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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Luis Rubio

Ever since its Independence in 1821, Mexico has enjoyed two periods of high growth with political and social stability: the Porfiriato (1876-1910), and the decades of the hard PRI, between the forties and the end of the sixties. The common denominator was the centralization of power and the vertical control that the president exercised from above. Both eras were successful for a while, but the two collapsed, each for their own reasons and circumstances. But the memory of the successful period of each of them left a trail of memories, myths and nostalgia to which later generations referred with longing. The current moment is not different.

The electorate was not timid in its judgment about the past decades: the mandate received by the president-elect is overwhelming and involves a transparent and transcendent message. Citizens, who for two decades opted for weaker presidencies through divided governments, now gave a clear and forceful mandate to the future President López Obrador. The question is what to do with it.

Of course, AMLO has a clear idea of ​​what he wants to do with it and all his statements, appointments and movements to date lead to the construction of a scaffolding of control that seeks to rebuild the strong presidency of the sixties to exercise a full command of general issues, especially about the economy. Looking at the sixties makes sense: that is when that old political system reached its peak in terms of economic success, combining investment in infrastructure organized from the government, with the productive capacity of private investment. It was then that projects like Cancún were cooked, the southeast of the country was electrified and several of the main highways that, until recently, were the only ones that existed. The nodal point was that, although there was corruption, the ability to concentrate forces and resources was enormous.

The memory of that era, like that of Porfirio Díaz half a century before, constitutes an enormous attraction for a government that intends to change the direction of the country’s development; so much so that, at least in thrust, the intention of the outgoing government was not very different. But it is important to recognize that those two eras of high growth with stability ended badly because they were unable to resolve the contradictions inherent to their own strength.

The case of the Porfiriato is evident due to the simple fact that that system was inextricably linked to the person of the president and followed his natural cycle of life. The Porfiriato was born and ended with Porfirio Diaz because there was no institutional mechanism -or the disposition- to build a peaceful succession and, since no one is permanent, both the rise and the decline were marked by the character’s biography. The contradictions between the needs of the country and the limitations of the person were exacerbated: the result was the Mexican Revolution.

The era of the hard PRI ended for different reasons. In some sense, as Roger Hansen argued, the PRI was nothing but the institutionalized version of the Porfiriato. That system did not end with the wear and tear of a person, but because of the lack of flexibility that inevitably accompanies – and characterizes – centralized control. The cycle begins with all the virtues of new ideas, positive expectations, good disposition and the promise of solving, once and for all, the core problems of the country, but then the power is concentrated, the former openness disappears and the vices and excesses of the people in power dominate the panorama. Success in terms of economic growth generates new sources of power; new needs that are not tolerable for those who control; and, thus, inevitably, explicit or implicit challenges to the system, as occurred with the student movement of 1968.

The end of the PRI system was not as thunderous as that of the Porfiriato, but it was equally catastrophic because it inaugurated the era of financial crises -1976, 1982, 1995- that impoverished the population and destroyed the incipient middle class again and again. All the virtues of the PRI era collapsed when trying to satisfy, artificially, all the bases and clienteles of the system, all of which provoked the hecatomb that, in spite of so many necessary reforms, has not truly concluded.

In this context, the question of centralizing and controlling for what is not idle. It clearly makes sense to centralize power to avoid the dispersion and misuse of public resources, focus spending and control actors such as the governors who, naturally, have a centrifugal propensity. Although such a scheme entails risks (because decisions are too concentrated), the benefits of greater achievements are evident. The problem is, as it was in the sixties and seventies, such a scheme is neither sustainable nor lasting.

The alternative would be to use the enormous mandate and the concentration of power to create institutions that give a new life to the country, a new political system that makes the virtuous circle permanent. Only a flexible institutional structure would avoid authoritarian excesses and make it possible for the next government to transcend.

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Luis Rubio

Mexican lawyers often say that “a bad deal is better than a good fight.” I imagine that’s what the NAFTA negotiators were thinking when they reached an agreement that does not meet any of the needs, or the reasons why the NAFTA was negotiated in the first place. The best that can now be expected is for the US Congress to reject the agreement and, with that, to leave things as they are. It may well be that, in a Machiavellian jump into the void, that’s what they were actually trying to accomplish.

From what is known of the agreement reached last Monday, there are two elements that are indicative of the concessions Mexico granted. On the one hand, a limit was set on the export of vehicles, the most dynamic industry in the country, thus capping the potential growth of the sector. It can be argued that many more vehicles could be exported outside the framework of the new accord, paying the corresponding tariffs, but it is impossible to ignore the risk that, when the “revision” of the agreement comes in six years, the American interpretation will be that it was an absolute limit, not constrained by the agreement itself. In other words, the negotiators accepted to put the pillar of the Mexican industry at risk.

On the other hand, the heart of the current NAFTA, Chapter 11, was weakened to the point of practically turning it into an irrelevancy. That chapter refers to the resolution of disputes and constitutes the essence of the treaty’s success from the Mexican perspective, for a very simple reason: because it confers certainty to investors that there will be no capricious actions or expropriations without justification, by the Mexican government. The mechanism entails procedures that allow resolving disputes in an environment free of political influence. That chapter was the reason why Mexico proposed the negotiation of what ended being NAFTA in the early 1990s to the United States.

It must be remembered that, in its origin and in its essence, the NAFTA was conceived with political rather than strictly economic objectives. To attract investment, the country required a mechanism that would provide certainty that there would be no constant changes in policy or politicized decision on economic matters so that conditions for investment would be like those of any other place on Earth. For investors, both national and foreign, investing in Mexico could be highly attractive as long as the legal and regulatory framework would be credible and would ensure that the conditions existing at the time of investing would be maintained. The NAFTA, through Chapter 11, makes it possible for economic agents to ignore all political considerations in investment decisions, which is precisely why the NAFTA is so important and so popular. It is, in fact, the only space where the Rule of Law reigns in the country.

What was negotiated in terms of dispute resolution protects services only, thus leaving manufacturing industry hanging out in the open. This suggests that, although the negotiators from the Ministry of the Economy fully understand the heart of the NAFTA and why these issues are so important, the decision to accept the result was not theirs. Rather, that the decision to accept this agreement was the product of political calculations that transcend that of preserving the stability and economic viability of the country.

In addition, something that does not necessarily reflect the preferences of the Mexican government, the way in which this stage of the negotiations was concluded leaves Canada up in the air, facing an ultimatum: it joins the agreement as is or it’s left out in the cold. Just as chapter 11 is crucial for Mexico, Chapter 19, on anti-dumping, is crucial for Canada; Mexico here accepted the elimination of that chapter, thus threatening Canada’s interests, and, with it, the trilateral relationship. Canada now faces a difficult dilemma, since even its ruling coalition could collapse if its government were to accept the terms imposed by the Mexican negotiation.

Everybody knows that this negotiation was forced upon Canada and Mexico by the circumstances and that the mechanism that had been identified to update and upgrade NAFTA without unleashing the negative passions associated with the word NAFTA -the TPP- collapsed the day Trump entered the White House. However, the promise was a NAFTA 2.0. The result ends up being a NAFTA 0.5.

The agreement reached a week ago casts several doubts: first, what Canada will do; second, whether it would be possible to send a bilateral agreement to the US Congress, given that the authorization this body gave the administration was for a trilateral one; third, if there would be enough votes for one (or two) bilateral agreements, given the contrasting interests of the American states on the two borders; fourth, how much damage has been done to the relationship with Canadas: and, fifth, perhaps most importantly, how many changes the Congress will seek to insert into the agreement that was, tentatively, reached this week. It seems clear that the companies deeply engaged in the North American region as manufacturers, starting with the automotive companies, will not remain idle: rather, they will be working with their representatives to ensure that their interests are as protected as those of the companies in the services sector.

The panorama suggests that there are only two possibilities: One is that Mexican negotiators trust that Mexico’s interests will be defended by third parties (US companies with interests in Mexico) through the US Congress (a Machiavellian leap to the void), which could imply that at least what already exists (NAFTA 1.0) remains in place or that what was negotiated is corrected out there. The alternative is that the real objective was to try to rid the outgoing administration of another failure. The great virtue of the NAFTA was its almost apolitical character; what was done here was to politicize it absolutely.

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a quick-translation of this article can be found at www.cidac.org

Luis Rubio

The days and weeks pass and the reality begins to sink in: things are more complex than the government in the making supposed and anticipated. The question is what it will do about it.

The speed with which the president-elect took control of the discourse stunned all of Mexico -and the world- but it did not surprise anyone. Since Peña Nieto disappeared from the map after Ayotzinapa, Andrés Manuel López Obrador took control of the narrative and created the conditions that made his overwhelming triumph possible. Perhaps it was inevitable that this would happen, but the fact has consequences: on the one hand, it has allowed the next president full control; on the other, it has made it impossible for him to ignore the real complexity of the country today: with 53% of the vote, the buck stops with him. These months have served to make clear that AMLO has a decision of essence to make: what to prioritize and how to do it.

Recognizing reality does not imply that the future should be a mere continuation of what has not brought favorable results for the population, but it is the starting point. One government after another in the world for almost half a century has accepted the premise that “there is no alternative” in the famous words of a British prime minister. For several decades, the world was moving in one direction and all nations competed for the same sources of investment, which created very precise conditions for a governmental strategy.

The circumstances that created the competitive environment for investment have not changed, but it is obvious that the willingness of voters to tolerate mediocre results has disappeared. The overwhelming vote for AMLO makes this quite clear. But that does not change two core factors: first, that there is no going back in the world of instant communications or the ubiquity of information. The voters turned out for a candidate and conferred upon him an extraordinary mandate, but they did not throw away their sources of information or their smartphones: it would be naive to assume that they will tolerate the destruction of what does work. The other element that is not altered is the fact that there are external constraints to what a government can do to change the direction of development.

Changing the direction of development is not only possible, it is necessary. The model followed to date started from the (implicit) premise that the political status quo had to be left untouched, which in fact implied preserving power strongholds, thus limiting the potential for development to those already living in the modern world: those who can compete, export and survive in the world of globalization would be the big winners; the rest were left to their own luck.

The problem is not the economic model that the country has followed since the 1980s, but the way in which a large part of the population has been de facto excluded. The economic reforms of the eighties and beyond were intended to create conditions for the country to prosper, but only as long as they did not alter the existing structure -political, trade union and business. This is what created a dual economy: those that could compete and be successful versus those that lagged behind. The challenge for the next government is very simple: destroy what does work (the environment that favors competition and success in the global world) or redefine its agenda so as to create conditions for that all Mexicans can be part of that success.

Although it seems paradoxical, there is no contradiction in this: the problem does not lie in the economic model or the ability of Mexicans to be successful, but in that everything that exists is biased to prevent Mexicans from making it. Mexicans emigrate because there are no conditions to be prosperous; Once they arrive at their destination, they are as successful or more as the best. One can see how the Oaxacans in Los Angeles or in Chicago are as capable as everyone else, but not in Oaxaca. The question thus becomes: Does the problem dwell on the Oaxacans as individuals or in the socio-political reality of Oaxaca?

The dilemma for the next government is that its premises and prejudices do not match reality. The reason why NAFTA is so popular is that therein are found the best jobs, the best paid and with those with better prospects: the lesson is that Mexico must generalize the conditions that make these circumstances possible. However, no matter how obvious the lesson, one government after another has been avoiding action for five decades: they have been dedicated to preserving the status quo, including an ancestral and unviable industrial plant, instead of creating a process of real transformation that creates opportunities for all to be successful.

The dilemma is simple and transparent: to break with the impediments to the success of the modern economy -in fact, make it possible for 100% of Mexicans to have access- or to insist on an agenda aimed at developing unproductive clienteles that will end up killing the sources of income of the country. There is nowhere to go: either addressing the issues that previous administrations have not wanted to attack or to remain in today’s mediocrity. The mandate gives for this and much more.

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Luis Rubio

The result of the presidential election altered not only the structure of power, but the nature of the political dispute. The citizenry opted for a strong presidency, with all the powers to undertake a structural change of potentially enormous dimensions. Even without anyone knowing, for certain, what the nature and reach of the so-called “fourth transformation” is, the election sparked a revealing debate of both buried emotions and latent resentments in the political and intellectual world. Now all this is seeing the light.

Three terms summarize the nature of the discussion: austerity, transformation and counterweights. Although there are obviously many ways to define each of these words, the political burden that accompanies each of them is quite suggestive.

López Obrador is a model of austerity in his person and has built a political career around this guiding principle. When he refers to the era of stabilizing development (the successful economic program of the 1940s-1960s), he’s presenting a vision of the world that is radically different from the one pursued by the reforms from the 1980s and on. Three factors characterized the stabilizing development model: first, a strong and centralized government, with an acute capacity to use public resources to finance large infrastructure projects. Instead of endless negotiations with the governors and various power groups (like today), the federal government decided the priorities, devoted the resources to that objective and imposed its vision on the country at large. Second, the government’s total expenditure as a percentage of GDP was significantly lower than it currently is: the government was effective and austere, a circumstance that changed dramatically in the 1970s when not only did spending increase at an accelerated pace, but also lost its ability to establish clear and precise priorities. Finally, the economy operated within a political context very different from the current one because the government had effective control of employers and unions through a variety of mechanisms (especially permit requirements) that determined the profitability of companies and the limits of the trade-union action.

The change in economic model that occurred in the mid-eighties never consolidated. Its two nodal anchors consisted of a fiscal balance and the liberalization of the economy. In the first, the spirit was to return to the sixties, an objective that was never achieved: although there were many cuts in spending (notably in investment, especially infrastructure), current spending continued to grow. The government of today is noticeably bigger with respect to the GDP than the one of the sixties and continues being clumsy and ineffective. The only thing it has achieved (more or less) is to stabilize the fiscal accounts to avoid crises; but it is no coincidence that the financial and exchange crises began in the seventies and continue to be present because, in contrast to that time, the concept of austerity of the last five decades has been rather lax.

If AMLO does manage to reduce the enormous excesses of government spending and to allocate resources in a more effective way, his impact could be enormous and extremely positive, but that is not what those proposing the end of austerity within his entourage mean. There is no doubt that this contradiction anticipates deep conflicts.

The transformation that the next president has announced is still to be specified, but the mere fact that it is posited as a radical change -the size of the Juarez or Madero “transformations”- has unleashed all kinds of proposals, speculations and fears. The change of model that was postulated at the end of the eighties did not consolidate because the political structure did not change, even if the reality of power was altered. Let me explain: the political regime centered on the presidency and the distribution of privileges has not changed one iota since the end of the Revolution a century ago; PRI and PAN governments came and went, but the regime persists and, in spite of the hoopla, it may very well end up strengthening, rather than changing, in the six years that are about to begin.

Despite this, the reality of power did change because the circumstances are different: the economic dynamics of the different regions of the country; the power of organized crime; the abuses of the governors; and the strength of the market in economic decisions; are all elements that illustrate how the reality of power has changed (for better or for worse), despite the fact that the formal political system has not reckoned with it. However, the discrepancy between the two is suggestive of another of the conflicts that are brewing: the notion that today’s problems can be solved by centralizing power can only work by annihilating the contrasting regional dynamics, which would involve demolishing the sources of economic growth that exist today.

The dilemma forward ends up being very simple: to centralize in order to control, with the risks and potential benefits that such a course might entail, or to construct a new political system that makes possible an effective allocation of resources for a more balanced and generalized growth. In a word: there will be no change as long as the paradigm of the unipersonal regime is not altered, the one that Porfirio Díaz inaugurated back in the 19^th century.

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Luis Rubio

The temptation to imitate the Colombian process to pacify their country is immense. Although that process is yet to be concluded -or enjoy widespread support- the Colombian experience is exemplary for the depth and solidity of its conception and process, but also because it sought not only to resolve an ancient dispute with the oldest source of violence in the continent, but also to incorporate the violent ones into the normality of everyday life. I imagine that this is the source that inspired the new governing team to proceed with a process of negotiation, pacification and transitional justice, all terms that, as the extraordinary text of the Colombian negotiator Sergio Jaramillo* illustrates, come from there. The problem is that the Colombian circumstances bear no resemblance to Mexico’s.

In Colombia there are two essential factors that made the peace process possible: first, over three decades, one government after another built institutional capacity, which not only strengthened the government itself, but also conferred upon it solidity to act. Different presidents led the effort, which ended up constructing the foundations for a functional government. That is, they first built a professional police force and an independent judiciary as means not only to be able to negotiate, but above all to deal with the consequences after the negotiation process itself. The negotiation carried out by the government of President Santos would not have been possible, not even conceivable, without the existence of a true State.

Second, in Colombia the source of violence was not merely drug trafficking, although this was a central component, but the guerrilla that for half a century had controlled a huge swath of Colombian territory, from which it operated, kidnapped and killed systematically. A guerrilla is not the same as a criminal organization, although both collaborated over time: the central issue of the Colombian negotiation was the fact that there was an alternative political project that was financed by the narco. The negotiation was not with criminals but with a political entity.

In contrast with Colombia, Mexico´s institutions are weak, there are no professional police forces capable of guaranteeing security, nor are they capable of administering a peace process like the one that has been advanced in Colombia, or the one that is pompously being proposed for Mexico. Nor are there judicial institutions -either on the side of the prosecutor’s office or the judiciary- to be able to talk meaningfully of justice in any of its potential denomination. No less important is the fact that the initiative of the Colombian government was extremely ambitious, centered on the citizenry, especially on the victims, to build a democratic political project anchored on well-founded civil rights, that would protect the peace project in the long term. The idea was that those rights would also eliminate the resentments and hatreds that decades of armed conflict had generated. In Mexico, the real challenge is much more basic: to build the institutions that Colombia already had, as well as a political project of democratic institutionalization.

Of equal importance is the fact that in Mexico the potential interlocutors are not politicians who seek to advance an alternative project of a nation (a paradox with the fledgling government that proposed the same thing) but organized crime, pure and simple: these are not guerrillas and their project is not political. Perhaps there is some of this in the mountains of Guerrero or among the Zapatistas in Chiapas, but this is certainly not the source of extortion of store owners of Guanajuato, protection money in the La Merced market, or of murdered women in Ciudad Juarez. There is much to learn from the Colombian process, but that learning is clearly not present among those who are promoting a process of pacification or transitional justice.

Pacification is a praiseworthy and necessary objective, but it is not a substitute for the government’s ability to fulfill its nodal objective, which is to govern and confer certainty and trust to the citizenry. After two administrations that pursued a strategy that has not achieved their avowed objective, it is not only valid but necessary to change the approach, but this must start from a diagnosis about the true nature of the problem. Only from an accurate definition of the causes of insecurity in the country can a solution be developed. This can include negotiations and amnesty, but its essence does not lie on the other side, that of criminal organizations, but on that of the government itself. In the end, it is the government’s weakness that made it possible for organized crime to grow and multiply.

There are many potential models to follow in developing a structure of public security, some of which start from the municipal governments, while others, recognizing the municipal government’s inherent weakness, contemplate state governments as the heart of a secure nation. Whichever is the right one, the crucial thing is to have a correct diagnosis, so as to concentrate all forces and resources in the creation of an effective security system, one to which the governors would be fully accountable.

What one can see in the discussion forums on security that were launched in the last few days illustrates the most ingrained spirit of Mexico’s political nature: we crack the eggs first and then start looking for a pan. There are better ways.

*http://www.eltiempo.com/politica/proceso-de-paz/sergio-jaramillo-explica-como-se-logro-la-paz-con-las-farc-247388

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