In these pages, I have written before how the self-described idea of a “Fourth Transformation” peddled by President Andrés Manuel López Obrador is ultimately aiming for regime change in Mexico. Indeed, the President’s narrative —and that of his most zealous supporters— presents the “Fourth Transformation” as a political epic of historic proportions, not as a government seeking change —even if ambitious— within the constraints of a 21st century democracy. So far, the intended “regime change” presented by the President has implied the following:
• Expanding the government’s role in the Mexican economy and using state-owned enterprises —primarily in the energy sector— as economic drivers
• Deeply changing the public budget to instate cash transfer programs to certain social segments and to build emblematic national infrastructure projects —regardless of their merits,
• A security policy that, to put it mildly, prefers to address the “root causes” of organized crime and insecurity instead of confronting it, and
• A defensive foreign policy rather than one based on modern international engagement.
To be sure, President López Obrador has also made the end of corruption a top priority. Yet, he seems to be falling short of expectations, not because himself is corrupt, but because he has appeared lenient in notorious corruption cases during his term. Moreover, he has centered the anti-corruption effort on the President’s own will along with allegedly trying to change the “mentality” of the Mexican people, but not in a systematic effort to build better rules and institutions.
In order to achieve his regime change, Mr. López Obrador relies on a polarizing “us versus them rhetoric”, the strategic use of propaganda, an ideological and generational change in government, the construction and appropriation of a mystic past which must be recovered because it was much better, the consolidation of a voter base that receives some form of cash transfer from social programs, and the concentration of power in the Executive Branch and in particular with the President himself.
Judged by common and reasonable socio-economic metrics things are not going well for Mexico —at least as a whole. Yet, judging by electoral results MORENA (the President’s party) is well positioned and, as of today, likely to win again the 2024 presidential election. Just this past Sunday, it took four out of six governorship races. This means that by the end of the year, MORENA will govern in 22 out of 32 states, hold legislative majorities in both houses of the Mexican Congress and benefit from a very popular President with over 60 percent approval rating. In addition, MORENA has been able to win in states and districts beyond what was believed to be its traditional bastions, and now governs in around 60 percent of the population.
President López Obrador has not been shy about his intentions. After Sunday’s election, he warned that in the reminder of his term he was “going for much more in Mexico’s transformation”. Thus, it is not difficult to foresee a scenario for the next two years where the President doubles down on his program while political opposition tries to stop him wherever it can. There is no room for any political compromise. In this context, what happens during the time remaining of the López Obrador administration is relatively predictable and —bear with me— irrelevant. However, the 2024 presidential election becomes of utmost importance for the future of Mexico. We will have a referendum on whether the path that Mr. López Obrador has chosen for the country is the right one or not. And here, yes, it will have historic proportions. In my view, what has thus far been accomplished by him is more of a purge than a transformation. The 2024 presidential election will confront the voters with two extremely different visions of Mexico.
The safe and dispassionate money would bet on MORENA’s candidate taking Mexico’s 2024 presidential election. There are, however, four factors that could change things before then, and if not, I believe could become insurmountable obstacles for the next government:
• The economy and fiscal sustainability. Mexico’s GDP per capita will probably remain flat during López Obrador’s term in office. Investment has been minimal. The last analysts survey by Mexico’s central bank predicts an annual GDP growth of 2 percent for the next 10 years and places political uncertainty and insecurity as the main challenges for future growth. If you add in the mix the specter of a world economic recession, the picture is bleak. To be sure, Mexico has endured before long periods of slow growth. The question is what that will this do to public finances. Newly created cash transfer social programs and the injection of public money into PEMEX and CFE (the oil and electricity state-owned firms) is probably not sustainable without some serious fiscal reform that nobody is eager to take on.
• The evolution of organized crime. Public debate in Mexico has unfortunately centered on the so-called “war against the narcos “. More specifically, Mexican politicians and pundits argue among themselves about who purportedly started the war and who ended it, namely the Calderón and the López Obrador administrations. At its core, the strategy to deal with organized crime that President López Obrador chose seems reasonable but is not for that reason practicable: end poverty and you will end the root causes of crime and you will not generate further violence. Even if this was the case, the waiting time until the strategy has an effect carries unacceptable costs. Even worst, serious analysts suggest that organized crime is gaining ground, meddling in elections, and moving into all sorts of activities that include extorting legitimate businesses in different sectors.
• The relationship with the United States. President López Obrador initially showed caution and manage well the relationship with the northern neighbor —including the sort of challenges posed by former President Donald Trump. He was able to secure the new United States, Mexico and Canada Agreement (USMCA). However, he has recently taken a harder stand in several fronts of the relationship and even sometimes seems eager to pick a fight. The relationship is under a lot of stress and perhaps heading into unchartered territory, or at least one we had not seen in decades or with this level of inter-dependence between the two countries. Over the years, bureaucracies have built a decentralized and institutionalized relationship that helps keep things in track during hard times. Nevertheless, we cannot lose sight of the fact that the USMCA is to be reviewed in 2026. This process might very well come at a time when in the United States political actors on both sides of the aisle are holding grudges against Mexico.
• An energy crisis. Finally, if the strategy of previous administration was to gradually open room for private sector participation in producing oil and electricity because government could simply to afford it, the President’s strategy has been to return to government involvement in these activities at any cost in order to achieve “self-sufficiency” and “keep the prices low for the people”. Irrespective of anything else, his actions on this front are at best a costly bet of very uncertain prospects and, at worst, something that can leave Mexico without the energy resources it will need in the future.
