Before and After

Luis Rubio

 The corona crisis will become a great excuse for the economic disaster Mexicans are experiencing, but it will not change the nature –or the existence itself- of the problem. The cesspool already lies open.

To illustrate the phenomenon, let us think for a moment about the famous presidential airliner: the avowed objective was to get rid of the plane, for which a sweepstakes was devised that was notlinked with the artefact.The process has afforded the President massive numbers of opportunities to address the issue and to squeeze it dry to the utmost, doubtlessly a smack of political genius, except for one small detail: the time is drawing near, next September, that the sweepstakes will be over, but the aircraft will still be there, with the same obligation to make rent and maintenance payments. That is, the raffle, and the circus surrounding it, will not have resolved the problem generated by the President himself. The problem will still be there.

The same occurs with the economy: independently of the crisis caused by the virus -which is already contracting the economic activity causing a deep recession in 2020- there’s nothing in the horizon that makes it possible for the economy to recover once the trauma has passed. The reasons why the economy has remained paralyzed will not be altered by the virus, before or after, although there is no doubt that they will become more acute along the way.

The best way to describe what is approaching is denominating it the  “perfect storm:” a government that alienated private investment right off the bat; the total absence of a development strategy; the uncertainty in the energy supplies;  falling oil prices; and large unproductive governmental expenditure, at the expense of the other critical budget items, that have immobilized sectors such as construction. Each of these factors was present prior to the appearance of the virus on the spectrum and (almost) all are the government’s responsibility. External factors that modify the panorama for the worse must now be added:  the recession caused by the cloistering; the fall in remittances, the product of the contraction of the U.S. economy, especially in the service industry in which is concentrated a great deal of Mexican manpower; reduction of exports due to the lower demand for automobiles, household appliances, etc.; and growing pressure on public finances due to the diversity in the demands on the expenditure that the crisis itself is generating and, therefore, on the exchange rate.

Of course, no one can blame the government for the health crisis, but, as the saying goes, in reality this is about when it rains it pours, because the economy was going poorly before this affliction, rendering it unnecessarily deeper due to not confronting the causes of the previously existing recession. In a word, the economy was already in free fall when external circumstances accelerated its contraction. In this respect, it is obvious that the President will blame the coronavirus for the recession, but that will not resolve the fundamental problem nor will it contribute to a swift recovery once the immediate crisis is over.

What this crisis will do is to put on display the cesspool, the one existing previously as well as the one that the President uncovered without intending to. The cesspool that existed before is the one that allowed him to win the presidency but that, unfortunately, he has done nothing to eliminate: I refer to corruption. This is the product of one of the characteristics of Mexico’s legal and political system because it grants enormous powers to the authorities (at all levels) to decide who wins and who loses, unfettering huge chances to corrupt. Because corruption is never persecuted, the reigning impunity empowers it in inexorable fashion.  The fact that the President “purifies” instead of punishing public functionaries does nothing other than further establish that ancestral practice. In other words, the government has made no difference whatsoever in matters of corruption: the names have changed (as usual), but the practice endures. The causes are still there.

The cesspool that the President uncovered is not new, but it is much more transcendent because it cancels future growth. Private investment always proliferates when there are propitious conditions for it to prosper, and those conditions may be summed up in the existence of clear rules to which the government adheres and the certainty that these will be complied with. That is, everything refers to the trust that the government generates for those risking their savings and their capital. In addition, governments worldwide bend over backward to attract investors through the building of infrastructure, improving the regulatory and fiscal milieu, as well as leveling the playing field in order to facilitate the process. Regrettably, the present government rejects these premises out of hand and has done everything possible to deny them, the reason why it will not be able to attract investment during the remainder of the current presidential term.

As if anything more was missing from this scenario, the institutional destruction that has taken place, which could seem to be no big deal, has eliminated mechanisms that, for two or three decades, served to engender the illusion that Mexico had changed and that it now has applied itself to grow, albeit since 2018, with greater equity. The current government entertains other agendas not compatible with development.

 Twitter: @lrubiof