Sunday, June 20

The return to hegemony of the state sector runs into the polls in Mexico


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The president of Mexico, Andrés Manuel López Obrador, always speaks of the Fourth Transformation, the development of the country that must follow the milestones of the Mexican Independence, Reform and Revolution. But basically what it raises is a return to the 1960s and 1970s, in which the state sector, due to its dominance of a oil business absolutely decisive in the national and international economy, it was omnipotent. Back then, the Mexican president, at the head of a hegemonic PRI, was doing and undoing in the country, and that is what López Obrador seems to want to recreate, now with his Morena party.

The reversal given by López Obrador in the opening of the sector of hydrocarbons to private companies, in a liberalization that had been agreed in the previous presidency, and the plan to impose the electricity generated by the state company are examples of this attempt to back to the past. In that same direction are also, among other measures, the delivery to the military of certain economic activities (such as contracts for the realization of infrastructures), the unseen purpose of controlling the judiciary and the desire for greater intervention in the Central Bank .

The mid-term elections last Sunday made López Obrador’s agenda difficult, by deny the majority qualified that he was looking for in the Chamber of Deputies. The elections showed that, although the popularity of the president remains high and Morena continues to have the majority position reached in 2018, that option has lost its luster and the opposition has shown strength in certain states and municipalities.

The results make it possible to rule out a process of constitutional change that authorizes presidential re-election (a conquest of the Mexican revolution of 1910, nuclear in the national political system), with the consequent possible extension in power of López Obrador himself. However, it has enough power to insist on the desire to place important sectors, such as energy or infrastructure, under state control.

Chávez’s weapon, but out of date

The Chavista hegemony in Venezuela was built from the direct and partisan takeover of the state oil company PDVSA, at a time of permanent rise in the international price of crude oil. But while Venezuela has always been a petro-state, in which this item accounts for the vast majority of exports and the source of foreign exchange, in Mexico oil has ceased to be at the center of the economy. Today the Mexican economy is much more diversified than in the times of the PRI’s all-encompassing power. In 1980, oil constituted 62% of exports; in 2005, after a few years of filming the North American Free Trade Agreement, it had already dropped to 13%, and in 2019 it was only 5.5%. The core of Mexican GDP is now manufacturing.

Hence, frightening private initiative as López Obrador is doing is the worst strategy for the development of the country. The cancellation of the works for the new Mexico City airport, which were two-thirds advanced, was López Obrador’s first confrontation with the business world as soon as he came to power; then followed the violation of contracts in awards in the energy sector and the rhetorical war against large foreign investors, such as Spanish multinationals.

It is not surprising, then, that Mexico received in 2019 a 22% less in foreign investment direct than in 2018 (the 2020 data, also deficient, can be partly attributed to the pandemic). USA, closely linked to Mexico as a neighbor and especially due to the North American free trade agreement, was the first to look suspiciously at the new Mexican anti-business climate: historically, US companies had led the entry of direct investment into Mexico, however, in 2019 were below the investment made from Europe (flows from Spain fell 3.1%, although that country remained the main European investor).

In 2020, Mexico’s trade with the United States fell by 12.4% compared to the previous year. Mexico continues to be the first commercial partner of the United States, a position reached when the commercial war between Washington and Beijing, but its advantage is now minimal: in the first three months of 2021, US trade with Mexico was 153,906 dollars, just 3,000 more than trade with Canada and 5,000 more than that with China, according to statistics Americans.

Opportunity versus China, at risk

López Obrador may be losing Mexico a key opportunity. The pandemic has disrupted many of the supply chains that previously held China as a strategic hinge and Mexico could attract some of those routes, especially those that affect products that end up in the market of USA. The manufacturing industry installed in Mexico offers quality at a competitive price, when wages in China are closing the gap as domestic consumption increases.

López Obrador has not bothered to improve a climate conducive to attracting capital, leaving aside, at least apparently, the problem of drug cartels, and taking a low profile in managing the pandemic. With a drop in GDP of 8.3%, in 2020 Mexico had one of the worst data of the Latin American economies; By 2021, the World Bank expects growth of 5%, insufficient to recover pre-crisis production.

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