrained change, mostly to recreate the legal structures of the past. The president has not been shy or modest in his objective to establish strong personal control of all institutions and processes; rather, he moved, step by step, to subordinate the Congress, establish control of the Supreme Court and neutralize all the regulatory entities that were supposed to be autonomous.

The rationale is simple: he believes Mexico was successful back in the 1960s when the president had full control of the political arena, the economy and society in general; by recreating that era he expects to bring back the economic growth, stability and peace that characterized those times. Accomplishing this has meant backtracking on the reforms of energy, education, the tax system and the legal structure in general. With an extremely large series of reforms passed by Congress, many of them constitutional amendments, the president has amassed vast discretionary powers to threaten anyone and everyone.

Not surprisingly, the economy has slowed down. Investors, both local and foreign, distrust a government that is destroying the few checks and balances that had been built over the previous four decades and cannot function in a context of a government with ever more discretionary powers and ever changing rules of the game. Government and business clash on the fundamental rationale that divides them: whereas the president wants, in his words, to subordinate economic decisions to politics (that is, to the government), investment decisions in the 21st century are based on markets, considerations of efficiency and clear-cut rules of the game. The divide is unbridgeable.

Nothing illustrates the nature of the AMLO administration better than its foreign policy, or lack thereof. The president sees no value in participating in international meetings such as the G20 or in developing close links with nations of interest to Mexico. He refused to receive Chile’s president, Sebastian Piñera, but did invite Argentina’s incoming president, Alberto Fernández, to visit Mexico: he will only deal with his ideological brethren. In contrast with most nations around the world which compete for investors’ interest, López Obrador can do without them.

Despite its popularity, the administration is facing dicey prospects. It’s security policy, based on the notion that if the government does not attack organized criminals they will respond in kind, has floundered in Culiacan. Its energy policy -essentially suspending the reforms of the previous administration by not auctioning any more fields or farmouts- has reduced investment in the sector and entails ever growing subsidies for PEMEX, which the government can ill afford given its rapidly diminishing revenues. All that the government can show a year into its six-year administration is a few casualties of corruption in the form of an imprisoned former secretary in Peña-Nieto’s administration, a fallen minister of the Supreme Court and some other prominent figures in jail. The circus these actions permit help sustain the president’s popularity, but solve nothing: they do not even diminish corruption.

The key to the president’s actions, and of his support, is the profound resentment that many Mexicans, but above all his own coalition, hold against the past, the business community, the United States, the reforms carried out in the past few decades, the freedoms that Mexicans have secured, and corruption. Hate is the major impulse that animates his constituency and the president exploits it relentlessly. The problem is that neither the hate or resentment nor the arbitrariness of the government’s actions on the corruption front are conducive to economic progress or less violence. The president has concentrated power remorselessly, but this has not brought back the positive results of the 1960s.

At some point in time, the lack of delivery on economic promises will begin to undermine the president’s credibility, which will force him to respond. The big question is how he responds then. During his campaign, he famously said that “I always think the same but act according to circumstances.” He has proven to be consistent in the pursuit of his objectives and rejects any call to shift direction. Yet, he has also shown to be pragmatic (as in fixing the crisis his own team created on the issue of the gas pipelines), as well as responsible in the management of the fiscal accounts. These factors are more likely to bring him to a standstill than to overstep and, with that, to provoke a financial crisis. Except that it’s no always obvious what might bring about a sudden change in sentiment within the financial markets.

If one takes a long view of Mexico, none of the conundrums that López Obrador is facing (whether he sees them that way or not) are new. In fact, recognizing the nature of Mexico’s legal system and the weakness of its institutions, previous administrations pursued novel ways to provide certainty for investors while gradually institutionalizing the country’s politics. Thus came NAFTA, which was, and is, the key to Mexico’s long-term stability and economic development, which is why the United States agreed to go for it back in the 1990s.

What differentiates AMLO from his recent predecessors is his conviction that Mexico has to retreat from the reforms and changes of the past four decades, rather than move on towards a different future. He deeply believes Mexico ought to look inwardly and diminish its international links and commitments, starting with those with the United States.

He has just finished one year of extraordinary activity and activism. Five more of the same would bring Mexico back to the stone age.

Opinions expressed here are solely those of the author.