Pacific Council of  International Policy
Luis Rubio

JANUARY 8, 2018
By: Luis Rubio
In: Americas  Economics & Finance  Foreign Policy & Diplomacy

The presidential election of 2018 will be the first to be held in Mexico without an international anchor that guarantees the continuity of economic policy since the era of competitive, democratic elections was inaugurated back in the 1990s. That anchor has proven to be key to attracting investment and conferring certainty to the population as well as to investors and hence, to the gradual evolution of the country. This does not necessarily mean that there will be radical changes in the government’s strategy.

However, for the first time since NAFTA came into effect in 1994, the decision of how to conduct the country’s destiny will no longer be constrained by international commitments and, thus, whoever wins the upcoming election will have unbound power in this regard. The whole political point of NAFTA—an established framework to work under any electoral scenario—will no longer be there. Mexico is living a completely new political reality.

The rhetorical attacks on trade matters and, particularly, NAFTA that President Trump launched since his campaign in 2016 and his insistence on the possibility of canceling it, has had a decisive impact on Mexican politics. By eliminating the “untouchable” character of the deal within Mexico, the certainty that emanated from it has also evaporated. Even if NAFTA were to continue (in my opinion, the most likely scenario), the damage already inflicted is enormous—as the high domestic political costs that a withdrawal at Mexico’s behest would have entailed no longer exist.

In a context of uncertainty regarding the future of NAFTA, the dispute over economic policy could be the main issue of dispute in the coming electoral platforms.

All presidential elections since 1994 took place within a context that took NAFTA as given; therefore, the inherent risks in those contests turned out to be, in retrospect, limited. Now, in a context of uncertainty regarding the future of the agreement, the dispute over economic policy could be, as in the 1970s and 80s, the main issue of dispute in the coming electoral platforms.

Regardless of the economic policies that the next government adopts, its main challenge will be to convince the Mexican population and the international investment community that there will be economic stability and not radical change. Moreover, it will have to develop internal sources of credibility and certainty to counter the weakening of NAFTA.

The challenge is not minor: one must not forget that NAFTA emerged as a response to the lack of confidence that existed back in the 1990s regarding the continuity and permanence of the reforms that Mexico had undertaken in the late 1980s and early 90s, and to which the U.S. government assigned critical importance to its own security.

NAFTA was looked upon as a bulwark of stability. Now that this anchor has been weakened, the challenge will be to create new ones, which cannot come from anywhere else but from within Mexico.

Given the absence of internal sources of certainty, NAFTA was looked upon as a bulwark of stability. Now that this anchor has been weakened, the challenge will be to create new ones, which cannot come from anywhere else but from within Mexico, through the consolidation of the rule of law. For this to happen, however, the government would have to surrender the enormous powers that it actually enjoys—which are known as “meta constitutional” because they vastly overstep what the constitution confers upon it—so that effective checks and balances can emerge in both the legislative and judicial branches.

This is an enormous challenge in any circumstance and even more so when it depends on the government itself to accept limits on its own powers, not an easy feat to accomplish, therefore unlikely to take place. In other words, the key prerequisite for the rule of law to come about would be that the political system emanated from the 1910 Revolution would cease to exist in its present form: a structure centered on the presidency exerting vertical control.

These elements shape the environment that will characterize 2018 and will imply enormous electoral effervescence, important definitions regarding economic policy and governance (the rule of law), as well as a rocky bilateral relationship with the United States, the world’s foremost super power and Mexico’s largest trading partner by any measurement. All of this within the context of a lame duck presidency that loses credibility and capacity to operate at an accelerated pace.

Just as Mexico has become an issue of domestic politics in the United States, the United States and President Trump are issues of domestic politics within Mexico.

Regardless of the electoral preferences of the Mexican voters on July 1, the year that now begins promises enormous volatility. It is not only that there will be three very active presidential candidates running under the flag of the country’s major political parties, but that there will most likely be at least one independent candidate and maybe two.

Also, the way the United States—particularly President Trump—conduct themselves within the next several months could easily have an enormous bearing on the result. Just as Mexico has become an issue of domestic politics in the United States, the United States and President Trump are issues of domestic politics within Mexico.

In sum, the next few months will be of great complexity and the end result could be any. All three candidates have a fair chance of winning and each has strengths and weaknesses. Whatever the result, it is not only Mexico that will suffer the consequences, but so will the United States; after all, there is no country in the world that will impact the United States in the future as much as Mexico. Our destiny is bound together whether we like it or not.

_______________________

Luis Rubio is chairman of Mexico’s Center of Research for Development (CIDAC) and of the Mexican Council on Foreign Relations (COMEXI).

The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of the Pacific Council.

https://www.pacificcouncil.org/newsroom/mexico-2018-completely-new-political-reality

In  ¿Y ahora que? México ante el 2018.
Penguin Random House

Luis Rubio

We have been destined to live in a complicated world and in a stage of history in which complexity and change, within and outside of Mexico, are the determinant characteristics of well-being and development.

The pace of change could hardly be exaggerated:  technology has transformed not only the way of producing, communicating among ourselves, and interacting, but also but also our way of life. At the same time, the geopolitical changes that we have observed during the last decades –from the fall of the Berlin Wall to the “Great Recession” of 2009 and moving right along past the 9/11 attacks on the U.S., the factotum of world power and our neighbor- have created very distinct surroundings from those that Mexico experienced in the second half of the XX century.

 

Now that the country finds itself immersed in a new electoral contest, it is imperative to analyze how to take advantage of the current world situation to advance Mexico’s development. What is evident is that, despite the evolving international scenario, the country’s main challenges are to be encountered in its heart of hearts.

 

Since at least 1815, the world powers of each epoch have attempted to build situations of stability based on a balance of power be it at the world or regional level. For Mexico, the world order emerging from the Second World War allowed it to accelerate its economic growth rate, opening new opportunities for development. This growth generated a strong middle class, enormous urban expansion and an industry that, over time, has become one of the world’s manufacturing powers, above all in the automotive, aviation and electronic sectors. Liberalization of the economy from the eighties on conferred new life on the nation’s economic activity and established the bases for potential development, only to be limited by a complex network of regulations that have made the process of liberalization unequal, thus forestalling the integral progress of the country.

 

The changes undergone during the post-war order have affected Mexico’s way of functioning, the region in which we live and the world in general. The institutions, national as well as international, have proven inefficient in dealing with the challenges that come to present themselves, engendering recurrent crises and permanent instability both in the internal and external ambit.

 

At the same time, the proliferation of disruptive technologies has modified the way that societies relate to each other, altering the old forms of governing, converting the citizen into the heart of the economic development process. Old norms and criteria no longer work and, in general terms, a novel manner of visualizing the future has not surfaced.

 

That is, there are no longer across-the-board rules but rather perennial processes of change, which furnish opportunities as well as risks.

 

There are contradictions that have become the norm.  Hyper-productive companies and employees on the one hand vs. enterprises that go bankrupt. Burgeoning incomes for some segments of the population but declining and uncertain ones for others. Fewer costs for accessing markets, but a greater demand of human capital for achieving success in these markets. Greater income inequality vs. greater chances for development. Obsolete political systems in the face of a citizenry with more information than their governments and a greater capacity of action.

 

The new norm comprises polarization on all fronts, explaining the electoral phenomena that have materialized worldwide.

 

For Mexico, the victory of President Donald Trump in the U.S. represents an additional obstacle, since the main motor of economic growth is that of the U.S., in terms of the exportation of industrial goods (including the agro industry) as well as the remittances that Mexican residents in that nation send to their relatives in Mexico.

 

What is true is that the country evolved during these decades without a socially accepted flight plan. The structural reforms have created new opportunities, opened new markets and spawned previously inconceivable sources of income. In parallel, these reforms have been partial, in many cases insufficient and, in practically all cases, are curbed by the objective to not affect the interests of the traditional political system. Thus it is that, despite the reforms, many of these transcendental, Mexico is not prepared to cope successfully with the hazards of the metamorphosing international scene and the demand for skills that the economy demands in this knowledge era.

 

The segment of society that has become modernized enjoys opportunities that were never before possible and is well equipped to seize them, but the sector left behind not only does not enjoy those opportunities, but there is not even a plan to help them join the modern economy and society. Perhaps there is no better evidence of the political backlogs than the situation in which the country currently finds itself: Mexico has fallen behind because the political system has closed itself off and has become a hindrance to development.

 

Past and future

 

Mexico has been confronting the past with the future for decades, without being able to break through the former to decidedly embrace the latter. The evidence of this is overwhelming and particularly visible in the interminable collection of governmental actions oriented toward pretending to change without desiring any change whatsoever.

 

In the two ambits where there has been politico-governmental activism in recent decades, -electoral and economic and trade- the country has been distinguished by massive reforms with relatively poor results, although there are regions that grow at a nearly Asiatic pace.

 

I doubt whether there are many countries in the world that have undergone so many electoral reforms in so few years and, in spite of their having produced an extraordinarily exemplary and professional system, one that has been imitated around the world, we continue to experience uncontainable electoral disputes and of credibility, every time elections are held.

 

In the economy, the country has strived to orchestrate commercial agreements all around the world and has carried out ambitious reforms that never come to full fruition or have not been fully implemented.

 

It would not be an exaggeration to state that, thanks to NAFTA and the job opportunities that the U.S. economy has contributed for decades, the Mexican political class has not had to reorder their customs or cut down on their privileges. While the economic performance has been, to express it mildly, mediocre, it has been sufficient to keep the ship afloat.

 

But Mexico has advanced much more than it would appear at first glance: if one looks back, the magnitude of the change is impacting. Although our way of advancing is peculiar (two steps forward and at least one step back), the advance is real and can be observed in the powerful industry that has mushroomed, in the urban and rural middle class, in international commerce and,  by and large, in the improvement of human development indexes. Mexico has changed a great deal and, as a rule, for the good, but that change has been reluctant and frequently incorporated begrudgingly.

 

The reform process began in the eighties in a radically distinct international environment from that of the present. While we did not know it then, the Cold War was about to end and globalization unleashed uncontrollable energies that few understood at the time. Today the worldwide trend is toward growing disorder with strong centrifugal forces. The crisis, essentially fiscal, and the technological change undergone in the last years, has led innumerable countries to look inwardly.

 

None of that, however, changes two basic factors:  one, that technology presses on incessantly and no one can detach himself from it or its consequences. The other factor is that, although subject to governmental norms and regulations that have very profoundly altered the manner of production, consumption and living, the disappearance of globalization is unthinkable.

 

Within this context, Mexico has no alternative other than to move proactively in order to prepare its population for the upsurge of growth to come and that will be hallmarked by elements for which we are hardly prepared or, as a society, willing.

 

It seems clear that technology will continue to advance, that there are no longer mass markets but instead specialized (and profitable) niches and that  the digital revolution, which favors knowledge and creativity, will dominate value generation and production in the future. These realities situate us face to face with Mexico’s central challenge: how to reach the population that has not been able to access opportunities to benefit itself in the new economic, technological and international setting.

 

The challenge that this entails is vast because it involves processes that, by definition, take decades to consolidate, implying that every day lost postpones the opportunity, something of great concern in view of the ongoing demographic transition: if today’s young people are not incorporated into the knowledge economy, Mexico will end up a country of impoverished old people in a few decades.

 

Mexico more or less functioned in past decades because NAFTA supplied a source of indisputable certainty, while the U.S. job market diffused social pressure. Whatever happens in terms of the U.S. in the upcoming months (and I believe it will be benign), imported confidence will no longer be reliable.

 

Now everyone knows that this can disappear and that gives rise to a moment of extreme risk, but also of opportunity: the risk of destroying all that exists (without the penalties inherent in NAFTA) and the opportunity to confront our challenges to build sources of certainty founded on internal political arrangements.

 

It is important to recapitulate the reason why NAFTA has been transcendental in creating a modern economy. NAFTA was the culmination of a process of change that began in a debate within the government in the second half of the sixties and that, in the seventies, ushered the country to the brink of bankruptcy.

 

The quandary was whether to open up the economy or maintain it protected, to draw closer to the U.S. or remain distant from it, privilege the consumer or the producer, more government or less government in individual and entrepreneurial decision making.

 

That is, a debate ensued on the way that we Mexicans should conduct ourselves to achieve development.

 

In the seventies, the decision had been more government, more spending and more autarchy, and the result was the 1976 and 1982 financial crises. In the mid-eighties, in a milieu of quasi-hyperinflation, it was decided to stabilize the economy and initiate a sinuous process of economic liberalization.

 

Hundreds of businesses were privatized, the public expenditure was rationalized, the foreign debt was renegotiated and imports were liberalized. The wind change was radical; nonetheless, the much-awaited growth of private investment did not materialize. It was expected that the change in economic strategy would attract new, productive investment likely to raise the economy’s growth rate, thus the growth of employment and incomes.

 

In the end, NAFTA was the instrument that triggered private investment and, with that, the revolution in industry and exports. But NAFTA was much more than a commercial and investment agreement: it was a window of hope and opportunity.

 

For the man in the street in Mexico, this became the possibility of constructing a modern country, a society based on the Rule of Law and, above all, an open road to development.

 

This may explain the strange combination of perceptions regarding Trump in Mexico: on the one hand, disdain for the person, but not, broadly speaking, rampant anti-Americanism among the population. On the other hand, a terrible uneasiness: as if the dream of development was now standing in the pillory.

 

In “technical” terms, NAFTA complied extensively with its commitment: it has facilitated the growth of productive investment, generated a new industrial sector, impressive export prowess and has afforded investors certainty with respect to the “rules of the game.” Indirectly it also forged a sense of clarity in terms of the future, even for those not participating directly in NAFTA-linked activities. In a word, NAFTA became a portal of access to the modern world. The menace that Trump has imposed upon it gives rise to a threat not only to investment, but also to the vision of the future that the majority of us Mexicans share.

 

In its essence, NAFTA was a form of limiting the capacity of abuse from the government: on levying new game rules, it established a foundation of credibility in the development model. The effect of that vision made possible the political liberalization that followed which, although wanting, reduced the concentration of power and changed, at least an iota, the relationship of power between the citizenry and the politicians.

 

At the same time, a paradox allowed the politicians to continue living in their microcosm of privilege, without troubling themselves to perform the elemental functions that correspond to them, such as governing, engendering a modern educative system and guaranteeing the security of the population.

 

No one knows what will come to pass with NAFTA, but there is no doubt that the blow has been severe. Trump not only exposed the political vulnerabilities typifying Mexico, but he also destroyed the source of certainty that this “ticket to modernity” inherent in NAFTA entailed. While we might end up with a transformed and modernized NAFTA, no one can take away the blow already struck. The perceptions -and, along with that, the hopes and certainties- will not be the same any longer.

 

It is not by chance that proposals are reappearing to go back to festering within ourselves, take revenge on the U.S. and return to the efficient (?) state of yesteryear. Those recommending the latter do not understand that NAFTA was much more than an economic tool of the trade: it was the golden opportunity for a new and clear cut future.

 

Mexico’s true dilemma is the same as fifty years ago, but it now looms unavoidable. The country requires a thorough political transformation founded on an effectively represented population, a system of government that responds to it and a government whose purpose comprises that absentee verb: to govern.

 

The geopolitical challenge of Mexico is internal

 

The nation’s priority must be development. Our problem is that we have not brought the revolution that commenced in the eighties to a close. Two types of firms coexist –but do not communicate with each other- in today’s Mexico: those that are unviable enterprises and the most productive and successful of enterprises to be found in the globalized economy. The fusion of these has not been a very happy one because it has curtailed the growth capacity of the most modern of the latter, while preserving an old industry with no capacity whatsoever to compete. The predicament is how to correct these gaps. The tessitura is obvious: proceed to development or maintain the mediocrity.

 

A quarter of a century after NAFTA started it is evident that in politics (as in economic policy) long-term investment is the one that pays dividends. Many of the political avatars of recent years, and not a few of our difficulties, have been the product of short-term gambles, which never turned out well. NAFTA is the best example of that the long term is what yields results. Therefore, it is crucial to recognize that the “philosophy” that shapes it is what is imperative to promote: clear rules, mechanisms for adherence to them and no political interference.

 

What to do?

 

The big question is how to focus ourselves on the future? The country is saturated with diagnoses, some good and others bad, all intent upon slashing open a path and demolishing the obstructions to everyday life. It is evident that Mexico needs to refocus its efforts on countless areas, from the educative to the infrastructure, passing through the reform of which no one speaks but that is the most crucial, that of the government.

 

Nevertheless, the lesson of NAFTA and that provided by countries that have in effect achieved transforming themselves (including Spain, Chile, Korea, Taiwan, Singapore and China) is a very simple one: development is not a question of specific policies, albeit these would be required, but rather of vision and focus.

 

Essentially, the dilemma is: go backward or go forward. The dilemma is whether to attempt to solve all the problems from the government’s uppermost level: creating conditions for development to be possible, establishing general conditions and attending to key development problems, such as education and reforming, once and for all, the system of government at the federal level as well as its relationships with the states and municipalities.

 

The so called “developmentalist” projects of the XX century were centered on a “strong” government and control of the population and of the productive apparatus. The economy grew swiftly in that era (although no more than other similar economies, such as Brazil or Argentina).

 

Today the key lies in the form of government, very different from that geared to control which characterized the past and that still inspires many of our politicians. Governing does not consist of dictating preferences from above, but of solving problems, bringing about conditions for the progress and prosperity of the citizens. In a word, making it possible for the people to live a better life.

 

Mexico’s political system was created one hundred years ago to stabilize the country and control the population. Today, one hundred million Mexicans later, that system is totally obsolete and patching it up –like the electoral repairs of recent decades- is no longer sufficient. Mexico has to build a new system of government that confers certainty and obliges those in government to govern and to serve the citizen.

 

The many reforms will serve for nothing if there is not an ambience conducive for these to advance, and promotion of the internal market will in turn serve for naught if productivity does not escalate. Reforms are mere devices; without a strategy to articulate the reforms, development is impossible.

 

The two mainstays of development in the last decades, migration and NAFTA, will not bear the same fruits anymore in the future. Migration has changed in part due to that the U.S. workforce demand has diminished, but also because the demographic curve in Mexico has been transformed; in addition, the growing difficulties involved in crossing the border undeniably discourage migration.

 

For its part, the transcendence of NAFTA has diminished radically: with Trump the notion has disappeared that NAFTA is untouchable and that has caused investment to collapse. Unless we construct internal sources of certainty, NAFTA will no longer be the growth engine that it has been to date. Without investment, the economy will not grow however many reforms are produced or however much the internal market is highlighted. The only thing left as a possibility is the creation of conditions that render development feasible and that is nothing other than heightening productivity.

 

How can that be done? Productivity is the result of a better use of human and technological resources and that requires an educative system that permits the development of knowledge, skills and capacities for the productive process; that is, education must cease to be at the service of the political control that the unions exercise for their own benefit and must concentrate on the development of human capital to prepare individuals for a productive and successful life.

 

The same is valid for the infrastructure, for communications, for the way the bureaucracy treats the citizenry and, of course, for the judiciary. The point is that development is not free of charge nor can it be imposed by decree: it is the result of the existence of an environment that makes it possible to raise productivity and everything should be devoted to that.

 

Procuring the ambience of certainty that development requires implies abandoning the arbitrary nature of the governmental function, i.e., a political revolution.

 

Our 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 in the case of education. As long as that does not change, the economy will remain in stagnation, whether the project is one of great reforms or of the internal market. It’s all the same.

 

What has changed is the environment: the subterfuges devised to avoid decisive actions toward development and the future have vanished; we either do the job or stay stuck.

 

“The best way to predict the future, wrote Peter Drucker, is to create it.”

 

1. With or without NAFTA, Mexico must redefine its relationship with the U.S., which implies internal decisions and global negotiation of the interaction and of the neighborhood.
2. It is urgent for Mexico to find internal sources of certainty, that is, it must make its own the objective of institutionalizing Mexican politics, constructing checks and balances and enforcing compliance with the law.
3. Mexico should take leave of the XX century and integrally embrace the future, which implies building the institutions and the forms of interaction of a modern country and one that is desirous of being successful.

 

*from ¿y ahora qué? México ante el 2018, Penguin Random House.

 

Americas Society Council of the Americas
Luis Rubio

 

The presidential election of 2018 will be the first to be held in Mexico without an international anchor that guarantees the continuity of economic policy since the era of competitive, democratic elections was inaugurated back in the 90s. That anchor has proven to be key to attracting investment and conferring certainty to the population as well as to investors and hence, to the gradual evolution of the country. This does not necessarily mean that there will be radical changes in the government’s strategy. However, for the first time since NAFTA came into effect in 1994, the decision of how to conduct the country’s destiny will no longer be constrained by international commitments and, thus, whoever wins the upcoming election will have unbound power in this regard. The whole political point of NAFTA—an established framework to work under any electoral scenario—will no longer be there. Mexico is living a completely new political reality.

The rhetorical attacks on trade matters and, particularly, NAFTA that President Trump launched since his campaign in 2016 and his insistence on the possibility of cancelling it, has had a decisive impact on Mexican politics. By eliminating the “untouchable” character of the deal within Mexico, the certainty that emanated from it has also evaporated. Even if NAFTA were to continue (in my opinion, the most likely scenario), the damage already inflicted is enormous- as the high domestic political costs that a withdrawal at Mexico’s behest would have entailed no longer exist.

All presidential elections since 1994 took place within a context that took NAFTA as given; therefore, the inherent risks in those contests turned out to be, in retrospect, limited. Now, in a context of uncertainty regarding the future of the agreement, the dispute over economic policy could be, as in the 70s and 80s, the main issue of dispute in the coming electoral platforms.

Regardless of the economic policies that the next government adopts, its main challenge will be to convince the Mexican population and the international investment community that there will be economic stability and not radical change. Moreover, it will have to develop internal sources of credibility and certainty to counter the weakening of NAFTA. The challenge is not minor: one must not forget that NAFTA emerged as a response to the lack of confidence that existed back in the 90s regarding the continuity and permanence of the reforms that Mexico had undertaken in the late 80s and early 90s, and to which the US government assigned critical importance to its own security.

Given the absence of internal sources of certainty, NAFTA was looked upon as a bulwark of stability. Now that this anchor has been weakened, the challenge will be to create new ones, which cannot come from anywhere else but from within Mexico, through the consolidation of the rule of law. For this to happen, however, the government would have to surrender the enormous powers that it actually enjoys—which are known as “meta constitutional” because they vastly overstep what the Constitution confers upon it—so that effective checks and balances can emerge in both the legislative and judicial branches. That’s an enormous challenge in any circumstance and even more so when it depends on the government itself to accept limits on its own powers, not an easy feat to accomplish, therefore unlikely to take place. In other words, the key prerequisite for the rule of law to come about would be that the political system that emanated from the 1910 Revolution would cease to exist in its present form: a structure centered on the presidency exerting vertical control.

These elements shape the environment that will characterize 2018 and will imply enormous electoral effervescence, important definitions regarding economic policy and governance (the rule of law), as well as a rocky bilateral relationship with the United States, the world’s foremost superpower and Mexico’s largest trading partner by any measurement. All of this occurs within the context of a lame duck presidency that loses credibility and capacity to operate at an accelerated pace.

Regardless of the electoral preferences of the Mexican voters in July 1, the year that now begins promises enormous volatility. It is not only that there will be three very active presidential candidates running under the flag of the country’s major political parties, but that there will most likely be at least one independent candidate and maybe two. Also, the way the United States, particularly President Trump, conducts itself within the next several months could easily have an enormous bearing on the result. Just as Mexico has become an issue of domestic politics in the United States, the US and president Trump are issues of domestic politics within Mexico.

In sum, the next few months will be of great complexity and the end result could be anything. All three candidates have a fair chance of winning and each has strengths and weaknesses. Whatever the result, it is not only Mexico that will suffer the consequences, but so will the United States; after all, there is no country in the world that will impact the United States in the future as much as Mexico. Our destiny is bound together whether we like it or not.

Luis Rubio is the president of the Mexican Council on Foreign Relations, known as COMEXI. 

http://www.as-coa.org/articles/viewpoint-mexico-2018

  Luis Rubio

New year, year of presidential election: an amalgam of opportunities, but also of risks that no robust country should have to live through. Dual circumstances intertwine the opportunities and risks in a most tangible manner: on the one hand, although there have been enormous advances on multiple fronts, the problems continue to pile up and many, perhaps the majority, are disregarded, as if they did not exist. On the other hand, the power that a Mexican president amasses in his own right remains so vast that the person himself comprises the steadfastness and stability factor, or, contrariwise, that of risk and uncertainty. Thus begins Anno Domini 2018.

The headway that has been made is no small thing.  To start with, in the last twenty years we have procured that votes count and votes are counted, no minor accomplishment after seventy years of ballot-box fraud. Of course, the latter has not disappeared and the adaptive capacity of the old operators is impressive: over the last couple of years the citizens have witnessed the development of a strategy that could be dubbed “Louis XV”, that is, “After me the deluge:” the PRI won difficult elections at an exorbitant price in monies as well as in credibility. Time will tell whether this way of shooting marbles (in contrast with chess, which requires a strategy) brings with it benefits or damages, but when the measure of things is to win and not progress, the result speaks volumes.

In the economic arena, over the last decades Mexico went from a low-productivity economy, with a propensity for interminable crises, low salaries and few satisfying factors, to a thriving economy that, while far from solving the problems of the south of the country, offers a potential for development that was unthinkable in the past. The nation today boasts opportunities that were elusive before, the citizenry has become demanding and the government has no recourse other than responding or losing. Some administrations attempted to respond, others, like the one about to end, opted for losing but, in both cases, these were conscious decisions.

It is easy to criticize everything that has not been done and, doubtlessly, if one looks forward, the complexity of what is to come seems insurmountable. Problems that are the product of political immobility and of the disinterest of those in government (those in charge and those aspiring to be) are so obvious that it is not difficult to explain the currently reigning pessimism, to which one may add the flagrant corruption and impunity –and no one in the political spectrum is safe.

But the flip side of the coin is also true: if one looks back, the change that the country has undergone in levels of life, industrial competitiveness, longevity, the health system, balance of payments and a lengthy etcetera is impacting. The buildings, businesses, scholarships and opportunities materializing every day speak for themselves. Mexico cannot say that it has ventured into civilization, but it has clearly made progress in that direction.

Much is lacking and is also obvious: Mexico still depends on the decisions of a compact group that entertains an excess of arrogance and absolute impunity. That arbitrariness leads to the utilization of the resources of the State -such as the tax and the security institutions- for political espionage, using scare tactics on businesspeople or intimidating the citizens. While Trump seeks change without attaining it in nearly all cases, Mexican presidents possess such infinite and discretionary attributions that no Mexican can feel safe. The inherent risk concerning the person who wins the elections next July is so great that all of Mexico is holding its breath, whatever their choice of party or candidate. No serious nation can live through similar processes every six years and pretend that development is possible.

There are two types of challenges: those that can be termed “technical” and those referring to the power structure. The technical challenges are known and, in general, undisputed: the ineffectiveness of the monstrous parastatal companies, the insufficient and dreadful quality of the infrastructure, the inexistence of an educative system fit for the knowledge era, and everything related with poor regulations, bureaucratic excesses, the allocation of fiscal resources and the lack of mechanisms to make civil servants and politicians accountable on funds furnished by the citizenry through their taxes.

While the technical challenges can be defined, those associated with power are more convoluted and explain both the paralysis as well as why not even the technical issues are attended to. The power structure in the country is devoted to safeguarding the game preserves of benefits and privileges, and to impeding initiatives for raising productivity, facilitating the access of the population to decisions or, even, that elemental things improve such as the educative system. Whoever wins the election, the problem is the same: the system of privilege that controls everything and that, in consequence, drives the sense of unease as well as the anti-systemic factions.

As Womack put it, “It would be blind sight to hide the obvious, that contemporary Mexico demands profound and responsible reorganization, a reorganization that conducts a cleansing of all the ends of the knot, and not only one”.

Happy New Year!

www.cidac.org
@lrubiof

 

 

  Luis Rubio
NEXOS – January 2018

For a long time it was possible to imagine that the politico-economic transition that Mexicans have experienced would lead to a new level of civilization and development. There was no lack of reasons to think this: while it was evident that the changes and reforms required to make it to the other side of the river were not being carried out, at the onset of the nineties the future seemed promising in that we were ringing in new times in all ambits: the economy was recovering; exports were growing; the middle class was burgeoning, and the elections proffered an active partisan mosaic, inconceivable only a decade or so before. Of course, yellow lights were going off everywhere, but the country appeared to advance in a new direction that was delighting in wide-ranging social recognition.

After years of apparently interminable political disputes, those that had led to the crises of the seventies and to a decade of stagnation and (almost) hyperinflation in the eighties, the political debate entered into a stage of lesser conflict and bellicosity. The liberalization of the economy was bearing fruits, NAFTA was moving forward and the pathway toward the future seemed to be ensured. Years of crisis stayed behind and a guarded optimism reigned.

The beginning of the end came more quickly than could have been foreseen. The crisis of 1995 threw Mexican society into disorder, particularly with respect to its incipient middle class, uncorking a new era of political dispute, the one that now, in 2018, will undergo its third (and last?) electoral confrontation.

In 1996 a new window of hope opened with the unanimous approval of the electoral reform that, it was expected, would usher in a freshly minted democratic epoch. Unfortunately, viewed in retrospect, the successive electoral reforms did not solve legitimacy in terms of access to power and even less the manner of governing us.

Perhaps that would be the greatest deficit of the present: our system of government never adjusted. Arising from post-revolutionary times, with a closed economy, entrepreneurs and unions rigidly controlled and lacking in tolerance for debate or checks and balances, the system did not knuckle under. The structure of the economy changed, the means of access to power were democratized and the capacity of deciding and acting was lost. The old way of governing left off being possible (at least at the federal level) and nothing was substituted for it. The reality is that we are living in a dream because we did not build the scaffolding of a civilized and developed future and not having engaged in this task has opened up all sorts of spaces for regressive forces in all walks of our domestic life.

The world of tomorrow can be of two types: the one that is by force of habit, inertial, and that which is constructed by political decision. Inertia is the easy way out, but not the obvious one due to a very simple, and at the same time paradoxical, reason: the six-year presidential term about to end was simultaneously progressive and reactionary and that rare mixture bequeaths a legacy difficult to emulate. It was progressive in that it drove an agenda of reforms that lay bare great potential opportunities for a more balanced development for the majority of Mexicans. It was reactionary because it devoted itself to reverting institutional headway, eliminating mechanisms of transparency and accountability and violating the few existing counterweights.

This leaves us with a potentially optimistic panorama: the opportunity for casting aside the inertia, to be replaced by an era of building on the reforms effected and whose cost has already been paid, which would imply radically altering the structure of privileges and benefits that all kinds of groups and persons enjoy and that hinders development. The contrast between the South and the North speaks for itself: where socio-political barriers to development are virtually insurmountable under the current paradigm, as in the states of in Oaxaca or Guerrero, opportunity is minimal. If, contrariwise, the next government takes the project of combating those structures of privilege under its wing, the potential for development is literally infinite.

Inertia would imply a sufficiently elevated economic growth rate for the country to function, as done throughout the last three decades: insufficient for achieving a transformation, but satisfactory for dealing with the demand for jobs and for the consequences of our poor socioeconomic structure, translating as it does into poverty. Regarding the political, a scenario of inertia entails incessant conflict, in addition to permanent social dissatisfaction, but not a catastrophic situation. This situation could become complicated if NAFTA disappears.

At the end of the day, the country has accomplished extraordinary, if incomplete, reforms. The reforms unleash huge opportunities; lack of their thorough implementation limits them on a grand scale. We have been in this tessitura for several decades, a circumstance that explains the collective humor characterizing us. I personally am remaining optimistic, in the style of Prime Minister Harold Wilson, who observed: “I’m an optimist, but I’m an optimist who takes a raincoat with him.”

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Luis Rubio

The end of each year brings nostalgia for what’s gone, expectation for what’s coming, fear of the unknown and optimism for the opportunities that the New Year might bring with it. Today, the last day of a complex and contentious year, is a good time to reflect upon what the big thinkers, entrepreneurs and statesmen wondered before each one of these emotions.

The future… something which everyone reaches at the rate of sixty minutes an hour, whatever he does, whoever he is.

                                                                       C.S.Lewis, 1941

We must confess that at present the rich predominate, but the future will be for the virtuous and ingenious

                                                                       Jean de la Bruyere, 1688

 Fortune can take from us nothing but what she gave us.

                                                                       PubliliusSyrus, c 50BC

In ages of faith, the final aim of life is placed beyond life. The men of such ages are therefore used naturally and, as it were, involuntarily, to fix their gaze for many years on a static object toward which their progress is ever directed, and they learn by imperceptible degrees to repress a thousand small passing desires so as to satisfy more effectively this one great permanent longing which torments them. When these same men wish to concentrate upon worldly affairs, these habits come into their own. They readily settle upon one general and sure goal as an object for their actions here below and direct all their efforts toward it. You do not see them indulging in new projects every day but they do have definite plans which they never tire of pursuing.This explains why religious nations have often achieved such lasting results. They discovered the secret of success in this world by concentrating upon the next.

                                                                       Alexis de Tocqueville, 1831

In politics, what begins in fear usually ends in folly

Samuel Taylor Coleridge, 1830

 Worry over what has not occurred is a serious malady

Solomon ibnGabirol, c 1050

What makes a tyrant frightening?“His guards,” the man says, “ and their swords, and the chamberlains, and those who shut out people who try to enter.”Why is it, then, that when you bring a child in front  of him when he is surrounded by his guards, the child isn´t afraid? It is because he child doesn´t properly notice the guards? Now, if someone is fully aware of the, and of the fact that they’re carrying swords, and has come precisely because he wants to died, as the result of some misfortune, and is seeking and easy death at someone else’s hand, he won´t be frightened of the guards ether, will he?“No, because he wants the very thing that causes them to be frightening.”Well then, if someone who has no particular desire either to die or to live, but is happy to accept whatever is granted, comes into the presence of the tyrant, what is to prevent him from approaching him without fear?            “Nothing.”

Epictetus, c100

Nothing is more despicable than respect based on fear

Albert Camus, c 1940

It is life, life that matters, life alone -the continuous and everlasting process of discovering it- and not the discovery itself!

Fyodor Dostoevsky, 1868

The world is equally astonished –and resentful- at every new discovery, but in a short time accepts it as a commonplace.

Gertrude Atherton,1923

Science is a cementery of dealideas.

Miguel de Unamuno, 1913

 What one man can invent another can discover.

Arthur Conan Doyle, 1905

There are men in this city, and also there come other person every day from different places by reason of its greatness and goodness, who have very clever minds, capable of devising and inventing all manner of ingenious contrivances. And should it be legislated that the works and contrivances invented by them could not be copied and made by others so that they are deprived of their honor.

Venetian Statute on Industrial Brevets, 1495

The basic question one must ask is this: Why do people do all the things that, taken together, form the impressive image of a totally united society giving total support to its government? For any unprejudiced observer, the answer is, I think, self-evident: they are driven to it by fear.For fear of losing his job, the schoolteacher teaches things he does not believe; fearing for his future, the pupil repeats them after him; for fear of not being allowed to continue his studies, the young man joins the Youth League and participates in whatever of its activities are necessary; fear that, under the monstrous system of political credits, his son or daughter will not acquire the necessary total of points for enrollment at a school leads the father to take on all manner  of responsibilities and  “voluntarily” to do everything required. Fear of the consequences of refusal leads people to take part in elections, to vote for the proposed candidates, and to pretend that they regard such ceremonies as genuine elections;  out of fear for their livelihood, position, or prospects, they go to meetings, vote for every resolution they have to, or at least keep silent: it is fear that carries them through humiliating acts of self-criticism and penance and the dishonest filling out of a mass of degrading questionnaires; fear that someone might inform against them prevents them from giving public, and often even private, expression to their true opinions.

The basis of optimism is sheer terror.

Oscar Wilde, 1891

Old Year, New Year: what’s gone is gone; now comes the time of opportunities, if we know how to grab them. Happy New Year!

 

PS. All quotes from the extraordinary journal Lapham’s Quarterly

 

www.cidac.org

@lrubiof

 

Luis Rubio

 

ARGUMENT

Corruption Is Mexico’s Original Sin

Personal enrichment has always been central to Mexico’s political system — and only a revolution can change that.

Mexican President Enrique Pena Nieto at the National Palace in Mexico City on April 24, 2017. (Alfredo Estrella/AFP/Getty Images)

Luis Rubio is chairman of the Mexican Council on Foreign Relations and of México Evalúa-CIDAC.

http://foreignpolicy.com/2017/12/26/corruption

Luis Rubio

“I always imagined that Paradise would be a kind of library.”
Jorge Luis Borges

 

 

In such a changing and convulsive world, it is of the essence to read about everything, listen to ideas that are attractive as well as repulsive in order to maintain a clear and sharp perspective of the time in which we are living, but also of the context within which things take place. History is particularly useful for this purpose and this year I have read various excellent texts on key moments of the past. Here is a description of some of my best readings, at least those from which I learned the most.

The economic polarization and its consequent inequality are not novel themes, but they have become key issues in the public discussion of the entire world. A few years ago, the Thomas Piketty book appeared on the inequality in the world. From that moment studies were launched on diverse perspectives to analyze and assess the gravity and veracity of the French economist’s findings. The Cato Institute published an extraordinary compendium of these criticisms with the (meagerly creative) title “Anti-Piketty,” also published in Mexico by the Fondo de Cultura Económica (FCE). Rather than focusing on the past as Piketty does, this volume pinpoints the XXI century, which allows us to understand the enormous differences in the formation of capital and its social consequences. A must-read.

Richard White*, a historian, studies the evolution of U.S. society in the second half of the XIX century, beginning with the end of the Civil War and especially  brings into  focus the growth of the so-called “Robber Barons,”thegreat entrepreneurs who built huge empires, transformed the world and later were the object of anti-monopoly legislation. It is interesting to observe the similarities and differences of that era compared with ours, above all because the common denominator, the technological change,explains much more than the means proposed to combat the evils of our times as they were in times past.

One hundred years after the October Revolution, China Miéville** describes with exceptional expertise the way that Russia went from being an autocratic monarchy immersed in a profoundly unpopular war at the onset of 1917, to arrive in October having gone through not one but two revolutions and attempted to metamorphose into the vanguard of the world revolution. Nothing better details the tenor of this narrative than a quote that the author proffers at the start, asserting that “one need not be a prophet to foretell that the present order of things will have to disappear.”

Perry Anderson unfurls his marvelous curiosity, this time on the theme of hegemony, a term employed frequently in the most diverse ambits of international policyand of social control, but that is rarely spelt out punctiliously. Commencing with Greece, in The H-Word: the Peripeteia of Hegemony, Anderson elucidates the origin of the designation and its use throughout time. In a series of historical chronicles, he proceeds through Gramsci, E.H. Carr, Morgenthau, Kindelberger, Laclau, Arrighi and others, drawing to an end with a reflection on U.S. foreign policy and the complexity of the world and of the struggle among the powers of the moment in which we live.

None of my readings were as illuminating, but also as unsettling, as that of John Ferejohn and Frances McCall Rosenbluth, two political scientists who set out to decipher the provenance of democracy and the reasons for its emergence in distinctive nations. The title of the book, Forged Through Fire: War, Peace, and the Democratic Bargain, sums up their argument: without war there is no democracy. It is war that made possible the rise of democracy, basically because, in one country after the other, when the elites felt threatened it was then that they were required to seek out the population to save their own skins; that is what made possible a political arrangement for sharing the power, i.e., democracy.

Finally, during this past yearI found myself with several books, some excellent, dedicated more to attempting to make sense of specific, current events,than to “great”explanations, which deserve mention: The Road to Somewhereby David Goodhart outlines the new wellsprings of imparity between those who are “mobile” and those who have been marginalized. Mark Lilla has produced a gem in “The Shipwrecked Mind: On Political Reaction,” delineating the tensions between a changing world and those devoted to thwarting this advance. Tzvetan Todorov, a historian originating in totalitarian Bulgaria, has published another extraordinary book, The Inner Enemies of Democracy, focusing on the stage after the fall of the Berlin Wall and how the space for freedom and democracy has contracted worldwide. Christopher Hayes trains his thoughts on societies’ loss of confidence in their governments and traditional institutions, including those that clearly possess a rightful place in the society.  While his focal point is on the U.S., much of his line of reasoning is universal: The Twilight of the Elites: America After Meritocracy. In 2014, Peter Pomerantsev brought out a work on the Russia of today that is not lacking in contemporaneity in the world in general: Nothing Is True and Everything Is Possible takes on the fictional matter and narratives that governments fabricate to preserve the power, in the hopes that that no one take notice of the reality. Nothing seems to change.

 

 

*The Republic for Which It Stands, Oxford; **October, Verse.

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Luis Rubio

I do not know, dear reader, whether things in our daily lives seem normal to you that are not normal: the problems that are not solved, the corners at which people are robbed, the floods that return, the traffic jams and all the “little” things that make life unnecessarily complex, which is already that, and then some. It surprises us that the population does its utmost to aid the needy in times of difficulty or crisis, but we are not surprised that things that should function fail. In reality, this is about two sides of the same coin: the citizenry alienates itself when it sees that nothing works as it should, but acts precisely because it knows that it can make a big difference at a given time. This is a problem of authority.

“Ordinary things are more valuable than extraordinary things; nay, they are more extraordinary,“ wrote GK Chesterton a century ago. And they doubtlessly are: what should be ordinary emerges as extraordinary. Here are some examples of this in everyday life:

• It never fails to surprise me that traffic jams transpire in the same places. In some places this is simply the insufficiency of the infrastructure, even when the latter is new and can only be fixed with huge, additional, investments. However, there is an infinity of places in Mexico City (CDMX) where traffic gets strangled because of the lack of authority: for example, at the beginning and end of schooldays, when parents believe it is their divine right to double- and triple-park and there is no authority at all to regulate or discipline them. The same is true in front of Metro or Metrobús stations, where taxis cue up and compete for passengers without it mattering how. The point is not to impede parents from dropping off or picking up their children from school or passengers from taking a taxi; the point is that the authority is there, or should be there, to ensure that the rights of all the citizenry are countenanced and respected. This is about day-to-day circumstances: known and predictable.
• Something similar happens with the floods. We always are surprised that the rains leave large puddles in the same places time after time. That is, the governmental authority is privy to thorough knowledge of the sites where drainage does not work or is inexistent even with minor rainfalls, and does nothing.  They do not repair the streets, avoid flooding or attend to points that, commonly, frequently and repeatedly, hinder circulation. All of those points are well known in advance and the authority could clear them up without encountering many hurdles or costs; nonetheless, that does not come to pass.
• It is frequent that in the social networks there are rumors that “there are muggers at such and such a corner.” That information spreads like wildfire; notwithstanding this, the muggings continue, as if they were an economic activity deserving of respect and protection. In the country all types of illegal activities are permitted, such as unregistered taxis which are “tolerated,” food stands, street vendors and all kinds of paraphernalia for sale by purveyors of goods and services. While formally illegal, they form part of the quotidian scenario and, at least, satisfy a need, because were this not so, they would not exist: that is to say, there is a demand for those services, which illustrates, presumably, why the authority lets them be. I would like to believe that the thieves do not enter into that category, but one never knows, given its devotion to political clienteles…
• The pavement in the streets appears to be imported from war-time Vietnam: there they decided to repair the country after decades of war and we surely have imported the stray shards of pavement that they had left over, only in this manner can we decipher the streets of CDMX: the potholes, the larger holes, the ditches. The streets are not fixed or maintained, they are only repaired, patchwork style: all that is left before a sinkhole…

The common denominator is all this is the lack of authority, the absence of a government that complies with its raison d‘être, which is security and supplying services for the population. With local and regional differences (and some notable exceptions), there is no municipality or delegation in the nation that does not display abandonment, disinterest or disregard. All this leads one to question regarding the function of the authority, or rather: What does it do all day? The reality is that yes, it does work, spending long hours devoted to attending people’s demands, but not those of all citizens, only those of their “machines,” their “bases,” their clienteles. Therein lies the heart of our system of government: the coddled groups, the private profits (or rents, as economists call them), the seeking of power and its preservation at all costs.

Fukuyama affirms that in order for a government to be successful it should be capable of fulfilling basic functions such as security, the legal system and economic regulation, but sequence here is key: nations that  democratize prior to having built the capacity to govern effectively always fail because democracy exacerbates the quandaries, the privations and the challenges of the existing order, eating away at the capacity of the government to exercise its authority on its perceiving itself as submitted to too many contradictory demands. In Mexico’s case, the problem is not that the demands confront each other, but instead that they are concentrated on certain clienteles that often are not presentable, but are very powerful.

www.cidac.org

@lrubiof

 

 

 

Luis Rubio

Spain embarked upon the conformation of an integral strategy of tourism development in the cultural ambit when it identified, as an opportunity for attracting that type of visitor, the development of small counties and towns. That was how the national network of state-owned hotels, known as “paradores,” in many cases installed on the premises of ancient forts, palaces and monasteries, started, but whose objective it was to deliver content and viability to tourist development in places on occasion remotely located. Later would come first-class highways and high-speed trains, followed by an enormous proliferation of shops, cafés, restaurants and an interminable determination of the townspeople to convert tourism into a source of progress. The number of tourists that visit that nation every year far supersedes its total population and a big chunk of the income it provides stems from its cultural side.

The concept –towns with huge potential attraction for tourism- is obvious, thus it should not be surprising that Mexico has attempted to imitate this. In this manner was born the “Magical Villages”, described as “places with symbolism, legends, history, important events, day-to-day life, in other words, “magic” in their social and cultural manifestations, as great opportunities for tourism.” With that criterion, the Mexican Government has denominated 111 localities as “Magical Villages” along the entire length and breadth of the country. A great idea, but constructed Mexican style: pure rhetoric and no content.

The contrast with the Spanish experience could not be greater. There they began with the infrastructure -the hotels, followed by highways- supplying content and fundamentals to an integral strategy. It was a great vision rooted in real investments (not always profitable), which were followed by private investments complete with all of the accoutrements that tourists demand. In Mexico, hand-outs were printed up that read “Magic Village” and with that we attempted to attract a thriving tourism. It reminds me of the way that a few decades ago the urban capacity of Mexico City was expanded: the capacity of the Viaducto freeway surrounding the city’s periphery was increased by 50% with a traffic lane delineated with a bucket of paint. The problem is that doing things on the cheap turns out expensive.

Before anything else, what is mostly heard about the Magical Villages is the lack of infrastructure: they are difficult to get to, there is no parking, there are certainly no hotels and, once there, there are no cafés, shops or other tourist attractions. What’s more, the towns have not been organized to attract tourism, as they could be by preparing old buildings, churches, convents and other constructions for these to be visitor-worthy. The strategy has been limited to emitting decrees (or declarations), not to building the project. No one should be surprised by its poor results.

In second place, lack of the most minimal infrastructure is in addition to the fact that many of the so-called “Magical Villages” are found in highly violent regions, if not in frank narcoterritories, the result being a fiasco. A good idea ended up disrupted to the extent that it became a perversion and, probably, the beginning of the end of massive potential. Once a family visits one of these villages and leaves frustrated or, worse yet, after being held up, word gets around and no one wants to hear anything about the place again.

The case of the magical villages is not unusual. It is, in fact, the way we are: as the Russian saying goes, first we break the eggs and then we look for the frying pan. That is how laws are made, how Fronts are organized and how pacts are pieced together. Great announcements are made without a moment’s thought of the consequences and implications. Legislators do not read the content of the legal initiatives that they approve, which leads to their being fought over when the time arrives to implement them. The same thing happened with the Pact that led to the approval of the reforms driven by the present government: unless some of the Pact’s authors had an ulterior Machiavellian strategy in mind, it is clear that at least the PAN and the PRD did not weigh the consequences of themselves being identified with governmental corruption. These examples are the norm, not the exception: it is our way of doing things.

The building of the new Mexico City airport undoubtedly comes under the same logic: the costs have exceeded any budget surely because of corruption, but also because it was not taken into account that the land of that area is muddy and that this requires a much more expensive and complex foundation than budgeted for (that is, those who planned the airport did not know that the Lake Texcoco lakebed was there because this is newly created…). We first break the eggs and then look for the frying pan…

But above all, the failure of the Magical Villages program reveals a total incapacity on the part of the government to understand how important the security of the population is. It is obvious that narcotrafficking has a great deal to do with this matter, but the fact that security has not comprised a priority of the government manifests itself in all that it touches. It is impossible to build a better future with foundations made out of clay.

www.cidac.org

@lrubiof