Luis Rubio

At its thirtieth anniversary, the North American Free Trade Agreement (and its second iteration in the form of the USMCA) has been the most successful instrument of economic transformation that Mexico has ever had in its life as an independent nation. It sounds easy, but in recent decades it has been possible to provide stability to the economy and the exchange rate, two factors that for centuries seemed unattainable. Although there are many complaints and criticisms regarding this agreement, the best way to assess it would be to imagine what would have happened to Mexico in the absence of this instrument.

Three objectives motivated the negotiation of what ended up being NAFTA. The first two were economic in nature and the third was political. The aim was to promote active engagement in international trade with the aim of modernizing the Mexican economy and generating a source of foreign currency that would allow paying for imports carried out on a regular basis. Secondly, it sought to promote foreign investment in order to raise the growth rate of the economy, as a means of creating new sources of wealth and employment and, in this way, reducing poverty.

The numbers show that the success in both areas has been dramatic: Mexico has become a manufacturing export power, and these exports finance the growth of the economy as a whole. That is, exports are the main engine of growth of the Mexican economy and constitute a reliable source of foreign currency, which is an important part of the explanation why the peso-dollar exchange rate has remained stable in recent years (the other factor is remittances). For its part, foreign investment has grown year after year, even in an environment as hostile to it as the one promoted by the current administration. A more favorable environment, particularly in the context of so-called “nearshoring” could raise these rates in an extraordinary way (and, with it, the sources of employment and wealth creation).

The third objective was political in nature: it sought to depoliticize government decision-making related to private investment. The NAFTA constituted a straitjacket for the government, since it committed it to a series of disciplines and limited its capacity for arbitrary decisions as well as those motivated by sheer tantrum. By signing the agreement, the Mexican government committed to preserving a regulatory framework favorable to investment and foreign trade, protecting private investment and preserving a benign environment for economic development. These purposes arose after the expropriation of the banks in 1982, a situation that had created an environment of extreme distrust among both national and foreign investors, without whose activity the country would have no possibility of fostering economic growth, employment, as well as addressing poverty in a systematic way. In this context, the NAFTA made it possible to depoliticize decisions regarding private investment, an objective that continues to work even with an administration that would clearly prefer that the NAFTA not exist, but from which it has benefited immensely. In fact, the NAFTA was designed precisely for a government like the current one.

For 24 years, with very different governments, each with its own, contrasting, priorities, the NAFTA was preserved, and its fundamental principles were respected. From this perspective, NAFTA fully achieved its goal, as even many of its staunchest critics at the beginning recognize today.

Criticism of the treaty originates from elements that have nothing to do with the agreement, essentially that it did not achieve the comprehensive development of the country. The inevitable answer is more than obvious: NAFTA is nothing more than an instrument for the achievement of specific objectives, all of which were achieved. What was not achieved has to do with everything that was not done so that the country could effectively develop, poverty would disappear, and inequality would decrease, and that -all of it- has to do with the absence of a development policy that would have implied the consolidation of the rule of law, the creation of a modern public security system and the concomitant strategies in education, health and the like.

NAFTA is a central instrument for the country’s development. It allowed business decisions to be depoliticized, contributing to the development of highly competitive and world-class companies and industries. Although it is still far from benefiting all Mexicans, its success is so overwhelming that its limitations end up being inconsequential in relative terms. But NAFTA is not, nor can it be, an objective in itself. The country requires a development strategy that assumes it as one of its pillars, but that goes further: to governance, to education, to infrastructure, to security, to the comprehensive competitiveness of the economy and the population. In short, to increase the general productivity of the economy, because only in this way will development be achieved. In the absence of a strategy of this nature Mexico will end up being a country perpetually dependent on low wages. Sad corollary for an institution as visionary and successful as NAFTA has proven to be.

www.mexicoevalua.org
@lrubiof

 • WORLDCRUNCH – ENGLISH EDITION

LOPEZ-OBRADOR
As Mexico´s president seeks to consolidate his power ahead of the 2024 general elections in the fall, will voters and institutions react to safeguard the country´s democracy or fall deeper into outgoing President López Obrador´s authoritarian impulses?

MEXICO CITY — Two philosophies divide the realm of power. One seeks to ensure the state has all the tools it needs to bring about equality, and the other pursues the state’s decentralization and expand civil liberties. The first philosophy, rooted in the ideas of the 18th century French thinker Rousseau, is cherished by governments keen to take charge of their citizens. Such governments will always tout the leader or head of state as the people’s only representative.

Though, inevitably, such regimes incline toward tyranny. The second philosophy, rooted in the writings of the Englishman John Locke, favors a balance of power inside the state, precisely to prevent the tyranny of any one person or party. Another 18th century thinker, Montesquieu, described the state as a structure made of three branches of government (judicial, legislative and executive), with each acting as a check on the power of the other two.

In the last century, the philosophy of government has evolved here in Mexico. An initial, formative period (1916-17) that followed the tumult of the 1910 revolution, saw jostling between liberal, conservative, authoritarian, even trade-unionist and anarchist ideas until a constitutional agreement was reached and a charter approved in 1917.

Much of it was based on the liberal constitution of 1857. Subsequent decades saw a consolidation of this centralising vision, associated especially with the presidency of Lázaro Cárdenas, which shaped Mexican governance through a period of economic development. This system began to falter with the 1968 student riots, and then the 1985 Mexico City earthquake.

These events would fuel electoral rivalries throughout the 1980s, as well as a number of economic and political reforms that would lay the groundwork for a more open economy and a political system that aspired to be fully democratic.

Most importantly, the economic and especially political changes of recent decades did not emerge from a Left-Right division. Students were the first group to demand democratization and limits to presidential powers, later being backed, for a while at least, by the center-right National Action Party (PAN), which had itself emerged as a reaction to the corruption of the PRI (Institutional Revolutionary Party).

A new reality
Such changes have entailed an extraordinary, philosophical revolution, which has
inevitably prompted its own counterrevolution seen in the current president, Andrés
Manuel López Obrador (often simply called by his initials AMLO). Since its election in
2018, the current administration has not only worked to consolidate its power but also
eliminate any counterweight or outpost of resistance.

Many institutions have been eradicated, starved of funds or neutralized (by leaving
vacancies in bodies like the market regulator or the Electoral Court, well, vacant). This
all illustrates an easily discernible pattern. The president says parallel bodies are
"onerous" to the public purse and are being removed to save people money. Yet this
downsizing has more to do with his vision of power – call it a blast from the past – that
excludes citizens and gives preference to total presidential control.

Power, unfortunately, corrupts.

In the Soviet Union — another top-down system — they'd say it was easy to
differentiate between authoritarian and democratic systems. In the former, politicians
mocked citizens and in democracies the opposite occurred. But political systems
where one person says and does as they please and mock, or pummel, those who
oppose their vision are all too common. Power, unfortunately, corrupts.
Looking ahead, two fundamental questions hang over the president's institutional plans.
Firstly: how will candidates (for the 2024 general elections) react to his proposals? The
answer to this question will reveal these candidates' inclinations to side either with their
citizens or with tyranny? The second concerns parliament: will it fulfill its responsibilities,
or continue to submit to the president as nothing more than a rubber stamp?

Hope for a new future

In 1997, when the PRI first lost its absolute majority in parliament, the opposition
celebrated the hope of a new future in Mexico.”Together we outnumber you,” one
opponent told the country´s PRI president Ernesto Zedillo. From 1997 to 2012,
parliament was not so much a counterweight as an impregnable wall of opposition.
That changed with Enrique Peña Nieto and the return of some old-style politics with a
bit of help from cash bribes! As for this parliament, it has been Soviet-style in its
submission and loyalty!
We´ve seen a lot of mediocrity and lackluster performances.
But our country has a big opportunity in September and October 2024, with the
formation of a new parliament and a new government. We´ve had a range of
experiences in recent decades, both in leadership and legislative terms, with a lot of
mediocrity and lackluster performances.
People have a chance to vote in a system of checks and balances that constitutes
collective governance. This means a new framework of full legitimacy consisting of
three branches of government. Put simply, it is the chance to end our decline towards
authoritarianism and begin a new stage of development.

https://worldcrunch.com/world-affairs/mexico-2024-elections

 Luis Rubio

 Luis Rubio

Two philosophies of power divide the world: one seeks its concentration to guarantee that the State has full powers to advance equality, while the other seeks its decentralization to ensure the freedom of citizens. The first, originally articulated by Rousseau, is the favorite of governments that aim to put themselves above the citizenry. Hence the notion that the head of the government is the sole representative of the people. Inevitably, these governments tend to become tyrannical. The second philosophy, articulated by John Locke, aims at building counterweights to power to ensure that the consecration of a tyrannical government is impossible. Montesquieu formalized this philosophy with his approach to a structure of divided government (executive, legislative and judicial), with a system of limits where each branch balances the others. Clearly, these are explicitly contradictory views.

In the last hundred years, Mexico has seen its governing philosophy evolve. In the constituent period, diverse currents -liberal, conservative, authoritarian, unionist, democratic, anarchist and everything else- coexisted, until an agreement was reached in the form of the constitutional document that ended up being adopted in 1917, much of whose content was derived from the liberal constitution of 1857. In the following decades, the centralizing vision that characterized the Cardenista era took shape and was strengthened as the country advanced in its economic development. The student movement of 1968 and then the 1985 earthquake shook the political system, giving rise to the politico-electoral disputes of the eighties and, from there on, to the series of both economic and political reforms that laid the foundations for an open economy and a political system that aspires to be fully democratic.

It is important to note that the political-economic changes of recent decades, especially the political ones, did not emerge from a left-right axis. In the political sphere in particular, the calls for democracy and the demand to limit presidential power originated in the student movement and was supported -in time- by the PAN, whose very origin was a reaction to the consolidation of the PRI system.

The philosophical evolution has been extraordinary, and it would have been naive to assume that a counterrevolution like the one championed by the President would not occur. Since its inauguration in 2018, the current government has been committed not only to concentrating power, but also to eliminating any loopholes that would prevent or limit the exercise of power. The elimination of institutions, the financial starvation of some of these and the de facto neutralization of others (especially by not appointing replacements when their members’ terms expired, as in the INAI, the COFECE and now the Electoral Tribunal) are all examples of a pattern which is easy to discern. The presidential bill to formalize the elimination of these and other autonomous bodies, which the President justifies in terms of cost (they are “onerous,” he said), in reality is the product of a vision of power that excludes the citizenry and privileges the unrestricted exercise of power by the President.

In the Soviet era, many of whose jokes were like Mexico’s, it was said that the difference between an authoritarian government and a democratic one was very simple: in an authoritarian system politicians make fun of citizens, while in a democratic system It happens exactly the other way around. It is not difficult to understand the preference for an authoritarian system in which a person -in this case the President- systematically dedicates himself to excluding, disqualifying, ignoring and attacking all those who do not align with his vision of power and life.

Looking ahead there are two factors that are important. The first is how the two candidates will react to the presidential proposal, revealing their preferences and propensities. Will they align themselves with the citizenry or with tyranny? The second is regarding Congress: will it exercise its responsibility, or will it continue to accept being railroaded by the executive, as if it were a mere appendage?

In 1997, when the PRI lost its absolute majority in the Congress for the first time, the opposition boasted about the new reality (“together we are more than you,” Porfirio Muñoz Ledo snapped at then-President Zedillo), but dedicated itself to opposing each and any initiative that came from the executive. Instead of a counterweight, the Mexican Congress between 1997 and 2012 was an almost irreducible wall of opposition. The Congress of Peña’s presidency succumbed to direct cash payments that bought the votes. The current Congress has been submissive to a fault.

The big opportunity begins next September and October, respectively. Then Mexico will have a new Congress and a new government. After mixed experiences of alternation of political parties in government, various styles of Presidents in power and a pathetic performance overall, the opportunity to build an effective system of counterweights dedicated to co-governing will be unique: to build a new scaffolding of governance that enjoys full legitimacy, supported by the three branches of government, all committed to asserting their functions and responsibilities. In other words, to get out of the morass in which Mexicans find themselves to enter a new stage of development.

www.mexicoevalua.org
@lrubiof

                                      Luis Rubio

The world is living through an era of animosity and Mexico is not the exception. The presidential strategy of dividing and polarizing has been utilized by leaders around the world during these convulsive times, as illustrated by Trump, Narendra Modi in India, Bolsonaro in Brazil and Orban in Hungary. Some leaders have been subtler in their ways, less strident, but equally divisive in their strategies, as was Obama. The point is that, during the last decade, polarization has become an instrument for conducting politics. Everything in the Mexican public space -the Presidency, the Congress, the Supreme Court and the electoral processes- acquired calamitous dimensions as if in each vote, decision or sentence the future of the country was at stake.  The question that seems pertinent to me is whether, considering the upcoming electoral contest, the country can return to a schema of unity, which is not the same as unanimity.

The point of departure is that Mexico is not a homogeneous nor an egalitarian country where social, economic, political or economic differences are any the lesser. In fact, the opposite has happened: Mexican society has evolved in the direction of a growing diversity that, of course, is not new, because a mosaic has long characterized Mexicans, with the ensuing differences, divisions and conflicting perspectives. If one observes the world, it is natural for heterogeneity to exist in all orders of society. That is, disagreement on matters that are fundamental for development and the future is inherent and inevitable in a free society. Thus, the question of the possibility of achieving agreements on the future is relevant.

Pierre Manent* argues that in a free and therefore diverse society, unity does not mean thinking alike, unity means acting together. Manent suggests that nations count on common anchors that define them in terms of nationality, history and cultural foundations, all of which implies that this is not about enemies to the death, but instead about persons who, plain and simple, think distinctly and that, thus, the political task should consist of finding the spaces under which everyone can participate without that implying coinciding in everything. Under that premise, an effective leadership would procure uniting efforts to a greater degree than imposing a particular vision.

Unfortunately, Mexican politics has been polarized for many years, a situation that has been exacerbated in this government, essentially because everything has been organized and structured, intentionally or not, around the disagreements that exist more than on the coincidences. This, intrinsic as it is in the processes of political rivalry, does not contribute to the building of agreements during non-electoral times and much less so when the express objective is that of honing the divisions.

In a political system with such level of concentration of power like Mexico’s,  the leadership ends up being crucial. A good leader can contribute to resolving problems and to paving the way for development, while a negative leader can undermine the sources of growth and limit the country’s long-term viability. It is that concentration of power that keeps Mexico permanently up in the air: with everything in the end depending on the person occupying the office of the presidency. Even great leadership that proves benign but that does not contribute to institutionalizing that power and to creating conditions for unity in the previously mentioned sense, ends up being insufficient for truly attending to the enormous challenges that the country faces.

In sum, we Mexicans have two very distinct but complementary challenges: one is that of creating the conditions to unify the efforts of the entire society for the sake of advancing toward greater development, and, in the political ambit, peace and stability. The other is that of proceeding toward institutionalizing power to consolidate the efforts of the whole of society. This has to do with two distinct conduits, but ones that unite and end up in the same place: the capacity and disposition of the leadership to act on both fronts.

What is common, or at least frequent, in Mexican history is that presidents aim to bring together the citizenry for the country to prosper. That has been particularly perceptible during the past three decades during which an attempt was made to create general mechanisms where everyone who could fit -citizens in the electoral environment, entrepreneurs in investment, unions in the labor space and   politicians in the legislative sphere- would carry out their functions without having to resort to special favors or permissions at each corner. The present government has gone back to controlling all of the processes, not always successfully, but the very fact of attempting to do so has had the effect of limiting the potential for development.

What the country requires is moving on to the next stage: not only to general rules, ever more institutionalized rules and with mechanisms that transcend the capacity of a sole president, even of whoever promotes them, to alter the rules at will. Philip Wallach** says that majority rule is about “domesticating brute political force into a somewhat gentler form.” Whoever wins in 2024, the country requires a distinct government, one appropriate for the XXI century and the circumstances, such as nearshoring, which only come once in history.

*Democracy Without Nations? **Why Congress

www.mexicoevalua.org
@lrubiof

Luis Rubio

According to Simón Kuznets, there are four types of countries in the world: developed, underdeveloped, Japan and Argentina. Argentina has been defying gravity for decades, in fact almost a century: with small moments of euphoria, its economy has gone from bad to worse for so long that this Nobel-winning economist ended up creating a special category for that nation, which was the second richest in the world at the beginning of the 20th century and today has more than 40% of its population living below the poverty line. Regardless of the economic and, in general, governmental project that the president-elect Javier Milei implements, for at least 56% of voters the situation had become so intolerable that any alternative seemed better.

It doesn’t take a genius to appreciate the unease of Argentines. In conceptual terms, Argentina’s problem is very obvious: over eight decades they built a set of social programs that entail increasing public spending, while facilitating, and in fact rewarding, unemployment. The number and diversity of “support” schemes is extraordinary: pensions, transfers based on the number of children, retirement with full salary with very few years of work and a wide variety of benefits. Juan Domingo Perón, president in the forties, created and was able to finance his transfers (which were meant to elicit loyalty from voters) and nationalizations due to the enormous wealth that that nation accumulated during the Second World War, but as soon as it vanished, everything collapsed: the first great fiscal crisis occurred at the beginning of the fifties. There has never been the capacity or willingness to face the simple fiscal reality: the programs remain, expand and multiply, but the income to pay for them does not.

The fiscal cost rises systematically, in fact exponentially, all of which has been financed with monetary emission, which keeps the country, especially in recent years, permanently on the brink of hyperinflation. The inflation that characterizes the country is structural: transfers have become acquired rights that take on a life of their own and become untouchable political factors.

The notion of forcing a solution through a monetary mechanism is not new. In the nineties Menem created the so-called convertibility that equated the Argentine peso with the dollar one to one. The theory behind that project was that the cost of breaking convertibility would be so high that it would force politicians to face fiscal realities. However, the problem was not addressed, spending continued to grow as always and the inevitable happened: the project collapsed with the so-called “corralito” at the beginning of this century, where most of the population lost all their savings, while a virtual depression occurred.

Milei has two traits: one is his style and rhetoric, which makes him similar to Trump. The resemblance to Trump is merely of appearance, because his economic team is not protectionist. According to Milei, who intends to shrink the government drastically, the problem does not lie exclusively in social spending but in a towering bureaucracy that prevents it from being resolved.

The other characteristic is a monetary shock program no longer with peso-dollar convertibility, but with the outright adoption of the dollar as currency. Adopting the dollar implies that spending can only increase to the extent that the number of dollars in the economy grows, which can only occur through exports, investments from abroad or the normal growth of the American monetary base. In practice, adopting the dollar implies an immediate brake on the economy, since everything has to be adjusted to the available dollars. As Argentina is in default with the IMF, the bondholders and the private banks, the project, if it is implemented (given that the president will not have a majority in Congress), would imply creating a pressure cooker effect: there is no money, but spending demands remain constant. The ensuing conflict is clear cut.

According to the economists behind Milei, the recession would be brief because there are many dollars in private hands and Argentina could increase its exports of meat, grains, oil, gas and the like as soon as the taxes that currently disincentivize exports are eliminated. This has logic, but it only covers part of the problem. The other problem is that deficit spending is structural due to social programs. If the government actually sticks to the monetary project it proposes, it would have to cut that spending immediately and brutally. Time will tell if voters understand the implications of what they voted for, but what’s coming is not going to be pleasant, however necessary it may be.

From Mexico’s vantage point, whose government did everything possible to support the losing Peronist candidate, the message is very clear: sooner or later the population rebels against what they consider intolerable. The notion that more of the same would be acceptable to the electorate has always been dubious, even while, clearly, Mexico does not face the size or type of crisis that characterizes Argentina today. The two candidates have a lot to learn from what happened in Argentina: for one to propose something different, but reasonable; and for the other to not get carried away by the idea that everything is fine.

www.mexicoevalua.org
@lrubiof

Luis Rubio

When one reads Kafka’s novels –The Trial, The Castle, The Metamorphosis – there is no way to avoid the sensation of confusion and fascination as one goes through those labyrinths of fear, uncertainty, anxiety, irony, and the every-present lacerating humor. Whoever looks through the pages of the Mexican-national newspapers or is brave enough to watch the early-morning presidential renderings could do nothing other than conclude that Kafka indeed lives in and resides in Mexico.

Mexico is a clinical case, on occasion a pathological one, and sometimes exceptionally healthy. Both realities coexist in all ambits: pacific regions and violent zones; a vigorous economy in some districts and depression in others; rising scholarship and extreme illiteracy; impressive wealth and acute poverty. Mexico is a cultural mosaic but also a cluster of benign and malignant contrasts. What works in some regions is spurned in others, and vice versa. The diversity is impacting, but so also are the disparities. Mexico is one thing and the other, all at the same time.

In this electoral season it is easy to fall back on simple phrases to attempt to explain exceedingly complex circumstances where, however much an individual aspiring to govern wishes, ready-made solutions that arise on short notice do not always work. The diversity, disparity, inequality and complexity of Mexico must be ministered to with viable strategies, not only for each one of them, but also for all of them, but without disdain toward the need to create conditions for these differences to find an exit channel. It is equally ingenuous to pretend that what constitutes a solution for a problematic in the Mexican state of Sonora is going to function, for example, in Chiapas State; each situation is different. Governing implies finding the golden mean between the general and the particular, a point intensely difficult to achieve.

The first great disquisition must be philosophical in character: attempt to control all of the processes or create conditions so that every Mexican can find the opportunities possible for them. The first pathway, Mexico’s history shows, leads us directly to the gallows. The second, duly structured, obliges the government to resolve problems at the same that it facilitates conditions for the citizenry to be productive and for the latter to make the process its own. Resolving problems so that progress could be possible is the most directly conducive path to development.

But resolving problems is not an easily obtained objective. Mexico’s problems are vast and complex but are not novel. At least from Andrés Molina Enríquez in his book The Great National Problems published a century ago, it is clear that Mexico confronts a plethora of circumstances, such as inequality and poverty, which have not been resolved. The past one hundred years have been witness to a diversity of attempts, limited and ambitious alike, to deal with these problems, but the result, on the whole, is not especially commendable. The current government tried a new version of the same -wagonloads of money- without the country coming to entertain a better possibility of advancing. I ask myself whether now would not be the time to scan the horizon for a different future.

Now that Mexicans find themselves in the face of a change of government, it would be desirable to procure novel ways of confronting the diverse problematics that the country comes up against, while those factors already nearly on track or that can almost function on their own are supported. There are no perfect solutions nor are there unambiguous ones, but there are indeed things that are known to function, while there are others that merit new ways of thinking and acting. The choice is very clear: pretending to control the uncontrollable given the diversity and dispersion of the population or focusing efforts and resources on the spaces and populations most susceptible to transforming themselves to join the process of development.

The problems facing Mexico, like those of other latitudes, are not incorrigible; in technical terms, everything has a solution. The problems are, deep down, political, because they respond to ideological interests, cultural interests or preferences that have nothing to do with the technical nature of the situation. These are the factors that differentiate nations in the way they face up to, or do not face to, their problems. These differences are also the factors that generate certainty or uncertainty.

Viewed from this perspective, the pertinent question would be, what is the best way to advance a long-term development project that additionally yields short-term tangible benefits, especially under rubrics such as poverty, income and growth? This question evidently presupposes that development is the objective, something that cannot be said for the outgoing administration, but that doubtlessly permeates the discourse of those aspiring to head up the next government. ln this context, it would not be impertinent to ask, for example, whether the attacks, mockeries and strategies aimed to polarize just for the mere fact of doing so contribute to that purpose. Polarization matches a government for which development is more a problem than an objective, but it is not so for government that wishes to promote it.

At the heart of the dilemma confronting Mexico in the next election lies a crucial factor, What is the government for: to control or to promote? To generate certainty or mistrust? In these dilemma Mexicans risk their future.

www.mexicoevalua.org
@lrubiof