After the Reforms

Luis Rubio

To steal the Hesperides’s golden apples, Hercules proposed to Atlas, the Titan holding up the heavens, that he would take up the heavy burden if Atlas obtained the apples protected by a monster with many heads. When Atlas returned, Hercules had to trick him in order for him to be relieved as Titan. Might this be a useful analogy for what follows after the reforms?

The project that animated the strategy of President Peña derived from the supposition that the country had become stuck due to the absence of reforms. In this, the President was not breaking any canon: despite the differences among parties, in recent decades a virtual consensus had taken shape with respect to the need for reforms. The presumption was that the country was not working because it had fallen behind and that certain reforms were urgently required to emerge from the hole.

That, nearly mechanical, connection between reforms and growth enjoyed wide acceptance in the academic and political world. In fact, the promoter for the idea of a pact was the PRD, a party with perhaps greater vision of State than of political pragmatism, because it recognized that only by sharing the costs could a reform agenda be advanced. For the PRD that was one way of breaking through the isolation in which a decade of populism and rejection of any institutional behavior had left it. The sum of the willingness of the PAN and the PRD to share the political costs and the enormous capacity of political operation of President Peña made possible the arrival at the doorway where we are today. Undoubtedly an unprecedented feat.

Now that the legislative process has culminated in the matter of reforms we will be able to see whether the approval of this ambitious package translates into economic growth. In contrast with the conciliatory and optimistic tone with which the Pact for Mexico began in December 2012, today opinions of both politicians and leading commentators are starkly contrasting. Today’s reading fluctuates between recognition of the President’s skill and rejection of the “sale” of the country and its resources as alleged by the most contumacious critics.

The most reasoned analyses and evaluations have focused less on the fact of the reforms and the (pre-electoral, 2015) rhetoric that accompany them than on the reforms themselves. Some applaud their potential for attracting investment, developing the natural resources possessed by the country and solving (almost) ancestral wrongs, such as the educative logjam. Others rather focus on the details and see potential obstacles along the way, incentives at cross-purposes and numerous sources of uncertainty, above all those emanating from the dozens of transitory articles that took shape in the new laws. The latter is not coincidental, because by means of those articles there was the intention to “correct” what was ammended in the Constitution or to protect special interests. Time will tell whether the problems are solved or whether they give rise to stumbling blocks.

The most notable of the reactions is that manifested by the government itself. Above all, there is the legitimate satisfaction of having achieved a historic landmark. Some of the approved reforms changed the vectors of the country’s development in such a way that only a few months ago appeared inconceivable. The general tone emerging from the government reflects the expectation that, from now on, the economy will improve and, with it, the President’s popularity indexes and the PRI’s electoral possibilities.

These upcoming months will be indicative of the degree to which the reforms effectively respond to obstacles to development. A first reaction will be observed in the way that the telecommunications market adjusts and whether, in effect, the law (and the regulatory entity) furnishes effective mechanisms for a transition toward a competitive market, something that, as made clear by several of the main actors in the industry, does not seem evident. The same will be visible in the manner in which the potential investors in the energy industry act. There’s nothing like the concrete reality and its immediate actors to measure the success of the reforms package, at least in the initial stage.

Much more complex is the reaction of the population in general. It is possible that the abysmally low approval and popularity indexes of the President reflect the time-honored skepticism of the Mexican in the face of great proposals of change:  ‘I’ll believe it when I see it’. If this is so, as soon as things improve, the indexes will revert themselves. But it’s also possible that the hypothesis of the reforms-growth tie-in may be erroneous.

Of course, there’s no doubt that a better economic performance would solve many problems, broaden job opportunities and improve living standards. However, it’s not obvious that these reforms solve basic structural problems. The people long time ago adjusted to the pathetic economic performance through the informal economy which is, at the end of the day, a form of survival in a hostile environment.  A general improvement of the economy would aid in but would not resolve the causes of informality.

Then there’s that hostile environment: the population suffers from multiple sources of disorder that the reforms not only do not attend to but do not even recognize as relevant. Therein lie the lack of opportunities, undue influence, corruption, extortion, insecurity, and the disdain in which the bureaucracy holds the citizen. In a word, the great disorder in which the population lives. Even if the economy grows, as long as the sources of disorder remain unsolved, the government will go on as Hercules attempting to hoodwink Atlas so that someone else would saddle himself with its problems.