AMLO in OMG infrastructure reveal

On November 26, 2019, Mexican President Andrés Manuel López Obrador (AMLO) gathered dozens of business leaders at the National Palace to announce a National Infrastructure Investment Agreement (ANII) comprising approximately US$42 billion of private sector investment in the country’s infrastructure.  We’re pleased, of course, because we really need it, but there is a lot of background and context to the splashy announcement so here goes. 

We are just about at the one-year mark of AMLO’s six-year presidential period, and this first year has been marked by a notable deceleration in the domestic economy.  López Obrador has made a career out of deriding savage neoliberal capitalism and trumpeting his solidarity with the poor, however now that he is actually president it is not that useful to crow about how tough things are in the country.  He has taken different tacks in responding to concerns about the economy, by turns saying that things were going better than the media reported, and then that economic growth wasn’t important anyway, since it only benefited the rich.  He’s not going to be able to have it both ways, though, and even the anti-capitalist firebrand would probably rather be able to point to a healthy economy under his watch.

A National Statistics Institute (INEGI) report updated in late November established that the national economy had contracted marginally in both the first and second quarters of the year, followed by 0% growth in the third quarter.  Analysts leapt to spin the data but either way, the term “stagnation” is getting a lot of mileage right now and AMLO is in danger of closing out his first year in power with no growth to claim credit for.  One of the president’s signature policy initiatives has been to reduce government spending, under a philosophy he calls “republican austerity.”  There’s no question he has made significant cutbacks, but this has also sewn terror in economic sectors such as agriculture and particularly construction, which depends heavily on public works projects.

INEGI reported that September 2019 marked the 15th straight month of contraction in construction GDP, stoking a rising clamor for urgent loosening of government purse strings to stimulate the economy.  Although AMLO has managed to maintain a relatively positive working relationship with the private sector despite some friction points, the pressure has really been building to take some action as employment stagnated.  The Presidency tried releasing a few statements along the lines of “Wait until you see what we’ve got planned for 2020” and “Coming soon: Major infrastructure plans to be revealed” but by November the townies were coming up the hill with pikes and torches.  Against this backdrop, AMLO staged the star-studded reveal party for infrastructure spending on November 26.

Top talking points for the event included 147 major investment projects totaling over US$42 billion, in areas such as ports, highways, railroads, airports and telecommunications.  The president and spokespersons for the business community emphasized repeatedly that the entirety of the investment for the cited projects will come from the private sector, which presumably will receive some manner of benefit in return, since, you know, that’s why companies invest.  Descriptions of the event would lead one to infer that backs were clapped and tears of relief were shed, however brows were subsequently knit in the media as pundits pointed out that economists and business leaders had been hoping for release of the government’s own National Infrastructure Plan (PNI) for 2020 – 2024, meaning public sector investment.  What they got was a recapitulation of private investment plans, including many projects that had been announced before as well as others that had begun but were suspended for one reason or another.  Citibanamex, in its review of the announced investment program, noted that at least the government is showing it is aware of the need for infrastructure investment, which is a step forward under the circumstances.

The administration’s own public sector infrastructure spending plan is now expected to be released in January.  Central bank Banco de México (Banxico) just revised downward its projection of GDP growth for 2019 to between -0.2 and 0.2%, so here’s to hoping the January plan brings more thunder than AMLO’s most recent economic conjuring trick.

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