Luis Rubio

The government that (finally…) is at the point of concluding lived besieged by what the president himself called the “bad social mood.” This is a vague concept that allows the transference of responsibility to others: It is not my fault but that of the population who does not understand. Using that measuring stick, the citizenry in Mexico has summarily engaged in a half century of “not understanding.” The exiting government never confronted the social mood as a problem, which led it to employ antidotes that not only did not attend to this mood, but that also exacerbated it, as in the famous media campaign, “stop complaining.” If the upcoming government wants to conclude in a better place, it will have to face the issue that all of the prior administrations have evaded and that is, in essence, the citizenry’s trust in the government.

The overwhelming majority of politicians have not wanted to understand that Mexican society lacks mainstays of certainty that confer on it a sense of security and future. Up to the sixties, the post-revolutionary governments achieved both of the latter by means of positive results in economic growth as well as in political stability; when. Beginning in the mid-seventies, crises and expropriations arrived, successive governments lost their bearings and never got them back.

From 1970, the citizenry has been privy to an internal war among politicians who have generated permanent polarization, creating deep-hewn social, regional, economic and political schisms across the length and breadth of the country. The security crisis is not the product of chance, but instead one of the incompetence of our politicians to transform the system of government into one suitable for the XXI century. The result has been an absolute incapacity to generate hope and tranquility, which are crucial for a “good” social mood or, simply, trust. After decades of the same, trust becomes increasingly more difficult to recuperate

Without the trust of the population, said Mao, nothing is possible. One can have arms and food, but there is nothing like having the acquiescence and cooperation of the citizenry to attain development. That trust is won inch by inch, but lost in the blink of an eye. Several of Mexico’s recent presidents achieved an inkling of trust only to subsequently squander it: like Sisyphus attempting to carry the stone to the top of the mountain, rebuilding trust is ever more difficult and costly. I ask myself whether the new government will attempt to do this if it really wants to make a difference.

In December of 1941, when Pearl Harbor was practically annihilated, the U.S felt defeated. President Roosevelt understood that, to win, he had to recoup the mood of the population, for which he pledged his first great effort to modifying perceptions, commencing when his Air Force bombed Tokyo the following April. The politico-social impact was brutal: suddenly, Americans realized that it was possible to win, thus the final stage of the war ensued. Something similar occurred in the U.K. when its coastal fishing and Merchant Marine communities wholeheartedly gave themselves over to retrieving the soldiers trapped on the French coast at Dunkirk.  England seemed to be quashed and on the brink of being invaded, but the heroic performance of the citizenry in transforming the popular mood converted the military endeavor into a true national liberation.

The next president does not have it easy. Although his plans are clearly very ambitious and grandiose, they will only bear fruit to the degree that he faces the deep-seated causes of citizen indifference and their profound distrust in the government. These months have shown that even the president’s most loyal acolytes harbor doubts and hold contradictory agendas. Thus, it is imperative for AMLO to address the distant causes of distrust. And soon.

In Mexico social ill-being goes back to Luis Echeverría (LEA), who destroyed the implicit “social compact” that had served to govern the country since the Revolution. His successor, López Portillo (JOLOPO), initiated his government intending to recover trust, only to end up wreaking havoc on it with his pathetic discourse on the expropriation of the banks. The devastation wrought was so acute that even later generations who have never heard of LEA or JOLOPO are skeptical of the government and reject it instinctively.

The society that viewed the future with optimism is today waiting for the other shoe to drop in the knowledge that the government –all governments- entertains other agendas, incompatible with those of the average citizen. AMLO might believe that he can count on an immutable base of popular support, but nothing is permanent and now, with the full responsibility on his shoulders, he’ll have end impunity and corruption and, for that, his persona will not be enough. He will have to construct institutions that limit his own power or he will end up like all the others.

The recent election revealed a profound social and political chasm. The winner has in his hands the challenge of polarizing or bringing the whole of the population in and, if it opts for joining all, his sole option will be to build guarantees for the permanence of citizen trust. That is, exactly the opposite of what he proposed to do as the presidential candidate.

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@lrubiof

AMERICAS QUARTERLY
Web Exclusive

How AMLO’s Airport Decision Signals a Return to Mexico’s Past

BY LUIS RUBIO | NOVEMBER 6, 2018

The end of Mexico City’s airport project reveals much about how AMLO will govern, writes the chairman of Mexico’s Council on Foreign Relations.

Mexico’s President-elect Andrés Manuel López Obrador likes to frame his coming presidency as the start of a new era in Mexican politics. He also wants to re-establish the role of the presidency as the centerpiece of power. That was part of his justification for holding a $13 billion airport project already underway outside Mexico City up to a public vote in October.

But the informal and legally dubious way that vote was conducted – and López Obrador’s subsequent decision to cancel the project anyway – shows what his goals are and how much of an old-establishment politician he really is. The question now is whether outcry over his decision will be enough for AMLO (as he is widely known) to adjust his approach.

López Obrador has a clear vision of what he wants to accomplish, but no concrete plan for how to get there. Like politicians from the autocratic Institutional Revolutionary Party (PRI) in the 1960s, he wants to recentralize power to recreate the old, strong presidency, and have the government establish priorities while the private sector follows along. He appears convinced the country lost its way when the old political system was abandoned, and reforms in the 1980s and beyond began to liberalize the economy and create autonomous agencies to provide certainty to investors and the public at large.

It is in this context that López Obrador’s decision to cancel the airport project must be understood. For him, everything is about politics: economic considerations had nothing to do with it. López Obrador’s decision was instead meant to establish new rules of the game, where he, rather than business or what he derisively refers to as “the markets,” will be in charge. But that shift may come with a cost.

Soon after he announced his decision, López Obrador said that negotiations would ensue to settle whatever claims contractors involved in the canceled project might have. It was a revealing statement. As in the 1960s, AMLO assumes that decisions of this magnitude are all about wheeling and dealing with a few influential powerbrokers. While he has already settled with most of the domestic contractors, Mexican style, he neglects the fact that Mexico’s economy has become totally integrated into the world economy and financial system. In other words, AMLO does not wield as much power as he believes.

López Obrador won’t take office until Dec. 1. But his airport decision clearly establishes the nature of things to come.

First, decisions will be political and López Obrador will seek to legitimize them through referenda (he’s already announced plans for a consultation on a rail project in Mexico’s southeast in coming months). If AMLO gets his way, he would also be on the ballot in midterm elections in 2021, giving citizens a chance to revoke his mandate.

Second, AMLO has shown willingness to eliminate, or undermine, independent or autonomous regulatory agencies (competition, telecommunications, energy, hydrocarbons, and so on), so as to further concentrate power in the presidency.

Finally, everything in Mexico in the foreseeable future will be about him. On this point, he’s not very different from the current U.S. president.

What López Obrador seems not realize, at least not yet, is that as Mexico’s next president his decisions carry far more weight than they did when he was an opposition figure. The airport cancellation, which roiled financial markets and the peso, is a perfect example. AMLO’s actions now directly affect Mexico’s ability to service its debt, and decisions made by investors both in Mexico and abroad. To that end, the airport decision – particularly the capricious way in which it was made – create enormous uncertainty for investors and citizens alike.

The current economic environment further complicates matters. López Obrador’s inauguration comes on the heels of the signing of a replacement for the North American Free Trade Agreement. The new agreement severely reduces legal protection for companies investing in Mexico. The danger today is that this combination – AMLO’s way of deciding and the trade agreement’s weakness – will combine to stall Mexico’s progress. It is worth remembering that NAFTA was originally conceived as a means to provide investors with certainty that the Mexican government would not change the rules of the game arbitrarily, and that this was seen to be in the U.S.’ national interest.

I expect AMLO will soon realize the enormous consequences of his decisions. The question is how he will respond. One possibility would be to search for scapegoats everywhere: from businessmen to Donald Trump to the media. However, the fact that this is coming so early in his administration, even before he’s been inaugurated, could well force him to rethink his ways.

AMLO won the presidency in large part because voters were convinced that “more of the same” wouldn’t fix Mexico’s problems. AMLO has a complex challenge ahead; if he truly wants to be a revolutionary, he should focus his efforts on strengthening institutions, rather than tearing them down.

https://www.americasquarterly.org/content/how-amlos-airport-decision-signals-return-mexicos-past

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ABOUT THE AUTHOR: Luis 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 is A World of Opportunities, published by the Wilson Center.

Luis Rubio

All presidents feel themselves destined to change the world, but none has achieved this in the last half century. What difference will the next one make? Recent presidents tried everything: exacerbated public spending (Echeverría and López Portillo), pacts (Miguel de la Madrid and Peña Nieto), alliances (Salinas), agreements (Zedillo) and treaties (like NAFTA). Plans were many but the results are not commendable because none of the former tackled the main challenge of the country: how to govern but, above all, why to govern. AMLO has the opportunity to carry out a deep transformation due to the legitimacy that he enjoys, but also because he’s not committed to preserving the status quo.

If one observes the nation, from at least 1964 when Díaz Ordaz assumed the Presidency, all the presidents began with grand plans and proposals and, with the sole exception of Zedillo, ended up badly: some because they provoked uncontrollable crises, others because their acts discredited them to the point of their not being able to be in the public light again. All promised the moon and the stars but few finished well.  Without doubt, some left transcendental legacies (as NAFTA has been) and others built institutions that have changed the nature of the national debate. All of them, each in his own fashion, attempted to reform the country to achieve elevated and sustained growth, but none procured that to be the case for the entirety of the population.

Today it is clear that no one has wished or has been willing to confront the problem at the core of the political and institutional structure: although much has changed, the government has remained the same. The country has underugone an economic transformation through the rise of an exporter economy that today comprises the most important, nearly single, growth engine; the demography is totally different from that in 1964: currently, the population is three times greater and has dispersed throughout the whole territory, and in addition sustains contacts and exchanges worldwide, something simply inconceivable a half century ago.  Mexicans are at present going through the most critical demographic moment -the so-called demographic bonus- the juncture at which young people are in the majority and, on their successful incorporation into the labor market, are slated to constitute the platform of creation of the most important wealth for the future. Were this process to fail, Mexico would wind up a poor and old society in the next generation. There’s no place left to hide.

While the economy and the demography furnish huge opportunities, the security crisis, poverty and political pugnaciousness are the sandbags that hold Mexico back; this has hindered the country from prospering and transforming itself into a power capable of successfully providing for all of the citizenry. Because at the end of the day, if the purpose of governing is not prosperity, its function is irrelevant. And the record of the last half century comes up short by this yardstick. The same goes for the way Lopez Obrador pretends to govern, as the affair with the airport demonstrated.

Three or four years ago, the government conducted a survey on perceptions about the country. The result was expressed in a bar graph in which there appeared, from more to less, the issues that the population evaluated positively, descending toward those that it perceived as negative. In this manner, there were very high bars on the left side of the graph and other, very negativeones on the right. The left-hand bars referred to the nature of the Mexican, the cuisine, the affability, the art, the history, the exports, and so on. Later there followed many small bars covering matters not perceived by the population as either good or bad, and terminating with a series of bars extending downward, each worse than the previous one: the latter referred to the police, education, the government, the tax and court authorities. That is, the population approved of everything that forms part of the country’s history and nature, while it disapproved of everything associated with the government. That is the country’s problem: it does not have a government that functions for what is relevant, for generating prosperity.

Politicians love to use the term “governance” to refer to the ability to do as they please. AMLO does not have that problem and he has demonstrated in a thorough manner. The problem for him is that it must yield results: it is not enough to dismantle existing programs or have an overwhelming majority in the legislative branch. If he does not achieve the prosperity of the country, his enormous power will end up being inconsequential. History teaches that recreating the same vices, programs and strategies that did not work in the past will not work in the future either. The country and the world have changed, which forces him to look for new ways to access opportunities for the entire population.

If AMLO wants this to end well, the government has to create conditions for the prosperity of the population and, for that, it must not only change the structure of the government, but also build means of access for the population that has always been excluded. It is not enough to be powerful: to get out of the hole it is imperative to create a new system of institutionalized government with the explicit criteria of social inclusion. The tragedy of his “consultation” about the airport is that he only thought about the change of power relations he wants, while utterly disregarding its consequences in terms of long-term development.

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Luis Rubio

All of the crises that Mexicans have experienced have been the result of a president who stopped doing his job or who did it badly. That is the price of a system centered on a sole individual: his moods, capacities, quality of his responses and errors determine the result for 120 million Mexicans.

The political system emanating from the Revolution constituted the institutionalization of the Porfirio Diaz system: instead of an eternal dictator, the presidents would be monarchs without the possibility of bequeathing their post, in the words of Cosío Villegas, but monarchs nonetheless. That regime conferred meta-constitutional faculties on those who would occupy the Presidency, which would serve for executing public power in discretionary fashion, making arbitrary decisions and ensuring the permanence of the status quo through loyalties and clienteles, effectively nurtured by corruption. The president, at the center of the power, having the public resources and the so-called “institutions” at his beck and call for his own purposes.

The great benefit of that system was the dexterity with which changes could be achieved when they were necessary, while the immense cost and risk lay in the inexistence of the counterweights that would impede costly errors. This system led to profound exchange-rate crises in 1976, 1982 and 1994-1995, all attributable to the evident mistakes of the individual occupying the Presidency at the time, but it also facilitated rapid recovery the next year under a new administration. In the same manner, while duly institutionalized countries take years to carry out reforms to attack their economies’ nodal problems (as occurred with the European ones in the past decade), in Mexico those reforms have always been adopted almost without batting an eye.

The point is that development and civilization entail costs, but the benefit lies in that the citizenry of these nations are not subject to the caprices, styles and capacities of whoever presides over governmental functioning. One can argue that the possibility of undertaking urgent reforms compensates for the risks of a poor government, but what would indeed be desirable would be for there to be no bad governments or for their capacity to make bad decisions to be limited by strong and independent institutions.

In the political arena it is common to hear expressions relative to the strength of the institutions. Ascribed to these institutions, the argument goes, are fundamental powers to limit the exercise of presidential power. However, the evidence does not justify those pretensions. One can observe how those institutions have been changed -or those responsible for them- each time the de facto powers, beginning with the Presidency, decide that they are not satisfied with their functioning: that is what happened with the Federal Electoral Institute and with the Commissions of Competition and Telecommunications. From this perspective, there is no reason to think that, within a scenario of pressure, the same thing would not take place with others such as the Supreme Court or the Bank of Mexico. It is not even necessary to speak here about the Congress and the Senate: one comment by the incumbent is all that is needed for them to act.

Mexico’s political regime is unipersonal and that implies effective powers over the institutions: a president with extraordinary faculties who, these days, is only limited by the personal capacities of he who flaunts them and by the international financial markets that very few in the world dare to challenge.

A unipersonal presidential system has its virtues but all of them depend on the capacities and integrity of the president. Governments that operate in this way depend on the zealousness, consistency, fortitude and character of the president. If the president falls short of the mark or refrains from doing his job, the nation pays the consequences. If the president utilizes the public resources to wager on the future of the country, it is the citizens who would benefit from or suffer the costs. When Enrique Peña Nieto fell asleep at the wheel after Ayotzinapa, the country froze, rendering possible the coming of a messiah. There is no such thing as a free lunch.

We Mexicans love to push the envelope, make illegal turns in traffic or double-park. It seems to us that it is improper, wrong or unjust for someone else to do this, but we think that we personally have the divine right to do it ourselves. That way of being is a faithful reflection of the political system, where the president entertains royal powers for behaving himself in the same manner, within the ambits of competence of his function. If we want the president to abide by the rules and the mechanisms of checks and balances, the citizenry itself would have to change its ways.

Every six years the country goes into a trance due to the inherent danger that a madman, a destroyer or a person postulating a radical change will assume the presidency. However, rather than our focusing on underlying problem –the excessive faculties of the Presidency- all lights are trained on the supposed or real defects or positive characteristics of that person. Mexico’s problem is not that this or that individual is good and deserving of the opportunity of being president, but rather that there are no effective limits in case that individual turns out to be not so deserving. Even of López Obrador does not recognize it, Mexico, and he himself, are in urgent need of a new regime sustained on successful checks and balances.

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@lrubiof

Luis Rubio

Trump has been a headache but for a reason that we Mexicans are obligated to accept: because we have not built a platform of certainty for the citizenry to be able to lead their lives in a normal manner. Overwhelmed by the insecurity, the bureaucratic excesses and the permanent economic ups and downs, we Mexicans have become accustomed to living on the dark side of the law. What is most revealing about the current political moment is that the president-elect and his team do not recognize that the principal challenge that the country is presently encountering is not economic but rather one of certainty.

From the time of his campaign, it was evident that Trump would be an enormous challenge for Mexico. His violent rhetoric implied a new political relationship and a severe risk for the sources of sustainability of the Mexican economy. And rightly so: NAFTA has been the main domestic economic engine and, however much the political grandiloquence may denote something else, there are no easy substitutes. The nation wagered on closeness to the U.S. economy through NAFTA for obvious reasons: above all, because it was more efficient and rational in economic terms but, mostly, because NAFTA has served as a source of certitude without which the tremendous progress of the last several decades would have been impossible.

The fact that Trump called into question the permanence of NAFTA gave rise to vast uncertainty that appears to be incomprehensible for many politicians because they cannot fathom the lack of trust and uncertainty that lie at the heart of the nation’s dilemma. In the face of the absence of a functional government and clear and reliable rules (the latter nothing other than the Rule of Law), NAFTA has been the main source of certainty in the Mexican economy; all of the governments, from 1994 to date, have opted to enshrine NAFTA as if it were a museum piece instead of constructing a great institutional scaffold that incorporated the entire economy –not only the one that interconnected with foreign trade- and the society in the logic of a modern country, one sure of itself.

The weakness of the Mexican stance in the recent negotiations derived from the reality that during all of those years political and institutional reforms were not carried out that created a modern system of government in a manner in which the country could replace the political function of NAFTA: that is, the risk was not, in the strict sense, of economic nature; the risk dwelt in that the sole source of trust and certainty currently existing in the country would disappear. Consciously or unconsciously, this has been the foremost source of stability of the middle class, the business community and the investors. And that risk mushrooms dramatically inasmuch as radical changes might be proposed for economic policy, something that would have been less threatening prior to the arrival of Trump.

Mexico’s system of government has made development impossible because it is designed for a few to control the key processes that generate power and privilege. As long as that does not change, the economy will continue to exhibit immense variance throughout the nation, whatever the economic project of the incoming administration might be: whether one of the great reforms or one focused on the national market. It’s all the same.

The fundamental challenge for the next government, even more so because of its long critical stand of the reforms, will be that of creating sources of internal trust that consolidate and solidify the function that NAFTA, during all these years, has fulfilled. Certainty is achieved when there are game rules -laws, practices, actions- that cannot be modified by a functionary or the bureaucracy without mediation by a legislative process with effective checks and balances. The reason NAFTA has been as powerful as a source of confidence, at least until Trump threatened to withdraw his domain from it, is precisely because its content could not be modified on a unilateral basis. In this fashion, in contrast with the Mexican laws that change every time a public official decides to do so, NAFTA instituted perennial, thus reliable, rules, something less certain now with the new agreement. It is certainty that is at stake in the decision of the new airport.

The quasi democratic life that the nation is experiencing occurs within a context in which there are no certainties for the citizenry. The president-elect will wield immense –excessive?- powers that are susceptible to recast the lives of Mexicans for good or ill. The virtue of NAFTA was that it limited the potential of pernicious effects on a vital part of the Mexican nation, that is, productive investment. With the new agreement, “ACME” in Spanish, the incoming administration can count on a more or less solid source of external trust, but will have no choice but to develop new sources of certainty deriving from an integral political transformation, a political reengineering that supplies better equity and a new equilibrium among the government and the populace. This is not about concessions to the citizenry, but rather recouping the capacity to grow the economy within a context of political stability and citizen security. And trust.

The worst that the president-elect could do would be to underestimate the enormous distrust, uncertainty and insecurity in which the citizenry, of all colors, lives.

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@lrubiof

Luis Rubio

We Mexicans are fed up with the violence, the slaughter, the extortion, the abductions, the lack of security and the cavalier attitude manifested toward these by the authority. In this regard there is nearly absolute and universal consensus.  Where opinion divides –and polarizes- is in what to do about it and, above all, whether Felipe Calderón erred in launching an attack on the factions of organized crime. For some, the true problem resided in believing that insecurity is a problem: it would have been better, they say, to negotiate peace with the criminals, give them their space, therefore living in peace and quiet. That is, according to this logic, the error was in kicking the hornet’s nest, because that was what engendered the violence.

Behind the discussion on public security lie two issues that are frequently interwoven but that are distinct: on the one hand, the function of the government in matters of security and, on the other, the strategy that should or can be followed to combat it.      That is, the former is the objective toward which we should aspire and the latter is to how to advance in that direction. While the dispute with respect to security is centered on the latter, the reality is that the important one is the former. Those who perceive that the problem was in kicking the hornets’ nest do not understand what the nature was of the political regime that made peace possible in the past, in addition to that that they have not the least regard for the panic with which the greater part of the citizenry lives.

There is an enormous measure of nostalgia in the notion that we can return to that mythical era of peace and tranquility that worked because the government “negotiated” with the criminals. That nostalgia, which feeds the AMLO discourse and that has been the action guide (in a manner of saying) of the current government, derives from an erroneous premise: that the peace and stability that did in effect exist in the fifties or sixties was the product of an effective security system, when in fact the peace and security that Mexico experienced for some decades was to a greater degree the upshot of authoritarian controls than of a sustainable security system. In brief, unless someone thinks that it is desirable, or possible, to reconstruct the fifties, there is nowhere to return to.

If one accepts that the nodal function of the existence of a government is public security, then the Mexican government has been a failure. Instead of devoting itself to building the scaffolding necessary for the citizenry to have tranquility on a daily basis and that their family members will not be robbed, abducted, extorted or killed, the government has abdicated its responsibility: it engineers colloquies and insults the critics but does not solve the problem. The worst of it is that it does not even recognize that there is a problem.

It is within this context that the manner in which Felipe Calderón in terms of security matters should be evaluated. The chief merit of Calderón was that he recognized that the government is responsible for public security. Whatever his errors may have been -of strategy or of implementation- no one can detract from his having accepted that the government is accountable for peace among citizens. No minor exploit.

His strategy, in essence, consisted of constructing a federal police force that would dedicate itself to confronting organized crime. There are three types of critics of what he did: some, those already mentioned, do not perceive a problem and think that Calderón created it, thus he is answerable for the upsurge of deaths during the last decade. The paradox of that criticism is that the groundswell of deaths began to decline at the end of the Calderón presidential term, suggesting that at least something good was happening. The second reproof is that he should have attacked the money sources more than the narcos themselves, i.e., a matter of strategy. Finally the third group argues that everything was concentrated on besieging the criminal element and not on building the base of a new security system.

The experts will evaluate the critics, but there is no doubt that Calderón’s relevant legacy is having acknowledged the   responsibility of the State in this case in point. The challenge now is to edify a new security system.*

Beyond what was or was not done in the matter of security during the decades following the decline of authoritarianism, Mexicans are far from arriving at a consensus on the nature of the problem, supplying fodder for the myths and prejudices swarming around the political, legislative and public discussion.  Many of the existing proposals, from the Single Mandate (i.e. the governors controlling all local police forces) to legislation in interior security affairs (which would provide a legal framework for the army’s participation on security matters), respond to particular interests or situations that have nothing to do with the fear that the better part of the citizenry is suffering through.  The result is that we have a discouraged Federal Police force whose nerves are in tatters and no vision or strategy of constructing security from the bottom up, the only way it works, everywhere in the world.

The fallacy of the nostalgic coterie lies in its supposition that security can be imposed when in actuality it must constructed. And that construction should be from the bottom up (starting with the municipality) with the full support of the Federal Police and the Army. That is to say, those forces should focus on making possible the building of local police and judicial capacities. Everything else is the stuff of demagoguery.
* http://consejomexicano.org/?s=seccion&id=5

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Luis Rubio

The great learning gleaned from the crises of the seventies through the nineties was that economic stability depends on prudent management of public finances. Whenever fiscal accounts became unbalanced, generally due to excessive expenditure that led to growing public debt, there was a devaluation of the peso and the entire society suffered. The greater part of the politicians of that era finally ended up recognizing that the public finances could not be played around with. What has never been acknowledged is that from that premise Mexico’s financial managers took a step into the abyss, creating a contradiction between the fiscal interest and economic growth.

The stability of the economy is a condition sine qua non for achieving high and sustained growth that permits the generation of wealth, jobs and incomes. This formula is not novel nor is it exceptional, but not for its being evident is it less true and, at the same time, more rare. Independently of the depth of implementation of the the reforms that the country has undergone since the eighties, all governmental activity has been oriented toward engendering conditions for high growth: liberalization of imports, an energy opening,  rationalization of the regulatory framework, etc.

Notwithstanding this, the average growth rate continues to be a pathetic 2%. Although this average veils more than it reveals (some states -like Guanajuato, Querétaro and Aguascalientes- grow at nearly Asian rates, while others do not backtrack, in the best of cases). That is, all of those efforts have not translated into a better performance, above all in regions and entities where there is a predisposition against development, as has been proven in several southern areas. The big question is what is it that has generated this state of affairs.

My hypothesis is that there are two factors that have had an impact on bringing about this circumstance. On the one hand, despite so many reforms, the government, in its function as regulator and issuer of permits, has become an enormous dead weight. There are more and more regulations every day; the bureaucracy grows; adminstrative requirements multiply; inspectors are up to their old tricks;  payment of taxes –and procedures for doing so- have become ever more complicated; and, in general, the counterpart of the  the entire process of obtaining permits, paying taxes and complying with regulations and other obligations, comprises an immense source of extorsion and corruption. There’s (almost) no politician who did not fatten up his piggy bank for the next electoral campaign (or his pocketbook), making his current job a source of extorsion for everyone who dares to try to set up a business, grow an investment or, God forbid, produce a little wealth and employment.

The other factor impacting the poor economic performance is macroeconomic and may be summed up in one line: the interest of the Treasury  (financial stabilty) has not been compatible with the growth of the economy.  Specifically, the manner in which an equilibrium of the fiscal accounts has been procured has not been favorable for the growth of savings and investment: rather than cancelling useless, excessive or frequently counterproductive  programs or projects, what has been done is to extract more of the society’s resources to defray their costs. In this way, instead of attaining equilibrium by lowering the expenditure, this has been achieved by raising revenues. Taxes have wound up not being a form of redistributing revenues to generate better equity within a context of accelerating economic growth but a route to preserving the status quo, impeding the economy from growing significantly. If to the latter one adds the extremely poor quality of public investments and their low returns, the government constitutes an encumbrance to the economy and not a source of growth.

Behind this perversity lies the reality of the country’s political system: the professionals of the economy –except for those who have thought themselves politicians and used the fiscal acounts to advancing their own political aspirations via spending and thus indebtedness- have acted within the limits imposed by the circumstances of their milieu. In contrast, Mexican politicians have lived for themselves –for their privileges, perks and interests- and have possessed sufficient power to safeguard these and nourish them systematically, regardless of the cost for the remainder of the population. In this context, the professionals of the economy, tagged, disparangingly, as “technocrats,” have operated to preserve stabilty, and better economic conditions were only acquired when the political circumstances allowed.

In this fashion, the bureaucratic and fiscal interest clashes with that of economic development. The population has experienced less growth –and worse opportunities for development- because the bureaucratic interest –the extortion and corruption that the country endures on a daily basis- and the fiscal interest -more taxes and greater complications for functioning- have won the day. A change in government, and of paradigm, as the one coming about, could well start from here.

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Luis Rubio

Something evidently failed. The idea was that the country would adopt a set of strategies and economic reforms and that, within a reasonable time, the country’s economy would be transformed and, with that, it would move decisively towards development. Although today the reforms of the last decades are criticized a lot, it is essential to understand what happened and why the results ended up being inferior to what was desired and promised.

The first thing is to place oneself in the context of the old political system, in the era of the hard PRI in which the president was all-powerful and his capacity to impose his will enormous. The reforms began in the eighties when the country was virtually bankrupt (truly bankrupt, with total inability to meet its financial obligations) and everything tried until then had failed. The presidents of the seventies had changed course, raising public debt to unsustainable levels, without achieving anything relevant: although the economy grew, productivity stagnated and, when oil prices fell, government finances collapsed like the house of cards it had been.

The reforms were conceived as a means to force economic agents to raise their productivity levels, be more competitive, reduce prices and generate an environment of growth that, little by little, would bring the whole of the population into the process. The scheme made sense and was similar to the one that had been pursued by a host of successful countries. However, the errors and exceptions that accompanied it ended up being pernicious for the achievement of high growth rates.

An obvious mistake from the beginning was that the liberalization that took place (of investment, imports, regulations and exports) was limited for political reasons: the governments that hoisted the reforms refused to affect politically relevant interests in the political, trade union and political world. In this way, services, energy and a good part of the manufacturing industry were left protected, thus limiting their development. Also, the gas pipeline network was prevented from growing because a political group owned the trucks that distributed the gas. In a word, the reforms were well structured in general, but they were never conceived as a transformative project; rather, in practice, as a partial remedy, a patch.

A part of the economy and of the society experienced enormous benefits, but another one lagged behind. The contrasting performance of various states is more than illustrative. On the other hand, the implementation of the reforms coincided in time with the growing attrition, and eventual collapse, of much of the government and security structure that existed. The old system centralized everything and, for a time, maintained peace; however, it wore out over the years and never prepared itself to deal with the need to build the governance capacity that the future would require. At the beginning of this century, the entire structure collapsed, giving a death blow to countless families which, in the process, lost children, parents and brothers on the altar of organized crime and drug trafficking.

The economic problem is not the same as that of diminished capacity of government: they have different origins and distinct dynamics, but inevitably feed on each other. But two things are unobjectionable: first, although Mexico has an increasingly robust economy, economic performance has been insufficient to incorporate the population as a whole. Second, the political problem and its manifestation in the form of crime and violence has not even begun to be addressed.

Santiago Levy* has just published an excellent book that explains a lot of what went wrong: it is not that the reforms were bad, but that everything that was necessary was not reformed. Specifically, there was a lack of a strategy for social inclusion that would allow both to bring the whole of the population into the reforming economy and to raise productivity for the entire economy. As things went, productivity rose dramatically in the modern sector, but most of the population was stuck in an economy that was informal, unproductive, uncertain and without a future. Levy’s proposal is to create mechanisms that encourage formalization and increase productivity through a social policy strategy that does not make the costs of formalization fall on the micro-enterprises. The proposal is ambitious and complex but, coming from one of the original authors of the reforms, invaluable.

For his part, Jesús Villaseñor,** for decades a developer and manager of some of the main development banks of the country, argues that development banking is a potentially central element of economic progress but that sexennial changes, occurrences and errors end up undermining their potential and decreasing their impact. A book with extraordinary anecdotes, shows not only the importance of an institutionalized development bank, protected from political ebbs and flows, but also the indispensability of a technical body capable of leading these efforts.

León Felipe, the poet, understood what is important and necessary: “I go with tense reins, restraining the flight, because what matters is not to arrive alone or soon, but to arrive with everyone and on time.”

* Under-Rewarded Efforts: The Elusive Quest for Prosperity in Mexico

**El fin de la banca de desarrollo: institucionalizarse o morir

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Luis Rubio

After four decades of extraordinary transformation, no one can  doubt the enormous ambitions of China as a world power, now aided and abetted by the retreat launched by Trump, leaving it fertile ground for its political and strategic, as well as its economic, expansion. Napoleon thus understood it from 1817 when he declared from his “stay” on the island of Saint Helena: “China is a sleeping giant… Let her sleep, because when she wakes, she will move the world.” China has awoken and its presence worldwide makes itself felt both through the extraordinary logistic project it is building in Asia and Africa, as well as in its evident aspiration to recoup its importance as a world power. The question for Mexico is whether there is a viable space for interaction.

Mexico is localized in a geopolitical zone distant from that of China, which has conditioned much of the historical nature of the bilateral relationship. The paradox at present is that the attitude of the U.S. is generating a mutual incentive to explore common alternatives. The attraction is evident, but the complexity is no less: on the one hand, despite the huge transformation that the Asian nation has undergone, the economic distortions that characterize it are not insignificant and, in contrast with the complementary economic relation that Mexico has with Europe and the U.S., Mexico competes with China in innumerable sectors (whose actors allege that in China, conventional rules do not apply). On the other hand, the geopolitical circumstance is not simple, as demonstrated by the failed high-speed train project from Mexico City to Queretaro.

Nothing will change Mexico’s geography, but the political reality of the region obliges the diversification that has always been proposed but that has never been obtained (a similar situation, indeed, to the one typifying Canada). From this perspective, China constitutes, for Mexico, an example and a challenge, a problem and a solution, all at the same time. In spite of China’s own structural dilemmas, which are not easy to solve, that nation has become the world’s main growth engine and an imposing competitor in increasing numbers of sectors and activities.

In this context, it is not by chance that China and the potential relationship with that nation, unleashes passions: for some it is a country not conforming to any rule, while for others it represents a strategic alternative. Both of these can be true and would comprise one of the many contradictions with which it would be necessary to deal. China’s political system is closer in nature to that which distinguished Mexico throughout the XX century than the one Mexicans (supposedly) seek to create through democratic means; nonetheless, many admire China precisely because its government exerts an impacting capacity for ordaining structural changes and coercing the transformation of sectors, regions and activities. In one word, an eventual deepening of the relationship with China would necessitate a deep introspection within Mexico on values that, at least in everyday rhetoric, have become key, such as corruption, transparency and checks and balances, none of which feature a portion of China’s bill-of-fare. Within this context, any presumption of interaction would require very clear and precise internal definitions.*

My impression is that the passions the Chinese nation unleashes can be explained, above all by the lack of understanding of what China is and how it moves, a situation that is practically universal: a country controlled in the extreme, with authoritarian institutions and, while there are many informal information sources, its criterion in conducting its affairs, economic as well as political, is strategic and political. None of this is surprising, but it renders China a country difficult to know and to which, as a country, Mexicans have devoted very little attention.

China is an inexorable point of reference with which contact must be established, but the latter is inconceivable with such a strategic and centralized nation without a comparable vision, something unusual, not to say inexistent –as of today- in the Mexican context. Additionally, although the contact that would be established would be political (everything there is political), articulation will be, in the majority of cases, through private companies (at least on our side), which would obligate the Mexican government to spell out how it would act on encountering complex situations: i.e., when operational conditions were not fair or when their sources of competitiveness were politically determined. In a word, how will the Mexican side take the initiative and not leave all the driving to them. Few countries present such complexity.

What I have learned about China over the years, and have heard and read from diverse experts, is that we must be realistic to the extent possible regarding the relationship and keep a clear mind concerning its being a triangular relationship in which we do not have all of the chips because our geopolitical reality entails conditioning factors that cannot be overstepped. Much more importantly, with or without Trump, integration of industry across North America is taking place and nothing is going to modify that pattern, even though the rhythm could vary. Also, it is not impossible that, sooner or later, we will end concluding that dealing with the U.S., even with Trump, is child’s play in comparison with the Oriental dragon.

*COMEXI has just published a proposal to advance this process: http://www.consejomexicano.org/?s=contenido&id=3649

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Luis Rubio

At the “Speakers’ Corner” in London’s Hyde Park, something very peculiar happens: a few people get up on a bench and commence to rant and rave against the government, the Queen, the European Union, Trump and any other target that occurs to them. The key is the bench, which (figuratively) removes the person who insults from the English soil: that permits one, in the British tradition, to exercise full freedom of expression without there being complex rules in this respect. That is, the opposite of Mexico’s legislative style which is always geared to regulation and control (like the electoral code), pretending this makes Mexico a democracy through and through.

Instead of regulations, the English have traditions: from the wigs worn by judges on assuming the role of independent authority, separated from the personal, to the inexistence of a written constitution, despite their continual references to their constitution. The explanation for this lies in the history: while democracy in Mexico is something recent, English democracy began with the sealing of the Magna Carta in 1215. That has generated a lengthy saga of practices that transcend the law because they are understood to be the essence of the life in society, thus of civilization.

The majority of democratic nations do not enjoy the long history of democracy of the United Kingdom, but they have achieved a similar stage in that they have adopted the practices as their own –in written fashion or in daily undertakings- which make them democratic. When Felipe González assumed the presidency of the Spanish Government in 1982, the sparse democratic experience of that nation had dated only from a few extraordinarily convulsive years of the two Republican eras to the end of the XIX century and in the thirties of the XX century, followed by the rigid Franco dictatorship. When he won the presidency, Felipe González understood that half the population was euphoric with his victory, but that the other half was terrified. His answer was to strengthen the checks and balances inherent to the rule of law; to contain his most radical elements; and to move his office from the party headquarters to the house of government. His objective was to create conditions to govern with the recognition, if not complete support, of the whole of the population. His success in cementing Spain’s transformation speaks for itself.

The contrast with Mexico could hardly be greater. Rather than assuming the new democratic era in which, from at least the nineties, Mexicans have incurred in in legislative terms (although the first political reform dates from 1958), the political evolution in these last decades has been reluctant, capricious and replete with frequent reversions. Mexican politicians, of all parties, have preferred to be part of the game than to change the reality. An “ancestral” politician once told me that what is important is not whether the glass is half full or half empty, but to be inside the glass. It is with that sagacious philosophy they have pretended to govern Mexico.

Mexico’s great lack lies in the non-existence of a functional government, but the latter cannot be built because there is no statesmanlike vision, that disposition of constructing a future instead of preserving the past. And that is the same for individuals as well as for the political parties: what is important is not the institutions but to be on the inside of them in order to exploit them for one’s own interests and those of their backers. The behavior of the Morena contingents in the Congress over the past few weeks does not bode well.

In this context, it is not by chance that the sum and substance of politico-legislative life consists of buying time and making concessions as a tactic for nothing to change. Independently of their virtues and defects, legislations such as those in matters of corruption and of the General Prosecutor, are perfect examples of legislative conduct devoted to building appearances that do not change the essence, something akin to the villas that Potemkin edified as a façade for the Czar for him to believe that everything was functioning like clockwork. The traditional modus operandi has not been guided by democratic rules or accountability, because what has mattered is adherence to the dictum of Lampedusa: everything should change for everything to stay the same.

The problem today is that incredulousness no longer permits such great simulation, which goes a long way to explain the recent electoral result. It also creates an extraordinary opportunity for the incoming administration. The Peña administration is experiencing the contempt of the population, a product of its own actions, but also due to a long political tradition that conceives the government as a space to plunder. The president elect has promised a change –a transformation- that alters political life in the country. Time will tell whether the rear-view mirror is good enough for that.

We Mexicans are reaping what our politicians have sown but what they do not want to put into practice: a civilized manner of acceding to the power and exercising it, simili modo, in the government and in the opposition. The new reality of power presents an extraordinary opportunity to the new government, but particularly to the opposition political parties: to assume themselves as the check on presidential power as it befits them. As Felipe González illustrates, the essence does not reside in the laws, but in the willingness to create a new civilization. The imposing electoral result creates an opportunity not only for the new administration, but for the whole country: to put things into practice more and to regulate less, which is what civilized nations do, and which renders them democratic. And makes them governable.

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