Luis Rubio
The French economist Frédéric Bastiat differentiated between what took place in front of everyone, which he denominated “the seen”, in contrast with the long-term consequences of these observations, the “unseen.” His point was that it was easy to make ideological decisions or decisions in a conceptual vacuum, but by ignoring the behavioral manner of the members of society, these decisions unleash forces and perceptions beyond the capacity of a governor to control. In Mexico today, society confronts the consequences of the actions and decisions undertaken by the government and those forthcoming from the outside. The mixture provokes enormous uncertainty.
This is not the first time Mexico finds itself before a considerable challenge, although the specific circumstances are very distinct. During the seventies, eighties, and nineties, the country endured a succession of economic and financial crises, extraordinary inflation levels (including the moment in 1984 when it seemed that the country was being plunged into hyperinflation), and interminable incredulity concerning the future. Today, the population is satisfied, the President is highly popular, and everything indicates that the current reality does in no way appear to be like that of those ill-fated years. But, looks can be deceiving.
Following Bastiat’s logic, what is seen shows two radically opposite circumstances; the unseen obliges us to contemplate the prodigious uphill struggle that the country has before it. The population is content in that real incomes, thus the consumption capacity, have accrued in noteworthy fashion, an unarguable merit of the Morena governments. On the other hand, the economy is not growing at present, private and public investment is not materializing, and the anchor of stability that Mexico trusted in for three decades, the North American Free Trade Agreement (NAFTA), is in question with the Trump administration.
Everything indicates that we are coming upon the end of an era of the Mexico-U.S. relationship, a period during which the Mexican governments slept on their laurels on taking advantage of circumstances they thought to be permanent and immovable but that now with Trump are coming to naught with no shock absorbers to be seen. NAFTA made the growth of a competitive, productive, successful, and extraordinarily relevant industrial platform possible in terms of generating jobs, foreign currency, and stability for the country in general. Exports became the main engine of growth of the entire economy, despite the colossal obstacles already in existence and those that multiplied along the way, starting with criminality, the dreadful infrastructure, and the growing treaty violations, especially by the AMLO government. This was like smiting the feeding trough on purpose.
On the other hand, migration, considered an inalienable right in Mexico, permitted the avoidance of a social crisis, generated an immense flow of foreign remittances, and facilitated the neglect of one government after another of the country’s true problems of security, employment, education, and health because migration was serving as an escape valve that seemingly entailed no cost. Similarly to exports, the threat of deportations opens the possibility of an immense social, economic, and political crisis.
NAFTA was the way to procure conditions for the economy’s sustained growth. More political than economic in its original conception, the free trade agreement was constituted as a mechanism that, on being able to rely on institutional U.S. support, offered certainty to savers, entrepreneurs, and investors. No one can be in doubt concerning the success of the instrument, but Mexico’s most appreciable fault was that of not understanding that it was a temporary mechanism: it was a means by which the U.S. government proffered its endorsement for Mexico to build institutions, the Rule of Law and counterweights for its “take off” in economic as well as social terms.
There is no doubt that there was a more-or-less continual attempt, from the nineties forward, to engender institutions that complied with these objectives. Still, by now, it is evident that these latter did not accomplish the legitimacy or functionality required for the effective achievement of their purpose. While several of those autonomous organisms accomplished their immediate aims, it is evident at this point that they were remarkably vulnerable. And that vulnerability goes hand in hand with the certainty indispensable for the economy to prosper and to achieve the objectives that all these governments said they want.
Independent of what is reached in negotiating with Trump, one would have to be blind not to notice that the future, to be successful, will depend not on the connection with our neighbor to the North but instead on the institutional strength that Mexico develops for itself. The President’s strength is sustained in overly fragile anchors; therefore, it would not be excessive to begin thinking about buttresses less susceptible to collapsing the day Trump gets out of bed in a bad mood or the day that the rating agencies say enough is enough. The future must be built, and, now more than ever, this depends on what is accomplished internally because it won’t come from the outside.
@lrubiof
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