COVID blows AMLO legacy for lovers and haters alike

The COVID-19 pandemic has caused economic devastation and loss of life around the world, and we are now coming to the conclusion that the disease will rob us of one more thing some of us very much looked forward to seeing: The historical verdict on an AMLO government.  All our lives (or at least, in our case, since the López Portillo administration), we have parroted the same truisms about Mexican society: that all politicians are corrupt, the unions are corrupt, Pemex is corrupt, the police are corrupt, and generally that él que no transa no avanza — he who doesn’t engage in corruption doesn’t get ahead.  Before being elected fair and square in 2018, Andrés Manuel López Obrador (AMLO) had been running for president since at least 2005, promising no less than a complete transformation of Mexican society, from an irredeemable cesspool of capitalist injustice to shimmering elysian fields of egalitarian brotherhood and fair play.  The conservatives shuddered at the very idea, warning us in the severest of terms that a López Obrador government would turn Mexico into a Communist gulag.  AMLO’s supporters, in turn, gazed upon him with reverence, their eyes as of pinwheels, with unbreakable faith that he would give rest to all those who labored and were heavy laden, should they only come unto him at the polls.  Well, in his third run for the presidency on July 1, 2018, he beat the field like a gong and was inaugurated president December 1 the same year.  AMLOvers, as his supporters are sometimes called, shed tears of joy, looking forward to a society based on social and economic justice in Mexico at long last.  Conservatives uttered oaths and rent their garments, convinced that six years of communism would leave the country in ruins.  Which would it be?

As we have alluded to many times in this space, the very idea of being saddled with the populist demagogue López Obrador as president had us reaching for the Cutty Sark.  While the prospect of punishing the PRI and PAN at the polls was appealing, six years of backward development policies was a steep price to pay.  To reconcile ourselves to the idea of an AMLO administration, we decided that at least we would no longer have to listen to him droning on about conspiracies and fraud, since an election he won surely must have been legitimate, unlike those that he lost.  Ditto with his claims of government corruption, since now they’d be charged to his account.  And as a bonus, those of us who believe in sound public policy over dogmatic sloganeering would be able to see in real time if AMLO’s initiatives actually improved the quality of life in the country and provided a blueprint for the future, or if they just resurrected the PRI’s old pattern of handing out money and favors in exchange for political allegiance.

Certain parallels could be drawn to the administration of Salvador Allende, President of Chile from 1970 to 1973.  Like López Obrador, Allende was an entrenched leftist and fixture on his country’s political landscape for decades who finally got a shot at power toward the end of a long career.  Although Allende was a distinguished legislator while AMLO served predominantly in political or administrative roles, both leaders pledged to transform their countries to redress historical and systemic injustice.  Salvador Allende, love him or hate him, was well on his way to profoundly changing Chilean society when he was violently deposed in a U.S.-backed coup after just under three years in power.  We are by no means suggesting AMLO will end up like Allende – heaven forbid – just that we got to see what policies the Chilean leader implemented and to some degree, their effect on society.

AMLO, for his part, has dived into the pursuits that are of most interest to him, such as his beloved oil refinery and the train through the Mayan jungle.  Clearly, though, COVID-19 has blown the economic house down for the next few years, which happens to coincide with the remainder of his six-year presidential period.  Now, for starters, President López Obrador has downplayed the importance of conventional economic growth, saying redistribution of wealth is more important than making more money that only benefits the rich.  He has made “republican austerity” a slogan of his campaign, slashing public spending and slimming down the massive government bureaucracy, and pursued a feverish campaign to increase tax collection.  These initiatives began last year, back when GDP growth was notching a frothy 0%, a veritable orgy of excess compared to where the economy is now under COVID-19.  We are in the midst of a once-in-a-century economic crisis that other countries are addressing through relief and stimulus programs, and AMLO is deriding support for businesses as “rescuing the rich” while withholding VAT reimbursements for companies and ratcheting up scrutiny of financial operations across the board.  While we support rigorous application of regulation to businesses breaking the law, the additional burden on SMEs to prove that they have committed no crimes comes at a time when many are fighting for their survival.

AMLO has claimed that the elimination of corruption will free up resources to help pay for his favored programs, but this is a tenuous basis on which to project future revenue.  His pet infrastructure projects are big-ticket items, such as the Dos Bocas refinery (US$8 billion), the Maya Train (US$7.5 billion) and the Santa Lucía Airport (US$3.6 billion plus the cost of cancelling the previous president’s partially constructed airport project). The so-called “rescue” of Pemex, the national oil company, is another of AMLO’s priorities that is from all angles a financial black hole highly unlikely to deliver tangible returns.  The number crunching on oil production and revenue is covered in detail in other media, but as we see it the president is pushing a furious campaign to block solar and wind energy development and private sector investment in the energy industry at the same time that Mexico’s oil production is declining, Pemex is posting billion-dollar losses, global demand for fossil fuels is low and the rest of the world is moving fast toward renewable energy sources and electric vehicles.  We’re broke and we’re spending our last few bucks on a costly gasoline refinery that should be ready to go just in time for the global transition to electric cars. We don’t want to be gratuitously pessimistic but it’s hard to imagine the analysts of the future saying “Man AMLO was such a visionary, building that gasoline refinery and pivoting to coal and fuel oil to run the power plants in 2020 was totally the way to go!”

Ultimately, our desire is for a more prosperous, more socially just Mexico where corruption is the exception rather than the rule.  If by the close of the AMLO administration in 2024 we have advanced toward that goal, we will be thrilled to recognize his accomplishments.  What we expect, however, is that his signature achievement will have been to consolidate political power in one party just like it was back in the 1970s when oil was king.  The AMLOvers will see the miserable economy as a heroic achievement considering the COVID-19 pandemic, and the conservatives won’t even be able to blame him for wrecking the economy during a period of global prosperity.  Hopefully, in 2025 some as-yet-undetermined progressive – possibly Marcelo Ebrard, as we have suggested before in this space – will point this place in the direction of the future and start cleaning up the mess with a better worldwide economy to work with.

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