Economics: Transition pros and (mostly) cons
With only one week left before the next government takes office, we have already experienced one of the most active intergovernmental transition periods in the country’s history, judging by the intensity and impact of the decisions, proposals and precipitous actions of President-elect López Obrador and prominent members of his governing coalition. While the economic policy implications of the past four and a half months warrant the sort of thorough analysis we will be developing to determine each one’s advantages and disadvantages, it is worth starting with some highlights of what has occurred up until this point.
The already extensive list of “cons” is obviously much longer than that of “pros,” and is growing by the day. Some of those with the most adverse effects to date include the Texcoco airport cancellation and Morena Senate leader Ricardo Monreal’s proposal to ban banking commissions, both of which drew the ire of financial markets and contributed to the self-inflicted peso depreciation and jumps in Mexican government bond yields (and ratings agency downgrades) that have greatly magnified not only the government’s debt burden and servicing costs for years to come, but also those of businesses and consumers throughout the country.
A peso weakened by such an utter lack of governmental vision raises the cost of companies’ foreign currency bonds and loans, the interest all people have to pay on credit, the prices of imported fuels, and the transportation costs of all manner of goods, including basic foods and production inputs. Then there are the numerous efforts at deconstructing the country’s regulatory systems.
Although it initially appeared that the airport drama and banking commission kerfuffle had dynamited the tenuous working relationship AMLO had been building with many of the country’s most powerful captains of industry, he and his team have reacted to each such setback with new overtures. These include dangling new contracts at those who stood to lose from the shutdown of the Texcoco site, and a newly unveiled business advisory council that is supposed to counsel the next president starting next month and which includes many of the country’s most powerful business owners.
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