On July 1st, Mexican voters will go to the polls to elect the leader of the second-largest economy in Latin America and a key commercial and security ally to the US. The 2018 presidential elections come at a pivotal moment for contentious economic and social issues in Mexico, US-Mexico bilateral relations, and the implementation of a renegotiated NAFTA. In the first of a three-part conversation series with advisers to each of the top presidential candidates, the Atlantic Council, in collaboration with the Wilson Center’s Mexico Institute, hosted Graciela Márquez Colín, economic adviser to presidential candidate Andrés Manuel López Obrador (AMLO) of the Juntos Haremos Historia coalition and research professor at Colegio de México, for an insightful conversation about the priorities and proposals of the leading candidate.
Márquez kicked off the event with a historical overview of Mexico’s economy in terms of GDP growth, domestic impacts of trade under NAFTA, and US-Mexico relative economic performances.
While Mexico’s GPD per capita has been steadily growing since its nominal shift to democracy in 1917, growth has mostly stagnated in the past three decades. After the 1980s economic recession know as La Década Perdida, Mexico’s growth no longer paralleled that of the US. The ensuing wealth gap and social inequality still plague the country today – issues that AMLO has repeatedly prioritized in his campaign.
Márquez then spoke about NAFTA – a key issue for the future of US-Mexico relations. She explained how the treaty, since its implementation in 1994, has substantially increased flows in trade and investment but has yielded mixed results in terms of wages, employment, and wellbeing for Mexican workers. For example, she provided wage figures for workers in the auto industry: an average auto worker in Mexico earns five times less than his American counterpart. NAFTA has also led to the convergence of US-Mexico economic cycles. Márquez referred to the impacts of the 2007-2008 global financial crisis, noting how Latin America saw an average economic decrease of 1.9 percent while Mexico’s average decline was around 7 percent – closely paralleling that of the US. She said that “the crisis, combined with China’s entrance to the WTO in late 2001, was also responsible for job destruction in the US.” She acknowledged that while Mexico continues to be an outsourcing destination for US firms, China is to blame for most job losses in the US. Márquez was also concerned with Mexico’s $60 billion trade deficit with the US, but argued that this deficit would decrease to $10 billion if measured by trade in value added rather than only by gross trade flows. While hopeful that a renegotiated NAFTA will better address these economic challenges for Mexico, Márquez was also mindful that NAFTA is not going to resolve all of Mexico’s problems.
The last part of Márquez’s presentation was an overview of AMLO’s economic platform to tackle long-running economic issues with important social and political implications. She broke down AMLO’s platform in four parts: fiscal responsibility, infrastructure investment, public-private-partnership projects, and social programs to vulnerable populations. The platform, drawn mostly from AMLO’s tenure as mayor of Mexico City, proposes to prudently manage the national debt, preserve the latest tax reform enacted under the PRI party, maintain the current levels of inflation and currency exchange, protect the independence of the Bank of Mexico, and most importantly for her, pursue a policy of more efficient expenditure through budget control and adjustment of bureaucratic transparency. Plans for a tighter control of the budget, however, face plans for more investment in infrastructure and education. Márquez was critical of the previous administration’s fiscal inconsistency, saying that during President Peña Nieto’s six-year term, public spending decreased while the government deficit increased. In a would-be AMLO administration, she promised a combination of global trade and a strong domestic market.
Márquez also spoke about AMLO’s concerns regarding a NAFTA 2.0, namely the ongoing negotiations on the poison pills – regional content requirements, the dispute settlement agreements in Chapters 11, 19, and 20, and the sunset clause. She believes that, ideally, a new NAFTA would preserve the first two clauses because they provide regional competitiveness and certainty to investors. However, she fervently opposed the sunset clause, which requires a revision of NAFTA every five years. Márquez argued that this clause, will discredit the regional content changes and wage raises for Mexican auto workers, which require a three-year transitional period. “Once the transitional period ends, we will be negotiating NAFTA again” she said.
Márquez acknowledged the inherent difficulties and consequences of a negotiating process between three countries and stated that AMLO is willing to work with a new NAFTA, in any of its outcomes, even if the negotiations end before the July 1st elections.
After her presentation, Márquez answered questions from the audience about her proposed strategies to raise the minimum wage and labor productivity, to address income and regional inequality, and to tackle crime, corruption, and impunity.
Over a six-year period, she proposed a plan to convince business people of the need for an increase in purchasing power for the Mexican people. By raising minimum wage, criminal violence is expected to decline, and consequently, provide stability than can translate to reduced costs for private investment. Márquez added that this strategy will include technology training, adapting old technologies, and adopting new ones. As more Mexicans enter the formal economy empowered with technological skills, she expects to increase labor productivity and abridge income inequality. Márquez also tied AMLO’s infrastructure plans as part of a larger strategy to connect poor rural communities to urban areas. For example, she proposed a north-south tourist train from Cancún to Palenque (near the Chiapas Jungle) that will help create jobs in Mexico’s southern region.
She said that “crime and corruption are at the center of Mexican problems” and that “there will be no impunity for those who commit corrupt actions.” Again, she underscored the power of technology as an integral component of AMLO’s platform. To tackle corruption, Márquez envisions using digital technologies to follow the money and more effectively implement existing anti-corruption laws. She also included an educational element to AMLO’s anti-corruption strategy. If elected, AMLO plans to go on live television with popular academics to directly inform Mexican citizens about the importance of transparency, explain judicial reforms, and provide updates on his administration’s progress against corruption.