by Dr. Andrew Selee

By almost any indicator, Mexican President Andres Manuel Lopez Obrador has had a rough first year in office. The economy has slipped into recession and business confidence is low. Mexico’s homicide rate is at an all-time high. Between the future of the North American Free Trade Agreement (NAFTA), which is finally becoming somewhat clearer at year’s end, and a simmering dispute over migration policy, the relationship with the United States government has been difficult.

Nevertheless, President Lopez Obrador is doing well in the polls. He has consistently had over 60 percent support, and sometimes much more. Mexicans remain convinced that he will address the country’s issues, especially poverty and inequality. With a divided opposition, Mr. Lopez Obrador enjoys the kind of political dominance vis-a-vis Congress and state governors that hasn’t been seen in Mexico since the early 1990s, when the country was still a one-party state.

How can we explain this apparent paradox? On one hand, President Lopez Obrador has little tangible to show after a year in charge. Yet on the other, he remains wildly popular, and almost completely uncontested in his power and influence.

To a large degree, his popularity stems from the way he reshaped Mexican politics, creating a sense that elected officials are not as distant from the public as they used to be. Much of this is his style. He genuinely enjoys engaging with average Mexicans and travels frequently to meet with them in small towns across the country. But there is some substance to it as well. This past year, President Lopez Obrador has launched a series of social programs that bypass state and local governments and connect him directly with the people he wants to help.

During the next 12 months, he will have to pivot from symbolic politics to policy decision-making on economic and security issues if he is to jump-start the sluggish economy and contain rising violence. And he will have to do so in the middle of unpredictable U.S. elections, in which Mexico may well feature prominently. But for now, most Mexicans seem inclined to give him the benefit of the doubt and believe that he will eventually deliver on his promise to create a more equitable society.

Economic slowdown

President Lopez Obrador’s hope for addressing poverty and reducing inequality rests on achieving enough growth to sustain distributional policies and spur new investment in the poorest areas of the country. But through the first three quarters of the year, the economy has not grown in Mexico, pushing the country into recession. Growth prospects for 2019 are modest, in the range of little more than one percent.

Mexico’s business cycle has generally tracked that of the U.S., which makes explaining this recession particularly difficult. The U.S. economy has been growing rapidly and, taking advantage of the U.S-China trade conflict, Mexico overtook both China and Canada as leading trade partner of the American colossus in 2019.

Business confidence, however, appears weak at the moment due to a series of decisions made early on in the Lopez Obrador administration. Perhaps the most significant was his decision to cancel the construction of a $13 billion airport that was already partly built, on the grounds that the project was corrupt and bad for the environment. The Mexican government wrote off billions of dollars of sunk investment in the project. President Lopez Obrador also announced plans to limit future private investment in the oil and gas sector, after an ambitious opening of the energy industry under the past administration.

Austerity in the public sector may be putting yet another brake on growth. In an effort to reduce waste and maintain a low deficit, the Mexican president has engineered a very tight budget for his first year in office. He has cut expenditures across the government even as he created a series of new social programs that provide employment to agricultural workers and youth, scholarships to students, and additional retirement support to the elderly.

However, it is worth noting that Mr. Lopez Obrador has not reversed previous private sector investments in the oil and gas sector, as some feared, or entirely precluded future investments. He has generally maintained a business-friendly environment in the country despite the airport decision, even resolving a major dispute around the operations of new gas pipelines. He appears to want to end the cozy relationship between the state and private sector, but without scaring off investment. This is a fine line to walk, and it is still unclear if he can pull it off.

For now, the results have not been good, but that could well change in 2020 as some of the effects of his social investments are felt in the economy. This gamble depends on the global economy – the U.S. economy in particular – continuing to do well.

Crime on the rise

As 2019 draws to a close, it becomes clear that this will go down as Mexico’s most violent year in modern history. In the first six months of the year, homicides rose by 5 percent over the same period in 2018, which had previously been the most violent year on record, and violence shows no signs of abating. Homicides are on pace to reach a rate of around 30 per 100,000, which keeps Mexico among the most dangerous countries in the world. The ability of the son of famed drug trafficker Joaquin “El Chapo” Guzman to evade capture in October by mobilizing hundreds of henchman against the Mexican military and police at a moment’s notice, followed by the murder of six children and three women in November, have vividly highlighted the situation.

Some of the growing insecurity is the result of changing drug markets in the U.S., as synthetic opioids replace other illicit narcotics as the latest drug of choice, shaking up the supply and transit markets in Mexico. But the Lopez Obrador administration has so far been unable to develop a coherent public security strategy to address the threat that organized crime groups pose to Mexican society. Despite holding public-security cabinet meetings at 6 a.m. each day to monitor developments and coordinate strategy, no clear direction has emerged.

During the presidential campaign, Mr. Lopez Obrador often said that he supported abrazos (hugs) instead of balazos (gunfire), suggesting he would address insecurity by fighting poverty and youth unemployment. However, this perception of poverty as a driver of crime is almost certainly misplaced. Mexico’s insecurity has been driven by organized crime groups tied to international drug trafficking. They may use unemployed youth as enforcers for their business, but their incentives are driven by global demand for illegal narcotics and Mexico’s weak rule of law. While investments in anti-poverty programs are welcome on their own merits, they will do little to counteract the broader incentives driving criminal enterprises in Mexico.

So far, the Mexican government has been unsure how to pursue the structures of criminal groups or how to invest in improving local policing and the judicial system, which could help turn the tide against organized crime. Cooperation with the U.S. continues at an operational level, but there has been little high-level strategizing with the Trump administration on how to degrade the operations of these criminal groups on both sides of the border, since they live off the profits of drug sales to U.S. consumers. Crime could well become President Lopez Obrador’s Achilles’ heel if he doesn’t find a way to address it more effectively over the next year.

Difficult neighborhood

Bordering the U.S. has always been one of Mexico’s greatest challenges, and often one of its greatest opportunities. Mr. Lopez Obrador has had to contend with the administration of U.S. President Donald Trump, who came to office using Mexico as a political foil. After years of U.S. presidents striving for good ties with Mexico, Mexican presidents could count on a complex but productive relationship. President Lopez Obrador, however, faces a changed reality north of the border.

These difficulties came to a head in May 2019, as President Trump tweeted that he was ready to impose tariffs on Mexico if its government did not stop migration from Central America. There had been an exponential increase in the number of Guatemalans, Hondurans, and Salvadorans crossing the U.S.-Mexico border, and Trump blamed his Mexican counterpart for allowing them to pass too easily.

After days of intense negotiations in early June, the Mexican government agreed to put significant effort into apprehending and deporting third-country nationals who crossed their southern border illegally, and tasked thousands of National Guard troops with implementing the policy. In addition, the Lopez Obrador administration also agreed to take thousands of migrants awaiting their U.S. immigration hearings back into northern border communities to await their day in court. These two measures, along with a few others implemented unilaterally by the Trump administration, served as a significant deterrent, and migration numbers dropped dramatically at the U.S.-Mexico border after the agreement. Yet images of Central Americans living in tent communities on the northern border or in crowded detention centers on the southern border raised concerns among Mexicans about the wisdom of these measures.

Meanwhile, the outgoing Pena Nieto government, with backing from Mr. Lopez Obrador, successfully negotiated a new trade agreement with the United States and Canada to replace the long-standing NAFTA. This new agreement, the United States-Mexico-Canada Agreement (USMCA), languished in the U.S. Congress due to opposition from labor unions and Democratic lawmakers. A sudden breakthrough in early December has likely cleared the path for fast passage in all three countries in late 2019 or early 2020, after a series of concessions on labor rights by the Lopez Obrador administration.

As the U.S. heads into presidential elections next year, Mexican government officials are rightly worried that both migration issues and the fate of the USMCA could prove fertile ground for political demagoguery by U.S. politicians, especially (but not exclusively) Mr. Trump himself. In particular, any rise in illegal immigration could easily lead to a new round of U.S. demands on Mexico. Dealing with the neighbor to the north will remain a constant challenge for President Lopez Obrador.

Reinventing politics

Despite adverse news on the economy and public security and a rocky relationship with the Trump administration, Mexican President Andres Manuel Lopez Obrador remains wildly popular. Despite critics’ warnings that the sluggish economy and growing public insecurity will undermine his administration, his popularity shows no signs of abating.

Mr. Lopez Obrador has touted his government as a change of regime, not merely of administration, and called it Mexico’s “Fourth Transformation,” following three other major periods of transformation in the country that defined the nation as it is today. He has argued that his time in office will create a truly democratic political system and an inclusive economic policy that benefits all Mexicans.

Mexico’s four transformations

The three previous periods of transformation, according to Lopez Obrador, are independence from Spain; the “Liberal Reform” period in the 1860s which instilled separation of church and state and created a public education system; and the period after the “Mexican Revolution,” which brought agrarian reform and a massive extension of education in the 1920s and 1930s.

So far, it is hard to find concrete elements that would yet support this as a transformational period, but there is no question that President Lopez Obrador is a master of symbolism who changed Mexicans’ perception of politics. After years in which heads of state have talked about “building institutions” and creating a “modern Mexico,” but have allowed massive corruption – extremely visibly so under the past administration – the current president has succeeded in crafting a government that at least seems to be closer to average citizens.

First of all, there is no question that Mr. Lopez Obrador himself is personally austere, in stark contrast with the Pena Nieto administration, which was perceived as allowing a great deal of excess if not outright corruption. He travels on commercial airlines with no visible security detail, suggesting a man-of-the-people approach after years of distant leaders who were surrounded not only by guards but layers of pomp. His willingness to face the cameras every day for a press conference reinforces his image of direct engagement with average Mexicans.

President Lopez Obrador has also tackled Mexico’s longtime decentralization of power, which resulted in fiefdoms run by governors, mayors, and regional strongmen. He has done this in part by designating a presidential “delegate” in each state, who responds directly to the president and has ultimate responsibility for making decisions on public resources that are spent locally. This has allowed him to make resource distribution more efficient in some cases and to bypass political negotiations with local elites in many others.

He has also started a series of social programs that reach directly from the presidential office to local communities. These include jobs for agricultural workers to plant trees in poor areas of the country; a major employment program for young people; a college scholarship initiative; and a monthly pension for seniors. All of these have been implemented quickly and are scaling up fast, giving the president a role in the lives of voters, often improving their lot in substantial ways.

There is a risk that this centralized approach to development in a country as large and complex as Mexico may lend itself to new forms of clientelism and patronage, and a vastly empowered central government with few checks and balances. These are real concerns, especially with a divided opposition and only nascent regulatory and judicial institutions that can check central power. But since the traditional, more decentralized system of governance operated through local and state governments reliant on patronage, it is unclear whether most citizens see Mr. Lopez Obrador’s centralized approach as a danger or simply a more efficient way of implementing social policy.

Scenarios

The Lopez Obrador administration will have to see real economic growth and contain the worst excesses of organized crime groups if this presidency is to be truly transformational. However, President Lopez Obrador does seem to be enjoying sustained popularity even in the middle of a difficult economic and security picture. Predictions that he will soon lose support are probably misplaced. His ability to bypass local and state governments – and local and regional strongmen – by implementing simple, centrally controlled social programs, and his perceived accessibility and simplicity are huge assets that have helped him build a direct channel between public power and everyday people.

He is likely to double down on this in the future, and some of these measures may, in fact, have perceptible effects on poverty and economic growth. Over time, Mr. Lopez Obrador will probably develop a more nuanced, place-based strategy for dealing with crime, built on his intimate knowledge of the country, that can at least contain the worst excess of criminal groups.

The greater danger in Mexico is not of a coming meltdown where the economy goes backward and violence explodes, but rather a creeping authoritarianism that is common to populist governments.

President Lopez Obrador is committed to change and has genuine popular support. This, combined with the lack of a coherent opposition, allows him to reinvent government to respond to his demands rather than to institutional structures. Decisions on who receives social programs are increasingly centralized and run out of a database of eligible candidates controlled in the president’s office. The state delegates, who oversee public resource distribution, have helped curb the worst excesses of corrupt local and state governments, but they are themselves open to corruption over time. And any public security strategy based on controlling crime through national measures alone will fail to build the institutional structure – trustworthy local police and courts – needed to establish rule of law in the long term.

Mexico is going through a needed centralization under President Lopez Obrador, but it may come at the expense of democratic institutions. Even more than sluggish growth or uncertain security strategies, this may be the greatest threat that Mexico faces. The country may see a major transformation, perhaps even on par with other periods in history, but it may not be a fully positive one.

Dr. Andrew Selee is the President of the Migration Policy Institute and the author of Vanishing Frontiers: The Forces Driving Mexico and the United States Together (PublicAffairs, coming in June 2018).

Source: GIS Reports