Mexico’s first female president inherits a country of minefields Part 2: The economy is perhaps the most dangerous

Part 2 in our crash course on Mexico’s new political landscape: Former Mexican President Andres Manuel López Obrador (AMLO) promised a rosy economic future when he took over in 2018. But the GDP did not reach expected levels, so he depleted the public coffers to pay for his pet projects. Now how will the new president pay for hers?

By Telésforo Nava Vázquez

Read Part 1 here.

Primary among the political landmines that threaten Claudia Sheinbaum’s new administration is the country’s economic situation. During the campaign and in the early days of his own administration, AMLO promised that the economy would grow 4% in the first years, increasing to 6% by the end of his 6-year term. Today we know that during his presidential term, the GDP will likely barely exceed 1% under the most optimistic analyses. The more pessimistic believe it’s below that. Yes, it can be argued that the country, like the rest of the planet, suffered from the pandemic of 2020, but experts believe this might have affected economic growth by just one point. The national economic panorama is something the new president should seriously worry about.

Contrary to the facts, AMLO always claims to have other data, though he never supports it. Although “the other data” illustrates a Mexico that offers abundant employment, reality shows uncontrolled growth in the so-called “informal sector” (i.e. unlicensed businesses) and emigration, mainly to the United States. According to the National Institute of Statistics and Geography (INEGI), more than 50% of the working population is employed in the informal economy, which accounts for almost 25% of GDP.

The ex-president has boasted of the constant increase in remittances that Mexicans abroad send their families, presenting them as a triumph of his administration’s policies. He has never accepted that this emigration is the result of Mexico’s structural inability to satisfy the growing demand for jobs under his and previous governments. In his presidential campaign, he even assured that under his government, “migration will become part of history.” 

According to INEGI, in 2023 remittances from abroad amounted to $63.3 million (USD). Recent studies are finding that the accelerated growth of remittances is partly due to organized crime using them to launder money.

Likewise, the former president assured upon taking office that during his six-year term he would not increase public debt, which at that time totaled more than $538.5 million. By July of this year, the debt totaled more than $832 million. The Ministry of Finance and Public Credit projects that by the end of 2024, the total debt will represent 50.2% of GDP. The cost of servicing it is growing precipitously and threatens to severely affect public finances.

Another mine Sheinbaum will step into is nearly empty public coffers. Apart from the debt to finance his spending, AMLO depleted nearly all the funds from existing trusts, such as the Budget Income Stabilization Fund, which had nearly $14.3 billion US in 2018; and the fund created to deal with natural disasters, which had $2.6 billion. He also used a significant portion of public agencies’ budgets to finance his own social programs and priority works. Now that there’s no more money to get, he threatens to use Bank of Mexico funds.

One question is, where will the new president find the resources to finance her programs? It seems she has to continue increasing the public debt, which already represents a serious problem for the economy. For example, the state’s program for senior citizens almost tripled between 2019 and 2023, going from $6.3 billion to $17.3 billion. In general, these social programs cost almost $332 billion over five years. And Sheinbaum has said she will create more programs of that type.

Corruption in the state oil industry

Along those lines, the oil company Pemex is practically bankrupt. Despite the fact that two billion pesos were injected into it under the current administration, things only got worse. At the start of the year, PEMEX registered net losses of $13.7 billion US,  and a debt of $51 hundred billion. To lead the embattled company, AMLO appointed Octavio Romero Oropeza, a close friend who is an agricultural engineer by profession. Romero has no experience in energy and even less in managing companies of that magnitude. Fifty-four percent of the fuel consumed in the country is imported. The Olmeca refinery built in Tabasco is twice as costly as originally predicted, and despite having been formally launched three times, it still offers no tangible results. Its only results are enormous corruption, just like Pemex. In fact, corruption is the emblem of the current administration, though the former president claims to have ended it. There are still plenty of examples of its existence.

Another land mine the new president will inherit are the constitutional reforms that AMLO pushed full-steam in Congress this September, callously trampling on the opposition instead of seeking consensus. These reforms reconfigure Mexico’s Constitution without any broad debate or consultation as required by law. The reforms are all designed to completely centralize power in the hands of the head of the Executive Branch, just as the PRI — the party in power for 71 years — once did. Today, following the manipulation of the June 2 election results, the legislative branch is under the total command of the ruling party, Morena. And with the recently approved reform to the Judicial Branch, it will annul its independence and become subordinate to the head of the Executive Branch.

When Morena announced they were going all-out with the plan to reform the judiciary, businesses began to protest. So Sheinbaum went out to calm the markets by promising a slower process. She promised forums to allow for a broad reflection. She tried to calm the heads of the International Monetary Fund, the Bank of Mexico and the Organization for Economic Cooperation and Development and instructed the Secretary of Finance to issue a similar message. The following day, during his morning press conference, AMLO was blunt: “The reform to elect judges, magistrates and ministers by vote will be discussed in September.” Sheinbaum immediately stood to attention and the clicking of her boots was heard throughout the country. From then on it was clear that “where the captain commands, the sailor does not govern.”

Since the process of reforming the judiciary began, its employees declared a nationwide strike in protest against the change that seeks to void the judicial career ladder as a means of professionalization and promotion of its personnel, and to require that in the immediate future judges be elected by popular vote. Days later, the ministers of the Supreme Court of Justice joined the strike. Immediately, law students at public and private universities mobilized. As usual, the president attacked by berating them, stating in his morning press conference that they are manipulated by their professors. In one of the student mobilizations, a young man very rightly chanted: “Reform yes, but not like this.” It is evident that the judiciary requires a deep reform, but it must take place through a democratic process.

In Congress, the judicial reform was “discussed” (even though no dissent from the opposition was accepted) and approved in marathon sessions of more than 24 hours with the qualified majority of Morena and its mercenary parties, the Labor Party  and the Green Party. President-elect Sheinbaum immediately and publicly congratulated the legislators who approved it. In the state legislatures, everything was approved in just three days.

Shutting down government departments?

Linked to the previous constitutional reform are reforms that are likely to be approved this month whose strategic objective is to de facto eliminate autonomous institutions. This would be done either by subsuming them into government offices, such as the National Electoral Institute, which is to be returned to the Ministry of the Interior, where the PRI once controlled the electoral processes, or to integrate the National Council of Social Development into the Geography and Information institute — and to eliminate others completely.

These at-risk organizations include: INE (National Electoral Institute), INAI (National Institute for Transparency, Access to Information and Protection of Personal Data), CNDH (National Human Rights Commission), COFECE (Federal Economic Competition Commission) and CONEVAL (National Council for the Evaluation of Social Development Policy).

These organizations were formed to balance the excessive control and power that the government (then the PRI) exercised over fundamental activities that had to do mainly with citizens’ rights and oversight of government policies. For example, the INE — originally known as the Federal Electoral Institute, IFE — was built by political and social pressure to make the organization and qualification of the electoral processes independent, rather than under the strict control of the Ministry of the Interior. Ultimately, more than one constitutional reform had to be carried out to create the IFE and assure its independence from government control. When that process culminated in the elections of July 1997, the PRI for the first time lost control of the Chamber of Deputies, as well as the election of the head of Government of the Mexico City. (By the way, AMLO, among his insidious arguments, claims the IFE was created by neoliberals.)

The expected economic impact of these constitutional reforms is causing anxiety among the national and international business community. Business chambers have publicly called on legislators to act with prudence. Foreign media have reported that the promotion of these measures has paused 35 billion dollars in investments. Likewise, warnings are sounding that the reforms alter previously reached accords in the United States, Mexico and Canada Agreement, which will have repercussions in its next review. Both the former and new president downplay these warnings. But reality prevails. For example, after June 2, the dollar began to rise from just over 16 pesos per dollar to over 20 pesos. The reality is that transnational capital already has the arguments to blackmail and subordinate the Mexican regime even more, forcing it to accept its demands.

Trans-sexennial power?

The historical symbolism of electing a woman to the presidency of Mexico, after two centuries of the nation’s existence, cannot be overlooked. However, there are many doubts about whether Claudia Sheinbaum will actually be the captain of the ship.

AMLO assured us that at the end of his term he would retire to his ranch in Chiapas, to devote himself to reading and writing (which even he does not believe). Shortly before end of his term, he declared he would only return to Mexico City if there was war or the president called him. Later he announced that because his wife and youngest son will continue to live in Mexico City, he will come to visit them often.

The former president is playing it safe. What he is really saying is that, though he is constitutionally required to leave the presidency, he will try to remain as a kind of power behind the throne by other means. And he has created the conditions to do so. Nearly all of the country’s newly elected deputies and senators were chosen by him, which gives him a lot of influence. At least half the members of the new president’s cabinet are people linked to him, if not appointed by him. In some cases, the recommendation that they should be integrated into the incoming team was made public, to demonstrate that AMLO is still in charge. Likewise, he introduced into the Constitution the possibility of revoking the term of whoever is in charge of the executive branch — and having the legislators on his side would make this task easier. 

It could be said that he has placed a sword of Damocles over Sheinbaum’s head to remind her of his power in case she gets the bad idea of ​​distancing herself from him. In addition, it has recently been announced that his son, Andrés Manuel López Beltrán — who has been in the shadows as his father’s political operator in the government and in Morena — will be the party’s organization secretary. A word to the wise is sufficient: He is grooming for the presidential election in 2030.

Traditionally in Mexico, during the last year of an outgoing president, his power declines, the spotlight on him diminishes and everyone’s attention turned to the incoming head of the executive branch. The incoming one would try to maintain respect for whoever he would replace. 

In the transition underway today, the opposite is happening. Just after the elections, AMLO — who is always on tour — decided to invite Claudia Sheinbaum to come along, and she meekly accepted that role. Thus, he has paraded her around the country.

The question is whether this is a new snub by the former president meant to demonstrate, at a national level, the subordinate role of the newcomer. It would also be humiliating for her. 

Since she was appointed to the cabinet of the Mexico City government in 2000, Claudia Sheinbaum has remained submissive and obsequious. 

But now she is president. And as popular wisdom notes: “The clothes don’t make the person.”

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