As Mexican President Andrés Manuel López Obrador (AMLO) continues to fail on all fronts, his mistakes are leading to a huge cost in human lives due to his inept handling of the pandemic. His refusal to mitigate the collapse of the economy with conventional economic tools is making matters worse and his behavior has become increasingly irrational.
AMLO once again canceled a sizable private investment, this time an energy generation project on the verge of construction thanks to the necessary paperwork being finalized. He reinforced his attacks on his “adversaries” in the media and in the private sector, shutting down crucial autonomous government entities in charge of overlooking the proper operation of society and the economy. And he announced plans to travel to the US to pay homage to Donald Trump, who has humiliated Mexico consistently since he launched his candidacy and is universally reviled in the country.
The situation in Mexico is getting increasingly desperate. Last Friday, the chief of police of Mexico City, a man who commands a force of 80,000 armed police, was attacked on his way to work in one of the city’s best neighborhoods. Some 28 assailants fired nearly 500 bullets – including several rounds from high-velocity sniper rifles that pierced the police chief’s armored vehicle, killed two of his bodyguards and hit him three times. Fortunately, he survived but stray bullets killed an innocent passerby and penetrated several nearby houses.
In AMLO’s first 18 months in office, the President’s strategy to confront organized crime with “embraces, not bullets” has led to double the number of murders compared with the administration of Felipe Calderón (2006-12), who began the war against organized crime, and 55% more than Enrique Peña Nieto’s term (2012-18), and reached 54,000 by the end of May. June has been even worse with 100 deaths per day on average, the deadliest of all months so far.
If the public security situation is dire, the state of the economy is worse. In April, GDP had collapsed by 19.7%, very much in line with my forecast that second-quarter GDP would fall by about 20%. Twelve million jobs have been lost, in a country with virtually no social network to help those who lose their source of income. It is estimated that this year 15,000 corporations will go bankrupt, just in the formal sector. Casualties in the more vulnerable underground economy are expected to be huge, but no statistics exist.
AMLO’s hostility to foreign investment was again illustrated when the government blocked a plan by the Spanish firm Iberdrola to build an electricity-generating plant in northern Veracruz. The decision was cloaked with anti-Spain nationalist rhetoric, insinuating that corruption was involved. Phrases such as “we will no longer tolerate being treated like a conquered nation” were frequently used by the government. Spain is the second largest foreign investor in Mexico behind the US. Its vote will be crucial to gain the ratification of the new free trade agreement between Mexico and the European Union.
As has been the case with other incompetent populist leaders, AMLO’s management of the pandemic is disastrous, first by denying that Mexicans could be susceptible to Covid-19 infection, and then by minimizing the damage it could do.
The result is that today the number of cases stands at 221,000 people with 27,300 deaths. The number of new deaths is climbing faster than in any other country. This awful situation is also the result of extraordinarily little testing: 4.3 tested per hundred thousand, way behind the other laggards, Brazil, that has 14.2, and even India, 6.1. By comparison, the US has done 99.3, Spain, 110.5 and the UK, 136.9. Many experts suspect the real number of cases in Mexico could be five times higher than official figures.
AMLO insists on going to Washington DC to mark the launching of the US, Mexico, Canada Agreement (USMCA) that replaces the North American Free Trade Agreement (NAFTA). His presence is hardly necessary but since his American counterpart, Donald Trump, summoned him to a strange ceremony in Yuma, Arizona, where he stamped his signature on a section of the black border wall Trump is building to keep Mexican’s from entering the US, AMLO subserviently agreed to go.
The visit, which could take place later this week, is viewed in both countries as a blatant attempt by Trump to use as a campaign gimmick to attract badly needed votes from the Mexican-American community. But the move could end up hurting Mexico if the Democrats win the presidential election in November. It is impossible to understand AMLO’s obsequiousness to a racist US president who has repeatedly insulted his country and its population.
It is also worth noting that the launching of the USMCA is hardly a reason to celebrate. Unlike NAFTA, it is a government-managed trade deal that robs Mexico of its natural competitive advantages and is designed to provoke disputes related to manufactured goods, labor standards in Mexico supervised by US unions, and dumping complaints by US agricultural producers that cannot compete with Mexican counterparts. All these obstacles and many more, assure that the USMCA will result in an implosion of trade between Mexico and the US and a breakdown of production chains built so successfully over the past quarter-century.
The strange belief that the USMCA will be a magic-wand that will bring investment and prosperity to Mexico is a pipedream, especially with a government that seems to be doing everything it can to scare off foreign and domestic investors and damage consumer confidence. A government that has no respect for the rule of law and the sanctity of contracts and believes that profits are the sinful outcomes of exploiting the workforce.
Indeed, the demolition of Mexico is gathering speed!
Manuel Suárez-Mier is an economist and former central bank official, economic diplomat and professor at Georgetown and American universities. He now is a consultant residing in Washington, DC.