Can Mexico’s President-elect Revive its Economy or Take Down the Mexican Drug Cartel?

Mexico’s president-elect Andrés Manuel López (AMLO) has lofty plans to improve the economy and to eradicate the country’s corruption. 

With his lunchbox austerity plan, he is challenging legislators to bring their own packed lunches to cut down on government spending.  

“No costly expense account meals for me, proclaimed Martí Batres, a senior ally of president-elect Andrés Manuel López Obrador, as he took to social media to challenge legislators to embrace austerity by bringing their own packed lunches,” writes the Financial Times. “In the lower house, another senior figure in Mr López Obrador’s Morena party, Mario Delgado, urged colleagues to follow his lead and bring in a Thermos flask — a bid to save the 4m pesos ($211,000) the Chamber of Deputies spent on coffee, tea, biscuits and refreshments supplies for July to December.”

AMLO takes office on December 1 and plans to slash his own salary, along with other government workers. 

He also is giving up the presidential plane, limiting bonuses, and cutting jobs and agencies. Some of his plans aren’t exactly being embraced by government officials though.

Critics are concerned that this could be counterproductive. 

“We have to be careful not to lose talent. We are adjusting our ideal to reality,” said Alfonso Romo, AMLO’s pick for cabinet chief.

Could this lead to valuable government workers venturing off to the private sector? 

“There are a lot of technical staff who are very qualified and have been [in the government] for years but they’re saying, ‘I studied and worked hard to get where I am, I’ve got a mortgage and two children, I can’t take a 40 per cent pay cut’,” said Monica Graue, a partner at headhunter Atabay who has already been contacted by government leaders.

But government spending has gotten out of control under the current President Enrique Peña Nieto, specifically, the cost of Mexico’s bureaucracy has increased by 20 percent. 

Although AMLO is cutting government spending in terms of labor costs, he has plans to make major investments in oil refineries and infrastructure. 

“The President-elect also announced he would “review” the 107 contracts already rewarded over the last three years to international companies under the energy reforms enacted by current President Enrique Pena Nieto for “corruption.” AMLO appeared to indicate he would not cancel the contracts already awarded should they pass muster, but he also offered no clear definition of what actions he would consider to fall under the definition of “corruption” for the purposes of these reviews,” writes Forbes. 

Besides impacting the energy market with his oil industry overhaul, AMLO and his cabinet members including Alfonso Durazo have been on a peace tour vowing to end the Mexican cartel violence. 

But this means taking down the corrupt politicians and officials in the financial industry that are keeping the illegal drug network alive. 

“Instead of fighting fire with more fire, the López Obrador administration will try to combat the country’s criminal organizations as if they are economic entities, Durazo said,” writes the Desert Sun. “This could mean following the cartels’ money, investigating how it’s laundered and who helps them launder it, explained Adam Isacson, an expert on defense, security and peace-building at the Washington Office on Latin America. Drug policy experts believe this tactic would be effective but challenging, since it would require the government to take on the financial industry and corrupt politicians, he said.”

AMLO’s administration is also willing to offer controversial deals offering amnesty to some of those involved in the drug trade in order to take down the Mexican drug cartel.

Author’s note: AMLO appears to be acting more as a capitalist than a socialist, and this is a good thing. Can he conquer the corruption? Probably not. But so far some of his plans could help improve the dire state of Mexico’s economy. If he follows the other path and embraces socialist policies, then Mexico will be the next Venezuela. On the other hand, his notion of “peace” with the drug cartels, sounds more like Chamberlain’s “appeasement” with Hitler.