Note: This article was first published in esglobal. To access the original version in Spanish, click here.
In the much cited 2004 United Nations Development Program (UNDP) report on democracy in Latin America, one of the concluding points links the economic performance of governments to public support for democracy. It states that a very significant percentage of Latin Americans value development, so much that, they would support an authoritarian government if it were able to solve their economic problems. Deep down, the evaluation of a government is closely tied to a country’s economic situation and how it is perceived by society.
President Andrés Manuel López Obrador’s (AMLO) first year as head of the Mexican executive challenges this causal relationship. During his presidential campaign and upon assuming power, AMLO promised that the Mexican economy would grow at the end of his six-year term by seven percent, with an average annual growth of no less than four percent.
But since July 2019—halfway into his first year in office—analysis and debates about economic growth have revolved around whether the country is experiencing a recession (technical, at least), a slowdown, or is stagnant. Beyond technical concepts the Mexican economy has not grown. By differences in tenths or even hundredths, analysts put Mexico’s Gross Domestic Product (GDP) growth at zero percent and forecast one percent growth by 2020.
Although unemployment remains stable (3.6 percent in October 2019), workers’ enrollment to the social security system is unmatched to official unemployment figures, meaning that the poor quality and precariousness of available jobs remains.
Oil production—the centerpiece in AMLO’s agenda and vision of prosperity—is also underperforming. Petróleos Mexicanos (PEMEX), Mexico’s state-owned oil company, faces the possibility that its bonds will soon be classified as junk bonds. With public and private investment stagnant, consumers and the productive sector remain wary.
But there’s also good news. Inflation is at its lowest point (3.1 percent), public debt has not increased, and the Mexican peso/dollar parity—the great indicator of economic health for an average citizen—has remained stable, even amid the delay in the signing of the free trade agreement between Mexico, Canada and the United States (USMCA).
And yet, since mid-2019, citizens have been bombarded with news about the disappointing economic performance by analysts and the media. Surprisingly, AMLO’s popularity has remained high (68 percent), in fact, it’s the highest approval rating of a president since the democratic shift of power in 2000. What’s more, in June 2019, 54 percent of Mexicans disapproved of the government’s management of the economy, compared to only 23 percent who evaluated it positively. Toward the last months of the year the numbers shifted: in November, 39 percent approved while 34 percent disapproved.
In between those two polls, intense debates about the fiscal budget took place. They were marked by signs of an excessively optimistic Treasury Department that budgeted the 2020 economic package forecasting a two percent GDP growth—although the market foresees 1.3 percent at best—and oil production of 1.95 million barrels of crude oil—even though production has fallen in recent months. Debates over the budget were accompanied by the uprising of mayors—who will run out of sufficient resources to meet their constitutional obligations to their constituents—and violent protests by farmers protesting cuts to resource funding, putting at risk the only sector of the Mexican economy that has grown this year and has helped prevent a recession. In spite of everything, perception over the handling of the economy is much better now than at the beginning of the year.
The explanation for this phenomenon lies in AMLO’s communication strategy and the mantra he repeats in his morning conferences: growth isn’t important, development is; growth is not where we would like it to be, but we’re achieving more well-being—a discourse reinforced by the recent launch of AMLO’s book Toward a Moral Economy (Hacia una Economía Moral).
Following AMLO’s line of thinking, the fight against corruption and social policies fall into the administration’s economic policy. An example of this theory is the earnings AMLO touts from auctioning government vehicles, or the future sale of the presidential plane, that when finalized, will strengthen the public treasury and finance social programs. For AMLO, it doesn’t matter that the presidential plane has not been able to sell and generates expenses for storage, the important thing is that the President travels on commercial airlines or by road, creating the illusion of million dollar savings.
Similarly, AMLO highly publicized the creation of the Institute to Return to the People what was Stolen (Instituto para Devolverle al Pueblo lo Robado), which, of course, is not a new creation, but a change of name for the previously—and boringly—known Administration and Disposal of Assets Service (Servicio de Administración y Enajenación de Bienes). In a country with very high levels of corruption and the high profile scandals of the past administration of Enrique Peña Nieto, it is a discourse that sells, and convinces. For economists, the current administration’s “republican austerity” strategy is a brake on public investment and one of the explanatory factors for the country’s GDP stagnation. For thousands of bureaucrats fired without payment of the compensation required by law, it’s a synonym of labor injustice. But for large sectors of the population, it’s an example of good management.
The government’s social programs, also widely publicized by the new administration, still haven’t used up all the allocated resources as a result of the administration’s inability to manage them effectively. For example, the universal pension for elders—created so all elders have access to a minimum income upon retirement regardless of their place of work—was first distributed to beneficiaries enrolled in the contributory pension system rather than to the most unprotected population, because administratively it was easier. AMLO blamed the delay on the mismanagement of the previous government.
Another example is the government’s support for the countryside, which has inspired multiple protests in the past months. As mentioned above, agriculture was the only sector of the Mexican economy to experience growth, and in fact has recorded a greater than average increase since 2013. In 2019, while the industrial sector fell by 1.5 percent, and the service industry stagnated with growth of 0.1 percent, the agriculture sector grew by 5.4 percent. Agricultural production is also the most dynamic sector of Mexican exports, with highly productive large and medium-sized enterprises amounting for much of export earnings.
But the Mexican countryside also has another face, that of extreme poverty and marginalization, producing only enough for self-consumption. Following AMLO’s “moral” economy logic, through one of its flagship social programs, Sowing Lives (Sembrando Vidas), resources must be directed to support agriculture for survival and self-consumption. In turn, productive farmers must manage their business on their own, because they are not poor.
But the economic and commercial reality is that Mexican farmers compete with those in the United States and Europe, regions with very high agricultural subsidies. In the past, the Mexican government’s support was much less generous than those of its competitors, but eliminating agricultural subsidies completely will drive the only productive sector to failure. It is not a moral or immoral decision, but one of economic competitiveness.
One of President AMLO’s central policies is to build a “loving and fraternal republic.” The use of religious, even messianic, language has already been noted, commented and accepted in some sectors of the population. This is perhaps not strange in the context of the fight against corruption or social programs, but in the case of economic decisions it is quite unusual. In an extremely unequal country with income concentrated within a small elite, redistribution of wealth is very necessary. But how will the government ensure redistribution of wealth if the economy doesn’t grow? AMLO disqualifies these types of questions by labeling them as the neoliberal discourse of who he views as the conservative and reactionary block. But it’s worrisome that his plan seems to rely on biblical messages where the needs of the righteous will be met.