The Contradiction | Luis Rubio

Luis Rubio

Absolute power, insinuated by Lord Acton, is not a guarantee of good government. And even more so when all that power lies in the hands of an ethereal entity called the Morena party that, now without the active leadership in control of all the processes of AMLO, is becoming a complex, increasingly bureaucratic entity with a propensity toward fragmentation. And worse yet when the absence of even the most minimal semblance of counterweight -the result of the popular vote as well as of the illegal overrepresentation in Congress produced by AMLO- does nothing other than embolden the most extreme, radical and disruptive elements of the party. All of this leaves a president in control of part of the administration and with a demonstrated ability for conducting the complex relationship with Trump, but not with recognition of what makes an economy work.

The contradiction is conspicuous. In fact, read contradictions, in the plural. Morena, everything that that “movement” represents, is allergic to economic growth, but this is required to finance the interminable cash transfers it needs to fuel its client base, without which the supposed hegemony would cease to exist. AMLO understood well the inconsistency between loyalty and economic improvement: when people progress and become middle class, he said, they stop being loyal, thus it’s better to keep them poor and dependent. That worked for a while, but, as illustrated by the excessive and irresponsible fiscal deficit incurred in 2024, its limits are egregious, the reason why President Sheinbaum knows there is no option other than promoting economic growth. Her “Plan México” constitutes a recognition of that political imperative but also evidences the enormous distance between the objective -growth and nearshoring- and her comprehension of what would be required for productive investment to materialize.

Morena has driven a series of laws, constitutional amendments and incoherent regulations, nearly all these incompatible with a growing economy. The upcoming recession is palpable proof of this: however much the functionaries congratulate each other on the investment received from the exterior in recent years, the reality is that there has been practically no investment since the beginning of the past government of AMLO back in 2018. The savers, entrepreneurs and investors, national as well as foreign, have many options at their command and will never opt for those that entail intolerable risks. Risks such as those inherent in a politicized judiciary, a bureaucracy that changes the rules of the game according to the whims of the functionary or president in turn and, above all, a political apparatus that can change the Constitution in the blink of an eye. Only out of ideological zeal and political intransigence can it be expected to attract investment in this way.

The era in which the markets, mainly the financial ones, could dictate the limits of governmental acting (of all world governments), as took place during the last nearly half century, has passed, giving way to the reappearance of the power of the State. However, investment can equally be directed to distinct places, depending on the objective conditions of each locality. The term nearshoring has been in the vernacular of the world of commerce and the economy for years and the logic would seem to establish it as obvious that Mexico would be the great beneficiary of that geopolitical circumstance due to its geographic location and the existence of the United States—Mexico—Canada Agreement (USMCA). Notwithstanding this, there have been at least three slipshod governments that assumed that the opportunity would materialize on its own with no effort (or that it was not an opportunity at all). The evidence shows that the great beneficiaries have been countries such as Vietnam, Indonesia and the Dominican Republic, nations that seized the opportunity without flinching.

And then came Trump. To date (and this could change in an instant) President Sheinbaum has achieved a functional relationship, skirting the worst outbursts of her U.S. counterpart, but the fragility of the relationship is evident, whenever the gentleman in question wallows in a half-cooked idea or, more important, in the enormous vulnerability of Mexico, which Trump understands full well. Still more importantly, the “arrangements” arrived at do not include objective measures to which the parties can remit in the case of a disagreement, implying that everything is (and I fear will be) in the air for the next four years. And there is no worse dissuasive element to saving and investment than instability and uncertainty.

What is peculiar is President Sheinbaum’s extraordinary (and praiseworthy) willingness to negotiate with Trump and to devise ways and arguments to pacify him in the face of the absolute indisposition to understand and accept the need to review deep-rooted concepts and prejudices that are contrary and counterproductive for appealing to investment and promoting economic growth. It is not sufficient to recognize the need for growth and private investment (a milestone in itself after AMLO), because a decision to save or invest does not hinge on the rhetoric, but instead on the objective conditions and these have come to evolve as running precisely counter to what a potential investor requires and demands.

As Deirdre McCloskey states, “the evidence is overwhelming: that liberty, not coercion by a private master or a public state, inspires people to continuous betterment. For the poorest.”