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