As 2021 draws to a close and the administration of President Andrés Manuel López Obrador (AMLO) reaches its halfway point, the president has achieved at least one of his principal objectives: He is the only topic in Mexico. In Trumpian fashion, AMLO has extinguished any hope that anything constructive will be accomplished during his reign, and all subjects now revolve around him. ‘AMLO is a catastrophe, we are doomed!’ ‘AMLO is a saint, we are delivered!’ And on a more mundane level, will AMLO let anyone do business in this country, other than his protected devotees (who are making bank while the going is good)? He has become a political Santa Claus, who knows who’s been naughty (the private sector) and who’s been nice (the military and anyone professing blind fealty to him), and he will continue to stuff the stockings of the nice with gifties like newly-created public enterprises and juicy no-tender contracts, while the coal will keep coming for the naughty.
After three years of the 4T, as the president’s administration and political party are collectively referred to, we find that Mexico Business Blog has practically stopped writing posts on individual industrial sectors, because between the effects of the pandemic and anti-business public policies, there is not much to talk about. Most industries continue just trying to keep their heads above water, and many businesses appear to be suspending major investment due to the high level of uncertainty of the public policy environment. It’s hard to make projections of return on investment when the next day your industry may be taken over by the government or turned over to the military. We do believe that Mexican business people have not given up; on the contrary, companies are redoubling creativity and efforts to find ways to prosper despite the particular challenges of the current political and economic environment. It is our opinion, however, that there is a certain undercurrent of throwing up of hands (or perhaps just throwing up) in the sense that we are experiencing a lost sexenio (six-year presidential term) in economic terms. AMLO’s obsession with increasing tax collection has been brutal, not just for nefarious corporate tax cheats but for small and medium sized businesses and independent contractors as well. The president frequently inveighs against legitimately registered, taxpaying private businesses as corrupt thieves, while his government protects the approximately 50% of the economy that operates outside the tax system, contributing nothing to the SAT tax authority yet consuming public space, electricity and water illegally for free. Mr. López Obrador is nothing if not tenacious, and he has labored tirelessly to recreate the institutional one-party state exemplified by the PRI, in which he got his start and learned his trade so well. Remarkably, however, the efforts of the Supreme Court (SCJN), certain quasi-autonomous agencies such as the Federal Economic Competition Commission (Cofece) and various affected parties have stalled the implementation of several of the current government’s retrograde reforms pending further action by the courts and the legislature.
As we have mentioned before in this space, the COVID-19 pandemic provides AMLO a convenient explanation for Mexico’s poor economic performance over the last two years. To his credit, he has not taken to repeating this excuse, perhaps either to avoid drawing attention to economic contraction during his term, or simply because he is not demonstrably interested in economic growth. For the first year of paradise under the 4T, the blissfully COVID-free 2019, Mexico posted a sizzling 0.0% growth rate, following 2.1% growth in the last year of the previous administration. We then racked up growth of -8.2% in 2020, but we’ll give AMLO a freebie on that one due to the pandemic. This year analysts are projecting growth somewhere in the range of 5% – 6%, which would be great if it weren’t for the 8% hole we dug last year. Projections for 2022 are around 3% so probably by the time this 4T hot mess finally wraps up in 2024, it will be as if we jumped off a cliff and climbed back up to where we started with a lot of bruises for our trouble. Elsewhere in the economy, we are suffering from high inflation, as many countries are presumably due to pandemic effects, and official employment is slowly recovering from 2020 losses.
When we come back to work after the New Year holiday, we will officially be into the second half of AMLO’s six-year presidential term. The ongoing COVID pandemic will continue to undermine economic growth, and the president’s efforts to turn back the public policy clock to 1976 will likely do the rest to ensure that nothing constructive is accomplished economically or socially. So what is there to keep us paying attention? Two things come to mind: First, the outcome of AMLO’s pharaoh’s-tomb projects such as the oil refinery and the Mexico City airport, and second, the slow-motion battle to earn his nod as Morena candidate for the 2024 presidential election. On the infrastructure front, first up is the new Mexico City airport, scheduled to begin operations in March 2022. The stakes are fairly high, considering that AMLO unilaterally cancelled the partially constructed mega-airport commissioned by his predecessor, in order to have the military build him a more “austere” airport further from the capital. Will the new airport begin functioning as scheduled? More importantly, will airlines actually use it? Will it be safe, with the existing airport operating relatively nearby? Will passengers be willing to pay for the two-hour car ride to the new airport? A lot could go pear-shaped with the new airport launch, so all eyes will be upon it, especially those of the political opposition.
The next two big-ticket golden temples to the 4T, the Dos Bocas oil refinery and the Maya Train passenger railway, are much further off in time, particularly considering the likely schedule overruns. We presume that AMLO will inaugurate both of them during the remainder of his term regardless of their degree of completion, as is the political custom. Even if, as we expect, Dos Bocas never actually becomes a productive, fully operational oil refinery, the heaviest political fallout from that project will likely come after he has retired from public life. The Maya Train may well enter into operation, however the success of the scheme as a generator of revenue and economic development remains to be seen.
The one that’s going to sell the most popcorn in the near term, though, is the presidential succession. On the surface, AMLO is doing backflips and blowing trumpets to promote the candidacy of his protégé Claudia Sheinbaum, currently mayor of Mexico City. Sheinbaum herself is crisscrossing the nation with early campaign activities thinly disguised as official duties, while making sure to exalt the dear leader with worshipful hosannas at every opportunity. Long-suffering Minister of Foreign Relations Marcelo Ebrard, in turn, continues down the Way of Sorrows toward the election as again and again he is forced to defend the indefensible of the 4T lest he extinguish any last hope that the president will choose him as candidate over Sheinbaum. Adding the hot sauce to the popcorn is Senator Ricardo Monreal, a loose cannon who is loudly proclaiming his interest in the Morena candidacy to the chagrin of many in his own party. Since he knows he is not likely to be selected candidate by “the will of the people,” otherwise known as AMLO’s personal prerogative, Monreal has publicly acknowledged that the party’s “internal polls” to determine the candidate are fictitious theater. Political commentators have offered up a number of possible secondary candidates such as Energy Minister Rocío Nahle and Economy Minister Tatiana Clouthier, but we consider these to be window dressing.
Unless something unforeseeable happens, we think AMLO’s choice is between Sheinbaum and Ebrard, with Monreal causing an uncomfortable ruckus on the sidelines. Sheinbaum will continue her public campaign for the nod, while Ebrard, in his well-established fashion, will remain tight-lipped on the topic as he works discreetly behind the scenes to line up support through his position as cabinet secretary. AMLO, for his part, has maneuvered himself into a position in which either choice, Sheinbaum or Ebrard, will be interpreted as a sort of double crossing of the loser. This is of no consequence to the president himself, we presume, as he considers all his decisions to be for the benefit of the people, rather than for his own lengthy political career. Nonetheless, we will continue to scan the political horizon for signs that Marcelo could possibly be recruited by the opposition if AMLO picks Claudia for the Morena nomination, considering that the opposition has no one in sight right now who could make more than a ripple in the campaign. But there’s plenty of time left for strange things to happen. And happen they do, as evidenced by Mr. López Obrador being elected President of Mexico in 2018.
We wish all our readers a safe and happy year-end with the hope (just like last year) that this will be our last holiday season under the yoke of the COVID-19 pandemic.