Standing beside a sugar cane farmer who uses a wooden, horse-drawn press to squeeze juice into a plastic bucket, Mexican President Andrés Manuel López Obrador gave a demonstration of his economic world view.
On a visit to La Huasteca last week, near the Bajío region that is Mexico’s high-tech manufacturing powerhouse, the leftwing nationalist president — who prides himself on not having a checking account or credit card — extolled the virtues of artisanal microbusinesses that he said were “as or more important” in terms of job creation and development than big business.
“This is the economy we are boosting,” he said, sipping his cane juice.
The day after his trip, he abruptly fired the head of the agency charged with measuring poverty and evaluating the social programmes that are a pillar of his eight-month-old government.
Gonzalo Hernández Licona’s dismissal from Coneval, four days after he wrote an editorial saying budget cuts were crippling the agency’s ability to function, was the latest in a purge of technocrats and institutions the president says are corrupt, profligate or standing in the way of his transformation of Mexico after 36 years of failed market-focused “neoliberal” policies.
But some investors and analysts fear that in pursuing the mirage of a return to the golden era of growth of half a century ago, with the state firmly in the driving seat, the silver-haired shopkeepers’ son is flirting with the sort of demagoguery that could take Mexico down a dangerous populist path.
“There is a sense that history begins with him, that nothing of the past works and that he has to start a new era,” says Enrique Krauze, a prominent historian who has himself clashed with a president he once dubbed a “tropical messiah”. “He is not only taking decisions — good or bad — on economic policy but also institutions, which took so much effort to build. I’m truly worried.”
Mexico will publish second-quarter GDP data on Wednesday that are expected to show the economy close to recession, after a shock contraction at the start of the year, a fall in job creation and the lowest construction activity in 13 years. Citibanamex, a leading bank, has slashed its 2019 growth forecast to just 0.2 per cent in stark contrast to the president’s promise of 2 per cent.
Yet with approval ratings as high as 70 per cent and his main economic barometer, the peso, holding steady against the dollar, Mr López Obrador feels vindicated in his rush to jettison past policies and overhaul institutions in line with his beliefs, no matter who he upsets.
“I think that if your project is to change the status quo, political tensions are normal,” says Ignacio Marván, a professor at CIDE university and former adviser to Mr López Obrador when he was mayor of Mexico City. “He’s not risk averse. He’s not afraid of taking tough decisions, then he backtracks.
“[But] he may be thinking that . . . giving concessions now would weaken his support.”
The 65-year-old politician swept into office in December after a landslide victory that gave him a huge popular mandate and control of both houses of Congress. He has moved speedily to centralise decision-making in his hands and to consolidate an unprecedented level of power now that he has finally made it to the presidency at the third attempt.
In tandem with his own ethic of frugality, Mr López Obrador has pushed to shake-up the way many government departments and agencies spend money — with large reductions in operating expenses to allow more social spending to go directly to people.
But hopes that he would prove a pragmatic steward of the economy — as he was during his period as mayor of Mexico City — are fading fast. Mr López Obrador has already alarmed investors by scrapping a partially-built $13bn airport project and pushing ahead with a planned $8bn refinery that few in the oil industry believe makes sense or can be built on time and to budget. While his goals of eradicating corruption and fairer wealth distribution are widely lauded, many fear his methods spell a return to the failed nationalist policies of the 1970s.
As he hurtles ahead in a quest he hopes “with all my heart and soul” that future governments will never be able to undo, Mr López Obrador’s confrontational style has put him on collision course with energy regulators, whom he has dismissed as “real shysters”, the federal police which he said was “not up to scratch” and the “shameful” national human rights agency.
Carlos Urzúa, a longtime ally, resigned as finance minister in July after a dramatic falling-out with the president, claiming that policy decisions were not being “based on evidence”.
He joins a growing list of casualties: Germán Martínez quit as head of the state social security agency IMSS, Guillermo García Alcocer as head of energy regulator CRE and Tonatiuh Guillén as head of the National Migration Institute amid budget cuts, interdepartmental meddling and policy differences.
The message that many in Mexico have drawn is not just that awkward critics — those deemed not to be on board with the president’s radical crusade to sweep away corruption and all vestiges of the “neoliberal period” — are either enemies or expendable. But that the institutions they serve may be sacrificed, too, as the president imposes his uncompromising agenda on Latin America’s second-biggest economy.
“The problem is that his idea is not to build more technical institutions,” says Jacqueline Peschard, a former head of the agency in charge of access to information. “He subordinates everything to his narrative, which is more moralising than technical.”
The president refuses to entertain suggestions that he may have gone too far in his purge of technical staff and in swingeing budget and salary cuts he has implemented in a bid to free up cash for social spending.
He excoriated Coneval on Twitter, for example, saying it spent $1m more last year on office rental than on surveys. When Denise Dresser, a leftist commentator who is critical of Mr López Obrador, said he should spell out the source of his data and “improve institutions and not just demonise them”, she was attacked by presidential supporters.
Mr López Obrador says budget cuts are vital to purge ingrained graft and construct a “new paradigm” in economic policy that delivers welfare, not just higher gross domestic product.
His crusade against independent institutions in a country where the opposition is moribund after its electoral thrashing and the president faces few other checks and balances has alarmed even senior government allies. Gerardo Esquivel, who Mr López Obrador appointed as a Bank of Mexico board member defended the existence of Coneval.
Some observers fear that Inegi, the state statistics agency, which has already had to axe surveys because of budget cuts, could be next in the line of fire. Mr López Obrador told La Jornada, a leftwing newspaper, recently that his presidency “it wasn’t just a change of government but a change of regime, so we measure things in a different way”.
Mexico is a relatively young democracy with historically weak institutions including a corruption-riven judiciary and powerful, politically-motivated unions. For three-quarters of the 20th century it was under effective one-party rule until the Institutional Revolutionary party lost power in 2000. Its return, from 2012-18, amid spiralling graft and worsening crime, prompted voter disgust and a rush headlong into the arms of Mr López Obrador.
Agencies created as Mexico began opening up its economy in the 1980s and adapting to an era of plural politics “are the product of a period that the president dislikes and criticises. Any institution created after 1990 runs the risk of being taken over or disappeared,” says Antonio Ocaranza, a presidential spokesman in the 1990s. Those that stay, risk being retooled, keeping “the hardware of these institutions with a completely different software,” he adds.
Indeed, within days of firing Mr Hernández Licona, the president warned he could yet scrap Coneval altogether, passing the task of measuring poverty to the statistics agency. Any cash saved would then be ploughed into poverty reduction programmes such as higher pensions and state aid for students and unemployed youngsters.
“He doesn’t believe in institutions,” says Mr Krauze, “he believes in himself.”
In the name of reorganising public spending, Mr López Obrador has already eliminated Mexico’s export promotion and tourism boards and set up new intelligence agencies. He also undermined the energy regulator by appointing unqualified loyalists including a 90-year-old refinery expert, and locked horns with the Supreme Court.
In addition, he has stepped up near daily attacks on, and demanded apologies from, “unprofessional” rating agencies, the IMF and parts of the media, including the Financial Times, branding them apologists for past policies that he says protected the rich and fostered corruption while ruining the economy.
The armed forces is one of the few institutions that has been spared criticism — he has given them a bigger role, including the task of building his planned new airport.
He has also repeatedly promised not to interfere in the central bank, autonomous for the past quarter of a century. However, he has said he would like its mandate changed from just preserving the value of the peso by fighting inflation to one that includes fostering growth. Although not imminent, “the temptation [to meddle in] Banxico is right there,” says Ms Peschard.
That would follow in the footsteps of Argentina’s former President Cristina Fernández, whose heterodox policies led to high inflation and, many economists believe, the country’s current crisis.
In appointing Arturo Herrera to replace Mr Urzúa as finance minister, the president made clear that in addition to guarding the nation’s purse strings, the department now also had a social mission of fighting inequality and promoting redistribution.
“He is assigning the finance minister a new type of responsibility, like minister for social happiness or social justice,” says Alfonso Zárate, a political commentator. That could mean a new focus on alternative indicators, he adds.
Vacancies over the next couple of years mean that Mr López Obrador has the chance to stamp his imprint on both the central bank and Supreme Court.
Any further concentration of power will only add to the unease in the country. For much of the past year, some corporate leaders and political rivals have been guilty of a form of scaremongering with sometimes hysterical warnings that Mexico would follow Venezuela down the path to destruction.
However there are at least some echoes of the late Hugo Chávez in Mr López Obrador’s early moves. Like Chávez, he has boundless faith in himself as a saviour, taking on elites on behalf of the poor majority. Both pursued grandly-titled projects of national renewal — Mr López Obrador calls his the “Fourth Transformation” and promises it will be as epoch-defining as independence and liberal reforms in the 19th century and the Mexican Revolution 100 years ago.
While Chávez rewrote the constitution into a “little blue book”, Mr López Obrador is condensing his economic vision into a tome called The Moral Economy, due out on December 1, to coincide with his first anniversary in office.
Many businesses and economists are nervous that the notoriously stubborn Mr López Obrador — whose favourite phrase, when confronted with worsening economic growth forecasts, is “I have other data” — could become increasingly erratic.
“It’s very clear history is repeating itself from what happened in the early 1970s . . . The economy isn’t growing. Once this is evident even to Amlo, he’s going to realise he has to abandon fiscal restraint,” says a Mexican economist who advises investors and asked not to be identified for fear of repercussions.
“When that happens, rating agencies will have no option but to downgrade,” the economist adds. “There will be a stampede of foreign capital [out of Mexico] and the peso will explode . . . I don’t see how this could not end in a crisis.”
New president has clashed with the media
Every weekday at 7am, a smiling President Andrés Manuel López Obrador enters a gilded hall in the National Palace for a news conference that can extend for two hours. No questions are off-limits although the president, with his often rambling responses, can be skilled at dodging difficult subjects.
Though he frequently professes respect for freedom of the press, the Mexican leader made clear his scorn for the media at one of those news conferences last week, adopting a tone that would not be out of place in Donald Trump’s White House.
“The [leftist news] magazine Proceso, for example, has not been good to us,” Mr López Obrador declared. “I hardly read it any more.”
The Proceso reporter pointed out that making nice with a president is hardly the media’s job but Mr López Obrador — a politician who thrives on having adversaries — was undeterred. According to him, “all the best journalists in history have bet on transformations . . . It’s very convenient to say, ‘I am independent or journalism shouldn’t take sides’ . . . In that case, it’s just analysing reality, criticising reality, but not transforming it”.
Mr López Obrador demands the right to reply to published articles but regularly turns that into a tirade. He once likened the media to a criminal underworld and accused it of calumny.
“We’re going to keep on saying it — anyone who does not contribute to the transformation of Mexico . . . who is in favour of the status quo, is a conservative, whether they are in politics or the press,” Mr López Obrador said this weekend. “We’re going to keep on talking about these issues.”
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