Dec. 3, 2018–Mexico swore in Andres Manuel López Obrador as its new president on Saturday, bringing in a new era of governance and a dramatic shift in direction for Latin America’s second largest economy.
Mr. López Obrador, known by his populist name “AMLO,” ran on a campaign to root out corruption and cronyism and eliminate government privilege. He also promised to empower the people, especially in poor and indigenous regions, both economically and through direct representation, such as referendums.
It was perhaps that message or simply a wariness against the corrupt status quo that brings López Obrador to power. He won office last July in a landslide victory. He secured with 53 percent of the vote — 30 percentage points above the closest rival.
While The Economist magazine suggested the new president “seems to have little idea how a modern economic or democracy works,” the financial markets appear to be welcoming at least parts of his message.
A 100-Point Plan
The new president outlined a 100-point plan during his inauguration speech on Saturday.
It focuses on rooting out corruption in the private and public sectors, strengthening Mexican cultural identity, and transferring some streams of revenue to some of the poorest communities.
“Let’s discuss in all the public squares of Mexico whether we advance or not, with the purpose of having transparency and ending corruption and impunity. Let’s analyze in the houses, streets and squares if it improves or worsens the economic and social situation of our people,” López Obrador said.
‘Strict Republican Austerity’
Government reforms include instilling transparency in public payrolls and functions, consolidating duplicative offices and cutting privileges of holding office, such as travel expenses, parties and private transportation. López Obrador said that means “no cronyism, nepotism” and “none of the scourges of politics.”
It’s interesting that while López Obrador promises more funds for social programs like educational scholarships and medicine, he vowed not to raise taxes beyond inflation.
Migration & Jobs
Internationally, López Obrador promised to defend the rights of Mexican migrants in the United States. Furthermore, he said he wants to work with U.S. partners on economic development projects that keep workers from migrating abroad.
“Creating jobs in Mexico and Central America is the alternative to migration, not coercive measures,” he said.
As an example, López Obrador plans to develop an economic corridor along a shipping route between the Gulf of Mexico and the Pacific Ocean known as the Isthmus of Tehuantepec. The corridor would connect to connect Mexico with Asia and the East Coast of the United States, and it would mean investments in ports, railroad and highways and energy supplies.
Meanwhile, the new president’s foreign policy would be based on “diplomatic caution,” principles of self-determination and non-intervention. Moreover, international business would only be conducted with countries that penalize bribery.
International Economics
López Obrador’s socialist policies include price controls in the agricultural and energy sectors and a vast expansion of social welfare programs for poor and indigenous communities. It is not clear whether the price controls and subsidies would have trade implications.
Meanwhile, he said he would respect the independence of the Central Bank.
Owning Oil and Gas
It’s noteworthy from an international perspective that López Obrador plans to reverse “neoliberal” policies, such as the previous administration’s education reform and privatization of the oil sector.
The outgoing president Enrique Peño Nieta had opened up the state oil industry to private companies like Shell and ExxonMobil and auctioned off leases and contracts on pumping and refining oil to the private sector.
In contrast, the new administration is planning at least some nationalization of the oil industry and public investment in Mexican refineries. The goal is to make Mexico self-sufficient in its consumption of gasoline within three years.
