Mexican senator says AMLO will make peace with Mexico business sector

Mexico’s president will tone down his recent rhetoric against business leaders and seek to mend fences with them after several rule changes have disconcerted investors, Senate Majority Leader Ricardo Monreal said.

Monreal, who has known President Andres Manuel Lopez Obrador for 22 years, said in that time he has seen him move from radical positions to more conciliatory stances with his detractors. Monreal is the most senior senator of the Morena party, which Lopez Obrador founded.

Relationships between business leaders and AMLO, as the Mexican president is known, have deteriorated over the government’s response to the coronavirus and clashes on existing contracts, seen more recently in a dispute with the renewable energy industry. Business chambers in Mexico and abroad have warned the president’s actions put billions of dollars in investment at risk, and some policy makers say the measures create a climate of uncertainty.

Gross fixed investment, which includes company spending on factories and machinery in Mexico, dropped 11% in March from a year ago to the lowest in over a decade. The numbers don’t account for the bulk of the country’s lockdown measures in April.

Monreal said that Lopez Obrador has lately clashed with big business, by muscling them into paying back-taxes, raising costs for private electricity producers and refusing to boost public debt to pay for an economic recovery from the virus. Yet that tension is poised to subside, he said, without specifying what measures AMLO would take to improve relations.

“I can almost bet that the president, in a second stage after Covid, will try and reconstruct bonds of understanding with the economic sector and reinforce a good relationship with businessmen,” Monreal, 59, said during a video interview from Mexico’s senate.

Controversial Bill

Last week Monreal presented a bill proposing the merger of Mexico’s energy, antitrust and telecommunications regulators into a single entity, an idea that AMLO initially supported as a way to save money.

Critics say the bill is a power grab by the president to place his own commissioners into one of the few places where some checks and balances remain in Mexico.

Monreal said the system for choosing the new regulators may not include the president, who has been vocally critical of these entities in past administrations, and may require that they pass rigorous filters in order to be nominated. But the merging itself is something he thinks will prevail in the final version of the bill.

Energy, banking and telecommunications are still too concentrated in Mexico and companies are “very powerful,” he said.

Nevertheless, the senator decided to postpone the idea for now, at least until the start of the next legislative session in September, among other things because of the current climate of business “skepticism,” Monreal said.

“I wanted to leave them at peace,” he said, referring to the private sector.

The government is also considering an overhaul of Mexico’s $260 billion pension system, known as Afores, because retirees are getting much less than initially planned, Monreal said. He added that any possible reform won’t be presented this year, and won’t be passed in the short term, given the complexity of the issue.

While the senator declined to give specifics, he said a possible new bill would seek to “revalue” pension accounts and won’t include any nationalization of pension funds. Groups at the Finance Ministry and Congress are studying the options, he said.

“It’s not about seizing the Afores’ resources” but how to protect the system to “strengthen this income,” Monreal said. “There is no solution at the moment, it’s being studied.”

Source: Bloomberg

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