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The Costs of Doing Nothing

Luis Rubio

The Mexican book of anecdotes tells the story of President Adolfo Ruiz Cortines (1952-1958) keeping a completely tidy desk, with the exception of two bins: the first was labeled “Problems that resolve themselves” and the second, “Problems that time takes care of”. This political philosophy, carried over time, allowed successive Mexican administrations back in the middle of the 20th century to maintain the country in peace during some time, but was not able to avoid the regime’s collapse. Like so many moments in Mexico’s history –and that of the world-, things work until they don’t.

The epoch of Porfirio Díaz (1876-1910) functioned for a time, but later collapsed; the “stabilizing development” era (1940s-1970s) afforded the country some decades of accelerated growth until its inherent limitations ended it on rendering it unviable. The different French Republics encountered a similar fate, precisely akin to that which took place in the era of the reforms during Mexico’s most recent decades. Each of these examples dawned with great expectations but arrived at its destination exhausted, in good measure due to the complacency generated.

A great initiative is launched, whatever necessary is done for it to work effectively but, some years later, it wears out and no one does anything to correct its errors, insufficiencies or negative byproducts. The much-heralded process yields decreasing benefits until it collapses; that is what happened in Mexico from the 1940’s and until the beginning of the 1980’s. Instead of resolving the problems, updating the model, introducing novel elements and components, paving the way forward, Mexico’s history has been one of steering clear of difficult decisions, preserving predatory interests, protecting politically favored groups and, in a word, coddling the status quo. The outcome should surprise nobody: insufficient or incomplete results, unsatisfied expectations and, at the end of the day, collapse in the form of electoral rejection of the reformer project.

If something is clear about the reforming process of the 1980’s to date it is that the reforms were not sufficiently ambitious or, at least, they were not imbued with the integral drive required to be successful. It was claimed that it was possible to liberalize the importation of goods, but not to do so with services, leaving the industrialists facing top-notch competition without access to credit, insurance and diverse services (communications, infrastructure, etc.) similar to those typifying the producers of other countries.

It was claimed that it was possible to transform education and provide Mexican children with the tools and opportunities that would be required for them in the future to compete with their Japanese, French or Brazilian peers, without modifying the petty tyrannical control characterizing the Teachers Union (SNTE) or its radical appendages like the CNTE. It was claimed that some could be submitted to competition while others were protected. Under conditions such as these, it is impossible to envisage the success of a project. The evidence is reality.

Each of the decisions to impede the reforms can be explained analytically in terms of the actors and the specific correlation of forces at each particular juncture, a circumstance that is neither exceptional nor exclusive to Mexico, but it is also evident that there was enormous complacency in all of the ambits of political, economic, and union power. In contrast to countries that had no alternative other than to keep working to make possible a substantial improvement in their populations’ life levels, in Mexico migration to the United States and NAFTA let everyone rest on their laurels: migration diminished the social pressure and NAFTA created a state of exception within the country that attracted investment. Rather than extending that space in order to generalize it and for the exception to be what was not working, which would have required affecting diverse interests close to the “system,” all of the key actors became complacent and engendered an environment that rendered inevitable, in retrospect, the excess and consequent popular rejection of the status quo.

It is fortunate that the country enjoys the privilege of having an increasingly wealthy population residing outside of Mexico that sustains a huge part of the citizenry, above all in rural areas, through its ongoing remittances. Also implicit in this are the exports, which permit maintaining stability in the balance of payments and contributing decisively to the growth of vast regions of the country. However, these are exceptions and, given the current American context, overly precarious situations. Like its predecessors, the government of Andrés Manuel López Obrador (AMLO) benefits from these elements but cannot rely on them, because both are in the sights of Trump.

 

Whichever way President López Obrador takes in matters of economic development, there are two circumstances that he will be unable to avoid: on the one hand, he must procure a high growth rate: the notion that development can be achieved without growth is mere fantasy. On its part, growth requires private investment, which will only be attained when the uncertainty emanating from the government ceases. On the other hand, the only way to achieve growth that is likely to advance toward development is with an inclusive strategy that promotes social mobility, something natural in the 20th century but nearly nonexistent at present.

 

* Luis Rubio is chairman of the Mexican Council on Foreign Relations and of México Evalúa-CIDAC. A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. 

Twitter: @lrubiof

https://mexicotoday.com/2020/02/25/opinion-the-costs-of-doing-nothing/

 

 

Building the Future

Luis Rubio

The future is built, whether consciously or unconsciously. The Mexican President, through his actions, decisions and rhetoric, shapes it, like it or not. Nearly a year and a half after the beginning of President Andrés Manuel López Obrador’s administration, there are two things that are very clear: first, his objective is to change the future that was under construction throughout the previous four or five prior decades. And, second, he holds a series of very fixed and clear-cut ideas with respect to the future that he intends to build on and that are incompatible with the 21st century. Therein lies the problem.

The President’s vision arises from an era very different from that of the present. Mexico began to change decades ago  –a change President López Obrador demonizes as “neoliberalism”- because the development strategy based on the substitution of imports in a closed and protected economy had delivered all it could muster. During these decades the world changed due to the revolution in communications, the ubiquity of information, and, above all, the realities that those elements engendered at the global level: the internationalization of production; the threats from the environment and potential pandemics; the rules imposed by the importing nations; the exploitation of information -Big Data- by the technological behemoths; and the magnification of the expectations of an increasingly knowledgeable and in general a more worldly wise population. Rebuilding an idyllic past is simply not possible.

Despite the truism of our circumstance as a country embedded in the global context, the Mexican tradition of reinventing the government every six years continues to be as operative as ever. In terms of what distinguishes the current government is the enormity of its ambition: it wants to not only reinvent the government, but also to recreate the country. The steps it has been taking in that direction are revealing: it has been making mincemeat of all the structures and institutional organisms constructed to confer certainty on the population in its different aspects: the human rights commissions to protect the citizenry from the actions of the State; and the regulatory commissions in matters of energy, communications and competition to provide certainty for the actors in the economy.

The result of its performance is two-fold: on the one hand, it has increasingly concentrated power; on the other hand, it has generated an exceedingly elevated degree of uncertainty. The gap between the President’s popularity as a person vis-à-vis his government -of around 40%- illustrates the phenomenon: the citizenry trusts the President but does not see eye to eye with the actions of his government nor with its policies. We are at a let’s-see stage as to whether the National Electoral Institute (INE), an institution much more transcendent and well known to the ordinary citizen, is being similarly set upon. The evident question is: At what moment will the straw that breaks the camel’s back appears to topple the President’s popularity?

In fact, the easiness with which the institutional framework was dismantled reveals the lack of deep rootedness of those entities and the absence of credibility regarding their importance for Mexican daily life. At the same time, it exhibits the enormous weakness of the government itself because no country can bear up under the jolts between administrations that characterize the Mexican political system, and even less so in the period during which the well-being of almost all Mexicans depends on the mightily entrenched supply chains traversing the three nations of the subcontinent. The contradiction between the President’s objectives and the requirements for progress is more than evident.

The President undoubtedly wishes to attract private investment, but is unwilling to accept that, in the 21st century, his sole possibility of producing this rests in creating the proper conditions for it to flow on its own free volition. It has been decades since there has been the possibility of a government to force people modest or lofty- to save or invest without their permission. Investment will flow only to the extent that the uncertainty stemming from the very government itself and its troops.

The point of departure for the group in power resides in its belief that democracy was inaugurated in Mexico in 2018. Therefore, everything that existed prior to that should be eradicated and, simultaneously, the legitimacy that the government enjoys allows it to do whatever it pleases not only with the past, but even with the future. That type of arrogance has already sunk more than one government in our recent past and there is no reason to think that things would be distinct for the present one. The President’s alternative path lies in convening the construction of a common future, something that is plainly contrary to his nature and strategy but that, in the long term, will come to be recognized as its sole possibility of success.

Democracy, says David Runciman lives in the moment and displays its strengths over time (The Confidence Trap).This mismatch produces confusion and uncertainty. We can’t wait out the confusion and uncertainty because waiting them out gives them the room to grow, damaging both democracy and the economy. The question is whether the intention is to create or to destroy because the current milieu provides no alternatives. It is in this sense that it is worthwhile to think about the warning of the historian Mary Renault: “There is only one kind of shock worse than the totally unexpected: the expected for which one has refused to prepare”.

* Luis Rubio is chairman of the Mexican Council on Foreign Relations and of México Evalúa-CIDAC. A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. 

Twitter: @lrubiof

https://mexicotoday.com/2020/02/18/opinion-building-the-future/

 

Can Mexico Wake Up from AMLO’s Impossible Dream?

 

Luis Rubio
Americas Quarterly – February 13, 2020

 

 

To build a better economy, Mexico needs to focus on the future – not the past.

MEXICO CITY – Nostalgia may be a natural human trait, but nostalgic Mexicans today are facing a dilemma: choosing between different, and dueling, views of the past. On the one hand, President Andrés Manuel López Obrador, or AMLO, wants to recreate a distant era that few living Mexicans even knew. On the other side, we find many Mexicans that assume that the AMLO administration is a passing phenomenon—a dream or a nightmare depending on one’s perspective—so that things will go back to where they were when he took over. Neither is possible, and therein lies the ongoing fight for the future.

Many Mexicans, perhaps a majority, expect normalcy to resume once the current administration ends. The problem with that view is that AMLO’s election was not the result of chance, but of a society tired with the status quo and endless promises of improvement in daily life that failed to materialize. If one puts together the circumstances that led to the 2018 election and the nature of the AMLO coalition and his actions, returning to the past is all but inconceivable.

The question then becomes what kind of future awaits Mexicans after AMLO. The fight for the future is ongoing at several levels. On the one hand, harsh reality has meant that the economy is not growing and the government’s frame of reference—“the State is in charge and everybody follows”—is incompatible with the kind of competition for investment that is the trait of the 21st century. Although the government would like to attract private investment, both domestic and foreign, it fails to accept the rationale that it must create conditions for it to materialize and that, ultimately, it cannot force anyone to save or invest.

The government’s actions and rhetoric, particularly by cancelling the new Mexico City airport and, above all, by eliminating or neutralizing key regulatory agencies, have frightened off investors. Investment has kept flowing to maintain existing lines of production, and there have been several acquisitions of Mexican companies by foreign entities. “Carry trade”, given the beneficial interest rate differentials, has continued to attract portfolio investment in government securities, but there’s not a single new direct investment project in the works.

The president’s perspective was shaped during the 1960s and 1970s, an era of fast economic growth, high social mobility and, at least until the beginning of the 1970s, order and relative peace. In his hometown of Macuspana, in the oil-rich state of Tabasco, PEMEX would provide for the community and there was no need to attract private investments or create jobs. That very basic reality from the 1960s seems to animate his bigger plans for dominating Mexican politics in the 21st century, a contradiction that has been overshadowed by the president’s enduring popularity and skill at evading harsh questions in his daily early morning encounters with the media.

The issue at heart is the radical contrast in perspectives that the various constituencies around the president and AMLO himself harbor vis-à-vis Mexican politics and democracy. For all of them, Mexican democracy was born in 2018 and everything that existed before must be eradicated while, at the same time, it confers upon the government full legitimacy not only to do as they please with the past, particularly the reforms of the past few decades, but also to shape the future. But what about the next presidential election?

From 2000 on, Mexicans grew accustomed to competitive elections and the alternation of political parties in power, and the 2018 election was different only in that it brought the left into government for the first time. But the issue is far more relevant than it might appear at first sight. The question percolating inside the president’s Morena “movement” is whether to attempt to stay in power by winning elections (the old-fashioned way) or whether to stick to power at any cost. There are plenty of constituents for both perspectives within the party. The next issue looming as part of this divide dwells on the National Electoral Institute’s looming new appointments: Will Morena impose itself and nominate members of its own or will it open the game for all political parties to participate as a Congress is supposed to do?

Sooner or later, the obvious contradictions between the government’s actions and lack of economic delivery will erode the president’s popularity and force him to confront the need to take a different approach. The key factor that determines the nature of the coming challenge is the president’s deeply-felt commitment to a zero, or close to zero, fiscal deficit. Avoiding a financial crisis is crucial to his political perspective. Hence, his actions have not brought high levels of inflation that, in the past, quickly delegitimized several administrations. The flip side of the equation, stagnation, takes longer to bite into people’s livelihoods, but is gradually ever more visible in the difficulty of finding jobs, lower consumption of some non-key services and the like.

At some point, the president will be forced to radicalize, accept reality or change to make a series of reforms that Mexico does need to attack corruption, reduce poverty and increase social mobility, three key components of his electoral program that previous administrations refused to countenance. Unfortunately, the latter is almost inconceivable and, thus, the question is whether Mexico’s future will be another failed and mediocre administration (the best one can hope for at the moment) or a radicalization of the administration. Much rides on what happens on the midterms of 2021.

https://www.americasquarterly.org/content/mexican-dilemma

 

There’s No Turning Back

 Luis Rubio

The past will not return: Mexico and the world changed, each at its own rhythm and circumstance. Thus, the only certainty is that we are facing a different future. The “old” order is over; we find ourselves in the face of a historic rift of enormous proportions and the more one delays in assimilating this basic premise, the worse that future will be.

The most human propensity is to cling to what exists or, more commonly, to what is known. The clearest image in this respect is that of the interminable efforts that we all make, every day, for the genie to go back into its magic lamp. Instead of dealing with the new realities, we dream of returning to what there was: that the September 11th attacks had never occurred, that Candidate X (insert your preference, there are many) would have lost.  It’s like wanting to put the toothpaste back in the tube: it can’t be done. The only thing for sure is that the past no longer exists; the big question is what’s next.

Immersed in the conflict for the independence of India, someone asked Mahatma Gandhi what he thought about European civilization: his response was “it would be a great idea.” Attaining civilization would imply reaching a new stage of stability, growth and civility, three major concepts that are absent in Mexico’s current reality. It seems evident that the way we are going will not permit any of these three elements to materialize, which is why Gandhi’s response is highly pertinent for the Mexico of today. Civilization is built, it does not come about fortuitously.

It is important to recognize the crossroads at which Mexicans find themselves: it is not the product of chance, nor is it the result, at least in its origin, of the present government. That merit is held by a succession of various administrations that carried out changes and reforms without reflecting on the totality that they were constructing, particularly in the political ambit: in a word, they did not reckon with the need to develop the governmental capacity to cope with the social, economic and political forces being unleashed. But there is a specific government that not only lost its way, but that also never found it: it never understood why it came into power, what it came into power for or what its “mission” was.

The reforms began in 1983 because it was the last resort: the governments of the seventies had left the country bankrupt. One might coincide or not with the inclination of those reforms, but there was no alternative to the urgency for restructuring the government and stabilizing the economy. The governments that followed imprinted their bias on the process, some with greater vision and skill than others; some with clarity of course and others with an entire misunderstanding of the challenge they were dealt.

But without doubt it was the government of Peña Nieto which never understood, first, why the electorate conferred on the PRI a new opportunity to govern again and, second, the huge potential that this President had in his hands. Instead of edifying a “new” Mexican State, the project was limited to advancing some reforms (not to be scorned as is likely to become obvious when AMLO’s cart gets stuck in the near future) while the swindle of the century was being consummated. Without the government of Peña today’s Mexico would be very different.

No one can blame AMLO for the causes of his victory. The forcefulness with which he won constitutes a sentence of disapproval that leaves no doubt of the message: the electorate felt betrayed by the outgoing government and turned in full to the only option that offered something clearly different. And that distinct part is what today is in the throes of building a different order toward the future: it is not only another government; it is another way of seeing and understanding the world.

On the planet much is being debated concerning the end of the world order constructed after the conclusion of WWII. The reason, the same as that within Mexico, is that there are new actors, new power realities and new game rules. We find ourselves in the stage of the “arm wrestling” in which the new groups in power are attempting to impose themselves on diverse political, economic and social instances and institutions. Little by little, novel criteria and values are appearing, affecting –for good or for ill- the manner in which power is come by, the effective rights of the citizenry, the way the economy is run and how social controls are procured.

The new order does not necessarily imply less poverty, more equality or a better economic situation. It solely implies new rules of the game that respond to the new groups in power. As throughout the world, we find ourselves at a moment of change in which everything is at the verge of sprouting, susceptible to being altered, because what we see today cannot last, all of which creates a climate of inexorable uncertainty.

The President has devoted himself to attempting to provide certainty to the diverse social interests in that his conception of the old Mexico is viable and the message, like it or not, has been taken up by many key actors of all ambits –politicians, entrepreneurs, union leaders-, all of them jockeying to position themselves well. But it is, nonetheless, a misleading scenario, of a dead calm before the forces, interests and values of the new governing group make impose themselves on the whole of the political scene and ordain their law. A new order that despite being new will not necessarily be benign.

@lrubiof

https://mexicotoday.com/2020/02/11/opinion-theres-no-turning-back/

System of Government

Luis Rubio

Why did the Mexican government lose effectiveness? What had distinguished it throughout nearly the entire XX century was its steadiness and efficacy, in stark contrast with most of the nations of the hemisphere. Mexico was characterized, as the President constantly states, by its stability, order and economic growth. That all ceased and there is no shared diagnosis concerning the causes of the weakness of the Mexican government, but I am certain that the current attempt at centralization will not achieve its objective of restoring its effectiveness of yesteryear.

The heart of the problem lies in an obsolete system of government that has not worked for almost a half century and, more importantly, that is not going to function however much the present government attempts to reconstruct its decrepit structures. Mexico acquired a federal system of government because it replicated the U.S. Constitution, but the nations’ circumstances were not similar. Not by chance were the two stages of greatest economic growth –and of their benefits in the form of social mobility and job creation- those of the Porfirio Diaz government and the post-revolutionary PRI. The common denominator was the centralization of power, in flagrant violation of the constitutional framework. Despite the rhetorical reverence paid to federalism, the country does not possess a system of government that is compatible with a federal political organization.

Prior to the Porfiriato and from the end of the seventies, the Mexican government had been ineffective. Before because an institutional structure did not exist, today because that which exists does not work. Many Mexicans alive today remember (some with nostalgia) the stability and economic growth that made possible the strategy of “stabilizing development”, which gave up the ghost due to that the factors that rendered it successful disappeared. On the economic side, the import-substitution model reached its limit, while political demands ended up forcing an opening that reduced its vertical control.

Instead of the gradual economic liberalization that would allow for an adjustment of the domestic industry to the competition, from the 1970s the economy closed to an even greater degree, favoring national groups not concerned with elevating their productivity levels or satisfying the consumer. On top of that, the public expenditure rose in unusual fashion, all financed with debt. The mix ended up provoking the collapse of the government’s finances in 1982, bringing about a brutal adjustment because there was no longer any alternative.

The political opening was further encroached upon because it was reactive and went in counterflow to the most powerful interests. The most important electoral reform, that of 1996, created the conditions for equitable competition, but did not modify the manner in which the country was to be governed. The system of government, structured since the thirties, remained essentially the same. For example, instead of liberalizing the electoral system the reform incorporated the second and third parties (which then were the PAN and the PRD) into the PRI system of privilege. That is, it extended the existing system, assuming that the problems that the new structure would generate would solve themselves, which obviously did not take place.

Instead of transforming the system of government in order for it to deal with the conditions and challenges of the XXI century, its structure and objectives were clung to, leaving it totally incapable of functioning in a radically changed environment. Opening the economy implied that the government stopped controlling the private sector and the unions of the private sector. The political reforms produced vices that magnified themselves systematically: decontrol of the governors; the absence of institutions for security, beginning at the local level; mediocre services; de facto powers acting at will; and a population that, legitimately, reproved the existing order.

The reforms, in political and economic ambits, were necessary, but a strategy did not develop that anticipated their consequences in terms of governability, stability, security and efficacy. As Francis Fukuyama would say, Mexico became democratized before constructing a functional government. What we are observing today is an attempt to reconstruct what –a half-century ago- worked, when what is required is building a system of government for the XXI century.

The nodal point is that Mexico’s federal government is ever less powerful (even while more functions are being centralized) in the face of a society that is increasingly larger, more demanding and diverse and an economy that calls for conditions of stability in order to be successful. The Porfiriato and PRIist ruse of centralizing the power will not yield the result that the President desires because it is not compatible with the era of the ubiquity of information and of ferocious international competition.

The Mexican government needs to increase its capacity and that implies a change of conception: to build mechanisms that allow it to perform its functions from the municipal level to the federation, with procedures that make accountability possible, while systematically increasing its capacities to fulfill its functions, from the most elementary such as security, to the vital ones to eradicate poverty such as education and infrastructure.

Mexico stands in need of a revolution in its system of government; while this does not occur, governments will come and go, but peace and stability will continue to be illusory.

 

www.cidac.org
@lrubiof

 

The New Mantra

Luis Rubio

According to the new dogma, in 2019 conditions were created for the Mexican economy, and the country in general, to enter into a stage of elevated growth and development during this year. The conclusion -finally- of the new North American Trade Agreement, the high raise in minimum salaries and financial stability are the anchors that will allow for the widely awaited transformation. The only thing missing is for the decision-makers on savings and investment to get on board.

The new mantra makes sense but is not reality. The achievements so extensively celebrated by the president of the CCE (Business Coordinating Council) and his counterparts in the government –indistinguishable some from others- are useful conditions, but not sufficient: investment and savings flow when there are objective as well as subjective elements favorable for growth.

Among the objective elements are found without doubt those mentioned in the first paragraph of this piece, but these are not sufficient: in the XXI century investment as well as savings see the world as their space-of-interest, which implies that Mexico  literally competes with the rest of the planet to finance projects in our territory. In net terms, attracting investment requires appropriate conditions for that, which range from the macro economy to the infrastructure and the legal framework. These also require smoothing the way for projects to materialize. The government has changed the rules of the game and the legal framework and has abandoned any pretense of helping the way for investors and has not made any inroads on the issue of security. In addition to the latter, the new USMCA was designed by the U.S. to not drive investment in key industries for Mexico such as the automotive sector. In consequence, the objective factors that are indispensable for attracting investment are not conducive to satisfying the government’s rhetoric and that of its private trustee.

On the subjective side things are much more complicated, but also more transparent, because the President of the Republic has done everything possible to undermine the confidence essential for investment and savings to materialize. From the decision relative to the airport to the manner of deciding about projects such as the Tren Maya and the Dos Bocas Oil Refinery, any neutral observer could do nothing other than conclude that the only discernible pattern lies in the will of a sole individual. Aggravating these circumstances is the elimination (de jure or de facto) of any counterweight in regulatory matters: entities created over the years precisely to confer certainty on the investor. The way in which the (new) CRE* opened the door to PEMEX for its incursion into predatory practices in fuel sales speaks for itself. In a word, the absence of counterweights and (reasonably) autonomous institutions that limit governmental excesses or that, at least, evidence these, constitute absolute brakes on any investment project.

Objective as well as subjective conditions render it more difficult to suppose that the economy will be reactivated significantly in the upcoming months, even with the infrastructure projects that are in bud.  The question is whether there is something that could be done to improve the panorama.

There are two very clear routes: one is functional and the other ambitious. On the functional side, there are areas where the damage done is not (yet) catastrophic and thus, with relatively few actions, the perspective could be altered.  The case of energy is, by far, the most obvious: in this ambit the legislation has not changed and, with the exception (albeit not a lesser one)    of the composition of the Boards of the CRE and of the CNH**, basic institutions for the functioning of the sector, the government has only stopped soliciting bids. Recreating conditions for the re-launching of the sector is not something inconceivable and would exert the dual effect of strengthening the pragmatic side of the government and encouraging the development of a sector that is key under any premise. If in addition conditions were re-established for renewable energies, the scenario would improve. None of this would dramatically change the perspective, but it would permit reverting the worst tendencies profiling today.

The more ambitious way out, which would permit not only getting on with the remainder of the six-year presidential term of office but also modifying the general future of the country for good, would require a series of reforms that no government of the past four decades was willing to envision and that for which   President López Obrador counts on not only with the legitimacy but also with popular support for carrying out them out. The country requires profound reforms to attack the real lacks that Mexico possesses, such as poverty and inequality, and these would imply attacking the power groups and vested interests that have devoted themselves to impeding development in the states of Guerrero, Oaxaca and Chiapas; abusive unions with their daily pillaging; the politico-legal structure that create fiefdoms in state governments; and, in general, the jumble of interests that prey upon, extort and corrupt as their quotidian activity.

If the government truly desires to advance the development of the country, the agenda is not trifling, but its assets for achieving it are enormous.

 

*Comisión Reguladora de Energía, Energy Regulatory Commission **Comisión Nacional de Hidrocarburos, National Hydrocarbons Commission

 

www.cidac.org
@lrubiof

 

 

The Myth of the Past

Luis Rubio

For President López Obrador the sixties were the climactic moment of the public life of the country. In that era Mexico grew at rates of nearly 7%, there was order and there was no social conflict. The time seemed idyllic; much more so, on being viewed in retrospect. However, a backward glance at the way that Mexican society functioned during those times reveals circumstances that were much less commendable and, in any case, unrepeatable.

The main characteristic of that time was the almighty presidency that set the course, fixed priorities, resolved disputes and kept the peace. At least so goes the myth, but the undeniable fact is that the post-revolutionary system had achieved an effective equilibrium between the diverse interests of the so-called “revolutionary family” and the requirements of a thriving economy. The governing coalition –and the party’s structure of control that allowed the president enormous latitude- sanctioned a huge capacity of decision and action that, in the specific context of the post-WWII era, created an exceptionally favorable environment for economic growth.

The powerful presidency was maintained thanks to the conjunction of remarkable circumstances that, years later, no longer existed. In the first place, the private sector was strongly controlled through requisite permits for investing, exporting and importing. The closed economy gave the government immense carte blanche in terms of decisions and control over this factor of production that, in addition, was complemented by severe limitations to foreign investment and a robust propensity toward endorsing the existence of monopolies. The government regulated competition and determined, indirectly, the profits of the enterprises. For businesses, what was important did not dwell in the quality or the price of their products, but in their close proximity to the bureaucracy.

In second place, the unions worked as a mechanism of control in which the union leaders became wealthy in exchange for upholding control of the bases. The Labor Congress made it appear that there was union democracy, but this was limited to the rhetoric and worked provided that the leaders operated within the clearly delineated rules of the game. The key was control without any dissidence.

In third place, the governors lived under the constraints of the central government, always aware that they could undergo what was known as a “disappearance of powers,” that is, their removal, at the least provocation. Governors who in the recent past have boasted about not having any reason to answer to the president, received instructions from third- and fourth-level civil servants without a flinch.

In a word, this pertained to an authoritarian system centered on the president who, through the party’s tentacles and the mechanisms of reward and punishment sustained an iron-fisted grip on the country. A European diplomat based in Mexico during that time cited a Soviet functionary in that nation’s embassy, affirming that, compared with Mexico, the Russians were mere amateurs because here the construction of an authoritarian system was achieved with complete control but absolute legitimacy,  while in his country control could only be preserved through acute repression.

The success of that era permitted dreaming of its re-creation. The notion that it is possible to subordinate the private sector and economic decision-making to political priorities would lead to an alignment of priorities and higher rates of growth. Workers’ freedom, as mandated by the International Labor Organization (ILO) and the new free trade agreement, the USMCA, would facilitate the elimination of corrupt leaderships and their replacement by leaders trained in Canada, upgrading anti-corruption criteria to levels never seen before. The budget endorsed the reconstruction of political controls over governors, subordinating them to the central power and obliging them to cede their ambitions to the designs of the great national leader. Finally, the army would become the touchstone that empowers the central control with absolute dominion over all local and sectorial actors, with no consequences or risk of corruption. In other words, Nirvana, the XXI century version but with a 1960 signature.

The world of the sixties ended badly, not because it was poorly conceived or structured, but because it, simply, ended. As the saying goes, everything used gets used up, and that is what happened to the epoch of stabilizing development. It came to an end because it became unsustainable: because the way of producing in the world changed, because there was a financial revolution and another technological and because, little by little, communications created the conditions for the radical democratization of information.

Instead of leveraging what had been accomplished in order to then transform the political and productive structure as so many other Asian, European and a couple of Latin American nations had done, Mexicans insisted on proceeding stubbornly from crisis to crisis. And there we continue to this day. Pretending to reconstruct that era will not end up distinct because it is not anchored in the reality, but in an unattainable nostalgia.

www.cidac.org
@lrubiof

 

Key Year

Luis Rubio

The second complete year of the government of Andrés Manuel López Obrador commences, a year in which his project and strategies begin to bear fruits. That sown in his first year (in reality, given the circumstances, a year and a half) must yield results. But above all, from now on there is no way to blame the past, as in “they left us a mess.” The country, thus the responsibility for it, lies firmly in the hands of the President.

By now two things are undoubtable: first, the President’s central project –political control- has advanced relentlessly. Second, the economy exhibits severe affectations. The effect of this is manifested in diverse forms, but two sum up the dilemma: on the one hand, there is no private investment (and very little by the public sector), and on the other, tax revenues are ebbing inexorably. The latter is explained in good measure by the lack of growth of the economy, but its impact on public expenditure is dramatic, largely due to the government’s obligations in matters such as retirees’ pensions, which increase systematically, minimizing the so-called “fiscal space,” that is, the amount available for the government to direct toward its programs. In addition to this, the decision of the government to use its increasingly scarce resources to PEMEX reduces its expenditure options to an even greater extent.

Truth to tell, the issue of attracting private investment did not begin with this government. Investment practically disappeared from the time of the Trump campaign with his threat of cancelling NAFTA. That fact, which preceded by far the election of President López Obrador, is an obvious indicator of what prods or inhibits private investment, domestic as well as foreign. What NAFTA supplied was certainty regarding the rules of the game, with respect to what the government had committed itself to in terms of attracting investment. Trump brought investment to a halt and this has not been resolved since because the new USMCA eliminates the nodal source of certainty that was the heart of NAFTA, as well as because the current government displays a thorough lack of understanding (or refuses to accept) of what is required to attract private investment. Its insistence that economic decisions should be subordinated to political decisions evidences a thoroughgoing ignorance of the nature of the XXI century.

The question is whether, in the face of the risk that the economy will remain stagnant or of a recession, the government will be willing to review its premises and correct its course. From my point of view, the AMLO government has a better and greater opportunity historically speaking for confronting the problems that decades of reforms (the majority benign and necessary) were not resolved. The opportunity derives from two circumstances: first, the enormous legitimacy that it possesses and, second, the fact that the priorities that it marked long ago -corruption, poverty, regional inequality and lack of growth- are the national ones.

The economy has grown little on average for a long time due to decidedly explainable reasons. In the first place, in that there has not been greater investment in infrastructure in the South; in the second place, because there are powerful economic, political and/or union interests in the regions that do not grow that impede the development of new investment projects; in the third place, because innumerable regulations and practices promote the growth of the informal economy (which entails limits to its growth due to lack of access to credit and does not contribute to the tax pool) and, in the end, but perhaps summing up everything, because the country is characterized by permanent extortion: inspectors extort the citizens and entrepreneurs, union leaders extort the workers, politicians extort the population, the narcos extort the government and the society in general.  NAFTA did not eliminate extortion, but it did create conditions for it to be controlled in its space.  The rest of the country lives under permanent extortion.

The agenda of changes that the country requires is not difficult to identify and it is all absolutely compatible with the priorities the President earmarked a long time ago as well as with his political base.  In fact, if one observes the (incomplete) list in the previous paragraph, the big losers are always citizens who are small business owners, informal businesses, etc., who are not covered by the protection like the one NAFTA provides. Still worse, the South has fared worst of all, because local unions and politicians extort the population and deny them growth and development opportunities because this would imply altering the local status quo. Were one to evaluate where the regions of greatest poverty and inequity are found, their correlation with these evils is patent.

This incipient year comprises the great -and perhaps last- opportunity for the government to devote itself to attending to the cause of the ills the country suffers from and that, as mentioned previously, are precisely those that the President hand-picked as the axis of his campaign and his agenda. What has not worked to date constitutes a unique opportunity to advance this year. Given Mexico’s six-year term-of-office cycle, what is not done now will not done at all.

www.cidac.org
@lrubiof

The Relationship

Wilson Center – Mexico Institute
January 06,2020
by Luis Rubio
@lrubiof

 There is no border as complex and diverse as that separating Mexico from the U.S. It would be easy to simplify it, rationalize it as a merely commercial matter. The reality comprises an enormous diversity, complexity and multiplicity. The boundary with the U.S. includes legal and illegal crossing points, drugs, contraband, persons, ideas, goods, services and disputes. An old saying from the Mexican side of the region held that “if it fits through the bridge, it can pass”.

From the high plateau of Mexico City, it is difficult to understand the diversity and complexity of the border zone. It concerns a region, on both sides, that experiences a symbiotic relationship in which each lives off each other and neither could explain its existence, and success, in the absence of the other. Many have spoken of a “third” country as distant from Mexico as from Washington D.C., but in reality it entails a space of dynamic exchange where everything comes to pass, the best as well as the worst of both nations.

For decades, U.S. citizens saw the Mexican side of the border as a space for recreation and lust, but also of greater simplicity and ease of living without the very structured life of their country. We Mexicans ended up seeing the border as an inexhaustible opportunity for markets, clients and developments that would never have been possible without the liberalization of trade that took place under the auspices of NAFTA. Beyond the United States-Mexico-Canada Agreement (USMCA), the devalued successor of NAFTA, and, in general, deriving from the close relationship that existed up to 2016, the ties between the two nations are increasingly deeper and more diverse. The trade war between the U.S. and China opens additional opportunities that would have been inconceivable only a few years ago.

The big question is whether we Mexicans will be capable of converting this juncture into opportunity, now within the context of Trump and of old structural problems of Mexico that never get fixed and are not even part of the public agenda.

The Mexican government recognizes the existence of problems and limitations regarding the development of the country, but it has not been willing to recognize that its preconceptions are unviable and act to the detriment of the government’s objective of relaunching the development of the country. On the side of the problems, it recognizes that the insecurity is persistent, but not that its great purposes can be met with the strategy that it has adopted, which does not even strengthen or standardizes the police forces at the local level.

Mexicans, of any origin and lineage, have demonstrated a huge capacity of adaptation to daily life, while migrants, with an ever-greater capacity and enthusiasm for developing grand projects of economic and commercial transformation, make their appearance in the national life. The bilateral relationship is constant, unequivocal and systematic: source of enormous benefits or intractable conflict. But it does not endure radical changes.

The violence that typifies the relationship is the product of a poorly understood interaction. It is obvious that a large proportion of the arms employed by the mafias of organized crime stems from the U.S. Similarly obvious is the fact that Mexico –at all levels- has not been capable of developing security strategies that confer certainty on the inhabitants of the Mexican side of the border. It is a secret to no one that Mexico has been an immense failure in providing the most basic of rights, which is security, whether in borderline municipalities or in the principal cities of the country.

Mexico leads a life of uncertainty and insecurity that all Mexicans know, independent of the loyalty or rejection that they profess toward the President. Although many respond positively in opinion surveys and with conviction support the President, the same surveys show that the majority wants an improvement and not a radical change.

From the summit of power it is easy to accuse or pardon the supposed transgressors of the law but, for the Mexican citizen in the street, every example of corruption, extortion, murder and flagrant lying is just another milestone in a long history of abuse, imposition and corruption. The President can be impeccable, but his administration has been shown to be indistinguishable from those that have preceded it. Corruption is strangling Morena, as it did with the PRI, the PAN and the PRD. Unless it changes course, its results could not be distinct.

The bilateral relationship poses an opportunity or a curse, depending on the perspective that each Mexican decides to adopt. Whosoever has observed the day-to-day reality of life in the neighborhood knows well that the fundamental problem is not the border, the Americans, or the relationship, but the persistent incapacity of the Mexican side to stabilize the country, to generate local police officers capable of maintaining order and guaranteeing security, likewise to the most modest and the most lofty Mexican.

The President’s agenda is as ambitious as it is blind.  What Mexico requires is solutions; what the President seeks is excuses for going against what the citizenry wants and demands. The question is how much time –and damage- it will take for the obstinacy to cede to the reality.

 

https://www.wilsoncenter.org/article/the-relationship

The opinions expressed here are solely those of the author. 

The Relationship

Luis Rubio

There is no border as complex and diverse as that separating Mexico from the U.S. It would be easy to simplify it, rationalize it as a merely commercial matter. The reality comprises an enormous diversity, complexity and multiplicity. The boundary with the U.S. includes legal and illegal crossing points, drugs, contraband, persons, ideas, goods, services and disputes. An old saying from the Mexican side of the region held that “if it fits through the bridge, it can pass”.

From the high plateau of Mexico City, it is difficult to understand the diversity and complexity of the border zone. It concerns a region, on both sides, that experiences a symbiotic relationship in which each lives off each other andneither could explain its existence, and success, in the absence of the other. Many have spoken of a “third” country as distant from Mexico as from Washington D.C., but in reality it entails a space of dynamic exchange where everything comes to pass, the best as well as the worst of both nations.

For decades, U.S. citizens saw the Mexican side of the border as a space for recreation and lust, but also of greater simplicity and ease of living without the very structured life of their country. We Mexicans ended up seeing the border as an inexhaustible opportunity for markets, clients and developments that would never have been possible without the liberalization of trade that took place under the auspices of NAFTA. Beyond the United States-Mexico-Canada Agreement (USMCA), the devalued successor of NAFTA, and, in general, deriving from the close relationship that existed up to 2016, the ties between the two nations are increasingly deeper and more diverse. The trade war between the U.S. and China opens additional opportunities that would have been inconceivable only a few years ago.

The big question is whether we Mexicans will be capable of converting this juncture into opportunity, now within the context of Trump and of old structural problems of Mexico that never get fixed and are not even part of the public agenda.

The Mexican government recognizes the existence of problems and limitations regarding the development of the country, but it has not been willing to recognize that its preconceptions are unviable and act to the detriment of the government’s objective of relaunching the development of the country. On the side of the problems, it recognizes that the insecurity is persistent, but not that its great purposes can be met with the strategy that it has adopted, which does not even strengthen or standardizes the police forces at the local level.

Mexicans, of any origin and lineage, have demonstrated a huge capacity of adaptation to daily life, while migrants, with an ever-greater capacity and enthusiasm for developing grand projects of economic and commercial transformation, make their appearance in the national life. The bilateral relationship is constant, unequivocal and systematic: source of enormous benefits or intractable conflict. But it does not endure radical changes.

The violence that typifies the relationship is the product of a poorly understood interaction. It is obvious that a large proportion of the arms employed by the mafias of organized crime stems from the U.S. Similarly obvious is the fact that Mexico –at all levels- has not been capable of developing security strategies that confer certainty on the inhabitants of the Mexican side of the border. It is a secret to no one that Mexico has been an immense failure in providing the most basic of rights, which is security, whether in borderline municipalities or in the principal cities of the country.

Mexico leads a life of uncertainty and insecurity that all Mexicans know, independent of the loyalty or rejection that they profess toward the President. Although many respond positively in opinion surveys and with conviction support the President, the same surveys show that the majority wants an improvement and not a radical change.

From the summit of power it is easy to accuse or pardon the supposed transgressors of the law but, for the Mexican citizen in the street, every example of corruption, extortion, murder and flagrant lying is just another milestone in a long history of abuse, imposition and corruption. The President can be impeccable, but his administration has been shown to be indistinguishable from those that have preceded it. Corruption is strangling Morena, as it did with the PRI, the PAN and the PRD. Unless it changes course, its results could not be distinct.

The bilateral relationship poses an opportunity or a curse, depending on the perspective that each Mexican decides to adopt. Whosoever has observed the day-to-day reality of life in the neighborhood knows well that the fundamental problem is not the border, the Americans, or the relationship, but the persistent incapacity of the Mexican side to stabilize the country, to generate local police officers capable of maintaining order and guaranteeing security, likewise to the most modest and the most lofty Mexican.

The President’s agenda is as ambitious as it is blind.  What Mexico requires is solutions; what the President seeks is excuses for going against what the citizenry wants and demands. The question is how much time –and damage- it will take for the obstinacy to cede to the reality.

 

www.cidac.org

@lrubiof