By ANTONIO GARZA
Former U.S. ambassador to Mexico and a legal consultant specializing in cross-border diplomatic, business and political expertise at White & Case.
Over the past few weeks, I’ve met with investors, corporate directors and foreign-policy focused groups who are all acutely interested in Mexico’s ongoing political transition. Regardless of the sector, everyone has questions on what to expect from the next Mexican administration.
Newly instated President Andrés Manuel López Obrador (AMLO) assumed office on Dec. 1 with overwhelming majorities in both houses of Congress, and ongoing uncertainty surrounding the new team, how they will govern and potential political risks.
These questions are heightened given that López Obrador has more political power than any Mexican president in nearly 40 years, which means an impressive ability to push his policy agenda forward.
Since the presidential handover at the start of this month, we are getting a better sense of how the new administration is envisioning its strategy — bringing about both greater clarity and more anxiety.
The first major sign of how the López Obrador administration is looking to govern came in late October with the Mexico City airport consultation. As part of this consultation, the new government polled the public on whether or not they should continue constructing the city’s new $13 billion airport.
Approximately 1 percent of total voters participated, and overwhelmingly rejected the project. In response, López Obrador announced the airport construction’s cancellation— sending shivers through the markets, launching a protest in Mexico City, and ultimately leading credit-rating agency Fitch to downgrade Mexico’s country outlook from stable to negative.
The administration’s response to these adverse reactions was to schedule more consultations. On Nov. 24 and 25, Mexican voters were asked to vote for 10 social programs (including training and scholarships for 2.6 million young people and doubling pensions for citizens over 68 years old), a new oil refinery and the much-discussed “Tren Maya,” a rail line that will connect five southern states. However, unlike the Mexico City airport project, which López Obrador vocally opposed in the consultation’s leadup, these projects had his backing. They were all overwhelmingly approved by the participating voters.
Mexico’s energy sector is another major point of uncertainty. In early October, a member of Congress from López Obrador’s National Regeneration Movement (Morena) party introduced a bill to merge Mexico’s energy regulatory commission (CRE) and national hydrocarbons commission (CNH) into the Energy Secretariat. This proposed move was immediately criticized by the private sector, as it would strip the two regulators of their autonomy and reduce the sector’s credibility in international markets. And more recently, a bill impacting banking fees brought on a significant and adverse market reaction. After taking office, AMLO announced that he would suspend all oil tenders for at least three years, until private companies in Mexico can show that they are investing and producing more oil and gas.
However, there are some bright spots, with the new team promising that all previous oil and gas contracts will be respected.
Meanwhile, AMLO’s team released its security plan last month, which revolves around eight primary themes. The first axis focuses on corruption — the new administration’s signature issue and dominate campaign theme — and promises to root out conflicts of interest and classify corruption as a serious crime.
In terms of addressing security, the plan also announced some shifts that included a focus on violence prevention, a potential amnesty initiative and a new National Guard force run by the Mexican military. The latter initiative has provoked pushback given the military’s continued involvement in security operations.
If there wasn’t enough uncertainty in Mexico, the bilateral relationship between Mexico and the United States poses its own challenges. While it appears that the three countries did sign a new NAFTA/USMCA agreement, the deal’s congressional passage is still fraught with political obstacles.
Antonio Garza is a U.S. lawyer who served is as his country’s ambassador to Mexico between 2002 and 2009. In recognition of his work, in 2009, the Mexican government bestowed on him the Águila Azteca, the highest award granted to foreigners. Prior to his appointment as ambassador, Garza served as Texas’ secretary of State from January 1995 to November 1997 and was also chairman of the Texas Railroad Commission. He is currently a lawyer at White & Case, specializing in cross-border issues.