Mexico: The Venezuela Next Door?

Mexico: The Venezuela Next Door?

Could Mexico under the leadership of Andres Manuel Lopez Obrador plunge into the political and economic tailspin which we associate with Venezuela under Hugo Chávez?

Both the AMLO and Chávez governments, enamored of the wealth and power they saw flowing from oil, have shown an indifference to the environment, despite this having become a hot button issue in global politics. Pollution from Venezuela’s oil industry, already high, worsened under Chávez as he sought to keep up production at all costs, leaving, for example, Lake Maracaibo a contaminated disaster zone. 

For his part, AMLO is giving priority to the Federal Electricity Commission’s oil-burning power plants and to one using domestically produced coal. This has had the effect of stalling private projects in wind and solar energy which would not be able to connect to the national grid. Beyond the energy sector, he has pushed for splashy mega-projects such as the “Tren Maya”—a high-speed passenger railroad line to southern Mexico of dubious economic value which will pass through environmentally- sensitive areas and which is built on soft bedrock. This has led AMLO to denounce foreign support for Mexican environmental groups which oppose the project. In the face of delays to this signature project, AMLO has declared it to be of “national security” interest, short-circuiting environmental reviews and court challenges.

Fairness to AMLO requires us to recognize that his vision for Mexico’s economy, while retrograde, so far has not been as comprehensive as was that of Chávez. He has not sought to nationalize key sectors such as telecommunications, agriculture, retail food distribution, and other areas where Venezuela’s economy has been disastrously affected. But like Chávez and his successor Maduro, AMLO has used welfare spending to underscore the link with the leader’s beneficence, using party activists to distribute cash payments to low-income Mexicans.

It is also worth noting that AMLO has not gone the Chávez route of massive spending and deficits to cement his political position, even in the face of the COVID-induced economic crisis. Indeed, he has vocally proclaimed his commitment to austerity, claiming that government funding will go only to efforts that benefit the poor. He has cut back government subsidies to both culture and scientific research and capped civil service salaries (which may have the added benefit of driving out senior officials who are unsympathetic to his project). To what degree this caution derives from a genuine commitment is unclear, although he may indeed be averse to acquiring foreign debt and the vulnerability to external pressure which accompanies it. In any event, the reality is that without the historically high oil prices which Chávez enjoyed, and given that Mexico has less oil and the need to spread revenues over a larger population, big new spending is simply not a viable option.

IN THE end, is AMLO a would-be Chávez? The harsh rhetoric regarding his opponents, the efforts to gain control over judicial and electoral institutions, and the grand statist visions based on a hoped-for return to 1970s-era oil bounty all point in that direction. But he has not taken the irrevocable steps which Chávez took to break with democratic governance and impose an authoritarian model on his country. What is unknowable is whether AMLO, who after all began as a career politician in the once-dominant PRI, is simply not prepared to go as far as Chávez, who entered politics as a coup plotter, or whether Mexico, a far more complex society both politically and economically, does not given him this opportunity.

AMLO himself has indicated that his “fourth transformation” of Mexico will require more than the single six-year term which the constitution allows. Does this mean that he looks to a successor from his own MORENA party or would he seek to change the constitution to allow his reelection? Prospects for this have diminished with his failure to gain a two-thirds majority in this year’s midterms, and the fact that his personal popularity, while still high, is down from earlier levels. Thus, speculation now centers on who he will support within MORENA. But Mexican politics can be opaque and transactional and such a deal cannot be completely ruled out. Opposition parties in other Latin American countries have engaged in similarly self-destructive acts, notably in Nicaragua where Daniel Ortega, now in his fourteenth year in power, cut a corrupt bargain with the principal opposition party to gain office and then proceeded to crush all political rivals.

Will we see Mexico become the Venezuela next door? The higher probability is no, and that Mexico’s political and economic institutions can resist whatever stresses are put on them. But the stresses are real, and with a population of 130 million and a 1,900-mile-long border with the United States, there is reason for concern. Nonetheless, Mexico has guardrails against populist authoritarianism. Important as oil has been, Mexico’s economy is far more diverse than Venezuela’s. The latter’s industrial sector was always closely linked to the state as supplier to oil giant pdvsa, and domestic consumer demand, fueled by an inflated currency, was largely satisfied by imports.

Mexico has a far more diversified economy, in large measure spurred by the proximity to the U.S. market and the access provided by NAFTA (now USMCA). Beginning as “maquiladoras,” (in-bond processing plants largely for garment production) the industrial sector has benefited from enormous bets from major U.S. and other international firms across the board, but most visibly in auto manufacturing. Additionally, a large export-oriented agricultural sector has developed for the U.S. market. All of this means that there are millions of Mexicans whose livelihoods are linked to a modern outward-looking economy whether or not AMLO views it positively. The outskirts of Mexico’s large cities all have huge suburban developments of homes occupied by an emerging middle class. Their owners may have been attracted by AMLO’s everyman persona and his campaigning against corruption, but they are not likely to want to support grand ideological crusades which put their livelihoods at risk.

Politically, Mexico has stronger institutions than Venezuela did. Prior to Chávez’s rise, Venezuela had been an exception among Latin American countries, with two stable parties, one center-left and the other center-right. Both fell apart in the face of their histories of corruption, political infighting, and the collapse of the petroleum economy, leaving them in no shape to combat Chávez. By contrast, Mexico’s two large parties, the PRI and the PAN, remain intact, if battered, with significant presences in Congress and among state governorships. Both have a lot of rebuilding to do, but have bases from which they can work. Also, the constitutional requirement that the president serve only a single six-year term is deeply ingrained in Mexico’s political culture, where it has long been seen as a key check on the rise of one-man rule.

Will AMLO, who has proven himself to be highly skilled at mobilizing resentments, get a second wind and seek to push forward not only his program but his own personal ambitions? Or has he reached his high-water mark as opposing forces begin to mobilize? Whatever happens, the impact will be significant.

Richard Sanders is a global fellow of the Woodrow Wilson International Center for Scholars in Washington. He is a former member of the Senior Foreign Service of the U.S. Department of State, where he concentrated on the Western Hemisphere with service at U.S. embassies in Colombia, Uruguay, Chile, Venezuela, Nicaragua, and Canada as well as in the Offices of Mexican Affairs and of Brazilian and Southern Cone Affairs.

Image: Reuters.