Mexico’s Economic Deceleration Due to Investor Mistrust of President
By RICARDO CASTILLO
Fear does not ride on a burro; it flies at the speed of sound!
And spreading fear of President Andrés Manuel López Obrador’s (AMLO) economic policies seems to be the leading reason that Mexico’s Gross Domestic Product (GDP) has slumped markedly, to the point of reaching a minimal growth of 0.1 percent for the second quarter of 2019.
But who are the fearful and what makes them threatening to economic growth? They are most definitely the host of extremely conservative corporations that have met with AMLO and promised him – as the Mexican adage goes – “the sun, the moon and the stars” in terms of investment. But in the end, they are withholding their investment plans, taking a watch-and-wait approach, causing the obvious economic stagnation Mexico has slumped into this year.
Don’t think that AMLO or the financial wizards surrounding him are unaware that the destructive equation of “no confidence, no investment” is beginning to take its toll.
On the morning of Wednesday, Aug. 7, a Twitter message written by Finance (Hacienda) Secretary Eduardo Herrera went viral because, contrary to the phrase AMLO uses almost on a daily basis to describe his “opponents” claiming that “conservatives are hypocrites,” Herrera appealed to investors’ common sense. The tweet read:
“Yesterday, I got together with Poncho Romo and we agreed about the great importance private investment plays in the nation’s growth.”
Of course, Poncho Romo is none other than AMLO’s Chief of Staff and head financial guru Alfonso Romo, who has thus far buffered AMLO’s confrontations with the private sector through personal meetings with key financial players and organizations across the nation.
Clearly, the objective of the tweet was to show the financial community that AMLO’s top financial advisors are in agreement over the importance of ensuring that investors have confidence in the administration.
Also, the meet showed that fences between the two men have been mended and they now share a sound and friendly relationship. Romo had a major clash with AMLO’s previous finance secretary, Carlos Urzúa, which finally led to Urzua´s resignation and Herrera’s appointment.
But there are also rumblings in the business sector, particularly from AMLO’s leading opponent, Gustavo de Hoyos, leader of one of the top business groups, the Mexican Employers’ Confederation (Coparmex), who in disgust is launching an “alternate plan” to improve the economy and defend the investors from the “populist” AMLO.
Still, Coparmex distrust is only the tip of the iceberg. On Tuesday, Aug. 6, Bloomberg.com news published on its webpage the results of talks with several business leaders who, the article said, preferred not to be identified.
Part of the article described the mood of investors in Mexico, which by the way, was echoed by a Moody’s press release on Thursday, Aug. 8.
“Their objections lie with the president’s shaky track record when it comes to certain construction projects and recently signed contracts that are being scoured or scrapped all together. There’s an air of uncertainty over what his next move will be, with several of the executives saying they closely monitor his weekday 7 a.m. press conferences for any clues as to what industry he may next be targeting,” the article said.
“With that backdrop, they argued, there’s no confidence and no one is investing. Many see the beginning of a downward trend, where only the steepness of the slope is debated.”
Most likely, some of these anonymous interviewees are the same people who have been promising AMLO the stars during their meetings with him, particularly those from the Mexican Businessmen Council, among others groups of industrialists.
The low or no private investment gauging organizations all show declining numbers. The National Institute of Geography and Statistic (Inegi) reported that industrial investment machinery and production processes dropped by 6.9 percent up until last May.
The Institute for Industrial Development and Economic Growth (IDIC) measured a downwards trend on productive investment, a deceleration which began about a year ago, when AMLO was elected president.
And the flurry of negative figures goes on and on by different organizations. But they all coincide on the fact that investors are not confident in the people’s choice for president, who is soaring in popularity with 70 percent.
That’s why the Herrera-Romo gathering at the National Palace, where both men have their offices, is particularly important because it was to let investors know that they care and will do everything in their power to earn AMLO an investors’ vote of confidence, which the Mexican business community has never had of him nor his discourse.