Economy

Andrés Manuel López Obrador [AMLO]

Both AMLO and MORENA seek a new economic model through the Fourth Transformation because they consider that the old regimes have been a massive failure of the neoliberal model, bringing injustices and inequality to the Mexican society. Moreover, AMLO believes that such older economic models have not been able to provide welfare to the people whom he represents.  Now, through his policies and supported by MORENA, AMLO is striving towards a new economic model in which the State assumes responsibility for driving development; a model which will first address “the poor” as well as work without much external interference. This new model is focused on strengthening the popular economy and small companies with accessible financing. Lastly, AMLO’s model seeks to end monopolies, again, assisting small businesses.

Unfeasible reforms in an unreliable economic environment

AMLO’s economic reforms focus on praising the idea of a more fair income redistribution, than on achieving overall nationwide growth. His economic plan promises that“preference is given to the poor”and that the top priority is to secure the natural resources of the nation. Additionally, it claims that:

“the wealth of the nation and the fruits of the work of Mexicans will be distributed fairly, and the privileges of the few are not allowed to be sustained by the oppression, insecurity and misery of millions of Mexicans.” 

AMLO

AMLO’s main reforms desire to improve economic equity through social support programs; consolidate the public sector mainly by strengthening national companies like Pemex (the national oil company) and CFE (the national energy company); and promote economic sovereignty through actions such as reducing agricultural and oil imports. 

Within AMLO’s economic programs there are many sub-grants that “prioritize the poor” such as small loans to informal merchants, domestic workers and marginalized farmers. Yet, businesses, entrepreneurs, and national companies have not received any kind of economic relief. Among AMLO’s economic policies, the most resented sectors have been those who he considered “neoliberal;” whom he declared his enemies from the beginning. His economic plan excluded small business and large companies, particularly during Covid. Companies and private businesses had no incentives like bank bailouts, nor economic support or tax extension. In Mexico, small and medium-sized companies generate 72% of jobs in Mexico. AMLO is not considering that one shall not bite the hand that feeds you, or in this case, feeds millions of Mexicans by providing jobs. In the long run, what AMLO proposes will be insufficient and unsustainable if it does not seek an understanding of how the private sector provides for the development of the nation’s economy. 

An economic performance measured by happiness?

According to Forbes, AMLO’s economic policies are full of words and ideas that rarely materialize in clear economic reforms. His economic plan where he emphasizes the ideals that a “moral” economy should lead is divided into five sections: democracy, justice, honesty, austerity and well-being. AMLO’s policy consists mostly of strong speech with weak action. Some believe that his six-year term will end with him only repeating the ideas of ​​what Mexico should be like without actually  achieving what he preaches. 

For example, despite AMLO`s speech and vision, the Mexican economy has reported overall negative growth ever since AMLO took the presidency. At the end of April 2020, the INEGI (the Mexican Institute of Statistics and Geography) reported that the Mexican economy registered a contraction of 2.4% in the first quarter of the year. Nevertheless, AMLO’s speech has remained confident and positive when it comes to discussing economic matters. 

In addition to his positive position on the economy, whenever he is questioned about his lack of action or confronted  by his decision-making, AMLO has chosen a denying attitude. With such an attitude, he has chosen not to accept or approach statistics and ignore or delegitimize official data that confront the lack of economic growth the nation is facing. To ameliorate the backlash,  he has decided to change the unit of measurement to avoid recognizing the economic failures in his mandate. More specifically, AMLO has adopted a discourse where the emphasis is set on the effort to reset income distribution rather than the growth of the country. For instance, when AMLO has been questioned about his positive statistics (that some consider flawed), he has repeatedly responded with the same phrase: “I have other information;” delegitimizing the INEGI data and the general performance indicators of the economy.

Correspondingly, AMLO has stated that he considers GDP and other growth terms obsolete as he considers that these measurement parameters were designed in and for the “neoliberal era.” He has declared that his government is working on a new index that measures ‘people’s happiness’ (GNH) in order to move away from measuring growth and economy through GDP data or even “material goods.” With this new measurement, AMLO kills two birds with one stone: He will deviate attention from poor economic markers and will argue that “the people” are happier than ever before. In accordance with this rate of happiness, his economic plan states that:

“We consider that what is fundamental is not quantitative but qualitative: the equitable distribution of income and wealth. The ultimate goal of a state is to create the conditions for people to build their happiness; economic growth and increases in productivity and competitiveness do not make sense as objectives in themselves but as means to achieve a higher objective: the general well-being of the population.”

AMLO

Beyond measuring happiness, AMLO shall not forget that the GNH also encompasses the well-being in matters of health, how time is used, it embraces education, and cultural diversity and advocates for good governance, a sense of community and ecological diversity. In other words, having the population happy shall not exclude ruling with good governance.

Stop the neoliberals!

Not a day goes by without AMLO condemning the mafias who are embodied by the business and political elites; who he blames for fueling the country’s poverty and corruption. AMLO’s motto “first the poor” has seemingly become a “just the poor” policy. AMLO has only focused on programs that benefit the poorest and thus, he has closed the doors to medium and large companies, ultimately harming the middle class. In other words, helping the poor move up among society but not helping them once they move up. This has generated problems between AMLO, businesses, and the private sector in Mexico. In addition, it has scared inventors away from Mexico, one again, harming rather than helping the Mexican economy. His motives are that he wants to stop the unjust benefits of the “neoliberals” as he argues that they are the main cause of Mexico’s unequal distribution of wealth. 

According to Reuters, Mexican business leaders are upset with the president. Since his campaign, AMLO has emphasized that he and his government declare themselves anti-neoliberal. As a result, throughout his mandate AMLO has alarmed investors with policies that threaten the stability of the country and its economy. The AMLO administration has acted against the security and stability of investment into Mexico with decisions such as the cancellation of the mega-project of the new airport in Mexico City and the recent renewable energy reform, among others. Another example is when AMLO expressed his total disagreement with rating agencies such as Fitch Ratings and Standard & Poor’s; especially after they changed their growth outlook for Mexico to negative, discouraging investors from looking at Mexico. They changed their outlook on Mexico for reasons such as a lower forecast of economic growth for 2019 and 2020 as well as the change in public policies for the energy sector, not to spite AMLO. As such, they are not his biggest neoliberal nemesis because he does not consider them to be corrupt.

“The hallmark of neoliberalism is corruption,” said AMLO in front of the Union Congress. AMLO made it clear in his daily morning conference that the neoliberal governments are responsible for the negative estimates, while ensuring that there are “charlatans” in the international rating agencies. Moreover, The Mexican Business Coordinating Council (CCE); whom he refers to as “neoliberals,” “conservatives” and “corrupt,” has expressed dissatisfaction multiple times with AMLO’s proposals. All in all, AMLO’s rhetoric has affected the Mexican financial ecosystem much more than his policies as he has effectively burnt the bridge between his administration and the private sector. Yet, for AMLO to successfully implement his idea of ​​an economic model that works in people’s lives and generates growth in the country, he will have to cooperate with the private sector; a process which to him generates a partnership with the “enemy” and betrays his ideals. 

Against NAFTA but for USMCA?

During his candidacy AMLO (like Trump) described the USCMA as unfair and both politicians seriously criticized NAFTA (now called USMCA). AMLO’s key points of concern were the welfare and rights of the Mexican workers in both the US and Canada. Due to both leaders’ strong statements, the renegotiation of NAFTA was tense and hazardous. However, AMLO appeared to recognize that NAFTA represents a large part of the Mexican economy and ultimately compromised on many of his concerns. Just last year, Mexico exported almost $410 billion worth of goods, of which more than 80% was shipped to the United States and Canada. That said, for AMLO, NAFTA represented a threat to the protection of the Mexican agriculture and national resources. The trade agreement also represented benefits for his everlasting enemy, the “neoliberals’ in the sense that private companies would profit from the trade agreement. For all these reasons, AMLO was largely against NAFTA throughout his candidacy. 

However, AMLO’s behavior radically changed once he became president. Despite his past negative thoughts, once the renegotiation of NAFTA began he changed his views entirely on the matter. In the midst of the tense renegotiation of the trade agreement, AMLO even sent a letter to US White House Speaker Nancy Pelosi, urging her to take action to cease the negotiations and reach a beneficial agreement. After an intense renegotiation process, the governments of the three countries signed the new trade agreement in late 2019. AMLO’s new posture in favour of USMCA has shifted his focus to the protection of unions rights and higher wages for Mexican workers abroad.

Migration and President Trump were major pressure points for AMLO throughout the negotiation phase. This is in large part due to Trump using the USMCA as a tool to coerce his immigration policy with Mexico. To demonstrate, President Trump threatened to impose a 5% tariff on all products that his country imports from Mexico until theflow of undocumented migrants stops.” This forced AMLO to commit to strengthening Mexico’s borders to ensure the signing of the new USMCA and avoid an economic catastrophe. In the end, AMLO appeared to have a subordinate cooperation with Trump, something that completely undermines his domestic narrative as the top dog. It appears that while AMLO seemed to be externally angry, behind closed doors, he was more compliant. 

Isabel Barquin

Research and Analysis Intern