Financial Times Europe - 31.07.2019

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Wednesday31 July 2019 ★ FINANCIAL TIMES 7


Andrés Manuel López Obrador has pledged to attack corruption and direct more spending to the poor. But

as he does battle with many of Mexico’s economic institutions, some worry he is flirting with demagoguery.


right there,” says Ms Peschard.
That would follow in the footsteps of
Argentina’s formerPresident Cristina
Fernández, whose heterodox policies
led to high inflation and, many econo-
mists say, the country’s current risis.c
In appointing Arturo Herrera to
replace Mr Urzúa as finance minister,
the president made clear that in addi-
tion to guarding the nation’s purse
strings, the department now also had a
social mission of fighting inequality and
“He is assigning the finance minister a
new type of responsibility, like minister
for social happiness or social justice,”
says Alfonso Zárate, a political com-
mentator. That could mean a new focus
on alternative indicators, he adds.

The moral economy
Vacanciesover the next couple of years
mean that Mr López Obrador hasthe
chance to stamp his imprint on both the
central bank and Supreme Court.
Anyfurtherconcentration of power
will only add to the uneasein the coun-
try. For much of the past year, somecor-
porate leaders and political rivals, have
been guilty of a form of scaremongering
withsometimes hysterical warnings
that Mexico wouldfollow Venezuela
down the path to destruction.
However there are at least some ech-
oes of the late Hugo Chávez in Mr López
Obrador’s early moves. LikeChávez, he
has boundless faith in himself as a sav-
iour, taking on elites on behalf of the
poor majority. Both ursued grandly-ti-p
tled projects of national renewal — Mr
López Obrador calls his the “Fourth
Transformation” and promises it will be
as epoch-defining as independence and
liberal reforms in the 19th century and
the Mexican Revolution 100 years ago.
WhileChávez rewrote the constitu-
tion into a “little blue book”, Mr López
Obrador is condensing his economic
vision into a tome calledTheMoralEcon-
omy, due out on December 1, to coincide
with his first anniversary in office.
Many businesses and economists are
nervous that the notoriously stubborn
president— whose favourite phrase,
when confronted with worsening eco-
nomicforecasts, is “I have other data” —
could become increasingly erratic.
“It’s very clear history is repeating
itself from what happened in the early
1970s.. The economy isn’t growing..
Once this is evident even to Amlo, he’s
going to realise he has to abandon fiscal
restraint,” says a Mexican economist
who advises investors and asked not to
be identified for fear of repercussions.
“When that happens, rating agencies
will have no option but to downgrade,”
the economist adds. “There will be a
stampede of foreign capital [out of Mex-
ico] and the peso will explode... I don’t
see how this could not end in a crisis.”

‘I have



Every weekday at 7am, a smiling
President Andrés ManuelLópez
Obrador enters a gilded hall in the
National Palace for a news conference
that can extend for two hours.
No questions are off-limits although
Mr López Obrador, with his often
rambling and repetitive esponses, canr
be skilled at dodging more difficult
While he frequently professes
respect for freedom of the press, the
Mexican leadermade clear his scorn
for the media at one of thosenews
conferences last week, adopting a
tone that would not be out of place in
Donald Trump’s White House.
“The [leftist news] magazine
Proceso, for example, has not been
good to us,” Mr López Obrador
declared. “I hardly read it any more.”
The Proceso reporter pointed out
that making nice with a president is

Transforming reality
New president has clashed
with the media


tanding beside a sugar cane
farmer who uses a wooden,
horse-drawn press to squeeze
juice into a plastic bucket,
Mexican President Andrés
Manuel López Obrador gave a demon-
stration of his economic world view.
On a visit toLa Huasteca last week,
near the Bajío region that is Mexico’s
high-tech manufacturing powerhouse,
the leftwing nationalist president — who
prides himself on not having a checking
account or credit card — extolled the
virtues of artisanal microbusinesses
that he said were “as or more impor-
tant” in terms of job creation and devel-
opment than big business.
“This is the economy we are boost-
ing,” he said,sipping his cane juice.
The day after his trip, he abruptly
fired the ead of the agency chargedh
with measuring poverty and evaluating
the social programmes that are a pillar
of his eight-month-old government.
Gonzalo Hernández Licona’s dis-
missal from Coneval, four days after he
wrote an editorial sayingbudget cuts
were crippling the agency’s ability to
function, was the latest in a purge of
technocrats and institutions the presi-
dent says are corrupt, profligate or
standing in the way of his transforma-
tion of Mexico after 36 years of failed
market-focused “neoliberal” policies.
But some investors and analysts fear
that in pursuing the mirage of a return
to the golden era of growth of half a cen-

tury ago, with the state firmly in the
driving seat, the silver-haired shop-
keepers’ son is flirting ith the sort ofw
demagoguery that could take Mexico
down a dangerouspopulist path.
“There is a sense that history begins
with him, that nothing of the past works
and that he has to start a new era,” says
Enrique Krauze, a prominent historian
who has himself clashed with a presi-
dent he once dubbed a “tropical mes-
siah”. “He is not only taking decisions —
good or bad — on economic policy but
also institutions, which took so much
effort to build. I’m truly worried.”
Mexico will publish second-quarter
GDP data todaythat are expected to
showthe economy close to recession,
after a shock contraction at the start of
the year, a fall in job creation and the
lowest construction activity in 13 years.
Citibanamex, a leading bank, has
slashed its 2019 growth forecast to just
0.2 per cent in stark contrast to the pres-
ident’s promise of 2 per cent.
Yet with approval ratings as high as 70
per cent and his main economic barom-
eter, the peso, holding steady against the
dollar, Mr López Obrador feels vindi-
cated in his rush to jettison past policies
andoverhaul institutionsin line with his
beliefs, no matter who he upsets.
“I think that if your project is to
change the status quo, political tensions
are normal,” says Ignacio Marván, a pro-
fessor at CIDE university and former
adviser to Mr López Obrador when he
was mayor of Mexico City.“He’s not risk
averse. He’s not afraid of taking tough
decisions, then he backtracks.
“ [ B u t ] h e m a y b e t h i n k i n g
that.. .giving concessions now would
weaken his support.”

Unprecedented power
The 65-year-old politicianswept into
office in December after a landslide vic-
tory that gave him a huge popular man-
date and control of both houses of Con-
gress. He has moved speedily to central-
ise decision-making in his hands and to
consolidate an unprecedented level of
power now that he has finally made it to
the presidency at the third attempt.
In tandem with his own ethic of fru-
gality, Mr López Obrador has pushed to
shake-up the way many government
departments and agencies spend money
— with large reductions in operating
expenses to allow more social spending
to go directly to people.
But hopes that he would prove a prag-
matic steward of the economy — as he
was during a previous period as mayor
of Mexico City — arefading fast. Mr
López Obrador has already alarmed
investors by scrapping a partially-built
$13bn airport project and pushing
ahead with a planned$8bn refinerythat
few in the oil industry believemakes
senseor can be built on time and to
budget. While his goals of eradicating
corruption and fairer wealth distribu-
tion are widely lauded, many fear his
methods spell a return to the failed
nationalist policies of the 1970s.
As he hurtles ahead in a quest he
hopes “with all my heart and soul” that
future governments will never be able to
undo, Mr López Obrador’s confronta-

“are the product of a period that the
president dislikes and criticises. Any
institution created after 1990 runs the
risk of being taken over or disappeared,”
says Antonio Ocaranza, apresidential
spokesman in the 1990s. Those that
stay, risk being retooled, keeping “the
hardware of these institutions with a
completely different software,” he adds.
Indeed, within days of firing Mr
Hernández Licona, the president
warned he could yet scrap Coneval alto-
gether, passing the task of measuring
poverty tothe statistics agency. Any
cash saved would then be ploughed into
poverty reduction programmes such as
higher pensions and state aid for stu-
dents and unemployed youngsters.
“He doesn’t believe in institutions,”
says Mr Krauze, “he believes in

In the name of reorganising public
spending, Mr López Obrador has
already eliminated Mexico’s export pro-
motion and tourism boards and set up
new intelligenceagencies. Heunder-
mined the energy regulator by appoint-
ing unqualified loyalists including a 90-
year-old refinery expert, and locked
horns with the Supreme Court.
In addition, he has stepped up near
daily attacks on, and demanded apolo-
gies from, “unprofessional” rating agen-
cies, the IMF and parts of the media,
including the Financial Times, branding
them apologists for past policies that he
says protected the rich and fostered cor-
ruption while ruining the economy.
The armed forces — which isbuilding
the new airport— is one of the few insti-
tutions that has been spared criticism.
He has also repeatedly promised not
to interfere in the central bank, autono-
mous for the past quarter of a century.
However, he has said he would like its
mandate changed from just preserving
the value of the peso by fighting infla-
tion to one that includes fostering
growth. Although not imminent, “the
temptation [to meddle in] Banxico is

hardly the media’s job but Mr López
Obrador — a politician who thrives on
having adversaries — was undeterred.
s the president puts it, “all theA
best journalists in history have bet on
transformations... It’s very
convenient to say, ‘I am independent
or journalism shouldn’t take
sides’... In that case, it’s just
analysing reality, criticising reality, but
not transforming it”.
Mr López Obrador demands the
right to reply to published articles but
regularly turns that into a tirade.
Notwithstanding the oft-repeated
phrase “with all due respect”, with
which he prefaces his attacks, he once
likened the media to a criminal
underworld and accused it of calumny.
“We’re going to keep on saying it —
anyone who does not contribute to the
transformation of Mexico... who is in
favour of the status quo, is a
conservative, whether they are in
politics or the press,” Mr López
Obrador said this weekend. “We’re
going to keep on talking about these

Social spending as a  of GDP, 


South Korea

Old age Health
Other Labour market

Mexico’s economy hits a rough patch
Quarter-on-quarter  change in gross
domestic product




Two consecutive
quarterly contractions

Sources: Instituto Nacional de Estadística y Geografía; OECD

* Forecast


critics — those deemed not to be on
board with the president’s radical cru-
sade to sweep away corruption and all
vestiges of the “neoliberal period” —are
either enemies or expendable. Butthat
the institutions they serve may be sacri-
ficed, too, as the president imposes his
uncompromising agenda on Latin
America’s second-biggest economy.
“The problem is that his idea is not to
build more technical institutions,” says
Jacqueline Peschard, a former head of
the agency in charge of access to infor-
mation. “He subordinates everything to
his narrative, which is more moralising
than technical.”
The president refuses to entertain
suggestions that he may have gone too
far in his purge of technical staff nd ina
swingeing budgetcutsimplementedto
free up cash for social spending.
He excoriated Coneval on Twitter, for
example, saying it spent $1m more last
year on office rental than on surveys.
When Denise Dresser, a leftist commen-
tator who is critical of Mr López Obra-
dor, said he should spell out the source
of his data and “improve institutions
and not just demonise them”, she was
attacked by presidential supporters.
Mr López Obrador says budget cuts
are vital to purge ingrained graft and
construct a “new paradigm” in eco-
nomic policy that delivers welfare, not
just higher gross domestic product.

Taking on institutions
His crusade against independent insti-
tutions in a country where the opposi-
tion is moribund after its electoral
thrashing and the president faces few
other checks and balances has alarmed
even senior government allies.Gerardo
Esquivel, who Mr López Obrador
appointed as a Bank of Mexico board
member, and who defended the exist-
ence of Coneval.
Some observers fear that Inegi, the
state statistics agency, which has
already had to axe surveys because of
budget cuts, could benext in the line of
fire. Mr López Obrador told La Jornada,
a leftwing newspaper, recentlythat his
presidency “it wasn’t just a change of
government but a change of regime, so
we measure things in a different way”.
Mexico is a relatively young democ-
racy with historically weak institutions
including a corruption-riven judiciary
and powerful, politically-motivated
unions. For three-quarters of the 20th
century it was under effective one-party
rule until the Institutional Revolution-
ary party lost power in 2000. Its return,
from 2012-18, amid spiralling graft and
worsening crime, prompted voter dis-
gust and a rush headlong into the arms
of Mr López Obrador.
Agencies created as Mexico began
opening up its economy in the 1980s
and adapting to an era of plural politics

In a hurrySince taking office in
December, López Obrador has rushed
to implement bold economic plans

‘Tropical messiah’Critics say his
moves to concentrate power are
undermining independent institutions

Recession riskThe president’s belief in
budget restraint could be tested if
economic growth remains weak

‘He subordinates

everything to his

narrative, which is

more moralising

than technical’

tional style has put him on collision
course with energy regulators, whom he
has dismissed as “real shysters”, the fed-
eral police which he said was “not up to
scratch” and the “shameful” national
human rights agency.
Carlos Urzúa, a longtime ally,
resigned s finance minister in Julya after
a dramatic falling-out with the presi-
dent, claiming that policy decisions
were not being “based on evidence”.
He joins a growing list of casualties:
Germán Martínez quit as head of the
state social security agency IMSS, Guill-
ermo García Alcocer as head of energy
regulator CRE and Tonatiuh Guillén as
head of the National Migration Institute
amidbudget cuts, interdepartmental
meddling and policy differences.
Themessage that many in Mexico
have drawn is not just that awkward

‘The economy is not

growing. Once that is

evident even to Amlo, he

will realise he has to

abandon fiscal restraint’

Andrés Manuel López Obrador at one of his regular press conferences —Javier Lira/NOTIMEX/dpa

JULY 31 2019 Section:Features Time: 7/201930/ - 18:19 User:alistair.hayes Page Name:BIG PAGE, Part,Page,Edition:USA , 7, 1






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