AMLO’s Economic Legacy

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM). In this issue, you will find:

•AMLO’s Economic Legacy

•Milei’s First Three Months, With an Eye on Congress and Reelection

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The GCaM Team

Daniel de Cádiz
•AMLO’s Economic Legacy
623 words | 3 minutes reading time

At the end of September, President Andrés Manuel López Obrador (AMLO) will conclude his tenure as Mexico’s 58^th president. AMLO’s tenure was marked by ambitious attempts to transform Mexico’s politics, economy, and security landscape, framed within what he dubbed the “fourth transformation.”

• In this sense, AMLO has sought to cast himself as a revolutionary leader spearheading a sort of refoundation of the Mexican state. The reality of AMLO’s impact, especially on the macroeconomic front and regarding unfinished projects, paints a problematic picture.

• There is a certain historical logic to these attempts; for AMLO, the three previous transformations were the War of Independence, the liberal victory in the Reform War, and the Mexican Revolution of the early 20^th century.

• Above all, he has opted for a personalistic type of politics, with a view towards limiting the power of federal agencies. If he were a U.S. politician, he would doubtlessly talk about “draining the swamp” of unelected bureaucrats.

Data. Mexico’s economy shows mixed signals. The peso has shown unusual strength, but with regard to nearshoring, the U.S.-led attempt to establish closer, more resilient supply chains, missed opportunities abound. Despite global shifts that have favored Mexico’s economic standing, the country has not capitalized on these as much as anticipated. 

• AMLO’s administration managed to stage a remarkable post-pandemic recovery in 2021, achieving a 4.7% growth rate, followed by 3.1% in 2022 and a further uptick to 3.4% in 2023. Nevertheless, expectations for 2024 have dampened, with growth slated to hit 2.5%.

• Recent data shows that the number of individuals living in poverty has significantly decreased, dropping from 52.2 million in 2016 to 46.8 million by the end of 2023, that is, a decline from 43.2% to 36.3% of the population.

• However, this positive trend is tempered by an increase in extreme poverty levels, from 8.7 million to 9.1 million people, and a concerning deterioration in access to health services, which has surged from 16.2% to 39.1% of people.

Between the Lines. One of the critical areas of concern under AMLO’s leadership was his approach to unfinished projects and their allocation to the military. AMLO significantly augmented the power of the military by entrusting it with key infrastructure projects.

• These projects include a new tourism train system, a new oil refinery in his home state of Tabasco, and an airport project in Mexico City. This shift towards militarization in ostensibly civilian domains raises questions about the future of these projects and their economic viability. 

• The military’s control over ports, customs authority, and construction concessions represents a departure from traditional civilian oversight and could have damaging implications for Mexico’s economic landscape moving forward.

• There is a risk of alienating foreign investors. This is exacerbated by the administration’s penchant for issuing threats to private enterprises and its propensity to renegotiate supply contracts deemed too lucrative. 

Future Prospects. In January, AMLO declared his commitment to completing his ongoing projects, affirming his resolve not to pass on unfinished initiatives to the next administration, which will, in all likelihood, be led by his handpicked successor, Claudia Sheinbaum. As his presidency comes to its close, this appears less and less feasible.

• As of now, significant segments of his flagship Maya Train remain incomplete and underutilized, mirroring the status of ongoing expansion works at Tepic International Airport.

• AMLO pledged to provide free internet access to the remaining 15% of the Mexican populace lacking connectivity. The initiative has encountered considerable setbacks. With nearly $1 billion spent, experts affirm AMLO’s targets are unlikely to be achieved by the end of his presidential term.

• Some of the president’s initiatives have been derided as vanity projects. Their economic viability is in question, as is that of his generous proposal for pension reform. It must be recognized, however, that AMLO has been relatively austere; his level of debt accumulation is lower than that of previous presidents.

•Milei’s First Three Months, With an Eye on Congress and Reelection
613 words | 3 minutes reading time

Three months into his term, Argentine President Javier Milei is advancing quickly and forcefully, but he has had to withstand some painful political defeats.

Panorama. With important victories and setbacks alike, Javier Milei has already concluded what most presidents deem their honeymoon phase. With over three months at the reins, and although inflation is falling at a faster rate than expected, Argentina’s is still in the danger zone. This is unsurprising; in his inaugural address, he said, “There is no alternative to adjustment.” Milei thus shielded himself from most short-term criticism.

• Despite an interannual inflation rate of 276.2%, mainly the result of the poisoned chalice handed over by the previous government, Milei continues to enjoy an approval rating of around 50%.

• In February, Argentina reported a 13.2% inflation rate. When he took office in December, the monthly rate stood at 25.5%, dropping to 20.6% in January. February’s numbers exceeded even the most optimistic of forecasts, which predicted a rate of around 15%.

• Yet the situation remains critical, with certain items, like pharmaceuticals, recording monthly inflation rates of up to 40%. Additionally, Milei has suffered serious legislative defeats, notably that of his “omnibus law,” which would have granted him vast economic powers. 

Voices. According to Argentine analyst Facundo Vázquez, Milei’s first few months in power have been unsurprising. “At the political level, with few representatives in the Chamber of Deputies and Senate and without governors who respond to him, he failed to reach the necessary agreements to pass the second part of his economic plan. The first, the Necessity and Urgency Decree (DNU), also runs the risk of being voted down.”

• He added that Milei has responded by “searching for a ‘refoundation pact,’ where he summarizes his government’s position in these first months: agreement or confrontation.”

• “Continuing political confrontation depends on him, alongside the provincial governors, deputies, and senators,” he said. “At a social level, inflation seems to be subsiding, but the devaluation of the peso, coupled with cuts in subsidies, failed to limit the economic ‘adjustment’ to the ‘political caste,’ as Milei promised; rather, the impact on society has been strong.”

• “Despite this,” he continues, “the president still has a good approval rating—between 40% and 50%, depending on the poll—that allows him to continue working.”

Between the Lines. Milei’s legislative failures were to be expected. The radical nature of his deregulation plan carries a political cost that few opposition lawmakers could countenance. The DNU, for example, amends up to 300 laws and contains more than 600 articles.

• What could be considered a suicidal law that was doomed from the start could be an early campaign message for a possible midterm or reelection campaign.

• Milei could campaign on the claim that only a broad legislative majority would allow him to enact genuine reform. In this regard, he would likely cast current members of Congress as fickle elements of the “political caste.”

In Perspective. Milei’s boisterous speeches and bills suggest he is already planning for the long haul, with midterm elections in 2025 being essential to his eventual reelection. In December of next year, half the Chamber of Deputies and one-third of the Senate will be up for election. 

• Reelection would come in 2027. In that year, another half of the Chamber of Deputies and another third of the Senate would be elected, as would the enormously influential provincial governors.

• Despite the possible optimism, Mauricio Macri, Argentina’s previous right-wing president, also had an excellent approval rating at this point in his term. He was able to secure a good midterm result, yet his presidency ended in failure.

• Milei despises the gradualism of Macri’s policies; he insists on radical, sudden reform. If the Argentine president keeps steady, he could very well waltz comfortably into another four years at the Casa Rosada.