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

Luis Rubio

The evidence shows that the project is about power, not well-being or development. In this context, the crisis certainly fits like a glove, as the President recently stated. It means, as confirmed by Rahm Emanuel, then Obama’s political adviser, “You never want a serious crisis to go to waste. And by that I mean that it is an opportunity to do things that you think you could not before.” In the Marxist terms utilized by many Morena party members, the objective is to deepen the contradictions in order to change the reality.

In effect, the President was elected to change the reality: his electoral platform proposed to confront poverty, corruption, inequality, and the lack of accelerated growth. If anything has distinguished the President during the past year and a half it is his being consistent in his promises and in advancing his agenda on each of those fronts. The key question with respect to AMLO does not lie in his objectives, which are public and transparent, but rather in the strategies he espouses to achieve them. In plain terms, no one can be against those objectives, but what seems evident is that he is not advancing toward their resolution; instead, he is concentrating his power on all fronts, as if that would suffice for procuring his objectives.

The notion that the concentration of power resolves the country’s problems derives from a partial and insufficient reading of what occurred in the era of stabilizing development, above all in the sixties and at the beginning of the seventies. The dates matter because the results were contrasting: between the forties and the onset of the seventies the country enjoyed a situation of exceptional economic growth and political stability, a perfect combination that resulted from a political and economic model that maintained coherence between them but that, in the sixties, began to reach its limit. In the seventies there was an attempt to prolong a model that no longer possessed economic or political viability through growing indebtedness, which led to the debt crisis in 1982 and the terrible recession of that decade.

The main point is that there was a model that worked, a model whose characteristics included a strong presidency, the product of concrete economic and political strategies. The strong presidency was the consequence of a model, not the model itself. In addition, that model responded to an historical moment of Mexico and of the world that no longer exists. In this respect, attempting to recreate the presidency to resolve 21^st-century problems is, as Marx would have said, a farce.

The latter has not impeded the construction of a strong presidency and a government focused on control from proceeding rapidly and without pause, as illustrated by the attempt to eliminate any constitutional control in decision making of the public expenditure or the recent steal of electric rights. However, the fallacy behind that project is its not being susceptible to making headway toward the achievement of the objectives put forth by the President: clearly, corruption has not diminished (as always in Mexico’s political system, the corrupt are those of the government-in-progress, but there the corruption remains); poverty does not diminish with the increase of government transfers (but a client base is strengthened that has nothing to do with poverty); and, it is clear, inequality does not diminish. In terms of growth, there is no need to say anything further.

The evidence reveals that the true project is not development but control: not only is everything pinpointed in that direction, but there is not even any pretense of building the type of a steering-role capacity (“rectoría del Estado”) that characterized the stabilizing development era. However, the objective of control is accompanied by the neutralization not only of the (supposed) counterweights to presidential power, but also by the elimination of all of the success factors typifying the period that the President calls “neoliberal.” This implies that the objective is not exclusively to restore an era of Mexico’s past, but to destroy the mainstays that do allow some things to function (actually, many of them very well, such as the manufacturing plant for export, now at risk). This would follow the Trotsky maxim that “the worse things go, the better.”

What is peculiar about the current moment is that the President forges ahead within the legislative milieu nearly without restriction, but the results are, despite of that, pyrrhic. His control of the House of Representatives through Morena is indisputable and, for bills not requiring a qualified majority, he possesses similar control of the Senate. Nonetheless, although Morena is a tool of the President, it does not constitute social representation with ample presence in the society. Its legislative strength is overwhelming, which permits the President to manipulate and deploy the party at will, but it does not have the capacity to mobilize or control the society.

The President has converted the crisis of the pandemic into an opportunity to press onward with his project of control, but it is, nonetheless, not advancing: the society has increasingly acquired greater presence and relevance. In a word: this is the time and this is the opportunity for society to seize the role corresponding to it, to sever itself from the universe of fake news and prevailing corruption to build a platform of solid future development. Crises are opportunities for everyone.

 @lrubiof

https://mexicotoday.com/2020/05/26/opinion-opportunism/

Luis Rubio

It has always seemed to me a simplistic notion that everything the president does is reduced to implementing the principles of the São Paulo Forum, a space in which today’s President appears not to have had physical presence nor direct participation. Although there could be similarities between the Forum’s proposals and some policies that President López Obrador has undertaken, his most basic characteristic in the exercise of power has been the consistency between his actions and his declarations, all written in his books prior to his assuming the Presidency of Mexico.

The documents published by the São Paulo Forum reveal a very clear ideological profile, but its action proposals are much vaguer than commonly thought. Born of the initiative of then-President Lula of Brazil and supported by Fidel Castro, the Forum includes the entire gamma of Ibero-American Leftist parties, from reformists to revolutionaries. Their declarations tend to be very specific with respect to the particular circumstances of concrete nations and very general concerning the rest.

Of course, there is not the least doubt of the political ideology and objectives of the Organization’s members, which include work stoppages, strikes, proposals for the nationalization of private enterprises, rejection of “imported economic models” and support for the region’s Leftist governments. Their statements are so broad and generous that they easily lend themselves to all the conspiracies that are attributed to the Forum, beginning with seeking to overthrow governments not to their liking.

Many of the diverse components of the Morena Party are undoubtedly sympathizers of the Forum and the attendance of many of its personalities at its meetings strengthens the image that the Party appropriates them as its own. It is very possible that the latter is true, but it is not obvious that this in fact is a relevant source of the ideas or propositions ventured upon by President López Obrador. The President’s objectives and strategies can be delighted in or reviled, but they are always predictable because they comprise fixed concepts, mired in the sixties and published beforehand. While many of his ideas are not benign or viable and are in many cases perversely destructive, the President certainly does not engage in conspiratorial thoughts, except when thinking about those he sees as enemies.

More than following others’ visions, the President is motivated by very explainable tenets in his biography and that, at least in economic matters, Carlos Camacho Alfaro, in his “Seminario Político,” expresses with great coherence: “In Mexico a New Mexican Revolution is being carried out; the President of the Republic has been very explicit and specific in affirming this. It is about liquidating the Neoliberal Regime. As the Mexican Revolution liquidated the Porfirio Diaz legacy and its economic base of landowners, the Fourth Transformation (IV-T) is liquidating the social and political bases of the Neoliberal State. In its place, this new revolution will be nationalistic, popular and humanist, with “novel spiritual bases”, the National Regeneration. This is a strategy, and it is being applied within the context of the great crisis caused by the CoVid-19 Pandemic.”

The project is to regenerate what, in the mind of the President, worked before the treacherous technocrats arrived to change everything with their loathsome reforms. Formerly, as the President recalled in his Inaugural Address, during the era of stabilizing development, the country enjoyed high rates of growth, of order and there was no violence. As did his predecessor (who in political conception was not very different), the President has devoted himself to attempting to recharge what appeared to him as having been relevant during that period, especially his view of a presidency that centralizes power  and imposes its will, particularly in economic affairs. There is a vivid political and vindictive element (submit the so called “mafia ofpower”) and an intense flavor of nostalgia: to recreate the idyllic time of his youth when Pemex gave away money in the state of Tabasco and everyone lived (from the government purse) well.

Instead of a government plan, this involves a fantasy that calls up many of Luis Spota’s novels, describing the vagaries of Mexican presidents in an ambience of excessive power. But this is not a novel: it is a conception of the government, of the time and of the world that is not real, and, above all, not in the now. But most noteworthy is that, despite employing rhetorical resources that pretend to be grandiose, such as the president’s Fourth Transformation being made equal to those attributed to Juárez and Madero, his vision is less of grandeur than of a provincial understanding of a country without possibilities or a future, where the owner can have his way without limit or counterweight.

Mexico is not a small town lost in space. It is, rather, a great manufacturing and export power, something only possible because of the quality of its citizenry. Notwithstanding its being evident that Mexico has enormous lacks -education, insecurity, a bad health system, corruption, poverty, and regional inequality-the greatest of these is its government. The Mexican government, in the broadest sense of the word, is incompetent, bureaucratic, abusive and, more than anything else, ineffective. The great transformation would be to build one that functions and not to end the government’s term with yet more a failed one than it already is.

https://mexicotoday.com/2020/05/19/opinion-failed-project/

www.mexicoevalua.org
@lrubiof

Luis Rubio

 John Lennon once said about the early years of rock and roll, “Before Elvis there was nothing”. The government of President López Obrador bodes the same. For a year and a half, it embraced an enormous latitude, unknown since the seventies, for developing its programs and advancing its priorities. But, as for all presidents worldwide, something unexpected called this to a halt, changing everything thenceforth. What was, was; now begins the reality.

Perhaps the greatest change that the coronavirus brought with it, of necessity, was the strengthening of the society vis-à-vis the government, something unavoidably exacerbated due to the clumsy manner in which the government failed in its responsibility to protect the population. The consequences of this change will be discerned in the months and years to come, the greatest of these possibly being, in the last analysis, that Mexican society would free itself from an oppressive political system that has thwarted the rise of a true democracy. Time will tell.

The action of the society was not concerted nor organized and, because the isolation, the nodal characteristic of the circumstances, each company, organization, union, family or person made their own decisions. A new era that will doubtlessly change the future came into being.

The preeminent immediate challenge will be to deal with the sudden unemployment of the majority of Mexicans, the product of the disappearance of jobs and diverse earnings, constitutes the greatest intellectual and practical challenge for the government and for society because whatever emerges from these will determine the nature of the recovery that takes place afterwards. That is why the various initiatives coming out of society are so relevant -those having to do with financing the stalled economy as well as those in the congress that succeeded in stopping yet another attempt at authoritarian control-, though only time will tell whether they were sufficient. Many governments the world over anticipated these impacts, for which they developed assorted responses whose results will be seen by experience, but in this regard the contrast with Mexico’s government is plain: the government not only denied the existence of a crisis, but its actions intensified, deepened and prolonged it, without doing anything to mitigate those effects. Pathetic for a government which claims to be concerned for the poor.

The sum of a governmental strategy that was erroneous from the beginning of the administration –oriented toward imposing decisions on national and international economic actors- and the lack of foresight and capacity of response in the face of the crisis, will inexorably translate into an acute economic contraction and, much worse, an incapacity for achieving an accelerated recovery. To the errors in vision of the current administration, we must append the intrinsic weaknesses of the political system, whose historical feature is impunity. In a context such as this, a rapid recovery is inconceivable.

A scenario typified by severe recession, unemployment, political crisis and a total absence of credibility and trust in the government will result in political consequences that could feasibly be benign –the consolidation of a democratic system-, but that could also lead in the opposite direction: the fortifying of the most hard-core and radical elements of the Morena party; the dying out of any vestige of order; the growth of criminality, acting without distinction or consideration; the radicalization of the government in economic as well as in political and judicial matters; social and political decomposition that generates massive emigration.  There is no limit to the possibilities of deterioration.

What can be done in this respect? The first question that all of us citizens should ask ourselves is whether the President is going to adapt to the new reality or whether he will continue attempting to adapt the reality to his preconceived blueprints. The cost of that way of conducting himself will be measured in the number of lives lost, jobs that vanished, and the speed of an eventual recovery. To this one must add the natural propensity of criminal, political, partisan, military or paramilitary forces to take over governmental functions, which should be a sufficiently strong prod for the President to reconsider his original vision, because the country requires a way out of the hole into which it has fallen. Every Mexican would benefit from a pathway out of this crisis by effective, institutional, leadership, one that is tuned to today’s circumstances.

Unfortunately, the signals emerging from the government have been contrariwise: instead of applauding the society’s activism, the president has criticized and gone against it. His hostility to the private sector is known and has historical roots, but it begs the question: how does he expect to improve the lot of the 70% of Mexicans he claims to care for in the era of globalization without private sector investment, whether domestic or foreign. His way of acting reveals a preference for inciting social conflict, ignoring the potential consequences in terms of recession of poverty.  It is clearly not growth that is important, nor the poor, nor ending corruption or nor contributing to the development of the country. The question is what‘s next.

To date, the President and his government have basked in the support of a broad segment of the electorate, allowing them not to pay for the huge mistakes they have made. But the coronavirus changes those conditions: when these times of governmental absence are over, the time of reckoning and rendering of accounts will come to pass, the real one. This would be a great opportunity to set things straight before it is too late.

https://mexicotoday.com/2020/05/12/opinion-after-the-virus/

www.mexicoevalua.org
@lrubiof

Luis Rubio

William H. McNeill, author of the famous book Plagues and Peoples, begins his text by telling us that he became interested in this theme on reading how a warring people that was so prepared and as numerous as the Aztecs, came to submit themselves so easily to the comparatively tiny troop of opportunists led by Hernán Cortés. The answer is simple: infectious diseases that decimated the Mexica.

Plagues and infections have accompanied humanity from time immemorial. Thucydides describes the impact of a virulent plague that attacked Athens midway through the Peloponnesian War as “the catastrophe was so overwhelming that men, not knowing what would happen to them next, became indifferent to every rule of religion or law. . .” In Pericles’s funeral oration, the famous politician extols the attitude of Athenians in the face of the crisis, despite Sparta’s ending up winning the war and imposing a dictatorial regime. However, viewed in retrospect, Athenian democracy survived and bequeathed to the world what Churchill denominated “the worst form of Government except for all those other forms that have been tried from time to time…”

According to a study by Josiah Ober and Federica Carugati,* Athenian democracy persisted -and, in the long run, defeated Sparta- in spite of the wars and plagues that lasted for years, because the internal solidity of their society thus facilitated it. On emerging from the epidemic, people were intolerant of poor governmental policies and decisions and more demanding of their government.

The big question for Mexico is whether democracy will be strengthened or continue to languish (or worse). The response to the question depends on three factors: first, the strengths and weaknesses that characterize it; second, the quality of leadership: and third, the manner in which the citizenry learns from this crisis, which lessons it derives from it and how it decides to organize itself.

The nature of Mexico’s democracy is well known. Some eighteen years ago, in an official ceremony, a reporter asked each of the leaders of the main political parties whether Mexico was a democracy. The responses proffered were revealing: the then-president of the PRI affirmed that Mexico had always been a democracy; that of the PAN stated that Mexico had been a democracy since 2000; and the PRD president noted that Mexico had yet to achieve democracy. That is, the mere fact of democracy depends on that a party wins the election, not on the existence of a democratic way of governing, which would include components such as checks and balances, equilibrium among the three branches of government, freedom of expression, an independent and effective judiciary, a press independent from the government and boundless respect for citizen rights.

Measured by these criteria, it is clear that Mexican democracy is, rather, weak, which has been demonstrated by the ease with which the President and his party have taken control of all the instances of government, including those that theoretically would be key as counterweights. In a word, the point of departure is not praiseworthy.

In terms of quality of leadership, the panorama is eloquent. We have a President who, due to his not entertaining any association with the decisions of the past decades that he so sweepingly disparages, would be able to count on the elements and the legitimacy to carry out the reforms that Mexico in effect requires. However, his strategy and, in fact, his most basic instincts, lead him toward the opposite: confronting, disqualifying, attacking and moving backward. In building, he dismantles and rather than adding, he subtracts. Not much can be expected of the current leadership, but a pivotal question is what kind of alternative leadership might surface for the future, beginning with next year’s midterm elections. The announcement that the Mexican private sector had secured a huge credit from the IADB to fund small companies during the pandemic is a great beginning.

At the end of the day, what is crucial lies in the citizenry, the latter having been submitted, controlled and pummeled during nearly a century. The entire party and institutional structure was built for control and nothing –including freedom of expression and alternation of political parties in the government- has eroded it in major fashion.

That has produced a peculiar phenomenon, which was illustrated in a study on justice in Latin America of a few decades ago: on comparing the factors that influenced justice among the diverse nations of the region, Brazilian investigators found that Mexico followed very distinct guidelines. In comparison with a much larger universe, the results manifested that there were closer similarities between some ex-Communist nations and Mexico, not in ideological terms, but in the manner in which the dominating and controlling party system had diminished the citizenry.

One generation later, there are innumerable organizational efforts, many very innovative, on the part of the citizenry but there still persist many ancestral political forms, starting with the whole structure of the governing party.

George Bernard Shaw, the English dramatist, said that “Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.” I fear that Mexicans find ourselves there, at least for now.

*Economist, March 28, 2020

https://mexicotoday.com/2020/05/05/opinion-plagues-and-democracy/

www.mexicoevalua.org
@lrubiof

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.

https://mexicotoday.com/2020/04/28/opinion-before-and-after/

 Twitter: @lrubiof

Luis Rubio

 It is difficult to imagine a more striking contrast in government response to the coronavirus than that evidenced by the Mexican government vis-à-vis the United States and, in general, the majority of the developed world. The president has refused to contemplate anything that is alien to the strategy that he has been promoting since the beginning of his administration. As the saying in Spanish goes, “I am going straight forward and will not deviate.”

I have no doubt that a proactive response from the government to the brewing economic panorama is imperative; however, it is not evident to me that the proposals circulating today in this regard are either suitable or possible. At its core, the generic proposal is for the government to hire (more) debt to support companies that suddenly lost their customers as well as people who became unemployed. The proposals vary, but almost all involve tax credits, postponement of tax payments and of other government-provided services, as well as direct support to companies or individuals. The most complete and disinterested proposal is that of Santiago Levy in Nexos, where he focuses on minimizing the regressive impacts of the crisis by protecting the unemployed, especially the poorest, all while preserving macroeconomic stability so that there can be a recovery as soon as the sanitary emergency ends.

The first lesson that history teaches us and that, I suppose, is what motivates the president, is that every time the government gets into excessive debt, crises come about. In concept, there is no reason to think that this has to be the case, since there are circumstances that justify incurring into debt, but as long as the use of the proceeds allows not only to pay the debt in the future, but also to create public goods that improve the quality of life of the population, increase productivity and/or create assets that contribute to generating wealth for society.

The problem is that Mexican debt, almost never, throughout history, has been used productively; rather, the opposite is typical: public debt is contracted and then used to finance current spending. In other words, unproductive public spending -frequently politically (or electorally) motivated- which not only does not create conditions for greater prosperity, but also distracts productive resources. I would bet that a large part of the indebtedness loaded into the Pemex balance sheet was never used to develop new fields, but for objectives that have nothing to do with the basic activity of the entity. Perhaps they never even reached Pemex… In these circumstances, it is sheer temerity to assume that incurring new debt willreallylead to mitigating the costs of the pandemic. And worse from a government characterized by so many biases against economic growth and those who make it possible.

In addition to the above, the political moment cannot be disassociated from the risks inherent to the health emergency and the recession that deepens literally by the minute. Under normal conditions, as in 2009, the financial markets and the population understand the nature of an emergency and do not panic. In the current circumstances, in which there has not been a single new investment project since the Trump campaign back in 2016 (and the only exception, in Mexicali, has just been knocked down by the president himself), any movement in tax or additional debt could have direct impact on the exchange rate, which is already under pressure. The warning by the top rating agencies that the federal government’s investment grade is at risk certainly does not contribute to a favorable outlook.

What can be done in this context? The obvious is that people who lost their sources of income must be supported, especially those who work in the informal economy, since they are the most numerous and vulnerable. If in so doing those people would also commit to joining the formal economy, everybody would benefit. Also, it’s crucial to support the key industries that have been hardest hit by the crisis, such as those related to tourism.

The second thing that should be done is to modify several lines in the government’s budget to finance this objective; no government in recent memory has made as many such changes in spending as the current one, so there is no reason why this could not be done. The most obvious would be to stop financing white elephant projects that do not contribute to regional or national development, such as the Dos Bocas refinery and the Maya Train. The mere fact of canceling them would show fiscal sense, thus broadening social tolerance for a small growth in public debt.

The crucial thing is not to lose clarity of the objective that is being pursued: all this is to reduce the impact of the recession on the most vulnerable population and to ensure a rapid recovery once the health emergency has ended. To the extent that the priority continues to be transfers to favorite clienteles -the most unproductive spending in economic terms and of dubious political productivity- the country’s economy will contract without the least probability of recoverin. All that withthe risks in terms of governance and criminality that such a scenario entails.

Twitter: @lrubiof

https://mexicotoday.com/2020/04/21/opinion-easy-solutions/

Luis Rubio

Before, in the good times, Easter was a time to keep. Now that keeping has become a semi-permanent state, I set about gathering some ideas, explanations and comments on the current moment, aiming to better understand the situation or, at least, to laugh (or cry) at it.

“I have no idea what’s awaiting me, or what will happen when this all ends. For the moment I know this: there are sick people and they need curing.”Camus, The Plague

“It is obvious that human (and non-human) diseases are evolving with an unusual rapidity simply because changes in our behavior facilitate cross-fertilization of different strains of germs as never before, while an unending flow of new medicines (and pesticides) also present infectious organisms with rigorous, changing challenges to their survival.”William H. McNeill, Plagues and Peoples(1975)

“In the last two weeks, the world economic situation has changed dramatically and for the worse. All the countries of the world are experiencing the repercussions of the Coronavirus. It is too early to provide numbers, but it is certain that there will be a world recession, deeper than the one observed in 2008-2009. The same will happen in Mexico. We must prepare for a severe recession of uncertain duration.” Santiago Levy

“As a candidate, López Obrador told Jon Lee Anderson in an interview: “I always think the same, but I act differently depending on the circumstances.” He has lost that touch: now he thinks the same and acts the same, regardless of the circumstances.”Hector Aguilar Camin

“The President who does not govern himself is unable to command in the emergency. I confess myself surprised by the total lack of leadership in this circumstance.”Jesús Silva Herzog Marquez

“When decision-making is slow in public-health matters, the consequences are grave and serious.” Renowned physician of the National Health System

“The belated reaction to equip and prepare for the Covid-19 is directly associated with López Obrador’s denial of the reality of the pandemic and his resistance to prepare.” Raymundo Riva Palacio

“Mexico quickly went from a punishment vote to being punished for its vote.”Unmissable phrase stolen from Twitter

“The consequences of defunding public-health agencies, losing expertise, and stretching hospitals are no longer manifesting as angry opinion pieces, but as faltering lungs.” Ed Yong, How the Pandemic Will End

“Suppression strategies may work for a while. But there needs to be an exit strategy—be it surveillance, improved treatment, vaccination or whatever. If governments impose huge social and economic costs and the virus cuts a swathe through the population a little later, they will discover that when politicians disappoint the people over something this serious there is hell to pay.” The Economist

“The world changed for the worse, quickly and drastically. We are facing a double emergency, health and economic. Let us act soon and together to avoid further deterioration of expectations and of the environment, which will later be much more difficult to reverse.” Santiago Levy

It is always important in matters of high politics to know what you do not know. Those who think that they know, but are mistaken, and act upon their mistakes, are the most dangerous people to have in charge. Margaret Thatcher

“This crisis came like a godsend to consolidate the objectives of the Transformation.” AMLO

“[The] collapse in presidential popularity has to do… with the poor performance of the government in economic and security matters, and even in the fight against corruption… The collapse is sharp and will not be temporary. There are no improvements in the reality to reverse the fall in support, nor is AMLO changing his way of acting or his decisions, which are generating more and more rejections. On the contrary, theother debacles are coming: the epidemic and the economic recession. It looks very ugly for the country and for the President, if he does not change.” Guillermo Valdés Castellanos

“From now on the presidential term will be different. The President, his team and many of his supporters will find the mourning very difficult. But the fact, whether they digest it or not, is that now they will have to play more defensively. Managing losses, managing splits, dealing with the costs of what they did or didn’t want to do in this contingency. And with the opportunities that all this can represent for the renewal of oppositions.” Carlos Bravo Regidor

“Asking people to choose between privacy and health is, in fact, the very root of the problem. Because this is a false choice. We can and should enjoy both privacy and health. We can choose to protect our health and stop the coronavirus epidemic not by instituting totalitarian surveillance regimes, but rather by empowering citizens.”Yuval Noah Harari: The World After Coronavirus

“We are a democracy. We don’t achieve things by force, but through shared knowledge and co-operation.”Angela Merkel

“But what does it mean, the plague? It’s life, that’s all.” Albert Camus, The Plague

https://mexicotoday.com/2020/04/14/opinion-pests-and-the-pestered/ 

 Twitter: @lrubiof

Luis Rubio

The government and its coterie state that through their election in 2018 they achieved a regime change in Mexico, which explains (and justifies) all the outrages, excesses and problems that characterize the Mexican economy and society today. According to this thesis, the actions taken by President Andrés Manuel López Obrador’s administration stem from a change in the rules of the game and that they reflect a new governing coalition. Therefore, what is happening in the Mexican national stage comprises a novel political reality accompanied by what all this implies with respect to decisions, criteria and actions.

It seems to me that there are three elements that should be analyzed to evaluate what has in fact been occurring: in the first place, determine whether, in effect, a change in regime has come about; in second place, analyzing what it is that the government put into practice in reality and what the latter implies; and finally, evaluating the result.

There’s no one better than Leonardo Morlino, the dean of the scholars of regime change, to help us determine whether such a change has in fact taken place: “there is change of regime when, in addition to the collapse of the key characteristics of authoritarianism, all the components of the minimalist definition of democracy are set up” (Changes for Democracy: Actors, Structures, Processes, 2011). To ascertain whether these have been complied with, Morlino employs a series of measurements that include: Whether the cabinet is staffed by a single party or a coalition; whether the executive dominates the legislature; whether relations between government institutions and interest groups are pluralist or neo-corporatist in nature; and the degree of centralization of power.

Of course, there is no unique or specific gauge that determines whether a political system is democratic or authoritarian or when a change of regime to democracy has transpired. This is about qualitative factors that are supported quantitatively, but the key point (if Morlino would allow me) is if it can be evaluated according to the old rule: in dictatorships the politicians ridicule the citizens, while in democracies, it is the citizens who poke fun at the politicians. The problems with these measurements, –comical or analytical- is that they do not help us much because the traditional Mexican political system was so powerful that it was able to withstand the mockery without being a democracy.

In practical terms, the post-revolutionary regime underwent diverse adaptations throughout the 20th century, concluding with the creation of a professional, citizen-backed electoral system which allowed the alternation of parties in power. Those rotations created widespread spaces for freedom of expression and political competition, but they did not modify the essence of the regime dominated by a political class with access to privileges and benefits alien to those of the population as a whole even today under President López Obrador’s party, Morena.

What undoubtedly changed with the government of President López Obrador is the composition of the political coalition that sustains it, from which arises its own particular way of allocating resources, budgets and priorities. That change has been very steep above all because it has been accomplished in tandem with the elimination (real or virtual) of institutions constituted to (supposedly) limit the power of the presidency. However, if one analyzes the daily exercise of power that defines the López Obrador administration, it is not very distinct from that of its predecessors: the use of the formerly denominated “meta constitutional” attributions of the presidency is an everyday event (in fact, much larger than in the recent past); the demands of loyalty above that any other value are ubiquitous; discretional decisions (therefore, arbitrariness) in governmental action surpasses anything observed since the 1980’s; and the forging of clienteles with public monies is crucial, as is the absolute impunity of those in close proximity to the administration.

If by regime change one understands not Morlino’s definition but rather the reenactment of governmental practices of half-century ago, Mexicans are experiencing at present a regression in matters of democracy in a country in which democracy never came about beyond in electoral affairs (as fundamental as that is). The unipersonal exercise of power does not constitute a new regime, but instead the reenactment of the old one that, in reality, never left. It is, at the end of the day, the same old wine in a new bottle.

The problem of the attempt to reenact the old political system does not lie in its unviability (as it is evident present by observing the dreadful economic and health policy results, to cite two obvious examples), but in its incompatibility with the 21^st century. The old political system worked because it matched with a worldwide moment during which the governments were almighty; in the digital 21st century, markets, the integration of supply chains and the decisions of individuals are in command. One may like or dislike this, but it is the clash between of these two components –the new/old political system and the way the economy functions in the 21st century- which explains the present economic stagnation. And there is no reason to anticipate that this will change once the current health emergency ends.

 Twitter: @lrubiof

https://mexicotoday.com/2020/04/07/opinion-regime-change/