5 July 2018

Can AMLO Save Mexico?

As this year’s presidential campaign in Mexico dragged on, it was clear that the leader of that country’s political left-wing for the past two decades, Andres Manuel Lopez Obrador, was headed for a historic victory.  Therefore, it was little shock when Mr. Lopez Obrador, or AMLO as he is commonly referred to as in Mexico, won a comprehensive victory in this year’s presidential election.  Once known as an unpredictable firebrand, Lopez Obrador has made many changes to his style and substance in recent years, allowing him to gain support from a wider spectrum of voters, and this allowed him to seize and control the front-runner status throughout this election campaign.  Now, as he prepares to take office for a single six-year term, the president-elect faces a number of daunting challenges.  First, Lopez Obrador must find a way to improve Mexico’s economic situation, both in terms of generating higher rates of growth and in terms of ensuring that this growth benefits a larger share of the country’s population.  Second, Mexico’s next president must find a way to reduce the level of crime and corruption in that country as, so far, no government in Mexico City has found a way to combat these ills.  Finally, Lopez Obrador will have to find a way to maintain close economic and political ties with the United States in the face of a government in Washington that has proven to be extremely hostile to many Mexican interests.  As a country of 124 million people that is home to Latin America’s second-largest economy, Mexico is clearly an important country, and one that needs good governance in order to navigate these many challenges and to achieve its full potential.

Polls taken in the months before Mexico’s presidential election showed Lopez Obrador holding a wide lead over his main rivals, a lead that consistently expanded during the final three months of the election campaign.  Therefore, it was little surprise when the final results showed that he had won the election with nearly 53% of the popular vote, the largest share of the vote for a candidate in any Mexican presidential election since 1982.  In contrast, Lopez Obrador’s two main rivals, Ricardo Anaya of the PAN party and Jose Antonio Meade of the once-dominant PRI party, won just 23% and 15% of the vote respectively.  Lopez Obrador was able to achieve such a tremendous result due to his ability to widen his support base.  Economically, he continued to champion policies aimed at improving the economic situation for poorer areas of the country (mostly in southern Mexico), but he also won support from many business leaders thanks to his vow to reduce the level of crime and corruption in Mexico.  Socially, he maintained the support of more socially-liberal segments of Mexican society, but also managed to attract the support of some socially-conservative voters by forming alliances with groups championing socially-conservative policies.  Finally, whereas his support in previous elections was strongest in southern Mexico, he gained far more support this time around in wealthier northern areas of Mexico, including many areas that have suffered the most from high rates of crime and corruption.

Challenge #1 - The Economy: Once he takes office six months from now, President-elect Lopez Obrador’s first challenge will be to fix Mexico’s struggling economy.  He has made it clear that his economic priority will be to reduce the level of wealth inequality in Mexico, which is among the highest of any country in the world.  Like Italy or Spain, Mexico is characterized by a wealthier north and a poorer south, and Lopez Obrador has vowed to increase government spending and to promote investment in his country’s poorer southern states.  Meanwhile, despite having the massive advantage of its unique access to the wealthiest large market in the world, Mexico’s economy has not benefitted as much as had been expected from its access to the 360 million consumers in North America.  In fact, since 2001 the Mexican economy has grown by an average of just 2.2% per year, one of the worst performances of any large emerging market in the world.  This poor performance is largely the result of Mexico having fallen further behind many other emerging markets in terms of economic competitiveness, and a large share of the blame lies at the foot of Mexico’s political leadership during this period.  For Mexico to succeed, President-elect Lopez Obrador will have to do more to boost his country’s competitiveness and to raise the level of consumer, business and investor confidence in Mexico.

Challenge #2 - Crime and Corruption: Mexico’s new president will also have to face a number of daunting political and social challenges after he takes office.  As the first president in Mexico not to come from either the PRI or the PAN party in nearly a century, he and his diverse MORENA alliance may find it difficult to both govern effectively and retain the unity that it maintained during this year’s election campaign.  At the same time, Lopez Obrador will be judged by his ability to reduce the level of crime and corruption that continues to plague Mexico.  Despite massive efforts by previous administrations, the overall crime rate in Mexico continues to rise, with some areas of the country ranking among the most dangerous areas of earth due to cartel-related violence.  Likewise, corruption remains pervasive, and this has limited Mexico’s ability to attract the investment needed to improve the country’s economic health.  As such, the president-elect will find that one of his most important tasks will be to restore the faith in the Mexican government among the country’s population, as well as among the businesses and investors interested in operating in his country.

Challenge #3 - Relations with the United States: While the economic and political situation in Mexico will present major challenges for Lopez Obrador, it is an external challenge that might prove to be the most difficult problem facing that country’s next president.  Of course, this challenge is related to Mexico’s all-important relationship with its giant neighbor to the north, the United States.  While relations between the US and Mexico have been bedeviled by issues such as immigration, trade and the environment, they have not been more difficult than they are today for a very long time.  This is due, in part to the election of United States President Donald Trump in 2016, whose criticism of Mexico and his vow to build a wall along the US’ border with that country found a good deal of support among US voters.  Now, the US president is threatening to withdraw his country from NAFTA, a move that could have devastating consequences for the Mexican economy, particularly if the US also imposes punitive tariffs on imports from Mexico.  This presents a massive challenge for President-elect Lopez Obrador as his US counterpart clearly has a number of major advantages, notably the dependence of Mexico’s economy on exports to the United States as well as scale of the investment by US-based manufacturing firms in Mexican operations.  In order to avoid an economic disaster, let alone achieve his economic goals, Mexico’s next president will have to find a way to maintain relations with a hostile government in Washington.  If not, Mexico could face the type of economic disasters that have befallen many other Latin American countries in recent years.

Without a doubt, President-elect Lopez Obrador faces one of the toughest jobs in world politics.  On the economic front, he must revive what has been one of the world’s most disappointing economies, a task made all the more difficult by a worsening external situation that includes a deteriorating relationship with the country’s most important trading partner.  Politically, Lopez Obrador faces the same challenges that political outsiders do all over the world, and, in his case, he faces some of the most entrenched political interests in the world.  Externally, no country stands to suffer more from the trend towards protectionism in the United States than Mexico, and Lopez Obrador’s relationship with US President Donald Trump will be fascinating to watch in the months ahead.  Mexico’s new president will not have much time to tackle these issues, for he has vowed to hold a referendum on his presidency after just two years in office.  Should he stumble out of the gates, he could find himself quickly positioned as a lame duck president.  However, regardless of their political orientation, Mexicans must hope that this one-time left-wing firebrand can restore confidence in their country’s economic, political and social future, or else Mexico will face a very difficult future.