AMLO splashes the cash in his first 100 days

How Andrés Manuel López Obrador is reshaping the Mexican state.

“POWER STUNS the intelligent and drives fools mad.” Andrés Manuel López Obrador, Mexico’s president, repeats this adage often, as a rebuke to politicians who promise much and accomplish little. On March 4th, the 94th day of his presidential term, he tweeted the phrase again to show that power has neither stunned nor maddened him, and that he will keep his promise to transform Mexico.

Mr López Obrador, or AMLO, as he is known, has already brought considerable change. He cancelled construction of a part-built international airport, stopped new private investment in the oil industry and shut down fuel pipelines to prevent theft, a measure that caused shortages in much of the country. He has revived Mexico’s policy of non-interference in other countries’ affairs by recognising Venezuela’s left-wing dictator, Nicolás Maduro, rather than the head of its legislature, Juan Guaidó, as the country’s president. Most big democracies recognise Mr Guaidó. AMLO has cut the salaries of senior officials and bureaucrats, including his own, and put their cars up for auction. He travels about by commercial airliner.

More than three-quarters of Mexicans like what they see. Nearing 100 days in office, AMLO is more popular than any president at that stage bar Vicente Fox, the first president of the democratic era, in 2001. Although AMLO is restricted to one six-year term, he hopes that his left-wing Movement for National Regeneration (Morena) will be in power for much longer.

His plan to achieve this involves restoring the state to its earlier position as the main underwriter of Mexicans’ well-being. Most recent presidents thought that one of its main roles was to create conditions for firms and civil-society groups to provide prosperity and welfare. Enrique Peña Nieto, AMLO’s predecessor, invited foreigners to invest in oil and introduced competition in telecoms, which lowered prices. But crime and corruption during his presidency overshadowed those achievements. He left office as Mexico’s least popular president. Under AMLO, the state will take the lead, and the credit. However, he must reconcile that ambition with the need to contain spending and avoid budget deficits.

AMLO’s statism does not preclude co-operation with the private sector. As Mexico City’s mayor in the early 2000s, he worked closely with firms, for example to rebuild the city’s centre. Many of the infrastructure projects he plans, such as the “Maya train” through the south, will need private or foreign finance. But no one will doubt that the train comes from him.

AMLO has begun by giving more money directly to individuals. His government has doubled pension benefits and made more people eligible for them. It set a minimum price for beans grown in the state of Zacatecas. Eventually, most major crops across Mexico will have support prices. The government will give scholarships and grants to 2.3m young adults. To maintain a budget surplus, AMLO has slowed the introduction of these programmes, for example by raising pensions for city-dwellers over 68, not 65 as he had hoped.

Where non-state groups spend the government’s money to promote its goals, AMLO wants to cut out the middleman. Ministers are forbidden to channel money through “intermediaries” such as contractors, trade unions or NGOs. Under Mr Peña, some 10,000 civil-society groups got 30bn pesos ($1.6bn) over six years; more went to contractors, child-care providers and other “parallel structures”, as AMLO calls them. Much of their money has ended up in the pockets of politicians’ cronies, he contends. Now all government support “will be delivered directly to the beneficiaries”. This has a political pay-off. “Voters will say: ‘AMLOgave me this money,’” notes Luis de la Calle, an economist.

Change is coming to child care. The “children’s room” programme created by Felipe Calderón, president from 2006 to 2012, pays 950 pesos a month per child to women who provide day care in their neighbourhoods, often their homes. Some 300,000 mothers use the programme. Many do not realise that the state is subsidising the bill. AMLO plans to correct this (and save some money) by paying mothers 800 pesos a month directly.

The pesos-for-the-people approach may not always help its intended beneficiaries. AMLO said he would end subsidies for women’s shelters but failed to explain how he would give money to victims of domestic abuse. After an outcry, he retreated.

Seeming generous will sustain his popularity only if he keeps other promises, especially to reduce crime and corruption, and keep the economy strong. His dirigisme, and his suspicion of independent institutions, may make that harder.

There is no sign yet that the murder rate, which last year was higher than in Colombia and Brazil for the first time, is on its way down. AMLO’s big idea for reducing it is setting up a national guard, which is to have 150,000 members by 2024. This may help, but it will not compensate for failures of state and local police. AMLO has resisted the appointment of an independent anti-corruption prosecutor. Any scandal would undermine his claim that his honesty alone will inspire probity in others.

The biggest threat to his popularity is the economy. The central bank has revised its projection of GDP growth for this year down from 2.2% to 1.6%. Foreign direct investment in the last quarter of 2018 was 15% below its level a year before, partly because investors distrust AMLO and because American tax cuts make investing at home more attractive for American firms.

AMLO has failed to convince investors that he will solve the problems of Pemex, the state-owned oil giant, which provides a fifth of government revenue but has an alarmingly high debt. That puts Mexico’s investment-grade credit rating at risk. On March 2nd S&P Global, a rating agency, downgraded the outlook for Mexico’s sovereign debt from stable to negative. A recession in the United States next year, which some analysts deem likely, could cause one in Mexico. That would spell trouble for a president who needs growth to pay for his social programmes.

But for now, millions of Mexicans are cheering a windfall, and the president, just as he hopes. Marcos Velázquez, a repairman in Mexico City, says his mother has just seen her pension double. They both voted for AMLO, and do not regret it. Unlike the politicians of the past, Mr Velázquez says, AMLO has brought “real change”.

Source The Economist

The Mazatlan Post

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