The Financial Express

Mexico: Economic consequences of AMLO's victory  

| Updated: July 10, 2018 14:31:32

Mexican President-elect Andres Manuel Lopez Obrador talks to journalists as he arrives to a meeting with his new cabinet in Mexico City, Mexico on  July 0 7, 2018.	 — Photo: Reuters Mexican President-elect Andres Manuel Lopez Obrador talks to journalists as he arrives to a meeting with his new cabinet in Mexico City, Mexico on July 0 7, 2018. — Photo: Reuters

Andrés Manuel López Obrador (AMLO) finally made it to Los Piños, Mexico's presidential palace, and found his lost chord after a 12-year search. As a progressive, popular, and not-at-all populist Mexico City mayor during 2000-05, AMLO shifted from the leftist Partido de la Revolución Democrática (PRD) to the even more leftist Morena to become president, even as he fitted the metropolitan with the kind of a double-decker highway that capitalists always think of.

AMLO's secret of success was simple: as failed presidential candidate in 2006 and 2012, he noted the cracks in his country's aging political machine and fissures in the emergent neo-liberal order better than any other candidate, and capitalised upon them to challenge the status quo. It took Mexicans another six years to catch up with him; but when they did on July 01, 2018, it was in droves, with determination, and a decisiveness reminiscent of what Mexico's leadership was like before the neo-liberal order: 'a perfect dictatorship', in Peruvian Mario Vargas Llosa's words.

No matter how leftist he is today, it is unlikely this ideological peripatetic politician will be able to bring that orientation to bear upon his policies. For at least three reasons, the United States should not expect another Cuba on its doorsteps as it has done since 1958. First, AMLO's agenda prioritises corralling corruption and restoring order, which are full-time jobs his three previous predecessors simply failed to do: Mexico's survival as a strong state depends upon this, and AMLO is fully aware of it. Second, he is shrewd enough to not rock the political boat so early, knowing that half the country awaits his first mistake to pounce on him, making healing more than halving Mexico a more likely immediate pathway. Third, since he will, for the first time, converse with foreign leaders on an equal basis, whether they come from the north (Canada, the United States: Justin Trudeau and Donald J. Trump), across the Atlantic (the 'Three M's: Emmanuel Macron, Theresa May, and Angela Merkel), or from over the Pacific (Shinzo Abe, Narendra Modi, Xi Jinping), he sees neither a 'left' preaching leader or policy to synchronise with, nor the luxury to promote it for Mexico against strong pro-market forces.

That is not to say economic policies will be subordinated to security or governance. In an increasingly economically unequal country, AMLO's election campaign carried a pledge to uplift mainstream Mexicans. Though corruption (and with it, drug linkages between traffickers and political facilitators), serves only as the tip of that economic iceberg, we do expect some redistribution policies to be revived or initiated. In fact, before turning left, the party he first belonged to, PRI (Partido Revolucionario Institucional), was known for lavishing workers and typical Mexicans with all sorts of supports, from housing to pension. It was a centre-right party with ample leftist features. AMLO was at home with that. What he might try to initiate is to actually preserve social security from the privatised forces it is currently facing. Under the neo-liberal thrust, Mexico stands at the precipice of doing just that, which fuelled the middle-class anger against the status quo supporters: PRI and PAN (Partido Acción Nacional) candidates. How they were mauled in the 2018 election for this is the hidden development against the dramatic AMLO victory.

Yet neo-liberalism will still have to be tamed for spiking corruption and narcotics flows. Of course, the neo-liberal highpoint was the North American Free Trade Agreement (NAFTA): AMLO was never a supporter of it, and currently, as NAFTA negotiations have bogged down and Mexico's automatic trade surpluses with the United States as a NAFTA member will now face greater scrutiny, we do expect some NAFTA initiatives. Unlikely to be ditched, since that would result in a massive and costly capital flight, piecemeal NAFTA treatment is expected.

At least that would fit the country's largest economic partner and northern neighbour, the United States. AMLO shares Trump's distaste for NAFTA provisions, though their expectations, for example, on treating the quarter-century agreement, differs. AMLO will be under pressure to support Mexican farmers (who came out for him partly for being hit by NAFTA terms), Trump to reduce Mexican trade surpluses. Trump wants more US sales, and thereby investors, in Mexico, and AMLO has a lot to gain from that, particularly as an oil-deficient country today. Mexico needs US corporations to lead Gulf of Mexico petroleum exploration (although receptive to such summons, Trump's administration might prefer selling Texan shale to Mexico, for both the income and political support). As the largest foreign investor and claiming an overwhelming larger share of franchises inside Mexico than any other country, Trump would be wary to let these advantages slip against a resurgent China. Both Mexico and China have been negotiating deals for a long time. Trump's imperative is to not lose out.

Above all, Trump has an election he must prepare for in November. It is not his own, but the congressional elections bear directly upon his policy preferences. As such, we will expect some tough talk, though privately diplomats may go out of their way to keep AMLO from overshooting. Keeping his tradition of meeting as many irregular heads-of-state, such as North Korea's Kim Jong-un and possibly Russia's Vladimir Putin, we expect an AMLO-Trump summit soon. As NAFTA members, both countries are mandated to meet, along with Canada, at least once annually, at the highest level. The first NAFTA summit henceforth may shed more light on AMLO's broad economic policy approach than anything else.

What it is unlikely to confirm is Mexico being a full-fledged leftist country. Trump might harp on that to extract as much as he can, since his own political 'base' may want nothing less, but just as with Kim in Singapore last month, Trump may end up concluding grand agreements without ample substance. That, too, would downsize any 'leftist' threat in a country that has fought forces from that front, for example, against a communist Cuba, longer than any other. Trump's United States, which was the first country to congratulate AMLO's victory even before official results were released, may usher a new and more pragmatic Mexico-US relations, although the outcomes may not be as heart-warming for as long as the 'illegal immigration' voter mindset remains in the United States.

Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.

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