During Enrique Peña Nieto’s successful campaign for president and during the first months of his administration, beginning in December 2012, he vowed that his government would end the close relationship between Mexican and United States security programs, halting the “perp walks” of captured drug lords and their lieutenants before television cameras.
A Peña Nieto government, he declared, would concentrate on recharging Mexico’s economy to secure its rightful place among the world’s middle-class nations.
Reality swiftly chewed apart such fantasies. First signs came quickly: U.S. security forces helped the new administration capture or kill several drug cartel heavyweights or their top lieutenants. Parading captured “capos” before the public media returned dramatically. And by last month the equally dramatically uncharged Mexican economy was sagging badly.
Mexico’s central bank governor, Agustin Carstens, said May 23 that the nation’s economy will expand only 2.7 percent this year, rather than the government’s forecasted 3.9 percent, a number that had been widely viewed with skepticism.
The just ended first quarter growth for 2014 was 1.8 percent, Mexican officials said. This comes on the heels of the administration-embarrassing expansion of just 0.7 percent in the fourth quarter of 2013. However, Reuters news agency reported Monday, June 2, that the economy grew only 0.3 percent in the first quarter of 2014.
The Bank of America Merrill Lynch Global Research earlier reported that Mexico was “mired in recession” during the first part of this year despite government denials. But what more immediately and irritatingly troubled both Mexican citizens and foreign residents were the clutter of new and confusing monetary regulations. They seemed to demonstrate a lack of logic and coherence, said a bank employee dealing with confused and angry clients. The new laws, said to be aimed at curtailing money laundering by drug cartels, among others, are making living in Mexico more costly, more difficult and more bizarre, according to both foreign and Mexican residents. Several security analysts have deemed this a doomed errand.The first hits were anticipated under the rubric cuesta de enero, the traditional, often unnecessary, “cost” hikes that accompany the changing of the year. That included larger than expected hikes in the costs of gasoline and diesel, along with increases in the cost of electricity and natural (LP) gas, as well as water. Though the Peña Nieto administration tried to deflect petroleum product hikes – with its hope that troops of foreign investors will flock to Mexico’s Gulf coast basin of deep oil reserves.
That didn’t convincingly counter the judgment of economists that the crowded basket of tax hikes and monetary decrees would boost inflation (prices of medicine leaped immediately) – that unshrinking nemesis of Mexican aspirants to the middle class and those who have already (just barely) climbed aboard that social class. For them government mauling of their daily private spending seems outrageous. For most of Mexico’s political and wealthy elite whose lives are based upon “connections,” it is bothersome. But clearly for the 50 percent of Mexico’s population in poverty, those barely clinging with a fingernail grasp to the shaky spokes of the Pena Nieto economic carousel, the new, befuddling and befuddled rules appear disastrous.
Many foreigners visiting or residing here do not readily share their Mexican neighbors’ resignation that they are governed by what’s been repeatedly called “a predatory bureaucracy.” Angry, puzzled Mexicans point to a tangled heap of evidence: The present salto of tightening regulations that the federal government advertises as changes that will create Nieto’s ballyhooed “Mexican Moment” – another reference to the administration’s ambition to pose as a middle class nation.
Meanwhile, will any of this new source of government income benefit the citizenry? One Mexican businessman in Guadalajara said, “It won’t. It’s not for them to decide. Certainly they won’t be asked how their ‘contribution’ should be spent.” Discussing this unsavory “political” stew this past Monday, both a Mexican businessman and a UdeG instructor suggested we consider this: The Mexican Employers Association has reported that Mexican companies spend more than ten percent of their total revenue on “corrupt acts.” More than 44 percent of Mexican companies were making secret payments to public servants at the local, state and national levels in 2012. That “expense” has risen sharply since then, it has been reported. Mexico last year was ranked 98th out of 178 countries on Transparency International’s Corruption Index. That puts Mexico in the interesting company of Egypt and Burkino Faso. As a result, it is conventionally calculated that corruption cost this nation approximately nine percent of its gross national product in 2012. That figure, unsurprisingly, also has grown, the university instructor said, placing it now at over 10 percent.
But government skullduggery is versatile, and those who seem to know this most painfully are of course folks at the lower rungs of the economic ladder. They are being most affected, particularly because the new regulations are battering businesses least able to defend themselves in what is being called on the street the “government’s war against its citizens,” especially the most vulnerable: those small merchants puesteros of basic foods, and their customers. Many street-side, and public market stands have already gone out of business, as this punitive bundle of inflation, currency restrictions and baffling constraints strikes pitilessly.
The administration’s effort – alternately dubbed “arrogant” or “suicidal” by some – to make Mexico seem “modern,” and middle class, may be backfiring. Government’s limitations on how, why and in what manner citizens, tourists and foreign residents may spend their money seems to be stirring both exasperation and anger at all levels, as well as disillusionment. If business failures continue and unemployment continues to grow so will this heated response.
It is topped off by the regulation that all facturas, receipts, must be electronically produced. That appears to some as willfully blind regarding the abilities of Mexico’s present 54.6 million citizens living in poverty, and the more than ten percent of the population living in “extreme poverty.” The president’s new regulations appear to be aimed at enlarging – and criminalizing – this most vulnerable sector of Mexico’s population. Clearly, the poor won’t be able to obey this seemingly destructive command, noted one Mexican comparative economics researcher.
This presidential command appears absurd to many for undisguiseable reasons. Take for instance the often repeated declaration of Mexico’s Finance Minister Luis Videgaray: “The only feasible, permanent answer to reducing poverty in Mexico is through economic growth.” The irony here, many economic observers have noted, is that put together the vast amounts of money disappearing into traditional – and accepted – government commercial shakedowns, and the rather openly stepped up corruption costs for doing business in this country are said to provide enough money to both greatly reduce Mexican poverty and to boost its GDP. Other economists say that just a slice from of these two “gold mines” would do the trick. Other veteran analysts similarly argue: 1) That one half of the great sums flowing into concealed government corruption need to be released so they can nourish Mexico’s traditionally weak economic growth; if not, then 2) Mexico’s poverty rate will continue at stubbornly high levels. This, they say, will undermine Pena Nieto’s repeatedly declared goal of making Mexico appear fit to enter the list of the top emerging economies during his six-year term. Particularly now, hard-eyed economic analysts suggest it will take longer.