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Trump not to blame for Mexico's economic woes

Trump not to blame for Mexico's economic woes

June 5th, 2019 by Andres Oppenheimer in Opinion Columns

Six months after Mexican President Andres Manuel Lopez Obrador's Dec. 1 inauguration, there are reasons to be worried about Mexico's future that go far beyond President Trump's insane plan to impose tariffs on Mexican imports.

Trump tweeted on May 30 that he will impose a 5% tax on Mexican goods starting on June 10. He then said that the tax will increase to 25% unless Mexico reduces the flow of Central Americans to the U.S. border. Trump's decision would be a devastating blow to Mexico's economy and increase the pressure for more migration to the north.

But while Trump's latest temper tantrum would make things worse, Mexico's economy is already heading down since the populist leftist Lopez Obrador's inauguration.

Far from Lopez Obrador's campaign promise of 4% annual growth rates, the economy had shrunk by 0.2% during the past three months, compared with the previous three-month period, according to Mexican government figures.

The Bank of Mexico, the country's central bank, released a survey of leading economists two days before Trump's tax announcement, downgrading the country's growth projections to between 0.8% and 1.8 percent.

Lopez Obrador had earlier dismissed such grim economic projections, saying that, "There will be much more growth." He stresses, among other things, that the Mexican peso has strengthened since he took office.

But, as I heard from many businesspeople during a recent trip to Mexico, the business community is preparing for the worst. Most say that Lopez Obrador is spending way beyond the government's means and scaring away investors with his populist, anti-free-market rhetoric.

There are widespread fears that he will soon run out of money for his broad social subsidies and that some disastrous decisions—such as scrapping a $13 billion airport reconstruction project that was well under way—will continue to seriously undermine investors' confidence.

On the security front, where Lopez Obrador had promised a drastic reduction of crime rates, the number of homicides rose by 9.7% during the first three months of this year compared with the same period last year, according to official figures.

Lopez Obrador's potentially catastrophic education policies and his lack of interest in science, technology and innovation are even more worrisome for Mexico's long-term future.

Lopez Obrador is reversing education reforms that sought to impose mandatory teacher evaluations by independent agencies and at preventing corrupt teachers' unions from deciding who could be a teacher. In cahoots with powerful teachers' unions, Lopez Obrador is seeking to reinstate teachers who flunked their evaluation tests and were deemed unfit to be in front of a classroom.

Mexico needs exactly the opposite: further reforms to improve education standards so that it can have a more skilled workforce capable of competing with China and other top manufacturing countries.

On science, technology and innovation, Lopez Obrador's recently unveiled 228-page National Development Plan for 2019-2024 devotes only five lines to science and technology.

His appointed director of Mexico's science and technology agency, known as CONACYT, recently was quoted as saying that her model country for scientific research is Cuba. That Caribbean island, despite its government propaganda to the contrary, produced only nine international patents last year, compared with Chile's 161 and South Korea's 91,000, according to the U.N. World Intellectual Property Organization.

Granted, there are a few things that Lopez Obrador deserves credit for, such as his obsession with reducing corruption—the jury is still out on whether he'll be able to do it—and his wise decision to react calmly to Trump's tirades and unhinged trade measures against Mexico.

But Lopez Obrador's first six months in power have been bad for Mexico. Sadly, Trump's stupid tariffs—in addition to raising car, computer and tablet prices for U.S. consumers—threaten to make Mexico's future even bleaker.

Trump and Lopez Obrador should be working together to increase North America's economic integration, seeking to turn Mexico into a magnet for investments to reduce poverty and illegal migration.

Right now, however, they're doing more harm than good.

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