The Impact of AMLO Win on the Mexican Economy

Andres Manuel Lopez Obrador, popularly known as AMLO, is no stranger to Mexican politics. He has already run for the office of President twice in the past. Both times, he has failed to secure the top job in Mexico. However, in 2018, it was AMLO’s chance to create history.

He has become the first left-leaning President in recent Mexican history. While voters were overjoyed because of AMLO’s landslide victory, the businesses didn’t seem too excited. This was openly visible in the reactions of the markets.

The stock markets fell as the news of AMLO’s victory spread. Similarly, the Peso also witnessed a fall in the currency markets. The dollar-denominated debt that the Mexican government has issued in the past also saw a downward trend.

The reaction of the businesses is understandable. Andres has been advocating the merits of left-leaning policies. The last leftist Latin American leader was Hugo Chavez, who enjoyed a cult status in Venezuela. However, just a few years after his death, Venezuela is now in total chaos! It is on the verge of bankruptcy and hyperinflation is the norm. Businesses are afraid that AMLO and his populist policies might take Mexico down the same road.

In this article, we will have a closer look at what some of the policies proposed by AMLO are and how they might affect the economy.

• Increased Pension and Benefits: AMLO has reached the Mexican parliament by promising to provide economic benefits to poor Mexicans. The average Mexican person is fed up with the corruption which is rampant in Mexico.

  Andres has pledged to spend more money on education. He has also promised to increase the amount of pension being paid to Mexicans. However, the problem is that the Mexican government already has a lot of debt.

  Giving out more freebies will end up exacerbating the deficit even further. However, Andres claims that he will cut down on other government expenditures which do not benefit the people but are instead a mechanism to embezzle money into the hands of corrupt politicians.

  Even though Andres has promised that he will not allow the fiscal deficit situation to worsen, the investors and business owners are still skeptical. The record of history clearly shows that left-leaning governments eventually lead nations to bankruptcy.

• Energy Reforms in Mexico: The previous Mexican President Enrique Pena Nieto had privatized the Mexican oil industry in 2014. For several decades, Mexican state-owned company Pemex had a monopoly on the exploration, refining as well as marketing of oil in Mexico. Pena Nieto broke this monopoly and sold off some of the rights to private companies. This was done to accumulate some money from these sales which would help reduce the growing Mexican fiscal deficit.

  AMLO is planning to overturn this privatization and re-nationalize the Mexican oil industry. This is giving the jitters to the investors and businessmen in Mexico. Not only will it aggravate the fiscal deficit in Mexico but it is also a blow to investor confidence. Mexico is turning out to be a nation where the policies are not stable. This policy, if enacted by AMLO, will scare off many potential foreign investors.

• NAFTA: AMLO has been a vocal opponent of the North American Free Trade Agreement (NAFTA). He believes that Americans are the ones who really benefit from NAFTA and yet they are still the ones doing the bargaining. Donald Trump has used NAFTA as a bargaining tool with Pena Nieto. This is because Pena Nieto was mostly dependent upon the support of the Mexican business community. This community benefitted from NAFTA since about 80% of Mexican exports end up in America. Hence, Pena Nieto did not want to anger America. This is the reason why he was playing Trump’s puppet when he closed down the North Korean embassy in Mexico city even though North Korea and Mexico have never been at loggerheads.

Andres, on the other hand, has been elected without the support of the business community. It is the 90% of Mexicans who live below the poverty level that have voted Andres into power. Their sentiments are deeply hurt by Donald Trump’s unflattering portrayal of Mexicans. Hence, they support AMLO’s decision to stand up to America. Andres has made it clear that Mexico will not do America’s dirty work of stopping immigrants from South American countries crossing into America. He believes that Mexico should align its resources for the welfare of Mexicans. The business community does not agree with AMLO in this regard. They want to keep America happy at any cost. AMLO’s policies seem counterproductive to them, and they are almost sure that AMLO will jeopardize their business interests.

It would be incorrect to say that AMLO is a socialist. In fact, he has a record of co-operating with local industry when he was the Mayor of Mexico City. However, AMLO is opposed to the corrupt practice of bowing down to the Americans. He believes that the nation’s resources are squandered away at the behest of the Americans. The benefits, on the other hand, accrue to very few people. It would, therefore, be fair to say that Trump has found his match in AMLO. With aggressive leaders on both sides of the wall, the risk of a trade war is imminent. However, the average Mexican is happy to salvage some pride instead of bowing down to American imperialism.