As the populist government of Andrés Manuel López Obrador (AMLO) in Mexico continues to centralize power in his hands, by weakening all institutions that represent checks-and-balances to the growing encroachment of the executive, and by changing laws and regulations that guarded individual and property rights from the government’s intrusion, the incompetence of the administration to perform the most basic functions of governing has led to a series of failures and disasters, with skyrocketing social and economic costs.
Perhaps the most glaring metaphor to illustrate such ineptitude is the case of the presidential plane. During his decade and a half presidential campaign, AMLO had been denouncing what he claimed to be the luxurious spending of previous governments. When the administration of Felipe Calderón (2006-12) traded an old and accident-prone B-757 for a new, state-of-the-art, B-787-8, his accusations mounted. It turned out that the new plane was not delivered in time for Calderón to fly in it, but it benefited his successor Enrique Peña Nieto (2012-18), who used it regularly, as most heads of state do with their airplanes.
AMLO’s demagoguery on the subject mounted, declaring that the presidential plane “was of such luxury that not even Obama had one,” an image that appealed to many of his uncouth supporters. In AMLO’s small village mindset, he couldn’t imagine that the Air Force One program (actually, two B-747-8 modified to the needs specified by the Pentagon), which was approved to replace the Reagan-era planes currently in service, would cost more than US$4 billion, compared to US$218.7 million for Mexico’s TP-01 (presidential transport 1).
The day of AMLO’s inauguration as president, he sent TP-01 to storage in the US and put it on sale. What he apparently didn’t know was that the plane had a 15-year lease and was not his, or the governments for that matter, to sell. The plane spent a year in storage in California at a cost of more than US$1 million, plus the lease payments that continued to be disbursed by the government infrastructure bank. It has just been returned to Mexico.
Throughout this process, the demagogue promised many times to spend the proceeds that he dreams he will get from the imagined sale on the most varied purposes, depending on the inspiration of the moment. Recently he promised the inhabitants of Zacualtipán in the state of Hidalgo, a town of 35,000 inhabitants, that he would bring them water with the revenue from the plane’s sale.
But since there are no clients lining up to buy the aircraft in Mexico or elsewhere, AMLO came up with what he thinks is a marvelous idea: he will raffle it off to the general population, selling 6 million tickets at 500 pesos each (US $25), which would generate, assuming all the tickets are sold, US$150 million, perhaps enough to pay the balance of the lease, but not to give the money to the dozens of harebrained projects that the demagogue has concocted. And this leaves unanswered what the winner of the airplane would do with it since AMLO devised all sorts of restrictions for the buyer.
As was to be expected, the brouhaha following the saga of the ill-fated sale of the aircraft distracted public attention from the massive failures of the government in areas that affect the welfare of the people far more, of which a brief summary follows:
• The public health system of the country is in complete chaos since AMLO canceled a world-renowned program of popular health insurance to replace it with a centralized, government-run one that failed dismally when it started on January 1. Part of pandemonium is due to the lack of sufficient drugs in the hospitals and clinics of the system because the government centralized all the purchases in the hands of ignorant bureaucrats with no knowledge of health issues. The problem is so serious that parents of children with cancer that were not being treated blocked for several hours this week all entrances to Mexico City’s international airport in protest.
• The latest figures show that 2019, the first full year of AMLO in power, was the bloodiest, with 34,212 homicides, an increase of 17% over the previous year. This terrible situation is a direct consequence of AMLO’s “strategy of embraces and not shootings” that summarizes his reluctance to deal with the numerous bands of criminals throughout the country, and his conviction that the root cause of all criminal activity is the country’s prevailing poverty, which has fallen sharply in the last two decades, a fact that he denies. His failure in assuaging the violence that afflicts Mexico has not led him to rethink his approach but to reinforce it!
• AMLO has virtually completed a turnaround in the energy policy followed by his predecessor to open the energy sector – oil and gas exploration, refining and distribution, as well as electricity generation and distribution – to private investment, domestic and foreign. He is re-centralizing all these activities in the sole hands of the government’s badly-run monopolies Pemex (Petróleos Mexicanos) and CFE (Federal Electricity Commission). AMLO has been pouring large amounts of public money into these money-losing behemoths as if we were back in the 1970s, a time of increasing oil prices and new and rich oil discoveries. Both monopolies are virtually bankrupt, with an unbearable debt – in the case of Pemex more than US $100 billion – and in all likelihood they will lose their investment grade this year, putting the country in severe peril.
• The economy is at a standstill with zero growth in 2019, virtually no private investment and new employment with negative growth, for the first time in decades. Although the fiscal balance has been maintained, that is not likely to last long because the government blew half of the contingency fund that had been accumulated over many years to confront serious economic crises, like the global one that hit the markets in 2008. The other reason that the exchange rate has remained quite steady under the level of 20 pesos per US dollar, which AMLO claims is a great accomplishment, is a tight monetary policy that keeps interest rates high, with Mexico’s prime at 7.25%.
Despite frequent reunions with private sector leaders in which AMLO and the segment of his aides that is more or less rational – an absolute minority compared to the ultra-radicals that want to extend the government’s tentacles in every direction, and produce grandiose expressions of solidarity and promises of large future investments – the confidence of the private sector is shot for good. This explains a serious retrenchment of all investment and the dismal prospects for future growth.
I believe that 2020 will mark the beginning of AMLO’s unraveling, as he confronts even more serious crises of his own making that will affect his government, as it continues to prove its complete ineptitude at performing the basic functions of a good government with the handpicked personnel that he has selected to staff most of it, favoring personal loyalty over training.
The prospects of 2020 in Mexico are bleak, as it is unlikely that there will be any change in the government’s course. It will demolish Mexico’s economy, institutions and democracy.
Manuel Suárez-Mier is an economist and former central bank official, economic diplomat, professor at Georgetown and American universities. Consultant residing in Washington DC. suarezmier@gmail.com