Ten years ago we were crawling around in the smoldering wreckage of the 2008 financial crisis, hoping to survive the economic nuclear winter on grubs and bark. Heaven knows there were some lean times there but somewhere along the way things must have turned around because in more recent years, to hear the media tell it, the North American economy had become Biggie Smalls, spending its days smoking blunts and drinking Cristal with chickenheads in a jacuzzi and it was all good. Biggie’s long dead of course and the media are now auguring a similar fate for the NAFTA-zone economy, and much like back-to-school, we feel like we’re not ready for the heady summer of fun to end.
It seems like since about the beginning of the year the trend in economic indicators began to take on a noticeably more negative slant. In the United States, despite a generally strong stock market and historically low unemployment, much of the media has taken to obsessing about a coming recession. Here in Mexico, monthly and annual indicators that the previous administration probably looked forward to have become a source of irritation for President Andrés Manuel López Obrador (AMLO). Projections of 2019 GDP growth have been revised downward repeatedly since the beginning of the year, with recent estimates from the IMF, HR Ratings and a Citibank survey of economists sinking below the 1% threshold. Just yesterday, the National Statistics Institute (INEGI) reported that industrial output had dropped 2.8% in July year-on-year, marking the 10th straight month of declines. When INEGI reported 0% growth in the second quarter with respect to the previous quarter, an aggravated AMLO responded to meddlesome reporters that it was more important to redistribute existing wealth to the economically disadvantaged than to generate growth only to benefit the wealthy. The president maintained his own projection of 2% growth for the current year despite the flagging indicators, insisting that the economy is doing well, “much differently than what the experts think”.
We would like to point out that if a significant economic downturn does materialize over the next year, it will do so at a particularly inconvenient time for the presidents of both Mexico and the United States. Donald Trump is just over a year away from a U.S. presidential election, and López Obrador is still in the early stages of a six-year term in which he promised no less than to transform the nation. Regardless of whether a recession were their fault or not, politics is an unforgiving business and both stand to lose some degree of popular support from a deteriorating economy, and in Trump’s case his reelection could potentially be at risk. Without going down the AMLO-is-like-Trump rabbit hole, both tend to insinuate that the media is conspiring to mislead the public, rather than addressing the presumed economic alarm bells. Trump bombastically calls the press “the enemy of the people,” while AMLO, in his folksy, old fashioned way, calls them “la prensa fifí” or what years ago might have been called “the bourgeois press,” implying that the media serve the interests of the upper classes to the detriment of the average Jose Lunchbucket. Mr. López Obrador and his protégée, Mexico City Mayor Claudia Sheinbaum, have resorted frequently to blaming the country’s or city’s problems on the previous administrations, and we’ll give them a courtesy pass on that for a bit. But year one of the current administration ends in three months, and all but their most unconditional supporters are going to start getting antsy if things continue to deteriorate. The security situation is dire, AMLO has handed over the education system to a gang of thuggish extortionists masquerading as a teachers union, and his pharaonic infrastructure projects could be years off at best. It may be a stroke of bad luck for him if we get a recession on top of everything else, but that will be little consolation to a very disillusioned and increasingly cranky populace.