With Mexico facing economic meltdown due to the Covid-19 pandemic, President Andres Manuel Lopez Obrador will stick to his principles of putting the country’s poorest and most vulnerable citizens first, rather than propping up the private sector with a bailout that he says will only lead to more “misery.”
Lopez Obrador was one of the biggest critics of the $US50 billion bank bailout that followed the 1994/95 peso crisis, which sparked a major recession, with GDP falling more than six percent and inflation and extreme poverty skyrocketing.
In his latest three-month, state-of-the-nation report delivered last Sunday, the president said he would continue with his policies of social transformation that include subsides for the poor, as well as public programs and projects in the most depressed areas of the country. Lopez Obrador insisted that he will maintain public sector austerity programs and avoid running a bigger deficit. His signature projects — a new oil refinery, tourist train line in the south of the country and the Santa Lucia Mexico City Airport — will continue, while investment in other public projects, as well as the state-run oil company Pemex, will be expanded, he vowed.
All senior government bureaucrats will take a drop in salary, he said.
Lopez Obrador said once the coroanvirus threat has subsided, he expected to see the creation of two million jobs in the following nine months. Most economists, however, believe Mexico will see a significant decrease in its GDP as a result of the pandemic — perhaps as much as eight percent.
Although the president has promised 25 billion pesos (just over $US1 billion) in credits for small and medium sized businesses, as well as 339-billion-pesos (almost US$14 billion) for job creation in the private sector, it pales into insignificance compared to measures taken in other nations whose economies have been damaged by the pandemic.
Mexico’s private sector, whose relationship with Lopez Obrador has always been rocky, immediately criticized the stimulus package, saying the measures were insufficient and that his goals of creating so many new jobs will be impossible unless there was an abrupt change in economic policy to increase the public deficit.
Throughout the crisis Lopez Obrador has remained upbeat, stressing on several occasions that the lockdown measures are only “transitory” and that he expects the economy to recover swiftly once life is back to normal.
Guadalajara editorialist Diego Petersen, writing in El Informador, said Lopez Obrador sees himself as a modern-day Franklin D. Roosevelt, whose New Deal fundamentally changed the U.S. federal government by expanding its size and scope — especially its role in the economy.
“The formula that (Lopez Obrador) is proposing is the one that was applied during the Great Depression in the United States 90 years ago,” Petersen wrote, adding that using a similar strategy today is “inconceivable” given that modern economies are “radically different.”