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.
This past year has proven to be an interesting time to watch the political and economic dynamics across the Western Hemisphere. Elections have reshaped political realities, with new presidents and outlooks for Mexico and Brazil, and a new majority in the U.S. House of Representatives.
Throughout the region, other countries have systematically dismantled their democracies, with Daniel Ortega in Nicaragua continuing to crack down on the political opposition, Nicolás Maduro in Venezuela deepening his stronghold on power, and Juan Orlando Hernández in Honduras entering office this past January among allegations of electoral fraud. As these countries’ economic fortunes have plummeted and political risk levels spiked, millions of their citizens have fled into surrounding countries and north to the United States — creating another series of tensions that have dominated the news for much of the past few months.
Looking out to 2019, the region and the world don’t look any more stable, with many of the same challenges expected to continue. Trade skirmishes, market volatility and serious security issues are also likely to persist. While in the United States, President Donald Trump faces 17 investigations and a new head of the House Committee on Oversight and Government Reform is gearing up to shift the political status quo. And during the past year, the United States has continued to step away from any significant regional or global engagement and other nonregional actors will increasingly be all too happy to fill the void.
In Mexico, where I have lived and worked for 16 years, President Andrés Manuel López Obrador is forging ahead as the country’s first truly populist president in over 80 years. On Dec. 1, López Obrador was sworn in with a ceremony in Congress and a speech in Mexico City’s Zócalo. The goal, he and his team assert, is to foster Mexico’s “Fourth Transformation,” in line with the country’s independence, reform wars (1857-1861), and revolution.
While the Mexican president has been stylistically and, in some cases, operationally different from predecessors, we are still waiting to see what he has in mind for the big transformations. Earlier this month, he announced a 16 percent increase in the minimum wage, which is set to start on Jan. 1. Yet, as the new team aims for big changes, they will also increasingly bump up against structural barriers and opposition from interest groups and civil society.
Another visible shift has been López Obrador’s use of consultas (referendums) to poll Mexicans on select policy proposals. On Nov. 24 and 25, the then-transition team held its second consulta on 10 items, including the Tren Maya (a tourist train that will connect many of the Yucatan Peninsula’s tourist sites), an $8 billion oil refinery in Campeche, and a host of social programs. Turnout was low, with around 950,000 voters (approximately 1 percent of the electorate), but 90 percent supported the initiatives. The administration now has to navigate the mega-projects’ environmental impact, construction and financing.
Additionally, the team is still facing fallout from the first referendum — that led to the cancellation of Mexico City new airport — as a group of bondholders have refused the government’s buyback offer. Yet, the new team offered investors some encouraging news earlier this month, with markets responding well to their proposed budget.
In Mexico’s energy sector, López Obrador has announced his National Electricity Program. While the program is not yet public, the details that emerged suggest a much more state-centered approach than during the previous administration. Some of the notable proposals include not closing any of the state-owned electricity company’s plants, not raising electricity tariffs above inflation, and ending subsidies for private companies.
Over the past few weeks, there has been other big energy news. For clean energy, the López Obrador team abruptly suspended — less than 24 hours before the participants submitted their proposals — the fourth clean energy tender in order to review the auction. The president also announced that oil tenders will be suspended for three years until private companies in Mexico show that they are investing and producing more oil and gas.
López Obrador’s team has also slowly outlined its approach to address high violence levels. One of the principle parts of this strategy appears to be a new security agency: the National Guard. This National Guard will absorb parts of the federal, military, and Naval police, and will be based under the Army’s control. To coordinate security operations, the new government also plans to administratively divide the country into 266 zones, with Mexico’s different security elements working together in each zone. Putting the Army in such a prominent security role is an unexpected move for a president that campaigned on removing soldiers from the streets. It also highlights what’s been left out of the strategy, with little clarity over the future steps to reform law enforcement across the country.
Migration will remain a hot topic. Since entering office, the new team has focused on an ambitious development plan for Central America, which is an effort to invest in the region along the lines of a modern-day Marshall Plan. On Dec. 18, the United States announced a $5.8 billion commitment to this plan via public and private investment to be targeted toward improving security, governance and economic prosperity in Central America. However, the program may not be as dramatic as it seems at first glance. Most of the promised funds were already approved in previous U.S. budgets, and loans, not aid, will make up the remaining funding.
There are many issues that have yet to be defined. One important example is what comes next in terms of addressing corruption. López Obrador made anti-corruption a defining issue on the campaign trail, but to date, there is still not a clear path forward for fully implementing the national anti-corruption system or for moving ahead with an independent Prosecutors Office. These steps will be particularly important to watch, as they are top priorities for Mexico’s civil society.
As we get ready for 2019, everything indicates increased volatility. Uncertainty seems to have become the new norm and the only certainty is more change.
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.