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A Review of the First Year of Five Mexican Presidents


Photo: Scottsdale Bullion and Coin

By RICARDO CASTILLO

The word “recession” currently seems to be striking terror in the heart of most Mexicans. And given the humongous volume of antagonism President Andrés López Obrador (AMLO) is confronting, the word is even more threatening to his opponents.

Not only that, AMLO is fighting a war of economic terminology in which the truth is in the voice of the person uttering the economic concepts. And like every coin, it’s got two sides. On one we see the gloomy over-abundance of prophets of doom claiming the economy is heading for the boondocks, while on the other, no one is claiming victory, but then, there is always the hope that the sun will shine tomorrow and that the current economic deceleration will not develop into recession.

AMLO’s first year at the helm of Mexico, however, is not much different from the first year of the four presidents before him. We’re talking about the past 24 years. in which, for the first time in the nation’s seven-century long history, (starting 1325 with the Aztecs), Mexicans are enjoying a true democracy. Whether those presidents were either good, bad or ugly is for historians to decide, but the fact that unites them is that all four – five should I say – were democratically elected.

Since 1994, when Ernesto Zedillo was elected, and through the presidencies of Vicente Fox, (2000), Felipe Calderón (2006), Enrique Peña Nieto (2012) and. now. AMLO (2018) the common denominator has been a turbulent first year in power.

With Zedillo, it did not take long for things to go awry. Just 14 days into his six-year mandate, in December 1994, then-Treasury Secretary Jaime Serra Puche “floated” the value of the peso against the dollar, causing a significant devaluation and considerable capital flight. Two weeks later, Serra Puche “resigned.”  Zedillo had to spend 1995 cleaning up the mess Serra Puche had left behind, now historically known as the “Error of December,” which sent the Zedillo administration reeling into bankruptcy.

Zedillo, with the help of “Papa” Bill Clinton, eventually managed to level off the economy and handed over to Vicente Fox a stabilized government.

Fox, the first president in 70 years that did not belong to the monolith Institutional Revolutionary Party (PRI) and living proof that democracy was being respected in Mexico, had one heck of a time his first year — not as a result of administering the economy, but rather trying to find a cabinet to help him rule the nation. Being from the then-minority National Action Party (PAN), Fox did not have many options other than to resort to headhunting agents to finally make up his cabinet.

By that time, however, the threat of another “Error of December” was wiped out thanks to the intervention of the International Monetary Fund (IMF) and the World Bank, which established a solid macroeconomic policy that’s still being respected today.

And in terms of the Secretariat of the Treasury (Hacienda), Fox chose the right person to lead the Mexican economy in Francisco Gil Díaz, who did the full six-year term – from Dec. 1, 2000 to Nov. 30, 2006 – as secretary, creating a stability that remained protective of the macroeconomic concept of running the nation, which proved to be the right approach.

Beyond the thunderous and infamous (for loser AMLO) election that led Felipe Calderón to power on Dec. 1, 2006, the nation’s second PAN president enjoyed a three-year bonanza, thanks to the stability established by Fox – who did intervene in the electoral process – but Calderón still had a hellish first three months in power because AMLO and his backers of the Democratic Revolution Party (PRD) literally shut down Mexico City’s main thoroughfare Avenida Reforma at the start of Calderón’s mandate. Reforma is the heart of Mexico City, and the blockade definitely deeply affected the city’s economy.

Nevertheless “Chicago boy” economist Agustín Carstens led Hacienda well until 2009, when he switched jobs to direct Mexico’s central Bank. At the same time, the Gross Domestic Product plummeted by minus 6.2 percent. Maybe Calderón did not have a bad first year, but he suffered a disastrous third one from which the economy never fully recovered, dragged down by devaluations and the devastating U.S. property foreclosures crisis. Calderón had two more Treasury secretaries, Ernesto Cordero and José Antonio Meade. He finally delivered a stable macroeconomy to Enrique Peña Nieto.

Peña Nieto had a wonderful first year. A PRI stalwart, he managed to make a political pact with  both the PAN and the Democratic Revolutionary Party (PRD) – right and left – signing the now infamous “Pact for Mexico” in order to change the constitution and push through his two ideological staple reforms on education and energy. Peña Nieto managed to push them through Congress with support from all parties.

Yet under Peña Nieto, the dollar-peso parity slowly eroded from about 12 pesos per dollar to the  current 19 per dollar exchange. Even worse, since 2014, the rumblings of rampant corruption began to make noise particularly within the state-run oil giant Petróleos Mexicanos (Pemex).

Furthermore, by 2017, Bank of Mexico director Carstens skipped ship, moving to a private, well-remunerated international job. Under the Peña Nieto administration, with Carstens managing the macroeconomy, Mexico’s international reserves dwindled from the original $199 billion Calderón delivered down to the $173 billion AMLO inherited. Definitely, Peña Nieto went from a good first year to a horrific last year. being the most unpopular president in the democratic period of the nation.

Now in AMLO’s shift, we are back to what seems to be the inevitable routine of a “first-year crisis.” But it’s different now because AMLO has struck enmity with the international rating companies and is carrying out deeds that are not to the liking of many, such as the cancellation of the New International Mexico Airport (NAIM), the building a new oil refinery, trying to straighten up Pemex’s financial mess and making it pay up its nearly $110 billion mega debt, fighting with the Federal Electricity Commission over “leonine” contracts legally signed by gas pipelines construction companies, who want their money, and, as infomercials inevitably claim … much, much more.

But going back to the term recession, AMLO has claimed incomprehension from critics who insist that two quarters of nongrowth already constitute a recession. Also, AMLO has said that, even in recession, he’s getting results.

But please do not let me get ahead of the times. The fact is that AMLO’s first year as president of Mexico is far from over, so it is too early to review properly.

That, of course, will not stop the panic of his abundant detractors from running amok in panic. But apparently, that’s an expected reaction to the Fourth Transformation – as AMLO touts his mandate – mainly because, at present, the panicky folks still have not gotten the gist of what his government is leading up to, which is, in his terms, “for the good of the nation.”

 

 

 

 

 

 

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