Context
May 18, 2025
Luis Rubio
Private investment requires only one thing to materialize: certainty. What inhibits it is not left-wing or right-wing policies, but rather the absence of clear, transparent, predictable rules of the game that are enforced. The “Mexico Plan” is a great idea, but it rests on fragile anchors precisely because it fails to acknowledge the need for a reliable and sustainable foundation of certainty. In one word: context matters.
Certainty is not an ideological issue. In recent months, due to the actions of the U.S. president, all of humanity has experienced an example of what uncertainty feels like; in other words, the point is universal. Uncertainty prevents people from defining what they can do —from the most modest individual to the loftiest businessperson. Some, particularly speculators, may know how to profit from uncertain moments, but the majority are paralyzed, waiting for things to settle. That is why uncertainty is destructive, as we have witnessed these times.
The phenomenon is ubiquitous, but some —even nations that lack a Western-style rule of law, like China— have successfully resolved it using alternative means to guarantee certainty. Mexico is a clinical case of lacking mechanisms that provide certainty, which historically explains why economic cycles have followed six-year terms; why corrupt officials in one administration are prosecuted by the next; why there is always doubt about what the next president will be like. This has been the story since colonial times and is one of the main reasons Mexico has not prospered as much as it could have. At the heart of this lies the origin of NAFTA, which was conceived as a mechanism to provide certainty to investors. Its success was notable in terms of economic modernization, the construction of a powerful manufacturing base, and the overall stabilization of the economy. Unfortunately, that logic was not extended to the entire country and society — something that could have driven Mexico toward comprehensive development.
Two things threaten the country’s development, being the main sources of uncertainty in the current context: one is the institutional dismantling promoted by Morena’s two administrations; the other comes from Trump.
Internally, it is not just that the rules are changing or that institutions and agencies that served as anchors for the functioning of various sectors (like the Energy Regulatory Commission or the National Institute of Statistics and Geography, INEGI, to name two obvious ones) have been eliminated, but that the direction of governmental policy —as illustrated by the judicial reform- aims to eliminate checks and balances, a crucial element for establishing certainty. Furthermore, many of the reforms carried out in recent years are of dubious rationality, more the product of AMLO’s personal obsessions and grievances than properly debated, argued, and negotiated processes that society can accept and legitimize. When everything depends on a hyper-powerful individual or a hegemonic party, no one —entrepreneur, investor, or ordinary citizen— can be sure their rights will be respected and protected.
Externally, the tariffs and threats imposed by Trump create an environment of uncertainty that will not be easily eradicated, even if they are lifted soon. The mere possibility that such instruments (which also violate the USMCA) could be implemented at any time is an inexhaustible source of uncertainty. President Sheinbaum’s government has done everything possible to address this source of instability, but it is paradoxical that it does not devote the same effort to building sources of certainty within the country.
Businesspeople and investors need certainty to decide to invest, create jobs, and grow. The existence of benign rhetoric, like that contained in the “Mexico Plan,” is a step forward, but it must be accompanied by an institutional framework that serves as an effective counterweight to executive power. However, everything we’ve seen since last September 1st goes precisely in the opposite direction. Therefore, the combination of the absence of checks and balances and external instability constitutes a major disincentive to growth, regardless of presidential rhetoric or praise from private sector politicians.
NAFTA was conceived precisely to provide certainty to investors, given the enormous difficulty (still present) in generating internal sources of credibility in the country, a phenomenon as evident during the PRI era as it is now under Morena, and for similar reasons: because our institutions grant so much power to the executive that any counterweight becomes irrelevant. The problem for Morena is that, in the absence of NAFTA —a risk that can no longer be dismissed— only the government can build sources of certainty. The challenge, therefore, is obviously immense.
Logic would suggest that institutions must be built, but as Román Revueltas says: “Trump, you see, does not have a monopoly on irrationality.”
@lrubiof