How Mexico became a failed state

Manuel Suárez-Mier’s series on the demolition of Mexico’s economy and democracy ran May 28 and May 29. This article is a continuation:

Mexico’s president has permitted the violence that has raged for years in many parts of the country, including areas adjacent or close to its border with the United States, to become far worse.

The current administration of President Andrés Manuel López Obrador declared from its inception that it had suspended hostilities against transnational criminal organizations, switching to “embraces and not bullets” (abrazos y no balazos).

AMLO, as the president is known, based that decision on the notion that it was best to attack the root causes of narco-violence – which he attributes to poverty and, specifically, to lack of opportunity for millions of uneducated youths in the legal labor market.

The result has been an unprecedented explosion in violence that has claimed close to 33,000 lives in the first eleven months of AMLO’s tenure. That’s nearly twice the rate recorded under the previous two governments, which had declared war on cartels. The  death toll of that war had reached 250,000 in 12 years.

Last week marked a climatic defeat of AMLO’s hapless “security strategy”: A botched operation to capture a son of the notorious drug lord Joaquín El Chapo Guzmán, who was recently condemned to life in prison in the US, unexpectedly encountered a mighty underworld force that surfaced to defend Ovidio Guzmán López. Junior’s defenders for a full day held hostage a city of almost a million inhabitants, forcing the Mexican armed forces to retreat and release the prisoner.

If before this disaster it appeared that parts of Mexico were under the full control of the drug dealers, now it is clear that the whole country has become a failed state where anti-systemic forces can do as they wish in front of a clueless government that prefers to be a bystander and avoid performing its most basic obligations.

The United States has been worried about a situation like this for quite some time. In 2008 a report about Pakistan and Mexico from the US Joint Forces Command warned that, in terms of worst-case scenarios, “two large and important states bear consideration for a rapid and sudden collapse.”

A comedy of errors surrounds this whole chapter, as in the many other instances in which AMLO and his abettors have piled failure upon failure in government services, not only in the security area but in all aspects of civilian life in which the federal government intervenes.

In the absence of a full official explanation of the Culiacán debacle, what is known is that the US Drug Enforcement Administration prodded AMLO’s government to capture El Chapo’s son for extradition, and that the operation ensued without the most elementary intelligence and coordination protocols between the agencies involved.

Meanwhile, the President was not available since he’d ditched all the government’s executive planes and was traveling commercial to remote areas of the south of the country to attend “native-Mexican” ceremonies, which he enjoys. He now claims he had never been consulted.

Without his presence, the “security cabinet,” which includes the heads of the army, navy and intelligence agency and is led by the secretary of public security, a mediocre political upstart without any credentials for the post, took all the decisions that led to the disaster – and then lied to the media, trying to cover their clumsiness.

After the botched capture attempt, in which innocent civilians including family members of the military died, no one in the government has resigned or assumed the responsibility for the failure.

When AMLO finally reappeared from his immersion bath of indigenous mumbo-jumbo he declared, “I support fully the decisions taken that saved many lives.”

That was a predictable response from someone  who has entrusted the country’s public education to a Trotskyite teachers’ union that has blackmailed the government for decades – and who also has yielded to all the demands of the “students” of three dozen teachers’ colleges throughout the country that teach Marxist propaganda, guerrilla methods and the production of home-made explosive and other warfare devises (not unlike militant Islamist madrassas), and that regularly kidnap public transportation buses and their drivers to go and create anarchic havoc where needed.

AMLO’s failed state has botched not only public security and education, but also:

• healthcare, by depriving the system of necessary drugs and regular payment of doctors and nurses;
• the productive agricultural sector, by discriminating in favor of communal and inefficient peasants and raising the prices of water, seeds and other inputs to the private, efficient ones;
• energy reform, which he canceled, that had opened the doors to private sector investment in oil and electricity, areas where the government lacks the resources to go it alone;
• modern science and technology from the “capitalist outside,” by canceling grants and fellowships in order to prioritize “indigenous” technical methods.

The government became utterly ineffectual by firing almost all its technocrats, trained in the best universities of the world, and replacing them with ignorant but loyal apparatchiks who frequently know nothing of the responsibilities and demands of their new jobs.

The head of the huge government-owned oil monopoly Pemex, Mexico’s largest corporation, is an old chum of AMLO’s who studied agronomy in a rural school in Tabasco, which is also the president’s home state.

The head of the electricity monopoly, also owned by the state, is an 82-year-old veteran of the dirtiest politics practiced in Mexico in the 1980’s, a man who lacks any knowledge of electricity – and who cannot touch US soil because of his alleged participation in various crimes, including the murder of a prominent journalist.

The forced “savings” that are killing the efficiency and effectiveness that the government once had are being rerouted as gifts to various segments of the population to solidify adherence to and support for the president and his movement, which will in turn pay handsomely at elections time.

That is how AMLO came to head the government of Mexico City a couple of decades ago and how, despite a dismally bad job, he will remain in power at least until 2024.

The only part of the government that has not yet collapsed is macroeconomic and financial management, although the first secretary of finance in AMLO’s administration did resign in disgust over the irrational whims of the president as he conducted policy.

That finance secretary’s successor and the central bank have more or less kept the public finances in order. However, it is clear that this will not suffice to make up for the destruction AMLO has undertaken.

His policies have included canceling construction of Mexico City’s new airport  as well as such other hare-brained projects as a train going around the Yucatán Peninsula, destroying fragile local habitat, and a new oil refinery in Tabasco built by Pemex, which is on the verge of bankruptcy, when there is a refining glut in the world and four world-reputed contractors said it could not be built at the cost that AMLO set.

The accumulation of all these strains on a budget that cannot grow, since the economy is at a standstill and recession is lurking around the corner, will eventually break the bank and incur large fiscal deficits.

The so-far autonomous central bank will refuse to finance with its credit, forcing the government to go to the financial markets, which will surely lead to the downgrading of Mexico’s credit to junk status, to major capital outflows and to a fast depreciation of the currency.

Mexico’s status as a failed state will only get worse with time, in a vicious cycle that characterizes all economic and political systems when they are led to the brink.

The consequences will be dire, particularly for the United States, because its neighbor to the south, descending into chaos, will bring all sort of calamities: unbridled drug and migration flows from third countries but also from Mexicans fleeing their own country; massive capital losses for domestic and foreign direct investors in the country; a welcoming place for terrorists from all over, who would take advantage of the anarchy along the United States’ southern border to go north.

When we think about what’s impressive here, it is the sheer amount of devastation of a large country (14^th in GDP; 135 million people) that a dogmatic, self-centered, narcissistic and ignorant leader can inflict in such short time.

Manuel Suárez-Mier is an economist in residence at the American University in Washington and a consultant on Latin American nations’ financial and economic issues. He holds a PhD in economics from the University of Chicago.