The López Obrador Effect: a plummeting peso
Now that the election is looming, voters and the business community are reconsidering the effects of an AMLO presidency on the economy.
By Victor H. Becerra
The Mexican economy had remained relatively immune to the possibility of Andrés Manuel López Obrador triumphing in the next presidential election; that is, until recently, when this false sense of tranquility disappeared. Markets are now beginning to factor in the danger that López Obrador represents.
For some, peso exchange rates have more to do with other causes: Syria, Korea, the revision of the North American Free Trade Agreement, the increase of interest rates in the US, etc. Although the truth is that the fluctuations took place following a sharp disagreement between the presidential candidate and business leaders, especially with Carlos Slim about the new Mexico City Airport, which gives strength to the idea that they are a reaction to his prominent position in the polls.
While many in the business community appeared to give the benefit of the doubt to a possible López Obrador government, the last few days have evidenced a growing alarm towards his proposals.
Thus, scenarios begin to circulate involving a strong deterioration in the main economic indicators in the event of an Obrador victory; increase in inflation, high interest rates, outflow of investments, and there is talk that the price of the dollar could reach 25 Mexican pesos, as opposed to 19 today, which would be a disaster for all Mexicans.
The growing self-confidence in his probable victory has emboldened the rhetoric of López Obrador and his allies (not to mention his huge army of online-bots and trolls with which he attacks his critics with racism, classism, and misogyny), as they seek to offer up an amnesty to criminals.
What can we expect to see in the future? The expropriation of all companies that do not bend to the designs of the new government, unrealistic plans for food “self-sufficiency”, price controls to the detriment of the burgeoning agricultural export sector, and the repeated threat of reversing all structural reforms in economy and education. Any of these proposals, on its own, would shake this or another economy. Together, they are an economic program that has always proven a great catastrophe wherever it has been applied.
López Obrador’s discourse in this campaign and the effects that are already visible in the real economy of all Mexicans reflect one of the essential problems of our democracies. Politicians promote ideas and make decisions that affect all but they never assume a personal cost when they go wrong. When that happens, they jump to the next gig to promote other ideas and make more decisions. Of course, without any direct consequence for them.
In order to advance towards more efficient democracies and fairer societies, we should demand that those who make government decisions and set public policies be affected by the consequences thereof. After all, it is always easy to be generous, creative, and take risks when others are footing the bill.
López Obrador and his allies are asking for the vote. They have an urgent need to win this election to have some chance to implement their agenda and continue their careers. Denying them that electoral victory would be the only mechanism of accountability available to us. And we can do this before the consequences become worse. Worse for us, of course, but at no cost to him and his allies in the following years.
Defeating them at the ballot box should not be difficult. Think only about all the irreparable damage that López Obrador has already caused to the Mexican economy and the threats to the well-being of all Mexicans: the oil blockades of 1995, the uncontrolled corruption during his government in Mexico City between 2000-2005, the political crisis and the closing of the Paseo de la Reforma in 2006, the almost criminal trade unions that he has protected and that today are trumpeting his candidacy, his periodic corruption scandals (ultimately all unpunished), and his permanent hate-speech that has exacerbated the division of Mexican society into two groups.
All these issues should be a warning sign for his current followers. Their needs and projects really do not matter to López Obrador. For him, they are merely a means to an end. If he cared he would have acted differently and without committing the same grievance over and over again. The only thing that has interested him, always, has been power. And he will sacrifice the welfare and dreams of all to get it.
Only one-third of the official campaign season has elapsed. During this period, López Obrador’s huge advantage has probably only begun to erode. His terrible performance in the first presidential debate and the economic unrest that he is unnecessarily causing have made sure of that, as we will see in the next set of polls.
In the remaining two months, however, the high cost of his possible victory will become increasingly visible. It’s likely that economic volatility will only increase as the election approaches, which will be a powerful deterrent for many voters until today determined to vote for him. Let’s hope that at the end of the day, the electorate will turn away from AMLO, through a realistic evaluation of the real damage that the people have suffered at the hands of López Obrador over the course of his long political career.