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Power to the people!

Power to the people! (08/12/2005)

A 25 años de que Mark Chapman cortara la vida del mejor de todos: John Lennon. Memorabilia, flores y velas en el área de Strawberry Fields en Central Park, Nueva York. Foto de Keith Bedford de Reuters.

Inversionistas y calificadoras sobre AMLO

Inversionistas y calificadoras sobre AMLO (08/12/2005)

La Jornada publica hoy las impresiones tanto de inversionistas, nacionales y extranjeros, como de la calificadora Standard & Poor's sobre el posible triunfo electoral de Andrés Manuel López Obrador, del PRD.

Guillermo Prieto Treviño, presidente de la Bolsa Mexicana de Valores (BMV) y Marcos Martínez Gavica, presidente de la Asociación de Bancos de México (ABM), consultados por el diario capitalino, coinciden en lo general que el eventual triunfo de López Obrador no genera preocupación entre los inversionistas.

La calificadora Standard & Poor's presentó un documento estilo Frequently Asked Questions (FAQ) sobre el proceso electoral y el impacto en la economía:

Opinion polls show that Mr. Andres Manuel Lopez Obrador of the left-wing Partido de la Revolucion Democratica is leading the presidential race. How does this affect Mexico's ratings?

First, the election is still a long time away and the poll results could change. It is premature to dismiss any of the three main candidates for the presidency, as all of them have a good chance to win.

Regarding Mr. Lopez Obrador, it is important to note that Leftist parties now govern many Latin American countries (including in Chile, the Federative Republic of Brazil, the Republics of Argentina and Uruguay, and the Bolivarian Republic of Venezuela). The possible advent of an Administration headed by Mr. Lopez Obrador does not, in and of itself, have a clear ratings' implication. It depends upon what the new president does and how his Administration reacts to Mexico's economic challenges.

Do you see Mr. Lopez Obrador more as a Lula or a Chavez?

The "Lula versus Chavez" discussion is useful at a simple level to highlight the two contrasting models in Latin America. However, each country has its own circumstances, traditions, and institutions. In that regard, Mexico is neither Brazil nor Venezuela.

Mexico has a Congress that has become increasingly powerful, acting as a counterbalance to the president. Mexico has NAFTA, and a substantial part of its labor force works in the U.S. Government control of the oil sector places tremendous resources at the disposal of Venezuelan President Hugo Chavez (at least when prices are high), allowing him to make decisions that hurt both the private and foreign sectors of the economy while still maintaining economic growth and his popularity. Petróleos Mexicanos (PEMEX) will never supply a Mexican government with a flow of money that would enable it to reduce its dependence upon the private sector for investment and growth.

For example, oil accounts for over 85% of Venezuela's exports compared with less than 15% in Mexico. Oil has typically accounted for more than half of the government's revenue in Venezuela (and even more today with high prices). In Mexico, oil revenue typically comprises only one-third of the government's revenue (about 40% today with high prices). Economic growth is largely driven by the oil sector in Venezuela. In Mexico, the industrial sector, especially firms linked to the U.S. market, plays a key role in driving GDP growth and job creation. This economic reality, and the growing vibrancy of Mexico's democracy, places limits on the actions of any new government.

Brazilian President Lula da Silva took office during a crisis and was under tremendous pressure to commit to economic policies that his followers had traditionally rejected but at that point in time appeared inescapable. He did not want to inherit a possible financial and economic meltdown just as he became president, and his initial policy actions set the tone for the rest of his term. The next Mexican president is unlikely to enter office under similar dire circumstances.

Mexico's economy is open and will remain open regardless of who wins. The U.S. and Mexico are integrated through very open trade flows, investment flows (except in a few sectors such as energy, which are kept closed to foreign investment), and labor flows (both legal and illegal). Almost everyone in Mexico realizes that it would be disastrous for the country if these trade, investment, and labor links were suddenly reduced or severed. No other Latin American country has such strong ties to the U.S., which impose a strong anchor on economic policy and reduce the level of policy discretion for any new president.

Mexico has a history of macroeconomic crises and high inflation. Only recently has Mexico achieved a degree of currency and price stability, backed by an independent central bank. Anything that jeopardizes this newfound stability, especially macroeconomic policies that threaten a return to big deficits, will create a negative reaction both in the local markets and in the population (including among the poor, who suffer most from inflation). All leading politicians in Mexico have a clear understanding of this situation.

If Mr. Lopez Obrador is neither a Lula nor a Chavez, what does he represent?

It may be better to draw lessons from Mexico's own rich political history than to study Presidents Lula or Chavez. Mexico has made a transition from being a closed, inward-looking economy that was managed in a discretionary manner by the national government, often through corporatist structures and patron/client relationships. Starting with former President Miguel de la Madrid through current President Vicente Fox, the national leadership has reoriented the economy toward free trade, open markets, and international integration.

The political and economic vision of Mexico's political class changed dramatically over the past decades, but there are sharp differences within the country about how to proceed. Mr. Lopez Obrador clearly does not share the line of economic thinking represented by former Mexican Presidents Carlos Salinas and Ernesto Zedillo or by President Fox. However, he is likely to have views closer to those of other Mexican leaders who opposed the economic policies of these presidents or who preferred the earlier development model, than to that of Presidents Lula or Chavez. However, Mexico has changed dramatically in recent decades and there is no question of going back to the old economic model; the question is how to work with the existing realities.

The Left in Mexico is sometimes more nostalgic than revolutionary. It has been in power through the Partido Revolucionario Institucional (PRI), which has a strong left-oriented segment. Some of them (like Mr. Lopez Obrador) quit PRI in the 1980s to set up the left-wing PRD, which has governed in many states and municipalities. Hence, the Left has been in power and has participated in governing Mexico in some form or another for many years. Even Mr. Lopez Obrador gas spent much of his life in government, either as a civil servant or an elected official, in contrast to many leftist leaders in the region.

The Left has been pragmatic when running state and local governments in Mexico. It is also likely to be pragmatic if it wins the presidency. This means that any analysis will have to focus on the details, to see if pragmatism results in policies that sustain investment and growth rather than in a diluted version of old, prereform policies that fail to deliver and possibly weaken the sovereign's credit standing.

Standard & Poor's, 5 de diciembre de 2005

- Inversionistas, tranquilos ante eventual triunfo de la izquierda
- No inquietan a calificadoras de EU las elecciones de 2006 en México

Faltó el invitado...

Faltó el invitado... (08/12/2005)

Nueva categoría. Para inaugurarla, la foto del día la tomó David Frust de AFP. Saddam Hussein cumplió su amenaza y no se presentó en la corte.