Mexico must focus on public investment, education and public health for the neediest, says Andrés Manuel López Obrador a presidential candidate
The economic and social policies that I have outlined for Mexico represent a clear break from the past 22 years. The government operates on the assumption that if it maintains macroeconomic stability, economic growth and employment will follow automatically. The key drivers of growth are the consumption of oil revenues and the expansion of consumer credit, with no room for discussion on the most appropriate way to distribute the benefits of that growth. This has resulted in 50 million Mexicans living on little more than $2 per day.
My programme, while maintaining the macroeconomic discipline that has earned Mexico investment-grade credit ratings and kept inflation in the low single digits, would tilt policy towards higher economic growth and ensure that the most needy in society are not excluded from its benefits. Reliable social services to tend to the needs of the poor will take many years to construct, but we will start with immediate actions focused on fighting poverty and inequality.
Growth should be driven by exports and not only by oil revenues. A stronger domestic market will provide an incentive for the public and private sectors to work together to build critical infrastructure. At the same time, the increased domestic integration of the energy sector will result in more competitive energy prices. This is in contrast with present policy that consists merely of extracting and exporting crude oil while importing refined products. Large regional-development projects will also begin to address the country’s long-neglected infrastructure and transport systems, further increasing the capacity of Mexico’s industry to compete.
More ethical government
A critical component of the change will be a transformation of the ethical basis of government, with a strong focus on attacking corruption, inequality and the inefficiency of government institutions. Taken together, these elements represent a clear break from the past. Corruption will not be tolerated, because of its cost in terms of lost opportunities. Analysts estimate, conservatively, that Mexico loses the equivalent of 2% of its gross domestic product or national income (GDP) annually to corruption. That is more than enough to cover the cost of all the new social programmes that we propose. Moreover, corruption creates a drag on the economy and thwarts competition and efficiency. At the same time, the government needs to grow leaner, more efficient and less intrusive in regulating the private sector. We are confident that it is possible to boost GDP by 2 to 3 percentage points of GDP by reducing the size of government and by taking a tough stance on corruption.
During the past four presidential administrations, the single-minded focus on macroeconomic stability has meant that public investment, education and public health services have been neglected. While we will maintain macroeconomic stability, we want public investment to become an instrument of public policy and we want to use it to mobilize and encourage private investment. Since Mexico embarked on its path of macroeconomic stabilization 22 years ago, it has used the same two instruments of policy: controlling inflation and reducing the fiscal deficit. Yet despite stabilization programmes and the large privatizations of the 1990s, public debt has ballooned from $82 billion to $280 billion and unemployment has grown, with the result that the number of our workers migrating to the US has rocketed to 2 million over the past five years. No wonder, given that per capita income has grown a paltry 0.4% a year.
Doing good to better govern
One can point to the moral reasons for focusing on the provision of basic social services and support for the poor, but there are other, equally-compelling reasons. These have to do with ensuring social harmony and governability. In the long run, it is not possible to govern effectively with huge sectors of the population suffering extreme poverty, unemployment and no hope of change.
The points I have outlined above should have been central components of public policy long ago. Convinced that the country’s elite rulers had run their course and could no longer deliver, Mexicans voted in 2000 to oust the Institutional Revolutionary Party. They presented Vicente Fox with a clear mandate for change. Six years later, most Mexicans feel disappointed and deceived, and this makes it all the harder for them to believe in another promise of wide-reaching change. Nevertheless, a platform that incorporates improved living standards for all Mexicans is what the country needs.
I am encouraged by my experience of governing Mexico City, one of the world’s largest cities. During my time in office, we successfully established new social programmes including food support for the elderly, created 16 high schools, one new university and numerous public works. These works were the first in the capital city since the early 1980s and, in some cases, since the mid-1970s. We have done it without jeopardizing the city’s fiscal standing, as the debt rating agencies can attest. We have identified five critical actions:
»social programmes comprising elderly support, medical services, micro-credits and scholarships for key segments of the population;
»construction of housing and other infrastructure projects using public and private investment;
»restructuring of the energy sector to increase integration, reduce prices and ensure that the energy sector functions as a reliable supplier to individuals and industry;
»creation of large development projects aimed at attracting greater private investment, providing a new supply of high-quality services and improving economic competitiveness; and
»reduction of the size of government and simplification of the tax system.
In order to sustain its growing population and remain competitive, Mexico can wait no longer to implement the actions I have outlined. The country needs to engage all the energies of the private and public sector and the support of the Mexican people. I am confident that domestic and international business will recognize this programme as a sensible way to bring long-lasting and much-needed change to Mexico.
CV Andrés Manuel lópez Obrador
Andrés Manuel López Obrador is the former mayor of Mexico City. He is the Party of
the Democratic Revolution’s candidate in this year’s presidential election.