Luis Rubio

The only thing about which there is no dispute is that the president is advancing pell-mell toward a growing concentration of power. Every step he takes and each decision he makes tends to eliminate competition, diminish or neutralize counterweights and cancel all sources of independence that he can. The manifest objective is to control so as to resolve the problems that the country has been experiencing with weak presidencies that proved incapable of reestablishing order and promoting the growth of the economy. In other words, recreating the sixties.

Decades of observing the functioning of the political system have led me to two conclusions on its fundamental pillars, hence on the viability of the project of concentration of power.

In the first place, there is not the least doubt that during the entire independent era of the country there have been only two periods when the economy grew swiftly and the society lived through years of peace and stability.  The first was that of the Presidency of Porfirio Díaz that, after decades of conflicts and uprisings, the government instituted an order that permitted attracting investments, constructing railroads and bestowing a strong drive on the economy. The second was the post-revolutionary stage, especially the years of the so-called “stabilizing development,” during which the economy burgeoned in an unusual manner and the country underwent rapid urbanization and growth of the middle class. The common denominator was a strong government that did not allow dissidence and one that imposed order. It is not difficult to identify in these achievements a powerful attraction for a president who dreams of procuring a third era of peace and stability.

The problem with a nostalgic glance back on the past is that it permits us to isolate the triumphs from the failures or the advances from their consequences. The Porfiriato period collapsed due to biological reasons in that it depended on one individual who pushed and controlled, negotiated and governed, but that inexorably came to a close. Even without a revolution, the Porfiriato endured contradictions that with difficulty would have survived the leader himself. The end of the era of the hard PRI was the product not of the lack of institutionality but rather to its close-mindedness and authoritarianism, which denied any flexibility for adjusting the model when its underpinnings began to take on water, while it simultaneously blinded its leaders to the development of the society, the product, ironically, of its own successful governing. Like in the Porfirio Diaz times, the nature of the system hindered it from transforming itself and there is no reason to think that a new era of iron-fisted presidential control would be distinct. The problems that the PRIsts are currently facing in their intent to re-create themselves derive from precisely this.

In the second place, Mexicans have an innate penchant for wasting opportunities, perhaps because of the shallowness of the Mexican democracy and its profound authoritarian leanings. Although the problem of access to power was (almost) solved, Mexicans are far from having built institutional scaffolding that protects the citizenry, deeply rooting citizen participation in such a diverse and unequal society and obligating the authority to be transparent and accountable for their acts. The mere fact that the president can decisively wipe out the incipient counterbalances with no cost says it all.

But the underlying problem is that power, as vast as it may be, does not guarantee a genial result. In the eighties and nineties, thanks to the pairing of the PRI and the presidency and the authoritarianism inherent in the latter, with an infinitely more powerful presidency than that which followed, the government was unable to carry out the integral change that its own project proposed. Incomplete reforms were made, frequently translating into substantial discomfiture, for which Mexicans are now paying the price. An example illustrates this to a T: Telmex had two title-concession projects for its privatization, one worth four times more than other; one pledged the immediate end of the monopoly and the opening of competition, while the other preserved the monopoly. Economic growth required the first; interest from internal revenue ensured the second. No such thing as a free lunch.

At the beginning of this century, Fox wasted the enormous opportunity that his election had created. To the dilution of presidential power he added the incompetence and frivolity of his person, who has to date been unable to understand his historical responsibility. Will the third –the so called 4T- be the charm?

The problem transcends the characteristics of a person or persons because it reflects the structural weakness of Mexican politics that is not resolved with the reconstruction of the imperial presidency.

AMLO is basking in enormous popular support, greater than Fox at his moment, but equally volatile. If something has been taught by Mexico’s history it is that the great statesmen recognized today were acknowledged as such from having transcended the barriers of the time and constructed a novel platform of reality. None of these -Juárez, Madero, Cárdenas- knew beforehand that they would be statesmen: they simply erected a new future. All of which shows the futility of attempting to recreate an unrepeatable past, when what is required is a new future.

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Luis Rubio

In 2018, the Mexican electorate shed the mask of the establishment’s dominant narrative and chose the candidate that promised to change the ruling axes of the country’s political and economic systems. Since the election, but especially since the congressional swearing-in on September 1, Morena’s groups and allies have acted less like an institutional parliamentary group and more like a clashing force that wants to alter the established order without formal procedures or negotiations. According to their logic, they came to power regardless of the election: rather than winning the election, the election merely acknowledged their victory. In light of this vindictive undercurrent among many members of the Morena coalition, the key question in the months ahead is whether López Obrador will support this idea or whether he will assume the presidency as a statesman who is accountable to the whole of the electorate.

The contrast between both scenarios is radical. The first case presents a government that seeks not only to rule in its own manner but also to change the established order and its sustaining institutions in an integral, drastic, even violent manner. It hearkens back to the days of the Mexican Revolution, where one regime ended and another began without an institutional process in between. In the second case, López Obrador could maintain the existing institutional frameworks in order to carry out his agenda while bringing with him the population at large, as happened in post-Franco Spain. Such an approach has the enormous virtue of making changes permanent.

Spain illustrates the contrast between these ways of proceeding. When Francisco Franco died in 1975, after nearly 40 years in power, the Spanish people wanted a new regime. Politicians wondered how to take that step. One option was to break away from the Franco regime and enter an environment of absolute uncertainty; the alternative was to accept the existing institutional regime—even if it was hated by most political forces and parties—until a new legal and institutional framework had been built. In that regard, the Moncloa Pact of 1978, in which the political parties and the trade unions came together to discuss the management of the post-Franco economy, did not agree on the “what” but on the “how.” The most pressing issue at that time was that of prices and wages, essential to economics but of lesser political importance. Mexico, by contrast, has failed to agree on the “how”: on procedures for governance and economic management. Beyond the specific issues discussed during the pact negotiations, the essential factor in its success was that all relevant and economic forces were there, from the extreme left to the extreme right, business owners to politicians to union leaders. After decades of exclusion, the presence of all these forces—including iconic figures who had been in exile, such as the communist leaders Dolores “La Pasionaria” Ibárruri and Santiago Carrillo—changed the national context. The presence of these stakeholders spoke volumes. During the discussions, Prime Minister Adolfo Suárez proposed that Spain’s political and economic leaders accept the continued existence of the Franco legal establishment until a new constitution could be drafted and implemented. In other words, the process through which the post-Franco Spain would transition to full democracy was agreed. The negotiations did not attempt to make headway on the content of the new constitution, the way in which state companies would be managed, or the process for granting media operating licenses. These affairs would be decided by a future government. The agreement confined itself to handling how the decisions would be made rather than what the decisions would be—and this was the key to its success. With this in mind, López Obrador must determine whether he will take the institutional path—as Suárez did, through which he rose to become one of Spain’s greatest statesman—or the path of radical imposition, typical of a revolutionary project.

In this author’s opinion, López Obrador will soon find that many of his ideas are unfeasible or extraordinarily damaging, and thus are counterproductive to his vision of Mexico’s future. His decision to cancel the new Mexico City airport project is a window through which one can observe his perspective on the potential costs of carrying out actions that have more relevant angles than initially thought. In this case, the airport project cancellation affected not merely a few contractors (for whom López Obrador has assured compensation for the termination of their contracts) but thousands or hundreds of thousands of bondholders in international financial markets, national and foreign providers, and many other kinds of key stakeholders. By closing that door, López Obrador sent a sign that he will not stick by the existing rules, and that no investment can be completely certain. The immediate costs of this decision were apparent in the actions of the credit-rating agencies as well as the effect on Mexico’s exchange rates, but the potentially uncontainable costs will come later, when future investors ponder whether it is worth losing their investments to the actions of an unpredictable government. Unlike contractors and the construction industry, businesses and investors operate a longer-term horizon.

Above all, López Obrador has a fundamental decision to make in terms of how he will act as president: whether to be a social activist or a statesman. If the former is true, the airport decision has set the tone already. If the latter, there is still time to set a new course, as he showed before the Conago (national governors’ conference) when he demonstrated his willingness to work with the governors rather than seek to impose his will on them. For López Obrador, such a change likely would be difficult to make, given his deeply rooted conviction that everything that was done after 1982 was wrong. This conviction is an important factor for his base, which has stayed with him against all odds and often chants “it’s an honor to be with López Obrador!” As a leader, he might well regard such a change, in a way, as the equivalent of betraying himself and the political bases that have supported him through thick and thin. Yet it also may be more important, in López Obrador’s point of view, to achieve his goals than to stick to counterproductive dogmas.

Excerpt from Unmasked: López Obrador and The End of Make-Believe, which can be downloaded at:
https://www.wilsoncenter.org/sites/default/files/mi_190625_unmasked_v2b.pdf

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Luis Rubio

When the vessel Andrea Gail set sail from the port of Gloucester, Massachusetts, in a desperate act to participate in the last great fishing expedition of the season, its captain and crew did not have the least idea of what awaited them in what ended up as the 1991 “Perfect Storm”: all of the factors that could turn out wrong came together to produce a disaster of immense dimensions. Something like that could be happening in Mexico‒United States relations: perhaps no one seeks or desires this but, little by little, elements are accumulating that, on not being attended to, could produce the type of clash that seemed to have disappeared from the panorama more than three decades ago.

For nearly a century, the relationship between the two neighboring nations vacillated between violent and conflict to distant. The North American Invasion in 1846 reverberated in Mexico, giving rise to a nationalist reaction to which some historians attribute the true birth of Mexicaness. The two nations experienced highs and lows during the revolutionary period, with eventual crises due to the threat of non-recognition of a new president, with all of what that entailed. The Mexican post-revolutionary governments maintained a distant relationship, while simultaneously promoting national unity on employing the loss of territory as instruments of internal cohesion. All of this was feasible because Mexico had its sights trained on the interior of the country and its ties with the exterior were important but essentially symbolic.

The financial crises of the seventies and eighties obligated the redesign of economic policy and that led to a redefinition of the relation with the United States. Mexico began exporting increasingly more goods to the American market, which caused commercial conflicts: from accusations of dumping to tuna boycotts. For the first time since the War of Independence, Mexico began to see its neighbor as a potential source of the solution to its economic problems. Likewise, the United States was confronting problems whose attention required the cooperation of the Mexican government. Bilateral interaction grew, but the problems –old and new (from the war on drugs launched by Nixon with the closing of the border crossings to the death of DEA agent Enrique Camarena)- multiplied. Both nations ended up recognizing the need to establish mechanisms for a functional relationship.

At the end of the eighties, Bush and Salinas agreed to a set of principles, explicit and implicit, for the good functioning of the relation and for the solution –or, at least management- of the problems that are inherent in such a complex interaction, broad-ranging and dissimilar, in addition to asymmetrical, such as that of these two countries. The heart of that agreement resided in a basic principle: isolate the problems and deal with each separately.  The objective was that, on not linking or mixing distinct matters, what was fundamental and quotidian could be worked out in a natural fashion.

Mixing unrelated issues (such as drugs and trade) produced constant crises and exacerbated moods. On agreeing not to contaminate certain themes with others, the two governments committed to seeing to each issue in its precise dimension, making it possible for the more explosive things –such as migration for the U.S. or arms for Mexico- not to impede the functioning of what had become natural, non-conflictive and inherent in the life of the two neighbors, such as trade. The agreement of Houston in 1988 conferred celerity on the bilateral relationship and eventually led to NAFTA.  From then on, one government after another –of both sides- adhered to the established principle because it recognized the value of not cross-contaminating matters and, above all, the risk of doing so. It was well understood that a functional, conflict-free relationship was in both nations’ interest.

On breaking with the sum and substance of what was agreed to –by admixing migration with trade- President Trump had placed in doubt the foundations of the bilateral relationship. It is not only the fact of attacking Mexico and Mexicans rhetorically, but of that of making threats to the viability of the main engine of the Mexican economy (the exports) and putting the AMLO government up against the wall in one matter, migration, which is particularly sensitive for his political base and his legitimacy.

To date, the Mexican government has responded in two ways: on the one hand it had previously announced its decision to review the schema of cooperation with respect to security (the so-called Mérida Initiative of 2008); on the other, it has accepted, reluctantly, the terms of Trump’s demands with respect to Central-American migration. The two watersheds are contradictory and will, sooner or later, generate sparks.

Up until now, discussion within the U.S. has ignored the advantages which that country derives from cooperation on the part of the Mexican government in diverse matters that interest the U.S. and that constituted the incentive for their active promotion of the Houston agreement thirty years ago. The risk now is that its acting places pressure on an administration (which, in any event, would much rather return to distancing itself from its Northern neighbor), that would wind up destroying what has worked effectively for so much time, to the benefit of the two nations.

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Luis Rubio

The risk of Mexico acquiring the Argentinian vice of being permanently stuck in a limbo of mediocre economic performance -worse than in recent years- with recurring ups and downs, as well as frequent financial crises is real and rises with the policies adopted by the current government. The coincidences begin to be too many to not see the danger that their consolidation could imply for the country and the generations of young people who renewed their hope with AMLO.

Both Peronism and Morenism are inclusive movements, characterized by an enormous diversity of acolytes and followers, but with one element in common that is the fierce loyalty to the boss: everything is valid as long as that loyalty remains unbreakable. AMLO is replacing the few institutions that existed in the country with personal structures of loyalty and submission, two recipes for certain instability in the future. Instead of consolidating the few institutional advances that had been achieved, Mexico is moving towards a project where the rules of government are the will of one person, as happened in the years of the Kirchners in Argentina.

Secondly, the strategy of subsidizing and generating clienteles, which follows the same pattern of subordination, but on a massive scale, inexorably comes with the creation of new rights that, in time, become difficult, if not impossible to reverse. The Argentine fiscal crisis is not the product of chance, but of rights acquired over time, which then turn into obligations that the government has to pay with increasingly scarce resources. Mexico is already advancing in its demographic evolution towards a society with ever more pensioned adults and less new entrants into the labor force, to which the cost of AMLO’s clienteles will now be added.

Third, the policies adopted by the two Kirchner governments in Argentina suggest the kind of risks that the strategy of the new Mexican government is going to foist on the country: the centralization of all social programs in the presidential office. The Kirchners did something very similar with their “banner” programs: Universal Assignment for Child (Asignación Universal por Hijo), Social Income with Work (Ingreso Social con Trabajo), They Do (Ellas Hacen), More and Better Work (Plan Más y Mejor Trabajo), Unemployment Benefit (Prestación por Desempleo), The Completion Plan for Primary and Secondary Studies, Fines (El Plan de Finalización de Estudios Primarios y Secundarios), Argentina Works (Argentina Trabaja) and Entrepreneurs of our Land (Emprendedores de nuestra tierra).

Mexico had already experienced clientele-based programs (and failures) such as these, but since the nineties achieved a certain level of institutionalization of the social policy, which has now been dismantled at a speed that astonishes. Worse, it’s surprising that neither the beneficiaries of programs like Prospera nor what remains of the opposition have raised even a finger. In Argentina, these programs allowed the opposition to be overwhelmed in one electoral process after another: the inexorable question is whether AMLO will navigate with that same ease from here to the elections of 2021 or whether he’ll face at least some pushback. The critical question, as Ben Franklin would have it, is whether the citizenry will defend its conquests.

There are other coincidences that should be of concern about their effect on political competition and the deteriorating business environment. For example, the Youth Program Building the Future (Programa de Jóvenes Construyendo El Futuro), a scheme very similar to that used by the Kirchners to attract young people to the movement of La Cámpora, an organization dedicated to mobilizing unemployed young people with few alternatives in the labor market. This type of programs are designed to generate dependency on the government, eroding the development of a workforce guided by criteria of merit and productivity, increasingly important in the era of the digital economy. An army of permanently mobilized youth is useful for electoral purposes but destroys the economic future of a country.

When the president states that his objective is to subordinate economic decisions to political priorities, now strengthened by the Secretary of Finance’s resignation, he is ratifying that he’s willing to go one of the most powerful forces of our time. When Bill Clinton was running for the presidency, his main political advisor, James Carville, suddenly realized that the world had changed: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” AMLO believes Mexico is still grounded in the 1980s…

The Argentine example is suggestive not only because of what happened there, but because it is the kind of program that AMLO and his followers see as desirable. The disappearance of (almost) all technical capacity in the government allows implementing costly programs without measuring any of their potential consequences, besides providing incentives to adopt policies whose medium and long-term effects always end up being devastating, such as price controls, nationalization of the pension funds and the use of tools such as legal reserve requirements as well as compulsory lending programs at banks. Some members of Morena drool at this type of mechanisms. They have no idea of the destruction they imply.

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 AMERICAS QUARTERLY –
BY LUIS RUBIO | JULY 9, 2019

 Mexico

Carlos Urzúa’s unexpected decision to step down as treasury secretary was a warning – will AMLO listen?

MEXICO CITY – In all my decades observing Mexican politics, I have never seen a public resignation like this one.

On July 9, Carlos Urzúa announced in a letter that he was stepping down as Mexico’s treasury secretary. The letter was explicit, forceful, scathing, and above all revealing. Mexican officials usually resign for “health reasons.” Urzúa chose to send a warning: This administration isn’t working, and I don’t want to be stuck on a sinking ship.

Urzúa’s letter included four critiques of Andrés Manuel López Obrador’s government. First, that decisions are made without proper analysis or evidence. Second, that Urzúa was being forced to resign not as a matter of ideology, but over fundamental concerns about public finances. Third, that officials without the requisite knowledge have been tasked with managing essential government functions. And fourth, that there are patent conflicts of interest within the government’s team.

The trigger for Urzúa’s resignation was not immediately clear, but on those four points the letter leaves little room for speculation. It therefore offers a window into how this administration operates. Clearly, the problem revealed in Urzúa’s letter does not lie in alleged differences between left and right or so-called moderates and radicals, but in a lack of economic and financial rationality behind decisions that are being made.

Demonstrations of this dynamic abound. The National Development Plan, for example, was published in two parts: one an ideological exposition proffered directly by López Obrador, and the other a more traditional financial approach drafted by the office of the treasury. That López Obrador discounted the importance of the treasury’s version was, in hindsight, a sign of things to come.

In this sense, Urzúa’s letter is more about López Obrador specifically than about any possible conflict within the Cabinet. For López Obrador and the markets, this is strike two (whether he realizes it or not); the first was the cancellation of his predecessor’s airport project.

Naming Arturo Herrera, a deputy under Urzúa, as the new secretary was an obvious choice. Like Urzúa, Herrera knows the president well and has worked with him in the past. The two economists’ histories with López Obrador are nearly identical. But they differ in two important ways: First, Herrera has experience in the field of international financial organizations, having worked at the World Bank. Second, Herrera is more inclined to say what he thinks.

A few months ago, in an interview with the Financial Times, Herrera said that a new refinery project at Dos Bocas was not financially viable. He knew full well that López Obrador would offer a rebuke, but made the comments anyway – true to his responsibilities as the deputy secretary.

So what comes next? Urzúa’s letter is so directly aimed at López Obrador that the president cannot avoid seeing it as a warning: the risks that the administration is taking through its behavior could well lead to financial catastrophe. This is not about the growth rates, but essential financial stability.

In the first months of López Obrador’s administration, it is the financial markets that have maintained stability in the exchange rate. The question the markets will be asking themselves now is not whether Herrera is the right person for the job – but rather, if things go wrong, who might possibly replace him?

It’s possible that the immediate issue that led to Urzúa’s resignation was over Pemex, the state oil company. The administration is due to present a financial plan for the company in the coming weeks. It is now up to Herrera to convince financial markets that things will improve under his watch. Herrera’s stricken facial expression as he was announced as Urzúa’s replacement suggests he knows what lies ahead. But if he succeeds, it will mean López Obrador has understood the risks inherent to ill-conceived decisions. The proof will be in the pudding.

https://www.americasquarterly.org/content/amlos-wakeup-call

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.

Luis Rubio

All governments blame their predecessors for the woes that they find or for those with which they cannot deal. No novelty here: this is not my problem, but that of my predecessor. AMLO is an exception to this in not reproaching a government, but instead an entire generation –three decades of presidents and functionaries- for what he does not like. His problem today is that, after a prolonged campaign to destroy whatever existed, he is now the one and, however much he finds faulty with others, the responsibility is his.

Candidates are measured by their promises and intentions; presidents are responsible for the results. AMLO vowed to change the reality and now finds himself confronted with the dilemma inevitably present in everyday affairs: from insecurity to economic growth. His electoral victory was due to that he focused his campaign on things that bothered the electorate –such as the corruption, the incompetence, the violence and the unequal economic performance- all of these matters that plagued his antecessors and that, it is evident, they did not resolve. Now AMLO, who is government, has no excuse: the ball is in his court.

The era we live in adds an additional level of complexity because of the inexorable tension that exists between the decisions of the electorate and the instruments within reach of a government to act in the real world, particularly in economic issues.  The voters responded to the pledges of the candidate and hoped that he would comply with them, but complying in the globalization era is highly intricate because it requires the support of the population as a whole.

By nature, candidates guarantee the moon and the stars: some do this with strident rhetoric, others with irreducible oaths; still others attack their antecedents and make the electorate believe that it’s all is a matter of will and conviction. But, in the last analysis, they all end up facing the same challenge: in the digital era, no government controls all of the variables and the performance of the economy because the world is interconnected, technology advances at the speed of sound and   provides access to all of the population to information sources that exceed the capacity of the government to control.   Worse yet, as much as a government amasses sources of control, centralizes power and imposes itself because of the diverse interests and power factors in its society, nothing ensures the favorable economic outcomes that are the most immediate parameter for measuring success or failure for the citizenry.

The dilemma is real and is not limited to Mexico: how to render compatible the population’s legitimate claim to see the problems afflicting them, that is, the reasons for which they voted for a determined candidate to solve, before a globalized, integrated and interdependent world in which decisions do not respond to the logic of the internal politics. This latter results in the fact that investment is, in the words of the lawyers, fungible: one can go to any part of the world and it’s the same whether one decides to live in Morelia, Shanghai or New York.

There are presidents who manage the dilemma and adapt in order to advance as much as possible, while others stubbornly cling to their positions, at whatever cost. The greater the obstinacy, the worse the results because promising is easy, but achieving results and satisfying voters is difficult. This phenomenon is magnified when the president creates and multiplies the number of enemies each morning.

The AMLO style of governing is not conducive to improvement. The time for acting jarringly, generating conflict and confrontation, culminated July 1^st, 2018 for the simple reason that campaigns call for pettiness, but the exercise of the government demands acting equitably for all, in that only with the collaboration of everyone it is possible to go forward. However, AMLO is devoted to systematically increasing (and terrifying) those who appear on his black list of guilty parties and adversaries; discrediting members of his cabinet and ignoring his own advisors, in addition to exploiting resentments and frustrations, without building anything that could come to satisfy the population’s demands, protestations or necessities.

It is evident that only with actions likely to solve the existing problems would it be possible to respond to his base with results. He is not engaging in any of that.

What is important to the electorate –the same for his as for that of that he loathes as “conservative”- is the result of the daily operation of the government. As illustrated by the gradual diminution in the numbers of the President’s popularity, one thing is the election and another, very distinct, is the exercise of power. His quandary is whether to continue employing the pulpit to attack those branded as “adversaries” or to build with them to achieve results.

To win an election it is necessary to attack, but to exercise power generosity and competence is indispensable. In reference to Alan Greenspan, the central banker blamed for the 2008 crisis, a politician in his country summed up the dilemma bluntly, applicable at present to AMLO: “If you get credit for the sun, you can’t bitch when you get blamed for the rain.”

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Luis Rubio

In her autobiography, African-American anthropologist Zora Neale Hurston writes that “it is no longer profitable, with few exceptions, to ask people what they think, for you will be told what they wish, instead.” That is how we are at present in Mexico: advancing preferences and desires instead of building opportunities and possibilities.

The matter is not one of preferences, but rather about the policies which could lead to much higher rates of economic growth and equitable development. Concentration of power is neither good nor bad in itself because it could as well lead to the creation of auspicious conditions for a more balanced development as to a new economic or political disaster.

To start with, growth depends on investment and it is not growing. The problem did not just begin but in 2016 when, in his campaign, today’s President Trump threatened the permanence of NAFTA. That threat was –and continues to be- much more serious than is generally recognized, because the key factor in attracting private investment to the country over the last three decades has been that agreement, on engendering a political, legal and regulatory framework for investment.

A government can be hard or soft in its conduct, but it cannot force the population to save, consume or invest. Those latter actions take place when individuals make voluntary decisions within the economic and political context in which they are found. This context determines the propensity of the citizen -as a saver, entrepreneur, investor or consumer- to contribute to development and that depends entirely on the factors that justify their confidence in the future. This is exactly the same for a family considering the acquisition of a refrigerator, for a worker pondering the purchase of a bicycle to get to work more rapidly or for an industrial megaproject. The reason that NAFTA was so important does not lie in its technical content, but in the political certainty that it provided.

A second component of investment is the public expenditure. Part of the reason that the Mexican economy grows so little, especially in the nation’s south, is the lack of public investment, above all in infrastructure. A business cannot be installed where there are no highways, railroads, or ports or services (such as electricity, water and drainage and, obviously, security), under adequate conditions. In addition to the political and union-related obstacles that plague the south of the country, an extremely old, inadequate and insufficient infrastructure is found. Successive governments have opted for ever increasing current spending, cutting back on investment expenditure, which has condemned the country to low growth rates. The present government follows the same strategy: although it is changing the expenditure rubrics (reducing salaries and programs to build clienteles), the absence of public investment remains the same. The result will not be distinct and could be worse.

Private investment might substitute public investment in many instances, but those possibilities have been truncated, as illustrated by the case of the Mexico City airport. That project promised to be a magnet of attraction for other investments and services, originating further sources of growth and employment. What is relevant is that its cancellation, in addition to the message conveyed, is going to be expensive in that the costs must be paid in exchange for nothing, while it simultaneously constitutes an exorbitant opportunity cost. It is equivalent to all of the infrastructure not constructed in the south of the country. Still worse will be dispensing billions of dollars on a refinery that is not required, which does not create wealth or jobs and that does not contribute to attracting private investment: it is a blunder of incalculable consequences. It is, above all, the worst use of scarce resources and, as the economists say, one without a multiplier effect.

At the start of the eighties the country found itself in a debt crisis that submitted the economy, and the society, to more than a decade of instability, inflation and uncertainty. The debt overwhelmed any project or opportunity because it impeded any action or investment. Everything was paralyzed and any circumstance exacerbated the panorama, as occurred with the 1985 Mexico City earthquake. In the end, the way out found was in the construction of institutions that became sources of trust and stability, such as autonomous entities –of competition, the National Electoral Institute (IFE), those of energy and telecommunications- until arriving at NAFTA.  Each of these elements –some more structured, others more costly, but all oriented in the same direction- they all ended up building political stability and providing a context prone for the attraction of private investment and, with this, economic growth in some regions of the country.

The privations are evident, but advancement cannot be executed ignoring the factors that make, or would make, growth possible. It is clear that many adjustments and corrections are required, for which the current government has earned exceptional legitimacy that, everything indicates, it is going to waste, one more time. Worse, destroying the factors that have favored stability and investment is self-destructive and, at the end of the day, suicidal.

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Luis Rubio

Argentina began the twentieth century with the highest GDP per capita in Latin America, very similar to that of the United States at that time; a century later, the South American nation is in the 53rd place. As an Argentine friend says, “whoever says things cannot get any worse, does not know Argentina,” a nation that seems to have dedicated itself, in a systematic way, to undermining its possibilities of developing, decade after decade. There are many hypotheses about the causes of the decline, but one evident has been the polarization that, since the government of Juan Domingo Perón in the 1950’s, became the norm and, to a large extent, the essence of its permanent political confrontation. I wonder if Mexico does not run the risk of falling into a similar vicious circle.

Perón was a genius communicator, which he used as a means to incite the population to confront, express their resentments and seek enemies of the people. The existence of a unique truth that explained history and everyday reality allowed the South American caudillo to polarize society and build a deep and lasting base of support. However, the consequence of his strategy was the permanent polarization of his society and, economically, its systematic impoverishment. Argentina has everything to be one of the richest nations in the world -a European society transplanted to one of the regions with more natural resources in the world- but has had the misfortune of living in permanent conflict. Three-quarters of a century from Perón’s time, Argentina remains a nation of constant ups and downs.

The great risk of López Obrador’s strategy lies in its potential to turn Mexico into a permanent loser. I am certain that this is not his purpose or his vision; on the contrary, his point of departure is that Mexico missed the boat in recent decades and that it must correct the course in order to build a new and better future. In this, his vision could not be more different from the one Chávez followed; however, his strategy of confrontation, which is an essential part of his political vision, entails the risk of paralyzing the country and reversing the things that do work, a scheme more similar to the post-Peron Argentina than to anything that Chávez ever tried.

AMLO believes in confrontation as a strategy in an era radically different from that of Perón. Héctor Aguilar Camín describes him this way: “He does not negotiate, he fights, but to negotiate on his terms. He does not have aversion but is rather attracted to conflict, but in order to make a pact… He feeds on confrontation, to attract adherents and agreements. But he has his own, unmistakable, voice that creates political realities… He is, by nature, a politician of protest and confrontation…”

A similar strategy led Argentina to an era of crisis that has been going on for more than half a century, with the enormous difference that the economy of that nation in the middle of the 20th century was protected from the outside and there was nothing like the context of globalization that today characterizes the world. The protected Latin American economies of the middle of the last century, dedicated essentially to the substitution of imports, had both economic and political characteristics that gave their governments enormous latitude of action.

To begin with, these were economic schemes that sought to minimize trade with the rest of the world and, in general, rejected foreign investment or limited it to certain sectors. Second, there were no instant communications like the ones that are now prototypical. Entrepreneurs could produce expensive and shoddy goods and the consumers had no alternative to satisfy their needs. In this context, politicians could impose laws and regulations as they pleased, knowing that society had no options. The government was in charge and determined the well-being, if any, of the population.

The reality of today is exactly the opposite. Today the consumer has infinite options, the prices of the most essential goods have decreased in real terms, after inflation; companies have to compete with their peers in Mexico with those from the rest of the world; and the government, If it wants to achieve high growth rates, would have to dedicate itself to attracting investments from both inside and outside. A strategy of confrontation in this environment creates uncertainty and leads to the alienation of the investor and, therefore, to the recession of the economy.

The nodal characteristic of nations that grow and are successful is social cohesion and consensus, which makes it possible to attack the ills that afflict Mexico, such as poverty, economic stagnation and violence. Wherever one looks, what stands out in nations like Chile, Colombia, Spain, Taiwan or Singapore is a clear vision for the future. Their politicians go out of their way to project a successful nation and seek the broadest support of the citizenry.

The strategy of confrontation involves the enormous risk of leaving a legacy of resentment, polarization, restlessness and crisis, decades after the end of the current governmental period, a scenario that neither the president nor any Mexican could welcome.

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Luis Rubio

In one of the final episodes of The Simpsons, the soporific and befuddled octogenarian Abe is recruited to cross the picket line and break a strike at a nuclear plant. His tactic: to confuse, if not to lull, the strikers by telling them stories that make no sense at all so as to exhaust them and, finally, to beat them. This is what the PRI governors look like before AMLO: overwhelmed, lost and defeated.

If something is evident after observing the way politics and business work for long periods this is that the ones who survive are those that have a clear sense of direction, understand the context and do not get lost among the trees. Those who understand the forest have the opportunity to overcome even the most powerful or the most incompetent because the alternative, being carried away by the current, always leads to bankruptcy or disappearance.

What is so obvious seems to elude the PRI governors who go blindly to the gorge that the Pied Piper of Hamelin, now resident of the National Palace, has marked to them with such skill.

The PRI has been the most important quarry of politics and politicians in the country. There’s virtually no person of power in Mexico that has not emerged from their ranks or was formed in their school of politics. For decades, that party was the vehicle -quite successful at that- for the construction of the country in the post-revolutionary era and it did so with the instruments and methods of the time: loyalty and corruption were not only prototypical characteristics but inherent and foundational. Its success was also the source of its growing erosion because everything works until it runs out.

In 2000 the citizens opted for another party and the PRI found itself, for the first time in its history, an orphan. In the following twelve years the PRI members played a fundamental role as responsible opposition and, in fact, made it possible to preserve the stability of the country; however, they did not use that time to transform themselves. In 2012, they returned to power under the banner of a “new” PRI, which brought nothing new but flagrant -and very visible- corruption and the arrogance of power, all incompatible with the era of social networks. Difficult to understand such a backward transformation, towards its origins, instead of responding to the demands of the 21st century. The citizenry’s verdict of 2018 says it all.

Now PRI members have two very simple and clear options: try to rebuild or succumb to the song of the Lopez Obrador sirens. There is no other choice: they either accept the path (or the trap) that AMLO has laid before the governors (probably in exchange for budgetary allocations) to join the “great transformation” that the president hoists in the form of the “4T,” or go back to the arduous task of rebuilding with the hope (because there is not much else) of creating a new party, one compatible with, and visionary for the national and world realities of this so convoluted and complex era in which we live.

It is easy to understand why the presidential appeal is so attractive to the governors. First of all, because it is a comfortable way out: why build something new if you can live grandly in the short term. Secondly, the easy exit does not involve confrontation while it does solve the problem of daily operation. If the Elías Calles or the Cárdenas of their time had thought like these low-life politicians, Mexico would probably have ended up like the fragile economies and societies of many Latin American nations.

Instead of debating the institutional reconstruction of the country, to which a transformed PRI could contribute so much, the PRI members are mired in an endless and useless conundrum about the number of militants that the party has which, it appears, they cannot get certified by the INE, the electoral authority. Without such certification, they could end up mired in an endless post electoral squabble, which would turn them into the laughingstock of the citizenry, justifying the scorn and contempt enjoyed by the party among a good part of the electorate. That is why the method they choose to pick their next leader is so important.

The method matters for three reasons: first, because they must achieve at least one objective forcefully: that there is no dispute about the result. Today there is certainty that an election not certified by the INE would lead to a dispute, which could arise from either the probable manipulation of the votes or from the vulnerability of an unreliable voter registry, potentially sanctionable by the INE. Second, what the PRI -and Mexico- require is a party that builds new institutions and becomes a credible contender for the future. A party subordinated to the president would hardly fulfill that task but that is what the governors are advancing. Finally, an indisputable method would confer legitimacy on a party that, because of its history and capacity, could be a future ruler but that, should it continue the way it´s going, it will face its demise.

The election this past June 2 showed the PAN as the big winner (or the least bad loser) because it has been consistent in its posture, thus becoming the stronghold of the opposition. There’s a lot that PRI members could learn from what citizens are observing and how they are behaving. As Jimmy Dean would have it, they “cannot direct the wind but we can adjust the sails.”

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@lrubiof

Luis Rubio

The letter sent by President López Obrador to President Trump can have many readings, but one great certainty: it is a document designed from and for domestic political purposes and, in those terms, it has been a great success. In addition to the popular support behind the president, which has been massive from the beginning, he can now boast of having the sympathy, if not necessarily the recognition, of a large part of society -businessmen, opinion leaders and critics- who have not been close to him. The success is remarkable. Capturing the new tone, one commentator said that “Trump managed to turn AMLO from a leader into a statesman.” The support is undeniable. The question is whether that solves the problem.

The context is fundamental: in the ten months that AMLO has (de facto) governed, the central characteristic has been confrontation in a highly divided country. The attack strategy used by the president has paid off, but it has been sustainable only because the international financial markets, in contrast to other eras of the country’s politics and economy, have been indifferent to internal discussions. While exports keep flowing, the interest rate differential remains high and the rating agencies ignore their own admonitions regarding the Dos Bocas refinery and the Mayan train, portfolio investors see no reason to change their strategy, which has been very profitable to date. Trump’s recent actions might well change that equation, as the downgrade of Mexico’s debt illustrates.

In “One Hundred Years of Solitude,” Gabriel García Márquez, a bit like Plato, creates characters that inhabit parallel worlds that, although they are seen, never come close. The famous magical realism described by the Colombian authror does not seem very distant from the events of the last days. Trump, another character of an equally sorcerous realism, managed to combine two obsessions in a catastrophic way for Mexico. His prejudice that trade deficits are bad and harmful to the economy is well known, but now he combined it with the issue of migratory flows, perhaps the most transcendent element in his 2016 electoral strategy. It is clear that, for Trump, the latest threat is a perfect foundation to launch his campaign for re-election. Each side in its own magical realism.

Whatever the future of the tariffs or the campaign, the impact on Mexico could be enormous. The true asymmetry in the relationship does not lie in the power of each of the two governments, but in the disproportionate impact that any measure coming out of the US government has on Mexico: while a Mexican-government decision amounts to nothing more than a little whisper -a drop in the bucket- to the American economy, almost any action by the US government has inordinate consequences for Mexicans. The sheer threat of tariffs caused a devaluation of more than 3% in one day, a pattern that has been not only historical, but especially characteristic of Trump’s actions since his presidential campaign three years ago.

The problem with Trump’s most recent tactic for Mexico is that it attacks, at one blow, the three key elements of the country’s stability. First, his threat of imposing increasing tariffs, damages the export sector, Mexico’s foremost engine of growth; second, the instability of the exchange rate that the tariff threat has generated reduces the attractiveness of portfolio investing in pesos now with a reduced differential in the peso-dollar interest rate; and, thirdly, the pressure on the rating agencies can only increase, since two of the key vectors in their considerations -the infrastructure projects that they consider impossible to finance and the exports that guarantee the flow of dollars- now play in the opposite direction. And the worst thing is that there is not much that the Mexican government can do about it in the time allotted.

At the same time, all Mexicans know that their government has been promising actions and responses to the migratory flows for decades and has done nothing about it. Throughout that time, the promises flowed but the actions were non-existent; since there were never any consequences to inaction, Mexicans always pretended that this was nothing more than a game of mirrors. The extreme was the current government that not only did the same as its predecessors, but also granted work and transit visas to migrants, creating an incentive that led to a sudden and huge growth in those flows. At the worst moment: with Trump.

The moment is propitious for a re-channeling of internal politics. The president has managed to generate, largely thanks to Trump, a truce in domestic politics, which confirms his own saying, even if in reverse, that the best domestic policy is the best foreign policy, a frequent recourse of past Mexican governments in cases like Cuba. The opportunity in the president’s hands is extraordinary: he now has the upper hand and could use it to either persist in his divisive strategy, which would be certain to provoke the rating agencies, or he could use it to redefine his strategy as a leader of all Mexicans, making it possible for himself to become the transformative factor that the country needs and with which he has long dreamed. The opportunity is unique and extraordinary and, hopefully, it could help prevent the worst consequences that the conflagration of Trump’s actions and AMLO’s current government strategy would otherwise bring.

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@lrubiof