Ricardo Pascoe Pierce
AMLO has economic advisors who tell him what to do to save the economy, but he does not follow their advice. At this point in the six-year term, with the prospect of a prolonged recession that portends a lost six-year term in economic and social terms, the wise thing to do would be to correct the course. But he is not doing so.
A few weeks ago, President López Obrador held a meeting with the business leaders to prepare a joint economic strategy. From that meeting, which was reported in the national and specialized press, a series of investment commitments by the businessmen were established. However, the announced commitments were received with skepticism, just as after previous presidential meetings when the same had been announced.
This skepticism arose because in that meeting, as in the previous ones, the commitments were expressed to the President, expecting him to reciprocate by announcing new government policies. They hoped that he would offer public policies that would respect the legal and judicial framework and previously agreed rules regarding private investment, as well as infrastructure support to encourage investment in productive sectors with fiscal stimuli, accessible and agile transportation, and sufficient and cheap electric energy, among other policies.
But there was something different in that meeting. The President did not make the commitments that the business people expected. With visible enthusiasm, the Federal Executive urged his Secretary of Finance to explain to his guests how the government intended to take advantage of the reorganization of the global economy, where the economic strategies of productive companies are focused on shortening supply chains so as not to be vulnerable to conflicts generated by situations such as the war in Ukraine or new hostile forces such as China and Russia.
The need for this shortening of the supply chains of goods, spare parts, and transportation means for Mexico the opportunity to become the recipient of billions of new investments beyond the historical routine investments that the supply and maintenance of the industrial plant imply in standard times. The advantage and privilege of being geographically close to the most dynamic economy in the world and a large and qualified labor force place our country in an unbeatable situation to make a quantum leap in our industrial development.
The enthusiasm of the businessmen upon learning that the President of the Republic was fully aware of the so-called “nearshoring” and its challenges and possibilities for Mexico was overwhelming. There were many proposals, ideas, and suggestions for this topic. The Secretary of Finance spoke and began to explain what the government planned to do. And he ended up explaining that they would continue doing what they have been doing up to now. Apparently, the hope of the president is that everything described as a seismic change in the world economy will accommodate what the 4T government has been doing since the beginning of its administration. That is to say, according to Lopez Obrador’s interpretation, the world economy will adjust to his economic policy, and not the other way around. In reality, there is no course correction.
He will simply continue along the same route he has traced since the first day of his administration. He disdains business people, ignores the country’s legal framework, and does not respect the rule of law or listen to his advisors. And he does not fulfill the few commitments he has established with them. In particular, however, he has his favorite businessmen and friends who have enriched themselves with direct awards, some military men.
The initial enthusiasm turned first into disappointment and then into cynicism. And, in response to the disenchantment, the same promises made since the beginning of this six-year term were made. The government does not deliver, and neither do the businessmen. And the national economy is sinking, a little slower than the Titanic.
Let’s start, with the analysis, at the end. Back in Mexico, the government proudly announced that U.S. companies had committed to invest 40 billion dollars in Mexico over the next two years. That amount of dollars sounds shocking. But financial analysts immediately clarified that this amount of investment is what they usually invest in Mexico for maintenance, procurement, and supply purchases for their scheduled business activities. In other words, it is not a “new” investment but the routine investment to keep their industries running. It is easy to guess that the same thing happened in Washington during the Mexican President’s recent meeting with U.S. business people.
They did not commit to new investments nor a diversification of productive activities in Mexico because they found that the President of Mexico offered no guarantees for investment, no legal protection, and much less an opening to the clean energy industry. He offered them his model: statism, legal arbitrariness, zero modernization, and lack of certainty.
In fact, in a document published after the meeting, representatives of the American Chamber of Commerce called on the Mexican government to make five changes in its public policies towards private investment: eliminate discrimination against private electric power companies, adhere to what was agreed to in the USMCA, eliminate delays in authorizations in the energy and customs sectors, stop illegally shutting down power plants, mines and quarries and, finally, speed up clearances for companies in the dynamic and advanced technology sectors of biopharmaceuticals, agricultural biotechnology, medical equipment, and food products.
The list of grievances officially expressed by the American Chamber of Commerce reflects the level of frustration among U.S. investors with the Lopez Obrador administration. In essence, they complain that in Mexico, there is no uniform or proper application of the current legal framework by the authorities. Therefore they demand Mexico’s return to a position of respect for the legal framework established trilaterally in the USMCA.
This document of such frankness in its discord is not usual after a meeting with a President unless it was concluded that there were no conditions or willingness to reach substantive agreements in the meeting. This is evidently the case.
And to top it all off, upon his return to the country, the President has been clarifying what he considers to be the “agreements” reached on his trip. The most important agreement is that there will be no permits for energy-producing companies that do not transit via CFE or PEMEX. Nothing outside the direct control of the state sector in energy matters will be accepted.
Lopez Obrador has made arbitrariness and state imposition the rule of conduct of his government. This being the case, global companies that want to relocate close to the U.S. market will opt for countries that respect the rule of law and ignore those that do not. And they have concluded that Mexico is not a reliable country.
The question remains unanswered: if the President knows there is an opportunity to make a qualitative leap forward in economic development, why doesn’t he take it, correcting his government’s policies?
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