Bloomberg Businessweek

 ECONOMICS Bloomberg Businessweek March 11, 2019

29

LI: PANG XINGLEI/XINHUA/ZUMA PRESS. AMLO: ALFREDO ESTRELLA/AFP/GETTY IMAGES. DATA: REFORMA, EL FINANCIERO, CONSULTA MITOFSKY

 AMLO at Mexico

City’s international

airport

○ Approval rating of

Mexican presidents

three months into

their term

Ernesto Zedillo

1994-2000

69%

Vicente Fox

2000-06

61

Felipe Calderón

2006-12

58

Enrique Peña Nieto

2012-18

50

AMLO

2018-

78

current economic situation was worse or much

worse than a year ago.

In contrast, the majority of Mexicans see a pres-

ident who’s delivering on his campaign pledges

to fight crime, raise living standards, and reduce

inequality. Since taking office on Dec. 1, his admin-

istration has launched welfare programs for the

elderly and disadvantaged youth, abolished cushy

retirement pensions for former presidents, and

cracked down on gangs of gasoline thieves whose

appetite for destruction rivals those of Mexico’s

infamous drug cartels. The social-media-adept

president touts his government’s achievements in

daily press conferences watched by hundreds of

thousands on YouTube.

“Andrés Manuel’s popularity with the elector-

ate is the result of a honeymoon period and an

incredibly savvy political communications strat-

egy,” says Duncan Wood, director of the Mexico

Institute at the Woodrow Wilson International

Center for Scholars in Washington. “Mexicans have

responded very well to his message on corruption,

equality, and development. But markets are look-

ing for a specific plan that will show how economic

growth could be generated in Mexico, and thus far

they haven’t seen one.”

In a statement released on March 1, S&P Global

Ratings said Mexico faces a 1 in 3 chance of being

downgraded in the coming year. Of particular con-

cern are AMLO’s plans to curb the private sector’s

role in the energy industry while pouring money into

the highly indebted national oil company, Petróleos

Mexicanos, known as Pemex. Economists are wor-

ried that such policies will have an adverse effect

on public finances and damp corporate investment.

Goldman Sachs Group Inc.’s Alberto Ramos

adjusted his 2019 growth estimate for the econ-

omy to 1.5 percent, from 1.7 percent, after perfor-

mance came in weaker than expected at the end

of the year. He cited “market apprehension” about

AMLO’s policies as a factor in the revision. Bank of

America Corp. is even more downbeat, predicting

an expansion of only 1 percent.

The president’s supporters measure the admin-

istration’s progress with a different set of yard-

sticks. Over the past three months his government

has doubled the minimum wage in cities and towns

near the U.S. border and raised it nationwide in

an attempt to counteract a decades-long erosion

in worker salaries. The measures have buoyed con-

sumer confidence, which reached its highest level

on record in February, according to the national

statistics agency.

At the same time, AMLO has unleashed a

raft of austerity measures targeting privileges

enjoyed by high-level bureaucrats. Among his

first acts in office were to put the presidential jet,

a Boeing 787 Dreamliner, up for sale and disband

Mexico’s equivalent of the U.S. Secret Service.

AMLO also has enlisted the army to help thwart

fuel thieves, a move that’s already saved the coun-

try 7.8 billion pesos ($405 million), according to

the government.

What will likely be remembered as one of the

defining moments of his presidency happened

even before AMLO took office. Four months after

his landslide victory, he announced a halt to the

construction of an airport on the outskirts of

Mexico City, calling the $13 billion project a waste-

ful extravagance. The move shocked investors at

home and abroad and sent the peso and Mexican

bonds tumbling. But it energized his supporters,

bolstering his image as a maverick willing to take

on the corporate establishment—what he calls the

“power mafia” that ran the country into the ground

with the help of neoliberal governments.

“In one stroke, he sent a strong message to the

crony capitalism players of Mexico,” says Rogelio

Ramírez de la O, an economist who advised AMLO

when he ran for president in 2006. The message,

Ramírez de la O says, goes something like this:

“I respect the value of your contracts, but if we

change the model, we’re going to have a much

healthier economy in the long term.”

In another sign that the status quo is fracturing,

the incidence of labor strikes has increased, par-

ticularly along the northern border, an area with

a high concentration of foreign-owned factories.

Some in the business community are also

unnerved by how much power the president

wields. His Morena Party and its coalition