How Mexico became a failed state
Author
of Asia Times’s wildly popular series “Demolition of Mexico’s economy
and democracy” says it’s even worse now: Country has pretty much gone to
hell in a hand basket under leftist, primitivist president
Manuel Suárez-Mier’s series on the demolition of Mexico’s economy and democracy ran May 28 and May 29. This article is a continuation:
Mexico’s president has permitted the violence that has raged for
years in many parts of the country, including areas adjacent or close to
its border with the United States, to become far worse. The current administration of President Andrés Manuel López Obrador
declared from its inception that it had suspended hostilities against
transnational criminal organizations, switching to “embraces and not
bullets” (abrazos y no balazos).
AMLO, as the president is known, based that decision on the notion
that it was best to attack the root causes of narco-violence – which he
attributes to poverty and, specifically, to lack of opportunity for
millions of uneducated youths in the legal labor market.
The result has been an unprecedented explosion in violence that has
claimed close to 33,000 lives in the first eleven months of AMLO’s
tenure. That’s nearly twice the rate recorded under the previous two
governments, which had declared war on cartels. The death toll of that
war had reached 250,000 in 12 years.
Last week marked a climatic defeat of AMLO’s hapless “security
strategy”: A botched operation to capture a son of the notorious drug
lord Joaquín El Chapo Guzmán, who was recently condemned to
life in prison in the US, unexpectedly encountered a mighty underworld
force that surfaced to defend Ovidio Guzmán López. Junior’s defenders
for a full day held hostage a city of almost a million inhabitants,
forcing the Mexican armed forces to retreat and release the prisoner.
If before this disaster it appeared that parts of Mexico were under
the full control of the drug dealers, now it is clear that the whole
country has become a failed state where anti-systemic forces can do as
they wish in front of a clueless government that prefers to be a
bystander and avoid performing its most basic obligations.
The United States has been worried about a situation like this for
quite some time. In 2008 a report about Pakistan and Mexico from the US
Joint Forces Command warned that, in terms of worst-case scenarios, “two
large and important states bear consideration for a rapid and sudden
collapse.”
A comedy of errors surrounds this whole chapter, as in the many other
instances in which AMLO and his abettors have piled failure upon
failure in government services, not only in the security area but in all
aspects of civilian life in which the federal government intervenes.
In the absence of a full official explanation of the Culiacán
debacle, what is known is that the US Drug Enforcement Administration
prodded AMLO’s government to capture El Chapo’s son for extradition, and
that the operation ensued without the most elementary intelligence and
coordination protocols between the agencies involved.
Meanwhile, the President was not available since he’d ditched all the
government’s executive planes and was traveling commercial to remote
areas of the south of the country to attend “native-Mexican” ceremonies,
which he enjoys. He now claims he had never been consulted.
Without his presence, the “security cabinet,” which includes the
heads of the army, navy and intelligence agency and is led by the
secretary of public security, a mediocre political upstart without any
credentials for the post, took all the decisions that led to the
disaster – and then lied to the media, trying to cover their clumsiness.
After the botched capture attempt, in which innocent civilians
including family members of the military died, no one in the government
has resigned or assumed the responsibility for the failure.
When AMLO finally reappeared from his immersion bath of indigenous
mumbo-jumbo he declared,
“I support fully the decisions taken that saved
many lives.”
That was a predictable response from someone who has entrusted the
country’s public education to a Trotskyite teachers’ union that has
blackmailed the government for decades – and who also has yielded to all
the demands of the “students” of three dozen teachers’ colleges
throughout the country that teach Marxist propaganda, guerrilla methods
and the production of home-made explosive and other warfare devises (not
unlike militant Islamist madrassas), and that regularly kidnap public
transportation buses and their drivers to go and create anarchic havoc
where needed.
AMLO’s failed state has botched not only public security and education, but also:
- healthcare, by depriving the system of necessary drugs and regular payment of doctors and nurses;
- the productive agricultural sector, by discriminating in favor of communal and inefficient peasants and raising the prices of water, seeds and other inputs to the private, efficient ones;
- energy reform, which he canceled, that had opened the doors to private sector investment in oil and electricity, areas where the government lacks the resources to go it alone;
- modern science and technology from the “capitalist outside,” by canceling grants and fellowships in order to prioritize “indigenous” technical methods.
The government became utterly ineffectual by firing almost all its
technocrats, trained in the best universities of the world, and
replacing them with ignorant but loyal apparatchiks who frequently know
nothing of the responsibilities and demands of their new jobs.
The head of the huge government-owned oil monopoly Pemex, Mexico’s
largest corporation, is an old chum of AMLO’s who studied agronomy in a
rural school in Tabasco, which is also the president’s home state.
The head of the electricity monopoly, also owned by the state, is an
82-year-old veteran of the dirtiest politics practiced in Mexico in the
1980’s, a man who lacks any knowledge of electricity – and who cannot
touch US soil because of his alleged participation in various crimes,
including the murder of a prominent journalist.
The forced “savings” that are killing the efficiency and
effectiveness that the government once had are being rerouted as gifts
to various segments of the population to solidify adherence to and
support for the president and his movement, which will in turn pay
handsomely at elections time.
That is how AMLO came to head the government of Mexico City a couple
of decades ago and how, despite a dismally bad job, he will remain in
power at least until 2024.
The only part of the government that has not yet collapsed is
macroeconomic and financial management, although the first secretary of
finance in AMLO’s administration did resign in disgust over the
irrational whims of the president as he conducted policy.
That finance secretary’s successor and the central bank have more or
less kept the public finances in order. However, it is clear that this
will not suffice to make up for the destruction AMLO has undertaken.
His policies have included canceling construction of Mexico City’s
new airport as well as such other hare-brained projects as a train
going around the Yucatán Peninsula, destroying fragile local habitat,
and a new oil refinery in Tabasco built by Pemex, which is on the verge
of bankruptcy, when there is a refining glut in the world and four
world-reputed contractors said it could not be built at the cost that
AMLO set.
The accumulation of all these strains on a budget that cannot grow,
since the economy is at a standstill and recession is lurking around the
corner, will eventually break the bank and incur large fiscal deficits.
The so-far autonomous central bank will refuse to finance with its
credit, forcing the government to go to the financial markets, which
will surely lead to the downgrading of Mexico’s credit to junk status,
to major capital outflows and to a fast depreciation of the currency.
Mexico’s status as a failed state will only get worse with time, in a
vicious cycle that characterizes all economic and political systems
when they are led to the brink.
The consequences will be dire, particularly for the United States,
because its neighbor to the south, descending into chaos, will bring all
sort of calamities: unbridled drug and migration flows from third
countries but also from Mexicans fleeing their own country; massive
capital losses for domestic and foreign direct investors in the country;
a welcoming place for terrorists from all over, who would take
advantage of the anarchy along the United States’ southern border to go
north.
When we think about what’s impressive here, it is the sheer amount of devastation of a large country (14th in GDP; 135 million people) that a dogmatic, self-centered, narcissistic and ignorant leader can inflict in such short time.
Manuel Suárez-Mier is an economist in residence at the American
University in Washington and a consultant on Latin American nations’
financial and economic issues. He holds a PhD in economics from the
University of Chicago.
MexicoAMLO|Opinion
People
take part in the so-called "March of Silence" against Mexican President
Andres Manuel Lopez Obrador's policies in Mexico City, on May 5, 2019.
Photo: AFP / Pedro Pardo
The demolition of Mexico’s economy and democracy (I)
This is the first of a two-part series on Mexican President Andrés Manuel López Obrador’s first six months in office
Just
as the new president of Mexico, Andrés Manuel López Obrador, also known
as AMLO, was about to be inaugurated six months ago, I wrote in this space
about the costs that his misguided and rash decisions had already
imposed on the country even before he formally took the oath of office.
After a half a year on the job, there is no doubt that he is persevering in installing a personal fiefdom, imposing broad government control of the economy, obliterating independent institutions and relentlessly attacking the press, the checks and balances that allow democracy to function. His tenure will lead the country to complete disaster.
Super delegates
The method AMLO devised to neuter Mexico’s federal pact is by personally naming “super-delegates” in each state to oversee the disbursing all federal budget funding. The government officials allocate funds directly to the specific spending projects of the central government, circumventing the mandate of locally elected governors, a scheme which violates the laws that regulate the budgeting and spending processes between the states and the federal government.
The “super-delegates” have become de-facto local officials but respond only to AMLO. They have not been popularly elected for anything and are in all cases politicians that belong to AMLO’s National Regeneration Movement political party, popularly known as Morena. The idea is that by the time there are elections for governor in the states, these loyal followers with the checkbooks at their disposal will be in an unbeatable position to win governorships.
Supreme Court and Congress
In the case of the Supreme Court, AMLO has already been able to name three loyal partisans to serve on the eleven-member bench. Under the Mexican system, justices on the high court serve terms limited to 15 years and there were several vacancies when he took office.
A qualified majority of the Senate is needed to approve nominees for the court, but the catch is that if it rejects them twice, as was the case with AMLO’s candidates, the president can name them directly, which is exactly what he did.
The competence of the new justices was questioned by legal experts and the likelihood of conflict of interest was highlighted. One of the newly appointed justices is the wife of AMLO’s favorite contractor and main opponent to the construction of the long-planned, and now-canceled, new Mexico City airport. The cancellation will cost the country around $500 billion, or 4% of GDP.
AMLO already has a majority in Congress, which has helped him pass most of the laws that he has proposed, but his party, Morena, continues to lure opposition legislators into its fold with all sorts of “inducements.” The efforts may succeed in creating a Morena super-majority that would allow AMLO to modify the Constitution at will.
Control over military
In order to acquire an effective control over the armed forces, which he badmouthed and even insulted throughout his decades-long political campaign, he has entrusted them with enormous power and responsibilities, unheard of in a democratic republic. They are now in charge of creating a new National Guard, nominally under civilian authority, which will combine personnel of the military police forces with that of the federal police, a civilian corps years in the making that is being terminated.
The armed forces will also be directly in charge of building a new airport in the main air force base in the country, some 50 kilometers away from the old Mexico City airport, which also will continue to serve, despite its decrepitude and conflicting air space with the proposed new airport.
They are being entrusted too with the development of a huge piece of land in Mexico City that was part of the largest army installation in the center of the country. The use of the military in civilian tasks on top of lucrative jobs for the top brass were taken from Hugo Chavez’ playbook in Venezuela, an effective tool to neutralize their potential opposition to the regime.
Undermining independent institutions
AMLO has also undertaken what is, so far, a sideways assault on the many autonomous entities created in recent years to ensure a level playing field between a powerful government, civil society and the private sector.
The Mexican president hates such organizations because they are independent and he has harassed them by lowering salaries drastically. He began dismembering the Energy Regulatory Commission, the arbiter in the oil and electricity sectors between the new private sector participants, state monopolies and the government, by naming inept candidates – also rejected twice by the Senate – to fill vacancies.
He has similar intentions with the electoral authority that finally rendered Mexican elections credible and fraud-free; the telecommunications regulator, in charge of ensuring equal access and competition in the sector; the human rights commission, which has played a crucial role in defending individuals against government abuse and misuse of power; and particularly, the entity in charge of assuring government transparency that AMLO blames of being “an accomplice to the neoliberal corrupt regimes.”
He has been more careful with the country’s central bank, a cornerstone of the country’s economic stability in the last 25 years, but he has already named two of its five governors. Although they are regarded generally as competent economists, they are not experts in monetary policy.
Without the checks and balances of an independent judiciary, Congress, state governors and local authorities, autonomous entities and a free press, the newly-empowered executive in Mexico is continuing to consolidate power and is resorting to the armed forces for non-military objectives. It is the perfect recipe for a debacle.
Manuel Suárez-Mier is an economist and former Mexican government and central bank official. He has taught at universities in Mexico and the US for 40 years.
After a half a year on the job, there is no doubt that he is persevering in installing a personal fiefdom, imposing broad government control of the economy, obliterating independent institutions and relentlessly attacking the press, the checks and balances that allow democracy to function. His tenure will lead the country to complete disaster.
Super delegates
The method AMLO devised to neuter Mexico’s federal pact is by personally naming “super-delegates” in each state to oversee the disbursing all federal budget funding. The government officials allocate funds directly to the specific spending projects of the central government, circumventing the mandate of locally elected governors, a scheme which violates the laws that regulate the budgeting and spending processes between the states and the federal government.
The “super-delegates” have become de-facto local officials but respond only to AMLO. They have not been popularly elected for anything and are in all cases politicians that belong to AMLO’s National Regeneration Movement political party, popularly known as Morena. The idea is that by the time there are elections for governor in the states, these loyal followers with the checkbooks at their disposal will be in an unbeatable position to win governorships.
Supreme Court and Congress
In the case of the Supreme Court, AMLO has already been able to name three loyal partisans to serve on the eleven-member bench. Under the Mexican system, justices on the high court serve terms limited to 15 years and there were several vacancies when he took office.
A qualified majority of the Senate is needed to approve nominees for the court, but the catch is that if it rejects them twice, as was the case with AMLO’s candidates, the president can name them directly, which is exactly what he did.
The competence of the new justices was questioned by legal experts and the likelihood of conflict of interest was highlighted. One of the newly appointed justices is the wife of AMLO’s favorite contractor and main opponent to the construction of the long-planned, and now-canceled, new Mexico City airport. The cancellation will cost the country around $500 billion, or 4% of GDP.
AMLO already has a majority in Congress, which has helped him pass most of the laws that he has proposed, but his party, Morena, continues to lure opposition legislators into its fold with all sorts of “inducements.” The efforts may succeed in creating a Morena super-majority that would allow AMLO to modify the Constitution at will.
Control over military
In order to acquire an effective control over the armed forces, which he badmouthed and even insulted throughout his decades-long political campaign, he has entrusted them with enormous power and responsibilities, unheard of in a democratic republic. They are now in charge of creating a new National Guard, nominally under civilian authority, which will combine personnel of the military police forces with that of the federal police, a civilian corps years in the making that is being terminated.
The armed forces will also be directly in charge of building a new airport in the main air force base in the country, some 50 kilometers away from the old Mexico City airport, which also will continue to serve, despite its decrepitude and conflicting air space with the proposed new airport.
They are being entrusted too with the development of a huge piece of land in Mexico City that was part of the largest army installation in the center of the country. The use of the military in civilian tasks on top of lucrative jobs for the top brass were taken from Hugo Chavez’ playbook in Venezuela, an effective tool to neutralize their potential opposition to the regime.
Undermining independent institutions
AMLO has also undertaken what is, so far, a sideways assault on the many autonomous entities created in recent years to ensure a level playing field between a powerful government, civil society and the private sector.
The Mexican president hates such organizations because they are independent and he has harassed them by lowering salaries drastically. He began dismembering the Energy Regulatory Commission, the arbiter in the oil and electricity sectors between the new private sector participants, state monopolies and the government, by naming inept candidates – also rejected twice by the Senate – to fill vacancies.
He has similar intentions with the electoral authority that finally rendered Mexican elections credible and fraud-free; the telecommunications regulator, in charge of ensuring equal access and competition in the sector; the human rights commission, which has played a crucial role in defending individuals against government abuse and misuse of power; and particularly, the entity in charge of assuring government transparency that AMLO blames of being “an accomplice to the neoliberal corrupt regimes.”
He has been more careful with the country’s central bank, a cornerstone of the country’s economic stability in the last 25 years, but he has already named two of its five governors. Although they are regarded generally as competent economists, they are not experts in monetary policy.
Without the checks and balances of an independent judiciary, Congress, state governors and local authorities, autonomous entities and a free press, the newly-empowered executive in Mexico is continuing to consolidate power and is resorting to the armed forces for non-military objectives. It is the perfect recipe for a debacle.
Manuel Suárez-Mier is an economist and former Mexican government and central bank official. He has taught at universities in Mexico and the US for 40 years.
MexicoAMLO|Opinion
Mexican President Andres Manuel Lopez Obrador attends an event marking the start of construction of a new international airport at the Santa Lucia Air Force Base outside of Mexico City, months after cancelling work on another airport that was already one-third complete. Photo: AFP / Pedro Pardo
The demolition of Mexico’s economy and democracy (II)
This is the second of a two-part examination of the administration of Mexican President Andrés Manuel López Obrador.
Yesterday, I wrote
about Mexican President Andrés Manuel López Obrador’s (AMLO) efforts
since he took office last December to consolidate power and undermine
the country’s democratic institutions. In this second installment, I
detail the scale of incompetence evident in his administration as well
as his doomed security and economic policies.
.
An increasingly inept administration
AMLO has said that the ills of Mexico stem from a “neoliberal”
economic model, which he asserts has ruled the country since 1983. As
such, one of his first priorities was to get rid of the “patrician”
technocrats by firing them directly, in most cases breaking prevailing
labor laws.
He has also decreed that no one in the public sector can earn more
than the president, including employees of the federal government, as
well as members of Congress, the judiciary, state-owned enterprises and
autonomous state entities. At the same time he lowered his own salary to
US$5,596 per month (at the prevailing exchange rate at the time of
writing).
As was to be predicted, that edict meant that thousands of well-paid
and highly competent technocrats, most of them with degrees from the
best universities of the world, left the public sector and many also
left the country.
On top of the devastating loss of human capital, the new government
has placed patently incompetent – but loyal – apparatchiks in virtually
all high-ranking jobs in the public sector. One example suffices to
illustrate this disaster: the chairmanship of Pemex, Mexico’s oil
conglomerate and the country’s largest corporation, was entrusted to
AMLO’s old pal Octavio Romero, an agronomist from a fourth-tier
provincial university in Tabasco, the home state of AMLO.
The list of inept or sinister characters that populate this
administration is unprecedented and it has already had dire consequences
for the country and its economy. Those that are somewhat competent –
though not when compared to previous administrations – are overwhelmed
or, worse, charged with impossible tasks for which they do not have the
personnel, talent or resources to achieve. A few examples illustrate
this situation.
All the purchases of the public sector have been centralized in the
Secretary of Finance’s office of administration (Oficialía Mayor, in
Spanish), which represents a huge bottleneck for a well-functioning
economy. Some of the results have been devastating:
- – The country had severe gasoline shortages at the pump level in January and February because the order to import the necessary amounts was rescinded by someone who didn’t understand the consequences. AMLO used the real problem of illegal extractions from pipelines as a cover, but it had nothing to do with the lack of fuel.
- – For more than a month earlier this year the splinter union of teachers – not its main union, the SNTE, but a highly radicalized faction of rebellious teachers with a stronghold in the poorest states – decided to block the passage of railroads near several crucial seaports, causing billions of dollars in losses to business. After failing to limit the damage, the government caved in to demands that have dashed the hope of much-needed education reform.
- – Only two weeks ago, Mexico City, which has a long record of severe pollution due to its geography, was choked with the worst air in its history as the result of the dry season and an unusual proliferation of forest fires. It turned out that the Ministry of Finance had cut the budget to entities in charge of firefighting and the special program to hire extra workers just when the fire season was arriving. Hasty and misguided cost-saving such as this has been used to fund AMLO’s populist hand-outs and pet infrastructure projects.
- – Just last week the CEO of the Social Security Institute – the IMSS is an institution that doubles as medical-care provider and pension fund – resigned with a nine-page letter where he describes in detail how the IMSS budget was mercilessly axed, making an already mediocre service provider much worse. Other health sector entities have suffered a similar fate and the country is now facing a crisis of scarcity of medical attention and supplies.
Doomed security and anti-corruption policies
In his eagerness to change everything, AMLO decided to destroy 18
years of experience in developing a national police force capable of
restoring security to the nation and invented, instead, a national guard
that is nominally a civilian force but will be run by the military.
The force is organized like the army and most of its members will
come from the military. The operational logic of this new force is
designed to be territorial and not functional, very much like how
military bases are deployed throughout the country. There is no mention
of units performing key jobs of intelligence, investigation and forensic
science, as in the now-defunct federal police.
There are no incentives for the state and local police forces to
improve, and some experts believe that this will lead to a substitution
of the local forces by the National Guard, entailing more
centralization. The civilian command of the guard is in the hands of one
politician with no relevant experience to speak of.
One of AMLO’s guiding principles is not to fight transnational
criminal organizations since he attributes their rising power to the
precarious economic conditions that resulted in poverty in many parts of
the country. He expects, in return for a de facto truce with drug
cartels, a decrease in violence. So far, he has fulfilled his part of
the deal, while organized crime has increased its activities rendering
the first semester of AMLO’s tenure as the bloodiest in the country’s
history.
Regarding corruption, AMLO’s attitude is equally naïve. Since he
declares himself to be personally honest, that means that everyone
around him must be the same. Meanwhile, 85% of the contracts of the
public sector and its enterprises have been granted to suppliers without
competitive bidding, far more than any previous administration.
With this careless procurement process, much lower salaries for the
bureaucracy and no transparency or oversight mechanisms, corruption is
sure to flourish as never before.
How is the economy doing?
All the indicators are that the economy is screeching to a halt as
there is no private investment and government spending is down
substantially. The key economic problem is uncertainty, mainly from two
sources: lack of confidence in the new administration and its economic
strategy, and doubts about the viability that the revised North American
Free Trade Agreement will be ratified by the US Congress.
So far, public finances have remained under control, but only due to
the savage cutting of spending by slashing salaries, firing people and
radically cutting crucial government functions, as illustrated above.
But this will not be sufficient to support the spending whims of AMLO
and his absurd projects, all of which will demand an increase in
resources that will have to come from deficit financing.
While the value of the Mexican peso has remained relatively stable in
recent months due to extremely tight monetary policy, that will all
change when rating agencies downgrade Mexico and strip it of its
investment grade rating. When this happens in the second half of this
year, as I expect, the exchange rate will sink as portfolio investment
flees the country in massive capital flight.
Opinion polls that gave AMLO an astonishing approval rating of 80%
after his first 100 days in office have finally started to fall. As more
people suffer the direct consequences of this government’s ineptitude,
popular support will surely plummet.
Manuel Suárez-Mier is an economist and former Mexican government
and central bank official. He has taught at universities in Mexico and
the US for 40 years.