Luis Rubio

 Financial advisers often differentiate between low-risk, low-return investments, from higher-risk bets, albeit with higher potential returns. The President’s trip to Washington followed a different logic: high risk with low returns. Given what was involved, it was not a bad strategy, but victory can only be claimed once it becomes clear that the reverberations do not prove counterproductive.

The speeches of the two presidents could not have been more contrasting, because each had a different objective. For Trump, the goal was to end the dispute that he himself generated with Mexico to appease Hispanic voters. His speech was flat, predictable, and contradictory with everything he had said since his campaign in 2016, particularly regarding the border, migration, NAFTA and, in general, Mexicans. A sparse speech, designed to praise his guest and, at the same time, addressed to his potential voters.

The objective of President López Obrador, of which there was so much speculation, was transparent: to be recognized by the President of the United States. More than a national agenda, his was personal and electoral (and, maybe, rewarded with the arrest of César Duarte, a former governor of Chihuahua). His speech was not that of a president engages in sensitive negotiations, but of one who had reached the zenith of the mountain and wanted to turn it into a historical milestone for his base. Shouting “Long live Mexico” at the White House might seem a bit out of place, but it was the call of someone who had just been legitimized by a higher authority. And that is the problem of the speech: despite repeatedly demanding to be treated with respect and as an equal, the speech suggests that he does not feel he is.

The dinner hosted by President Trump offered the opportunity for American businessmen, strongly represented by large investors in Mexico, especially in the automotive, financial and energy sectors, to ask questions and make clear statements about their concerns regarding decisions that, from the cancellation of the Mexico City airport, have characterized the López Obrador government. A dinner chaired by the businessman in Trump, who clearly understands the importance of certainty and trust in investment decisions, was a perfect context for American entrepreneurs to express themselves “frankly,” as the diplomatic jargon would have it.

The list of guests from the Mexican side leaves no doubt about the way AMLO conceives of business; all of his guests represent activities dependent on the government: contractors, owners of concessions (like telecoms, radio, mining and television), and sellers of services to the government itself. The contrast with the Americans is palpable, which will not help to mitigate the concerns that the AMLO government raises every time it cancels an investment project, calls for a manipulated “consultation” or eliminates an autonomous regulatory body.

The Mexican government is pleased to have concluded the visit without major incidents, which is to be celebrated, but its sights were not high to begin with. There are three risk factors that were not addressed, two of them consciously: the Democrats and the Mexican communities in the United States. The date of the meeting was not a coincidence: if it had taken place a week earlier, with the Congress in session prior to its summer recess, the president would have had to visit, at the very least, Ms. Nancy Pelosi, speaker of the House and a key person in the approval of the USCMA; otherwise, it would have created a diplomatic incident. Pretending that there will be no repercussions from the Democrats or candidate Joseph Biden’s team is naive. For them, the visit constitutes an AMLO vote for Trump, so one ought to wait to assess the results of the visit. Better leave the celebration for later.

Regarding the communities of Mexicans, it is inexplicable that there was not even an informal meeting with the leaders of such militant organizations and which the current president cultivated for a long time. A meeting would have had a minimal cost; not having organized one will surely have a monumental cost. One wonders who decided something so absurd and at the same time so obvious.

The third risk factor is related to the protests that took place when the president stood guard at the monuments of Juárez and Lincoln. I was not there, but the screams did not sound like Mexican Spanish; rather, they appeared South American, perhaps Cuban or Venezuelan. It is known that there is some opposition along those lines brewing in the state of Florida, so it is not impossible that the president has opened a dangerous Pandora’s Box without even realizing it.

Two no less important unknowns remain: the first is what will happen when a journalist catches Trump off guard and he returns to his traditional anti-Mexican rhetoric or when, in the next few days, he acts on the DACA issue.

On the other hand, nothing in this visit altered the stumbling block on the Mexican side: the wind will take care of the words heard in the Rose Garden; what matters then is not speeches but the results. To be successful, the new trade agreement, the  avowed reason for the meeting, depends entirely on the certainty that the government of President López Obrador generates among investors, something not guaranteed. The visit was saved; Now the economy needs to be saved as well.

https://mexicotoday.com/2020/07/14/opinion-pitfalls/

www.mexicoevalua.org
@lrubiof

Luis Rubio

Divergent objectives that aim to solve a common problem. Perhaps in this way one could begin to appreciate the complexity inherent to the new North American trade agreement. Each of the governments involved had its priorities and the result is the new USMCA that was inaugurated this week. Like any instrument, it has its strengths and weaknesses, but it is not a panacea.

According to old Greek mythology, the panacea, named after the goddess of universal remedies, is a cure for all ills. The new trade agreement is certainly not a panacea in the Greek sense, but it is without a doubt the best deal that was possible given the political circumstances. And that is the relevant criterion: negotiations among nations, like all negotiations, reflect both the purposes of the parties involved as well as of the correlation of forces at the time.

For President Trump, the primary objective was to discourage the emigration of industrial plants from the United States to Mexico and the new treaty reflects that priority. There is no greater contrast between the NAFTA and its successor, the USMCA, than this one. In this change, the number one priority for which Mexico proposed the original negotiation back in the nineties vanished.

The context of that accord is key: the Mexican government proposed the negotiation of a trade and investment agreement as a means of conferring certainty on investors after the conflict-ridden decade of the eighties: in a word, the objective was to use the American government as lever to regain the trust that the Mexican government had lost in the expropriation of the banks. A means was sought to assure investors that the Mexican government would not act capriciously or arbitrarily in the conduct of economic affairs and that any disputes that might arise between the government and investors would be resolved in courts not dependent on the Mexican government.

The American government of that time saw in NAFTA the opportunity to support Mexico to achieve accelerated progress, a key objective of its own definition of its national interest. Behind it dwelt the premise and expectation that Mexico would carry out deep reforms to turn the treaty into a transformative lever that would allow achieving the hoped-for development, something that evidently did not happen.

Although the renegotiation began with the Peña administration, President López Obrador gave it its distinctive character, incorporating his own objectives in the new treaty, which are very different from those that motivated the NAFTA, especially in labor and social matters. Many of the USMCA’s ​​most controversial and potentially onerous provisions stem from this vision, in which, for very different reasons, the two governments converge. While for Trump the avowed objective is the protection of the American worker, for the Mexican the priority is to attack inequality and reduce poverty. Through the treaty, the Mexican government intends to promote the modernization of the productive plant with a rationality of social inclusion and protection of labor rights. These are not different objectives, but it is not obvious how they will work out in practice. When ambitious purposes are mixed with limited instruments, the result is not always as expected.

The strangest thing is the use (which will undoubtedly be biased and politicized) of American institutions to force a change in the way of operating of Mexican companies, especially in the organization of unions and the election of their leaderships. The Mexican government intends a triple somersault: to democratize labor relations, to co-opt the new leaders (or to impose them), and to create new electoral clienteles, all through an international treaty where the government of the country on which all this depends has political and protectionist objectives, which clearly have nothing to do with the political logic of the López Obrador government.

Throughout the last quarter century, NAFTA became the main engine of growth of the Mexican economy through exports. When these collapsed due to the 2009 US financial crisis, the Mexican economy fell dramatically, evidencing both the enormous importance of the export sector, as well as the lack of a strategy to accelerate the transformation of the domestic market, to turn it into another powerful engine of development in its own right. However, nothing was done to respond to that obviousness, and this is one thing the new treaty aims to achieve, at least in spirit.

What has not changed on the Mexican side is the need to provide certainty to investors, something that the new treaty no longer guarantees, except for some services. Certainty will now have to be provided by the Mexican government itself, which has not distinguished itself by its willingness or ability to secure it. Without private investment, the new treaty -and any other strategy- will be irrelevant. The real challenge is not Mr. Trump or the potential (probable) law suits coming from the US, but the lack of an internal compass regarding what makes it possible to attract investment.

https://mexicotoday.com/2020/07/07/opinion-panaceas/

www.mexicoevalua.org
@lrubiof

 Wilson Center, June 29, 2020
Luis Rubio

Fellows and staff from the Wilson Center’s Canada and Mexico Institutes answer questions about the impact of the July 1 implementation of the United States-Mexico-Canada Agreement (USMCA).

Luis Rubio
Global Fellow & Advisory Board Member, Mexico Institute, Wilson Center; President, COMEXI
June 29, 2020, Mexico City, Mexico

NAFTA provided certainty for investors both through its specific investor protections and because it forced Mexican leaders to commit to stay the course on economic reforms. Can the USMCA provide similar certainty today?

The only true similarity between NAFTA and the new USMCA is the fact that both establish rules for trade and investment across the two North American borders. Beyond that, these are two quite distinct legal documents. NAFTA was meant to be a mechanism whereby the United States provided guarantees for investors in Mexico with the objective to accelerate Mexico’s development while deepening the economic ties across the three nations. The ulterior objective was to strengthen America’s border, which stemmed from the notion of Mexico as a primary national security interest. A prosperous Mexico, the then American president argued, is in the best interest of the United States. The primary objective of NAFTA was strategic and political. USMCA is above all a compromise on trade.

USMCA not only eliminates the guarantees for investors but creates disincentives for new capital to flow into Mexico through a series of mechanisms, including very tight rules of origin, severe penalties for labor practices, and (very high) minimum wages for a series of industrial processes. In addition, the agreement incorporates a sunset clause after every six years, a circumstance that hinders long-term projects from being contemplated. Clearly, the two documents pursue different objectives.

Most of the emphasis of the USMCA is placed on both updating the old agreement to incorporate the novelties of one of the fastest-changing periods in history, especially with the introduction of the Internet, online commerce, just-in-time delivery (as part of dynamic industrial supply chains that crisscross the region), and all things digital. On the other hand, the agreement incorporates a series of measures to introduce political change in Mexico, particularly as it attempts to dismantle the old labor-union structures that for decades were one of the staunchest support mechanisms of political stability. Whether the pretense of introducing democracy into the labor arena will deliver what the two governments want (which most likely is not the same thing) remains to be seen. What the López Obrador administration certainly wants is to replace the existing labor structures with his own, to then bring them over as social control systems within its own coalition.

To answer the question in one line, there is no way that the new USMCA will provide for long-term economic growth and political certainty because it is not meant to accomplish that. At best, it will protect, for a while, Mexico’s foremost engine of growth, namely exports of manufactured goods, and not even that is certain. Much ado about nothing wrote Shakespeare. Something similar may well be waiting for USMCA, albeit with much bigger, probably dire, consequences.

https://www.wilsoncenter.org/article/usmca-becomes-reality?emci=33dcecb6-0dbb-ea11-9b05-00155d039e74&emdi=e979ec8d-19bb-ea11-9b05-00155d039e74&ceid=49581

Luis Rubio

Oil could have been a blessing -or the curse that López Velarde, a 19^th century poet. ordained for Mexicans- but PEMEX is the grand ballast that is sinking public finances and, with these, the country.  The distinction between these is key because it lies at the heart of the energy dispute the country is undergoing today: the State enterprise that monopolizes (increasingly moreso) oil exploitation is not the same as the resource itself. What is crucial is the resource and its clean and efficient exploitation for its transformation into wealth. PEMEX has become a great obstacle to the country’s development and is a burden for public finances that threatens economic stability.

The paradox is that it is the government of President López Obrador that has come most damaged from PEMEX. After all, it is he who anticipated converting the state-owned company into the principal source of economic growth, as in the seventies. Instead of being an endless source of cash, PEMEX is devouring all the monies in the federal budget, affecting health services, the normal operation of the government and even universities. It is imperative to ask whether the President knows that he confronts a bottomless barrel and before the risk of losing investment grade on its debt that is crucial for the stability of the government’s finances.

The picture is clear: PEMEX is the world’s oil company most deeply in debt; its production has been declining over the past decades; and its operation is highly inefficient. The debt is extremely high and has been wasted in subsidizing gasoline, transfers to the government, and bad investments, such as Chicontepec. This besides its endemic corruption.

In terms of production, according to what experts in the sector tell me, PEMEX’s great fall from grace, or bad luck, was to have come upon the Cantarell oil field, because that field was so productive that no one worried about developing other possibilities or about training personnel for a time of less abundant exploitation. While Cantatrell lasted and oil prices were high, no one cared about the company’s inefficiency: when the cost of producing a barrel was, for the sake of argument, twenty dollars, and  was sold at one hundred, at a nominal profit of eighty dollars per barrel, frittering away two or three dollars on bad practices or corruption seemed irrelevant.

Now, the government possesses no more fiscal space for defraying the costs of basic functions and financing its pet projects due to its elevated debt and high interest rates. This is not the case of 2009 in which the federal debt was less than 30% of the GNP and the hydrocarbon reserves were substantially superior to those of today. Nor is it the case of the seventies when the reserves grew like foam, driving the rest of the economy with unusual demand for steel, pipes, cement, highways, etc.

Among the detractors of the energy reform undertaken by the previous government there is a clear propensity to view it as an ideological obsession. Seen in retrospect, what in reality that administration intended was something very distinct given that it clearly recognized PEMEX’s grave situation. Its objective was to develop the industry beyond PEMEX in order to generate a greater cash flow toward the economy in general.  That is, its objective was identical to that of President López Obrador, except that they did not want to continue to depend on an inefficient company, without the most advanced technology and, above all, while running excessive risks in the development of new oil fields. The fact that PEMEX is a partner in practically all private projects arising from the reform indicates that it is not being marginalized but rather protected.

The crucial point lies in what is important to Mexico is that those resources be utilized in the most efficient and multiplier manner possible. What the country possesses is an enormous source of potential wealth, and nothing more. What matters is not who exploits the resource but that it is exploited to achieve the benefit. However, counter to AMLO’s objective and to what is established in the Mexican Constitution, the government is sacrificing programs and fundamental functions to maintain the state-owned enterprise afloat. What PEMEX needs is to clean up its operation, not having subsidized its inefficiency.

In an ideal world, the true rescue of PEMEX would involve reconfiguring the refineries, adjusting labor costs and renegotiating the financial and labor liabilities of the company in order for these to match the real cash flows of the entity. That is, instead of continuing to infuse thousands of millions of scarce dollars into PEMEX, the entity’s finances would have to adjust to its productive reality and, once that is done, its debt would have to be renegotiated with the banks and bond holders. And, without doubt, part of the renegotiation would inexorably require reconsidering the taxes, explicit and implicit, that the government charges the company.

The point is that PEMEX should become an entity devoted to exploiting oil resources and not to be a source, as before, of federal government subsidies and, currently, of liabilities. The true rescue of PEMEX consists of cleaning it up. The recession obligates reviewing these costs and, simultaneously, renders it possible. Failing that, the financial markets will surely show the way, at an indescribable cost.

https://mexicotoday.com/2020/06/30/opinion-costly-playthings/

www.mexicoevalua.org
@lrubiof

Luis Rubio

In democracies with re-election, the advantages for the incumbent are more than evident. However, I daresay that, for now, many months distant, the U.S. presidential election is Biden’s to lose, provided he knows how to win it, which is certainly not obvious.

Joe Biden is the virtual winner of the Democratic Party nomination to a great extent because that party’s Establishment concluded that the only way of winning over today’s President Trump would be with a moderate candidate who could commandeer the political center. Biden has never run for office outside his (tiny) home state of Delaware and this is not the first time he has embarked upon the presidential candidacy: in the eighties he tried and failed in good measure due to his proclivity for being careless with his words, above all when responding to the press. In plain language, he tends to put his foot in his mouth. In the primaries, Bernie Sanders, the Independent senator from Vermont, was ahead, above all driven by the young and the more ideological vote of the party. Biden’s challenge now is to win over the Sanders base without threatening his standing with the political center. Not easy.

Elections have two components: the candidates and the context. President Trump has three great advantages and one enormous disadvantage. The first advantage is the very fact of his already being in the presidency, with all of the benefits that incumbency grants him, in addition to that he is well funded and nobody is contesting the nomination vs. a divided Democratic Party. The second advantage, a particularity of Trump’s, is his virtual control of the process of the primary election of representatives and senators through the hordes of believers he can manipulate. In the primaries, there is typically the participation of a very small number of party members, usually the most ideological of these, those who, in the case of the Republican Party, see in Trump their star (similar to the case of Sanders on the Democratic side). Finally, the third advantage is that the Republican Party is adrift at present, without ideas, a political project of no greater clarity than that of staying in power. The great disadvantage, unusual for an incumbent, lies in the moment at which the election falls: midway during the pandemic, the recession, the hugely damaging protests, and an uncommon level of unemployed, the latter a frequent indicator of the probability of re-election.

Biden also has advantages, but his disadvantages are equally pronounced. The first advantage, superlative in the entire “modern” or blue part of the country, is that he is not Trump. In reality, outside of his family, no one cares about Biden: everyone sees him as a means of defeating the President and nothing more. That confers on him massive popularity but turns him into an easy target just as well. The second advantage is that he has an energized party, decided on beating Trump but, at the same time, split between those desiring to accelerate the pace toward the Left, the political base of Sanders and Warren, and those who think the only way to win is moving toward the political Center to gain the vote of groups of independent electors. Perhaps the best example of this were the so-called “Reagan Democrats,” individuals who had normally cast their votes for Democrats but who, when that party shifted too much to the Left, voted Republican. Those “Independents” are unhappy with both candidates and might even stay home on Election Day rather than support a Biden who moves to the Left, leaving him in a bind: consolidate his Left flank (precisely those who stayed home and did not vote for Hillary in 2016) or move to the center of the spectrum, above all in the key battle ground states that gave the win to Trump in 2016 such as Michigan, Pennsylvania and  Wisconsin, as well as key groups of voters in those states, including  Hispanics and Afro-Americans. The positions that Biden adopts during these months as well as whom he nominates for Vice-President will define his strategy and, with that, his probability of winning.

Biden’s great disadvantage is Biden himself. His age, frequently politically incorrect reactions, and his apparent loss of focus in many of his responses render him overly vulnerable. He clearly counts on the protection of many in the media that, within such an ideologically polarized context, have often ignored his blunders, but it is not obvious whether that is sustainable. Thus, whoever is nominated for the Vice-Presidency will be key because it is not inconceivable that this individual will in the last analysis ascend to the Presidency. The Party powers have profiled a composite of who should occupy that position, essentially an Afro-American woman. There is no lack of potentially good candidates, but what is politically correct is not always electorally useful. Therefore, that nomination will be a defining element for the upcoming November election.

As concerns Mexico, what is important is the relationship with the United States, not who wins the election. People –of both sides of the border- change, but the relationship and the neighborhood are permanent. History demonstrates that what matters is not who, but the fact of not losing clarity of what is important. Every time that truism is mislaid the problems start.

https://mexicotoday.com/2020/06/23/opinion-can-he-win/

www.mexicoevalua.org
@lrubiof

Luis Rubio – Americas Quarterly – June 10, 2020

Mexico
Blame Politics for Mexico’s Recession, Not Just the Pandemic

The economy was shrinking long before the virus arrived.

MEXICO CITY – The president of Mexico, Andrés Manuel López Obrador, has argued that the coronavirus crisis “fits like a glove.” He never clarified what he meant by that, but the pandemic came at just the right time to provide yet another excuse for the failures of his administration. Only mirages do not last – much less when they involve millions of unemployed people with no source of income or support.

The easy part is blaming something rather as unfathomable as this virus for the deepening of a recession that started a year ago and for the ever-growing political rift provoked and accelerated. The question is what comes next. The more complicated part dwells in addressing the tough structural issues that lie at the core of the president’s presidential bid, like poverty, corruption and low rates of economic growth, all of which were the centerpiece of his campaign promises.

The current recession poses a peculiar challenge for a president with fixed and unchanging ideas and the inability to adjust to a radically altered scenario like a global pandemic. One of those is López Obrador’s conviction that Mexico cannot incur a fiscal deficit for fear of provoking a financial crisis. History supports that belief, for every time the country has spent beyond its means it ended in a major crisis. The problem today, though, is that Mexico is immersed in a deep crisis that nobody can blame on the administration, but for which the president has no answer other than to stay the course – a strategy that had already led to recession long before the virus struck.

López Obrador has a very clear vision of where he wants Mexico to be at the end of his term, but he lacks a plan to get there. His deeply held belief that Mexico erred its way when it began to liberalize and reform the economy in the 1980s is key. From his perspective, those reforms eliminated the factors that made it possible for the economy to grow at a high and steady pace and for society to be orderly and with no violence. The nostalgia for the 1960s and 1970s frames his view of the world and every action he has taken since assuming office has been oriented towards recreating the formidable presidency of that era.

Hence, he has swiftly proceeded to eliminate or neutralize checks on executive authority (like the entities charged with regulating energy), weakening the Supreme Court, subordinating economic decisions to political fiat, and strengthening the sources of wealth of that era, namely oil. His project is not ideologically driven: López Obrador means to recreate an era that may have worked well due to the circumstances, both domestic and international, decades ago but that have long ceased to be functional. And now, as the president tries to centralize and exert control over everything, he increasingly faces the opposite: the more he controls, the more things fall apart.

Complicating the picture is the nature of the coalition that López Obrador assembled to win the presidency, namely his Morena party, which includes groups from the extreme-left to the extreme-right. Morena incorporated former guerrillas, members of both PRI and PAN parties, dissident unions, the remnants of the communist party, Trotskyites, small businesses and youth organizations, plus iconic figures from all corners of the political spectrum. The result was a formidable coalition with no structure or organizing principle, whose only unifying principle is López Obrador himself. Morena’s supermajority allows the president to manipulate Congress at his pleasure. Many see Morena as a revolutionary movement that wants to undo the existing socio-economic foundation of Mexico, and they are certainly right, but in practice it functions more as a collection of agendas with disparate interests rather than an organized party.

Since 2016, with U.S. President Donald Trump’s systematic attacks on NAFTA, the key factor in Mexico’s relative economic success of the past three decades, new investment projects had already started to die down. And recovery is unlikely while economic decisions continue to be subordinated to political power, a point where AMLO has actually delivered: the cancellation of a new Mexico City airport, the annulment of a permit for a brewery already two-thirds built, coupled with permanent attacks on “the rich” and private investors. While Mexico is ideally placed to benefit from Trump’s trade war against China, it is unlikely it will harvest any benefits because of the uncertainty the administration keeps nurturing.

Mexicans are in for a ride. The most optimistic forecast for economic performance in 2020 show a contraction of 7%. The most optimistic forecasts for next year show growth of 2% – a two year net contraction of 5%. In the absence of new investment and of spending power from a battered population, the economy will not improve anytime soon.

That does not mean Mexicans are simply lying down. Governors are calling for a renegotiation of the “federal pact,” where the main feature is the way tax monies are distributed among states and the federal government. Civil society is also active: ever more civic organizations are developing solutions to everyday issues; large private sector organizations took the initiative to contract loans with the Inter-American Development Bank to support small firms badly affected by the recession. Social activism, though still far from ideal, is breaking with the historical mold. Anything could happen.

The government’s margin to maneuver is much more limited than the president seems to believe, and it is not obvious that society is ready to become the steadying force that Mexico’s future demands and requires, but the opportunity is exceptional. What is more certain is that four more years of institutional destruction like the one fostered by the president may bring Mexico back to the Stone Age.

ABOUT THE AUTHOR

Rubio is chairman of the Mexican Council on Foreign Relations. He writes a weekly column in newspaper Reforma, and is the author and editor of dozens of books. His most recent book, Unmasked: López Obrador and The End of Make-Believe, will be published on July 23rd by the Wilson Center.

@lrubiof

https://www.americasquarterly.org/article/blame-politics-for-mexicos-recession-not-just-pandemic/

 Luis Rubio

For the President, Mexico should return to its roots and attain happiness through a pathway of negation. That’s the vision he extols in a video* about an old sugar-mill, the trapiche, a primitive gig employed to extract juice from sugar cane as well as to use as an ore crusher in mining, a technology that arose in the XVI century. Therein appears to lie the point of convergence of the presidential vision: Mexico should summarily move backward four hundred years.

The economic indicators permit us to envisage that the President is procuring his objective: economic contraction accelerates, unemployment grows without limit and, without any doubt, the human dramas that are a product of the lack of income and growing needs become more acute. Anecdotal evidence suggests that the dimensions of unemployment as well as the deaths in the glutted hospitals are substantively greater than those recognized by the authorities, at least in public. Deceit lies at the heart of the project.

The problem is not the pandemic that gave rise to this indeed unfortunate scenario, but rather in the government that prior to the pandemic had already produced a recession without possibility of recovery. The President attacks Neoliberalism as the causal factor of the ills afflicting the country, but that is mere rhetoric. The evidence demonstrates that his vision is not that of development nor of progress, howsoever these are defined, but rather of a return to a very basic way of life, perhaps ancestral, all subsidized by oil. The devil with not only the (his) institutions -a phrase he uttered and that became famous in 2006- but also with the entire modern Mexico, the productive plant, and the eagerness to be better, civilized and developed. His plans –written and those in his daily dissertation- reveal a fundamentalist conception of life that starts with the recreation of agricultural self-sufficiency, the promotion of self-employment from the revitalization of diverse skills, as illustrated by the sugar mill, as well as barter and the simple and moral life. Religion is always an instrument to advance his vision.

The religious component is fundamental in the vision of the President because everything is judged through a moralistic filter determining who or what is or is not corrupt. Contrary to what many of his disciples assume, this has to do with an extremely conservative vision in which the definitions of corruption, honesty and mettle are all relative and not absolute: what matters is not the fact itself (stealing from the public funds, abuse in the sale of goods and services to the government or in personal conduct) but instead the purpose for which it is undertaken. If it contributes to the presidential objectives, redemption is not long in coming. Any action, conviction, or behavior that that is not conducive to the presidential project is corrupt, neoliberal, therefore contemptible and, yet more importantly, immoral. The preacher in the pulpit decides who lives and who does not.

From this perspective, it is perfectly explainable why the growth of the economy (one of the central factors in the President’s criticism of so-called Neoliberalism) no longer matters, violence can be ignored and knowledge is reprehensible. In addition, it is very convenient to pretend that there’s no reason for the government to be accountable for the country’s situation. Behind this lies the reality of a massive portion of the population that has endured the “education” made (im)possible by the two teachers unions, the CNTE and the SNTE, both sponsored and validated by AMLO himself. What is relevant is not consistency but expediency, wholly cloaked in the moral posturing that, at least to date, maintains a fairly high number of voters still believing in the President. In a world of fundamentalist poverty, education and health are irrelevant, because a higher authority says so, the very same authority which follows a single rationale, the only one that matters: the electoral.

The problem of the presidential vision is that it derives from a fallacy: that people are foolish and do not understand anything. That is, that the average Mexican can be lied to, cheated and duped because they have no way of grasping what is going on. The reality is precisely the opposite: the majority of Mexicans may have been furious with Peña’s flagrant corruption and arrogance, as well as with the promises and errors of technocrats in general and with the day-to-day sub-standard treatment of the population by bureaucrats and politicians, but they know well –they see it on television and hear it from their relatives in the U.S.- that the world works on the basis of openness, , democracy and the markets. Many will perceive the President as faultless, but that will be irrelevant when the dilemma is between an old sugar mill or a real job. Mexicans know that the future lies not in XVI-century technology but in the ultra-modern manufacturing plants of el Bajío or the Mexican North. The fact that many Mexicans receive money from the government does not deceive them, even while it naturally compels them to do what’s necessary to preserve those transfers.

The world of the old sugar mill leads nowhere, making it clear that the present government has no future and that its demise will end up being accelerated by this pandemic that lays everyone bare and makes evident what does not work. But the cost of all this will be enormous.

*https://www.youtube.com/watch?v=gxXLhYoVqxk

www.mexicoevalua.org
@lrubiof

https://mexicotoday.com/2020/06/16/opinion-the-old-sugar-mill-model/

Luis Rubio

 The ability to help individuals to frame and achieve their objectives and reach them, that which is called leadership, is perhaps the most transcending factor that makes all the difference in times of crisis. The great leaders are forged during trying times: when, due to circumstances that transcend their control, the population needs to resolve challenges beyond their personal capacities. The most effective leaders in history are those who build collective solidarity amid resolution of the problem. That is how the fame of Winston Churchill grew to attain superhuman proportions: his prior accident-prone history would not allow one to expect that he would be a great leader that his country, and the free world, would see as a light on the horizon even during the darkest moments.

Churchill was the key person at the crucial juncture, but not the only one. During the last ninety days, we have observed that Chancellor Merkel, whom many perceived as in the end phase of her influence, not only regained massive support in her country, but also became the symbol of vigor, clarity of mind and reasonableness. Jacinda Ardern, the Prime Minister of New Zealand, did likewise, as did her equivalent in Taiwan, Tsai Ing-wen. What distinguished them was never confusing their role nor entertaining secondary agendas: they devoted themselves to what corresponded to them and nothing more. Their success, and the recognition that they achieved in their nations consign it thus. The case of South Korea is emblematic: President Moon Jae-in faced decreasing approval but achieved a supermajority in his Parliament halfway through the pandemic due to the leadership that he exercised.

There are not many examples of such extraordinary accomplishment, but cases of failure are evident: those who dedicated their energies to seeking culprits instead of finding solutions. In situations of crisis, when the population calls for certainty and clarity of course, leaders may advance towards a prompt resolution, hindering permanent and inevitable decadence. On the collapse of apartheid, South Africa could have evolved in distinct directions, beginning with a slaughter of Whites. If rather than Nelson Mandela, the successor of F.W. de Klerk had been some of those who succeeded the country’s first Black president, that nation would have ended up in a violent twilight;  Mandela was the one who made a peaceful and successful transition, the requisite leader at the precise moment.

It is impossible to minimize the magnitude of the crisis now yet more heightened because it combines the risk of contagion –and the fears and concerns accompanying it- with the sudden collapse of economic activity due to the recourse of sheltering in place as a strategy to contend with the virus. The Americans procured converting the crisis into new grounds for political dispute: rather than responding to the crisis, the U.S. Government persisted in its agenda of polarization, prolonging and rendering the suffering more acute. Crises call for adequate action before and for the specific circumstances: as Sweden and Germany demonstrate, there’s not a single response that is possible, each nation has its own particular characteristics, but all have need of a clear-cut and convincing line of action that transcends the every-day political tussle. And even more so, in that this concerns divided societies, what is required is an efficient government and one entertaining a long-term vision to confront obstacles without precedent. The nodal point is to win over the trust of the people in a government that demonstrates that it knows what it is doing and that, as a product of the latter, achieves the solidarity of the society. Some governments gained this; others were left wanting.

A recent survey * found that “too many people in too many countries do not trust their national leaders to act in their national interest or, at the extreme, even to hold fair elections.” The same survey displayed the enormous approval (90%) of the scientists, followed by military leaders and entrepreneurs. The reason for the lack of trust is reduced to the corruption or weakness of the governments and politicians, factors accentuated the younger the age of the surveyed.

Moments of crisis are perfect for comparing the manner in which distinct societies and persons respond to the same challenge: it is from this that nations differentiate on their intrinsic institutional solidity to deal with the challenges presenting themselves, independently of the quality of their leadership, and also of their leaders –in strong or weak nations- that emerge, as illustrated by the German Chancellor vis-à-vis Mandela, both successful under critical circumstances. Margaret MacMillan, the author of some of the most transcending books on the XX century, affirms that “history shows that those societies that survive and adapt best to catastrophes were already strong.” ** She exemplifies this by contrasting the U.K. and France in the face of the Nazi lashing in WWII.

The lesson is obvious: only countries with solid institutions surface unscathed from crises. This is also achieved by countries with the right leadership in place when the circumstances demand it. When both of these are absent, the future becomes ill-fated. It is key for leadership to stand up and unite the people.

* Tällberg Foundation’s “Democracy’s Temperature” was conducted from April 14 to 30, 2020, among 526 respondents from 77 countries.

**Economist May 9, 2020.

https://mexicotoday.com/2020/06/09/opinion-leaders/

www.mexicoevalua.org
@lrubiof
a quick-translation of this article can be found at www.luisrubio.mx

Prologue to Luis de la Calle:
From the Economic and Equality Deficit to the Democratic Deficit*

 Prologue

 The world can appear static at times, but looking back, there is an ongoing process of change that transforms civilizations in the long run. Some say these changes occur every twenty years, an arbitrary period that nevertheless reflects natural generational renovation. The 20th century is a clear example of it: in the year 1900, Europe’s unmatched wealth and prosperity brought to mind the permanence of the moment; by 1920, however, the continent was coming out of a bloody war that would supposedly “end all wars” and yet had resulted in tens of millions of casualties and a defeated, impoverished Germany.

By 1940, the world was at war once again, this time with Germany dominating the European continent in what many believed would be the new normal. By 1960, Germany had been divided and the United States and the Soviet Union were halfway through the Cold War. By 1980, the United States had been defeated in Vietnam and was now aligned with China against the USSR. By 2000, the USSR, which had once seemed an unbeatable enemy, had disappeared, and by 2020 we are now facing an entirely new international reality.

China and the United States are engaged in geopolitical confrontation, complicated by the scaffolding of economic (and other) links forged during the past few decades. The only constant is constant change, much of it inspired by ideas that become increasingly or decreasingly relevant as time passes.

Mexico is not exempt from generational and geopolitical change, for the same reasons as the rest of the world: the context changes in ways that affect Mexicans and internal decisions, both right and wrong, shape the country’s fate. The Mexican economy has therefore undergone important changes that have opened some doors and closed others. The subject of whether the open economic model, which has been the norm since the end of World War II, is sustainable is currently being debated worldwide. It is no longer a matter of socialism vs. capitalism, as it was during the Cold War, but of which kind of capitalism —authoritarian vs. democratic—is best suited to the needs of the different nations. China’s success in generating high economic growth rates and solving essential infrastructure problems is attractive to many, including influential actors in Western capitalist nations, who see democratic decision processes as a hindrance to development. At the same time, the costs of China’s authoritarian model become equally apparent, as the country’s decision-making regarding the pandemic illustrate. Democracy comes at a cost, but its benefits are irreplaceable.

Additionally, the difficulties Mexico has faced in setting the course for its own development have brought up a very clear discussion in ideological terms, but not very precise regarding the factors in dispute and, especially, regarding the consequences of whatever the country decides for its future. The election of President López Obrador two years ago evidenced open and underlying tensions and conflicts that had been festering and are now the subject of everyday discussion, although they have been at the heart of the national debate for fifty years: how to achieve integral development and make Mexico a developed, successful and civilized country.

In this text, which COMEXI is honored to publish, Luis de la Calle persuasively explains the nature of the dilemmas the country faces, and the contradictions that become apparent in the debate, especially regarding delicate subjects such as growth, corruption and the market in general. His conclusion is one that politicians and economists have been avoiding for a long time: the country’s economic problems are in fact political, and they have more to do with the lack of democracy than with the alleged shortcomings of the economic model.

The ongoing debate in Mexico, though often shrouded, is no different from that of the rest of the world, and at its heart lies the Keynesian spirit that ideas shape the course of history: “The ideas…”, said Keynes, “…both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else”. Wrong ideas come at a high price: this is Luis de la Calle’s central argument. It is a significant debate whose outcome will determine the success or the failure of Mexico as a country, a circumstance that is magnified by the outbreak of the coronavirus crisis given the recession it entails. Whatever Mexico decides to do will allow it to either walk out of this triumphantly or become stagnated once again.

 Luis Rubio
Chairman, COMEXI

 * https://bit.ly/DemocraticDeficit

 Luis Rubio

In memory of Hector Fix-Fierro

 Nothing like a crisis to learn who we really are. Crises draw out the best and worst in people and governments and countries. I remember the spirit of solidarity that took hold in the 1985 Mexico City earthquake and that elicited brutal political repercussions, becoming a nodal factor of the democratization that Mexico underwent in the following years. The latter in good measure due to the incapacity demonstrated by the government to respond in the face of the tragedy, but particularly due to the society’s ability to organize itself and decisively contribute to the country’s stabilization. The late Adolfo Aguilar Zinser could not have described it better when, a year after the quake, he published a book entitled Still It Trembles. If an earthquake can change so many things, I ask myself what might change with weeks or months of confinement, serious recession and the absence of political leadership?

What was first noteworthy for me throughout these weeks was the solidarity that the population showed, but a solidarity that is split in two: a faithful reflection of the polarization that has characterized Mexican society, fed and exacerbated by the President. The country has been torn in two, but each of these halves has drawn closer to itself and there has been little empathy for those who summarily lost their incomes in addition to their occupations. Despite this, there were notable efforts among businessmen as well as employees to find ways to preserve sources of work, both parties ceding for the sake of avoiding a social catastrophe. Unfortunately, given the composition of the labor market, –one part formal and the majority informal- those efforts helped hundreds of families but not the millions of persons who were suddenly left, as the old saying goes, standing in the lurch. More importantly, integral solidarity waxes difficult in the absence of a government bent on explaining and wishing to unify.

The moment called for great leadership; in fact, it constituted a great opportunity to forge a new country, founded on a great appeal for solidarity, even for advancing the president’s “fourth transformation.” However, the raw material was insufficient for that. The president understands solidarity as loyalty to the government, as illustrated by statements by the pandemic’s spokesman for unhealth, the taxman and, the jewel, the president’s statement on “lessons on the pandemic,” in which he lashes against the US, the World Bank, the IMF and everybody in between.By the time the coronavirus arrived, the government had already dismantled the health sector by divesting it of medicines and critical goods, as revealed by the tragedy experienced by children with cancer.

After much wavering, the government finally adopted a strategy to deal with the health crisis. It was evident that the obstacle to facing the challenge was presidential unwillingness to run the risk of a recession, which led to a strategy of contagion (so called herd immunity), with all of the experts voicing disapproval about its being inadequate. Along the way, the return was able to be observed of the supreme government which it is not required to offer any explanation, nor information concerning the number of infected persons or deaths: enormous under-registration of both, all to save face. The government is not there to respect the citizenry or, even, to try to convince it.

In frank contrast with the governing caste, medical and health personnel did not back down an instant in giving their best, incurring immense personal risk due to the absence of requisite equipment, but nonetheless abiding by their vocation and duty beyond what might be expected. The contrast is flagrant between them and their political leaders, whose motivations are perennially those of the low passions.

On the side of the society there was something of everything: from hoarders of toilet paper and cleaning implements to persons, organizations and companies devoted to looking for solutions instead of excuses. As soon as it was known that MIT had designed an effective andinexpensive ventilator, production lines were assembled to manufacture it. Others lent their hotels for occupation by patients in less need of complex treatments, or by the families of those suffering from the virus.

From the substantive to the trivial, gestures of skill, disposition, and dedication exerted an impact. Working from their homes, many were able to create space to raise their productivity, while others opted to act as if they were on vacation. Some displayed great capacity for adaptation and discipline.

Worst of all, as evidenced in a thousand ways, was the dismal quality of the country’s infrastructure, in the broadest sense of the term. The priorities of many governments of recent decades have not been on what’s important as was revealed now in education, the digital gap and, obviously, the health system. Crises bring out the best and worst and here the Mexican government fails the test.

With respect to what the current government is responsible for, its only priority has beenpolitico electoral. The people’s dramas evidenced by the crisis are irrelevant. It is not solely its reluctance to incur a fiscal deficit, which arises from a legitimate concern, but instead its disdain even for those who in their majority voted for AMLO. Crises place their societies in evidence but completely denude their governments. As in 1985, Mexico embarks upon a new stage.

https://mexicotoday.com/2020/06/02/opinion-observations-and-learnings/

www.mexicoevalua.org
@lrubiof