Mexico’s 66-year-old populist President Andres Manuel Lopez Obrador’s latest claim that he hasn’t had a bank account or a credit card for the past 30 years raises a serious question: Does a leader who doesn’t use the banking system have the foggiest idea about how the economy works?
I’m not trying to be funny — what’s happening in Mexico is tragic. Lopez Obrador’s economic illiteracy is crippling Mexico’s economy and threatens to trigger more capital flight, greater poverty and new waves of migration to the United States.
According to new World Bank estimates released June 8, Mexico’s economy is projected to fall by 7.5 percent this year and to rebound by only 3 percent next year. That’s a steeper decline than that of most other Latin American countries.
During his 2018 campaign, Lopez Obrador — who constantly lashes out against previous Mexican governments’ “neo-liberal” economic policies — vowed to lift Mexico’s economy to 4 percent annual growth rates. Instead, even before the ongoing COVID-19 crisis, his erratic economic policies led to zero growth last year, after many years of mediocre but positive growth.
Earlier this week, Lopez Obrador repeated his frequent claim that, unlike his predecessors, he’s not corrupt and doesn’t care about money.
“I don’t have money in banks, I don’t have bank accounts, [I only have] what I’m paid, and that’s managed by [wife] Beatriz,” he said, adding that he hasn’t had a bank account in 30 years. “I don’t have credit cards. I’ve never had them,” he said.
Lopez Obrador long has made his austere lifestyle a huge part of his personal narrative. He started his career as a student activist — it took him 14 years to get his undergraduate degree in political science — and held various party and government jobs, including mayor of Mexico City. He is not known to have ever had a job in the private sector.
Lopez Obrador’s first major economic blunders after becoming president were pushing ahead with a plan to cancel an ongoing $13 billion Mexico City airport expansion project — which forced the government to pay billions in reparations to contractors — and building the $8 billion Dos Bocas oil refinery.
He is still betting on revamping Mexico’s economy by investing in the state-owned Pemex oil monopoly, at a time when world oil prices have plunged and many economists predict that oil is dead. Even major oil producers like Saudi Arabia have announced plans to diversify their economies beyond oil by 2030.
More recently, when COVID-19 paralyzed the world economy, Lopez Obrador refused to give emergency grants to major Mexican corporations to survive the lockdown. While the United States and most big Latin American countries gave large companies loans or grants to pay their workers during the shutdown, Mexico has only given micro-loans to some companies and direct cash subsidies to the poor.
According to a recent study by Miguel Szekely Pardo, director of the Mexican Center of Education and Social studies, Mexico’s current crisis may create about 12.2 million new poor by the end of Lopez Obrador’s term in 2024, in addition to a huge increase in the number of people working in the underground economy.
Many critics suspect that Lopez Obrador doesn’t mind increasing poverty, because that increases his political control through government handouts to the poor. But, most likely, Mexico’s economic downturn is the result of his sheer ignorance about how the economy works.
“Lopez Obrador manages the economy as if it were a small village store that only operates with cash,” says Alberto Bernal, chief emerging markets and global stragetist of XP Securities. “He doesn’t understand the banking system. He doesn’t understand the multiplying effect of bank deposits. He doesn’t understand anything.”
As investors flee and the economy tanks, Lopez Obrador is now doing what populists of all stripes — from President Trump to Venezuela’s Nicolas Maduro — do best: blame the opposition.
It would be great if somebody could give Lopez Obrador a crash course on basic economics, and tell him that there’s no glory in claiming not to have a bank account or credit card. He still has four years to go before completing his term — enough time to learn how the economy works, and to avoid a worsening disaster.
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