Why Mexico's López Obrador Is Playing With Fire
The new president is uniquely positioned to fix the country's long-ignored economic shortcomings. But he should work with the system, not brush it aside, writes economist Luis Rubio.
MEXICO CITY — Some years back, as China prepared to receive the heads of the intergovernmental Asia-Pacific forum APEC, the city government of Beijing shut down factories and banned millions of cars from circulating. The idea was to cut pollution and give a cleaner impression of the city.
And yet, a phone application was enough to show the Chinese capital's alarming pollution levels, in spite of the curbs. So what did the government do? It immediately set about resolving this outstanding pollution problem — by blocking the application!
Mexico's new president, Andrés Manuel López Obrador, seems to be taking a similar approach. Instead of solving problems, he insists on destroying what was already working in Mexico, and in some cases working very well. Despite some tremendous shortcomings and unresolved issues, the country was actually on the right track in recent times, and clearly doing much better than it was in the 1970s and 80s.
The strategy of labeling everything from before as bad and corrupt is having a negative impact: The jobless rate is rising, the economy diving, and a total lack of investments is exacerbating the first two indicators. The president, however, is not prepared to recognize that his strategy is the cause of these phenomena. Nor will he acknowledge that should things continue, his approach will duly plunge the country into a vast crisis. Markets are already sending signals of distrust regarding Mexican debt, and starting to anticipate risks that may, if unchecked, provoke just the crisis the president says he hopes to avoid.
Our core problem isn't that the finances of Pemex, the state oil firm, are out of wack. Yes, that's a major concern. What's really threatening the economy is the government's idea that it should do away with the existing system. Rather than start anew, the government needs to identify the country's problems — some of them recent, some of them long-standing — and take steps to fix them. These are problems that have been ignored for decades. And it was to fix these problems that voters chose López Obrador as president. He has a unique mandate to do so.
Andrès Manule Lòpez Obrador, Mexico's president — Photo: Arturo Monroy/Notimex/Newscom/ZUMA
The economic strategy that Mexico has followed in recent decades is the only viable one. But it has to be done properly. It is no coincidence that all nations, literally, have followed a similar path, because there is simply no other way. The exceptions are Venezuela or North Korea, examples that speak for themselves. Even Cuba has, in its own modest way, entered the logic of globalization.
López Obrador's starting point is that everything done since 1982 was wrong. This is mistaken for two reasons: First, it does not acknowledge that the 1982 crisis was the result of an excessively prolonged strategy of developmental stabilization that helped provoke a decades-long debt crisis. Second, it ignores the fact that the inward-looking, pre-1982 approach ran its course because it could no longer meet the needs of an increasingly demanding population and because the world, its technologies, production and communication modes were changing.
Simply put, the economic strategy Mexico followed after 1982 may have been flawed — and all efforts should be made not to repeat mistakes — but it was the only plausible way.
López Obrador has the legitimacy and necessary leadership to do what previous governments could or would not do: remove enduring obstacles to development that are today the bases for the low growth rates that have dogged Mexico for so long. Our problems are related to outdated social and political structures that favor what one local writer has called the "extortion economy." It is an economy where the authorities, trade unions, monopolies, bureaucratic systems and criminals extort money from citizens, consumers, traders, businessmen or students, impeding nationwide growth.
If the president really wants economic liftoff and to give poorer Mexicans new opportunities, his strategy should be to end this endemic, and rampant unaccountability. But by consolidating sectoral fiefdoms, rewarding obstructive unions and cultivating firms that block competition, he is doing the opposite.
Provoking union disputes, attacking energy firms or stoking tensions can only dampen growth and curb investments. If the president insists on destroying what has been established here, expect a crisis as big as 1995, or worse.
If there is no progress in the southern, rural state of Oaxaca, it is because publicity-seeking unions and political structures block it. One only need observe successful parts of the country like Aguascalientes or Querétaro to see what favorable political and business settings can create.
Now, does the president want to turn the entire country into something like the state of Oaxaca? What is the path he has chosen to ensure that those below, people with fewer privileges and less money, have the same rights and opportunities as those above them? Is it to lift them up, or push everyone else down to their level?