By THÉRÈSE MARGOLIS
When he spoke at the Group of 20 (G-20) internet summit on Sunday, Nov. 22, not only did Mexican President Andrés Manuel López Obrador call on members of the group to forgive Mexico and other underdeveloped nations their external debt, but he also demanded that international interest rates for these countries be the same as those for the United States and Mexico.
Apparently, no one ever explained to the Mexican head of state — who, by the way, has no knowledge of economics or finance, a fact that has led him to blindly lead the nation into economic collapse and a contraction even before the covid-19 pandemic came along — that financial credit is extended based on how reliable a proposed debtor is perceived to be in terms of being able and willing to pay off a loan.
Consequently, those who ask for a loan to be forgiven can hardly expect a positive response when, with the same breath, they request lower interest rates.
According to the World Bank, Mexico’s external debt increased to $446.898 billion in the second quarter of 2020, up from $441.291 billion in the first quarter of the year.
In other words, Mexico’s debt is on the rise and its capability to service that debt is rapidly decreasing.
Moreover, since he took office in December 2018, AMLO has consistently shown himself to be erratic and unreliable in terms of keeping Mexico’s commitments to investors and lenders alike, simply tearing up contracts and rewriting laws to suit his whims whenever he perceives that he drew the short straw in a deal or — God forbid — the investors manage to show a semblance of profit.
During his participation at the two-day virtual summit, López Obrador repeatedly took a holier-than-thou stance in preaching to the rest of the world how to manage their economies and how to deal with the covid pandemic.
This, despite the fact that, in the next 12 months, Mexico is expected, due to the government’s rampant financial mismanagement, to suffer the worst setback in the entire region, with the economy plummeting by a whopping 10.7 percent, while other Latin American countries are on course to contract only 9.4 percent, according to the World Economic Outlook.
And as for Mexico’s handling of covid-19, the country not only ranks fourth worldwide in overall cases, but it has the highest death rate of covid patients in the world (8.6 deaths per 100 confirmed cases).
Sadly, none of this seems to have dissuaded AMLO from mounting his virtual bully pulpit on Sunday and telling the rest of the world to follow in his disastrous footsteps.
What the Mexican president seems to have forgotten is that, unlike his captive audience of mindless lackeys who hang on his every word and follow him blindly no matter how absurd his proclamations during his monotonous daily “press conferences” (read: spiel fests), the G-20 leaders have not drunk the AMLO Kool-Aid and are not going to kowtow to his demands.
His ridiculous, would-be “show of leadership” resonated solely with his already-deluded pack of proselytes back in Mexico, who like the children of Hamelin, entranced with their Pied Piper, will continue to follow him straight off a cliff into economic abyss.
At the end of the summit, the other G-20 members vowed to “spare no effort in making a covid-19 vaccine widely available to all populations.”
And in an apparent hat tip to AMLO (or, perhaps, to shut him up), the G-20 leaders also made vague promises to review the issue of developing nations’ debt, but without offering any concrete steps to accomplish that goal.
At the end of the day, the G-20 vows “to consider” AMLO’s demands constituted little more than a display of courteous lip service, which only seems fitting since his rambling summit chatter was also nothing more than a lot of hot air with no substance or credibility.
AMLO likes to distract from his own reckless economic dereliction by pointing to an artificially inflated peso, which, by drawing off funds from the nation’s international reserves to prop it up, he has recently managed to buoy to about 20 to the U.S. dollar.
But the fact remains that by following to the letter the handbook of his buddy-buddy Nicolás Maduro of Venezuela, López Obrador is quickly running the nation into what may soon be the irreversibility of a failed state (Reuters has already declared it as such).
So long as Mexico continues to be led by an arrogant, self-proclaimed prophet with no understanding of economics or political realities, the country’s financial future is on a fast-track course for failure.
And, yes, there is a reason why Mexico’s interest rates are high, and that reason in López Obrador.
…Nov. 24, 2020