The real challenges of Mexican Economy under Lopez Obrador’s presidency

Jimy Cruz Camacho* 

It was repeated with certain frequency that, of arriving at the presidency the candidate Andres Manuel Lopez Obrador (AMLO) would be a danger in economic matter for Mexico. First of all, we must remember that in Mexico, unlike many other countries, monetary policy is established and executed by the central bank (Banco de México), which is autonomous and has the constitutional mandate to preserve the purchasing power of the currency and therefore control inflation. This institution is governed by a Board and can not be changed at will by the President of the Republic since its members have been elected for constitutional periods of 6 and 8 years. In fact, López Obrador has stated that if he becomes president, he will be respectful of the autonomy of the Bank of Mexico. On the other hand, the budget of income and expenses of the Federation (and therefore the central axis of fiscal policy) is proposed by the president (via the Ministry of Finance and Public Credit) but its approval and discussion must necessarily pass through the Chamber of Deputies, organ of the State where plurality is guaranteed. In fact, the deputies emanating from the PRI and the PAN (lawyers and economists) frequently make up the Finance and Budget and Public Account committees of the Chamber of Deputies. The big issue is how that budget is allocated and distributed. On the other hand, the members of the economic cabinet that López Obrador has appointed are highly trained economists and seem to be inclined to keep macroeconomic indicators under control. The peso-dollar exchange rate has been floating since the December 1994 crisis and today is subject to market forces and not to the whim of the president. 

In addition, Mexico stopped being a rigid presidential regime many years ago and nowadays there are organs of the private initiative (diverse business chambers such as the Business Coordinating Council, the Coparmex, Canancintra, etc.) organs of organized civil society, universities with highly prestigious research centers and there is a whole constitutional scaffolding, international treaties, laws and regulations that would make it impossible for the Federal Executive to forcibly impose his views on economic matters whoever wins the presidency.

What is seen as urgent is putting the fight against corruption on the agenda of the public administration, improving the distribution of income and, of course, strengthening the rule of law to combat violence. Controversial issues of AMLO? Many. Among them, the moral constitution, amnesty to criminals, cancellation of the new airport in Mexico City NAIM (perhaps it is understood by the hotbed of corruption that is seen there but not justified by the signal that a decision of that nature would send to investors), to throw back the energetic and educational reforms without proposing something concrete in its place, although it will also be necessary to clarify that the change of these reforms does not depend on the President but on the Congress. It is therefore not evident that if AMLO wins, there will be devaluation, debt growth, inflation, unemployment, etc. In fact, there has been more devaluation, inflation, debt growth, poverty growth and unemployment in the last two presidential periods  than in previous years. International conjuncture, error in monetary and fiscal policy decisions? It will have to be studied.

It would be worth remembering that the governments emanating from PAN and the PRI have been as eccentric as the Castro, Maduro and Chávez regimes that they associate with López Obrador, I cite some examples: more than 60,000 deceased deaths per sexennium, almost equal number of disappeared, we are the country with the highest number of murders to journalists, among the missing there are many students and that hurts enough since it is hard to understand a country where the class that represents the nation's hope is killed and disappears. Remember also that officials of all levels of government have been protagonists of millionaire embezzlement in SEDESOL, SAGARPA, multimillion dollar deviations from the PRI governments of Veracruz, Chihuahua, Quintana Roo, Coahuila and a long etcetera. The use and abuse that has been made of State institutions to favor particular interests is also causing increasing alarm. The Secretariat of Public Administration stand out to exonerate the President of the Republic of what appears to be a conflict of interest over the aberrant White House (Casa Blanca) affaire, the use of the Prosecutor of the Nation against a presidential candidate, of the Electoral Authorities to exonerate the current President for unlawful acts committed during his campaign.

Putting things in the balance not everything has been negative in the presidential periods of the PAN and the PRI. Progress has been made in the material well-being of families, freedom of expression has remained albeit with alarming chiaroscuro, macroeconomic stability has been maintained and with this, Mexico has attracted a large volume of foreign investment. Perhaps this has been the reason why popular discontent has not been channeled through violence and national disruption. 

However, there are also alarming signals. Recall that the main attribute of a state is that it is strong, guarantees the security of citizens and applies justice while exercising a monopoly on violence. That State must also guarantee free competition of agents in the economy. In Mexico it works exactly the other way around, there is no security, anyone is free to exercise violence against others, we live in an environment of profound injustice (not only formally and legally, but also from social and economic standpoint). In the field of the economy we are dominated by monopolies in a large number of industries, such as telecommunications, entertainment, cement, fuel, electricity, even bread and tortillas are ruled by predominant competitors. The damage that the above causes to the economy costs us all Mexicans and even decreases competitiveness and limits our growth. We receive products and service on many occasions of poor quality at exorbitant prices. Who pays the bill of the monopolies and the grotesque fortunes of their owners? The consumer. Who pays the corruption bill? The taxpayer. Nonetheless,  we just have to remember that the consumer and the taxpayer are the same people. This is how our country is dangerously close to being characterized as a failed state with alarming rates of social discontent. This is from my point of view the real danger for our country. 

AMLO is not the solution? I do not know, but for now on the ballot this July 1 we will only have two options, more PRI and PAN or a new party in the Presidency of the Republic. Let's leave the decision in the hands of the electors, but not of those dark forces that today desperately speak  in campaigns of hatred and disinformation.

* Consultant, economist by the UAM-Iztapalapa, graduated in business analysis and valuation by the London School of Economics and Political Science and Masters in Philosophy by ITESO in course.